Self-Employed Programmer Forced to Make Concessions

Pleasanton, CALindsey is a self-employed programmer who found his fee suddenly in jeopardy although he had completed more than half the job. The small company that employed him underestimated the hours needed and refused payment for what they perceived as over their budget and over time.

"I had a typical contract that started in September 07," says Lindsey. "The client asked for an estimation of the number of hours the job would require, which I supplied. I had my estimate checked by a supervisor and his estimate for the same job actually came out a bit higher.

"By the end of the year I'd heard nothing back except from the Chief Operating Officer (COO) who judged that my estimate was higher than expected--by double or triple. Up to that point, not having heard otherwise, I was quite happy with it. I was working for them; they needed my help and didn't want me to stop.

I asked if they needed a purchase order but they replied that it was unnecessary as they had all the indications they needed.

But apparently, my fee was never discussed with the owner of the company; it hadn't gotten past management. This was a family-owned business, where the husband ran the business side while the wife handled finances. I was told to send my invoices directly to her, which I did, but again I got no response--neither positive nor negative.

I went back to the COO, who said he would check out what was happening, and he returned asking if we could work out some kind of discount. He said he hadn't known my work would add up to so many hours, if not he would have requested a fixed rate.

Problem was that I had already put in 4-500 hours and was on my second project for them. So we went back and forth, trying to negotiate. After several meetings, he came back with a proposal in which they didn't specify a time frame for payment but asked for a 20 percent discount on my first and my future jobs--right across the board.

So I responded with a counter proposition. To me, asking for a discount on my completed project was a bit much! I thought I'd waited a long enough period but by the time I got a response, it was probably the end of February, into March.

At that point, the COO told me they'd reached an agreement regarding one of my counter proposals. 'Great!' I said. 'Is there anything I need to sign?' I had presented all of my proposals and invoices in writing. In fact, I was the only one who did; they never did put anything on paper. So it was decided to start fresh with a new proposal that included a discounted rate.

I was pretty surprised when the co-owner wrote back to me saying she knew nothing of the negotiations. It was clear that the COO had never taken them to her. He had needed me and kept me busy.

So I scheduled a meeting with her and it was her turn to be surprised, saying my invoice was way over budget. I replied to her, 'this is real work, I'm not ripping you off--you can corroborate that with the other employees. Of course it's not cheap.'

We continued to discuss. She wanted to reduce the bill and put it on a schedule but I couldn't just drop it like that. I said I'd rather come up with a flat fee. By then, they owed me $89,000 over 6 months and their proposition was to pay me $60,000 and have me forgive the $29,000. That's a tough request!

I've never accepted such a discount but on the other hand, they had provided me with a lot of work so I took off about 100 hours that represented low tech work, worked out something reasonable and forgave some.

What I had proposed was two things: a short payback time with a deep discount, or less of a discount and string the payments out longer. They came back and asked for the deepest discount over a longer repayment but by then I was so tired I said okay. We agreed to $9,000 a month over nine months so I'll be getting a cheque every month until the end of the year. I hadn't wanted to take them to court."

Believe it or not this was not the worst situation regarding refusal to pay monies owed that Lindsey had faced; it was the second worse. A previous employer continually added changes without due compensation so Lindsey just walked away.

Lindsey says such dilemmas are very common where small businesses employ contract programmers. "I've spoken to a lot of people," he says. "There was even one where the guys were so strapped for cash even their payroll bounced. Certain sectors are worse than others. This one I was in was in wet process chemical processing, which tends to be low tech and trying to bring itself up to speed. They underestimate the time needed to do the job. Business like medical, pharmaceuticals and solar technology tend to be better prepared."

A programmer for 20 years and self-employed part time for seven years and full time for three, Lindsey offers the following advice to others on their own. "It's good to make sure everything is in writing," he says. "And make sure you have good solid contracts. One thing that protected me was the fact that I had terms and conditions that they signed off on. And make sure they favor your business, not theirs. I also recently got business insurance, which is a really good idea. And, if you've got enough business, it's worth it to get incorporated so you separate personal liability from your corporation's.

"But in the end, no amount of paperwork is going to make people honest. You have to make then understand what you expect and vice versa. Each side is going to be thinking different things."

Overtime laws for California computer professionals can be a minefield for salaried employees but present an even more delicate situation for the self-employed. Consulting a lawyer before proposing a contract, or if an accepted one is contested, can save the loss of essential income.