Legal Question in Business Law in New York

Re: Reserve funds and Interest Bearing Accounts

Normally, this is a contractual matter between you and the agency. So unless your employment or service agreement with the agency requires payment of interest on such fund, which is unlikely, your choice is to either accept or reject the addendum.

How this affects you depends on the contract you already signed and the agency may or may not legally obligate you to sign the addendum. In practice, though, even if you are not legally obligated to sign it, your business relationship with the agency is probably going to suffer.

There is some chance that the state where you are performing personal services (IL ?) may regulate such matters by statute but it would require some legal research as modeling contracts are not as common as apartment leases.

Good luck.

The above reply was in the nature of general information, is not legal advice and should not be relied on as such.

Re: Reserve funds and Interest Bearing Accounts

In general I agree with Bill's response. This sounds like some form of escrow fund to assure you have not been paid for services that have not been paid for by the client; which presumes your basic agreement states you only become entitled to be paid if the client pays (although this might be unusual). You do not say whose money this account ultimately belongs to? If you were to leave the agency, any funds advanced by them on your behalf presumably are deducted and then the account becomes your money. Is this correct? Is the amount that will form this account currently taxable or tax deferred until the account is finally distributed? Presumably this is the latter. Finally, whose account is this really; your account or that of the agency? Most escrow accounts are not interest bearing, unless some arrangement is made with the bank in which it is located. Some interest-bearing accounts require a minimum balance be maintained, which might be more than what you have in the account at any time. It seems like all the agnecy is doing is creating an account, belonging to the model, but assuring that they get paid for advances and to protect if a client doen't pay.