We have a FFP contract for 30 days with Navy and we hired a person to do the project. He did not want to be 1099 as he does not know to pay taxes and hence we hired him as W2 with clear terms signed by him that he will only get paid at the end of the contract and also only once the deliverables are approved by the client Navy. Now, he was unable to get the work done as his skill sets were not apt and Navy is unwilling to pay us. He wants to get paid and threatening us with legal. What are our rights and how should we proceed? We did not get paid a dime by our client and his contract clearly says he will only get paid if we get paid.....
2 Answers from Attorneys
You hired him, you need to pay him. You can't just not pay employees. You may have a claim back against him if he committed fraud in getting hired or something like that, but that doesn't excuse payment of wages.
Of course, it goes without saying that you need to retain counsel for this. W2 or IC (independent contractor) is a tax designation and control. Payment of wages is covered under the FLSA, which has its own set of criteria for whether a person is paid per job/piece rate or hourly. A lot will hinge on the nature of the contract you signed with him.
You may be liable, at a minimum, for minimum wage. However, I would need to see the terms of the contract to determine the extent of vulnerability and what, if any, arguments you have.
Sean R. Hanover, Esq.
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