Contractors’ Questions: Is the agency’s Covid-19 cashflow issue a valid reason not to pay me?

Contractor’s Question: I’m a limited company contractor and normally opt out of the Agency Conduct Regs.

My last month of work for a client was invoiced to the agency relating to a contract which completed in February. The client has already paid the agency for my services, but the agency is withholding my final payment citing coronavirus-related cashflow issues with its other contractor placements and clients.

So the agency says it will not release my funds and worse still, they talk of a number of weeks “or so” to go, before releasing any of my payment.

Does my opting out create an issue here, or does anything I’ve done make the continued delay acceptable? I don't believe the agency has the right to withhold my funds in this way. Please advise.

Expert’s Answer: This is a classic illustration, really, of one of the two big reasons why it is rarely (if ever) in a contractor's interests to opt out of the ‘Agency Conduct Regs’ -- the Conduct of Employment Agencies and Employment businesses Regulations 2003.

Clearly, there is no valid excuse for not paying you. Your client has paid, and instead of paying you, the agency seems to be using that money elsewhere.

While it is unlikely that you have any rights directly against the client, particularly given that they themselves have paid, you might try and enlist the support of the client in your attempts to get the agency to put paying you at the top of their pile of ’things to do.’  

Not paying a contractor promptly -- again, particularly given that they themselves have paid -- is unlikely to endear them to the agency, or to enhance their confidence in the agency for the future.

It might of course be that letting it be known that you are considering approaching the client would motivate the agency just that little bit more towards paying you what you’re owed!

You’re absolutely entitled to keep pressing for payment. You might, if you wish, take legal action for the debt. And you might, if you wish, take steps towards winding the agency up, on the basis of its insolvency, as demonstrated by their ongoing failure to pay you. 

However I really do wish you’d not opted out. If you had not, then you could also have relied on regulation 12, which essentially makes it unlawful for the agency to fail to pay you for time you have worked. You could then have referred their default to the Employment Agencies Standards Inspectorate, which might themselves have taken action against them.

Finally, that other big reason why it’s rarely wise to opt-out is worth specifying: where the regulations apply, ‘handcuff’ clauses will generally be unlawful and unenforceable. In fact, regulation 6 makes it unlawful for the agency to attempt to restrict what you do after you have finished working through them. Best of luck with your situation.

The expert was Roger Sinclair, legal consultant at contracts specialist egos.