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Withholding payment until "Do-Not-Compete" is signed

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Bryce Leverich
Withholding payment until "Do-Not-Compete" is signed
on Oct 13, 2008 at 4:48:17 pm

Is it legal for a client (freelance based) to withhold payment on a product already finished and delivered until you sign a do not compete contract?

My client has recently given me a do not compete contract, and they have put holds on my invoices until I sign it… These invoices were given to them before mention of any do not compete contract. This just doesn’t seem legal.

Essentially they are threatening me with non-payment if I do not sign their contract. They have all of the masters and finished products in hand. Usually I do not give the product until I have been paid, but this client is someone that I have worked with for quite some time now, and they always pay on time… until now.

Another question is, the product that they have not paid for is being sold and distributed by them. Since I have not been paid, is this a copyright infringement on their part?

Thanks everyone, I hate being in these binds and your advice is usually amazing!



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walter biscardi
Re: Withholding payment until "Do-Not-Compete" is signed
on Oct 13, 2008 at 4:53:13 pm

Go back and search this forum for "Non-Compete" as there was a long discussion just recently.

Long story short, Non-Competes are not valid and especially as a freelancer, you should be not be required to sign a non-compete for payment. I would check with a lawyer and inform your client that you will be consulting an attorney on the matter, but in the meantime you fully expect payment for the services you rendered.



Walter Biscardi, Jr.
Biscardi Creative Media
HD and SD Production for Broadcast and Independent Productions.

Read my Blog!

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Bryce Leverich
Re: Withholding payment until "Do-Not-Compete" is signed
on Oct 13, 2008 at 5:00:56 pm

Walter,
Thanks, I am definitely not signing the contract. I completely understand that I pay 15% more taxes, have no insurance, no paid vacation and no 3-5% raise every year for a reason. That reason being that I can approach any client that I feel increases the success of my business. I just needed to know if they were overstepping their legal limitations by essentially forcing me to sign this. I will speak to an attorney if we do not come to an agreement.
I appreciate your advice Walter.


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Todd Terry
Re: Withholding payment until "Do-Not-Compete" is signed
on Oct 13, 2008 at 5:18:43 pm

Walter is absolutely right....

They have abstolutely NO right or standing to request that you sign a non-compete AFTER the fact. To do so takes a fair bit of gall in my book... they definitely have brass cujones.

They did have the right to ask you to sign one BEFORE they contracted with you for the work. I'm not saying that would be correct or the "right thing to do" to a freelancer, which is isn't. But they do have the right (we have the "right" to do a lot of things which we shouldn't). In any regard, a pure freelancer shouldn't sign a non-compete even before the fact, either. That's just maddness, and a clear blockade to your pursuit of your livelihood. What if they never called you again? They can't expect you to sit at home and starve.

Request your money, in full, immediately. If the firm-but-polite request doesn't work, demand it. If you still don't get it, tell them you will be hiring a lawyer. Then do it.

T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com






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David Roth Weiss
Re: Withholding payment until "Do-Not-Compete" is signed
on Oct 13, 2008 at 5:23:42 pm

[Bryce Leverich] "Is it legal for a client (freelance based) to withhold payment on a product already finished and delivered until you sign a do not compete contract?"

They call that "extortion." Under the circumstances you describe, i.e. it was never mentioned until now, it's certainly not ethical, and probably, if you check with an attorney, not legal. And, even if you sign the document it's probably not enforceable, especially if you write and sign an addendum to the Do-Not-Compete right below your signature explaining the situation.

Here are the two pertinent questions that come to mind:
1) Does this wonderful, long-term client owe you much?
2) Do you care about working with them ever again?

These are important issues, because, you have to decide if the money is more important than the relationship.

[Bryce Leverich] "the product that they have not paid for is being sold and distributed by them. Since I have not been paid, is this a copyright infringement on their part?"

Copyright is a difficult question. Listen to the Business & Marketing Podcast on the Cow that I recorded recently with Franklin McMahon and an IP attorney, and you'll learn that you and the client may both share claims to different aspects of the copyright. But, that would take a long, long time to sort out.

More important are the following two issues:
1) How can the client justify selling a product that they haven't paid for?
2)How can they justify not paying you for the work product that's good enough for them to sell?

In other words, they can only withhold payment if they claim the work product is of inferior quality. They can't withhold payment for some other reason that they drum up out of thin air. Selling the product is a pretty good indicator that it's acceptable quality, right?

David Roth Weiss
Director/Editor
David Weiss Productions, Inc.
Los Angeles

POST-PRODUCTION WITHOUT THE USUAL INSANITY ™


A forum host of Creative COW's Apple Final Cut Pro, Business & Marketing, and Indie Film & Documentary forums.


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Bryce Leverich
Re: Withholding payment until "Do-Not-Compete" is signed
on Oct 13, 2008 at 5:36:19 pm

David, in response to your direct questions:

1.) This client does owe me a decent amount of money roughly $6,000.
2.) I do care about working with them, but I don't think this will happen once I refuse to sign.
3.) They cannot justify selling the product, and not paying me, pretty simple.
4.) They can't justify not paying for good work either.

It's a tricky situation, but I am afraid I will lose this client. I simply cannot sign a Do-Not-Compete. I have a mouth, and it needs feedin'

Thanks again.


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David Roth Weiss
Re: Withholding payment until "Do-Not-Compete" is signed
on Oct 13, 2008 at 5:58:58 pm

[Bryce Leverich] "1.) This client does owe me a decent amount of money roughly $6,000."

Not to minimize the importance, but by legal standards, that's a relatively small amount Bryce. It's the stuff small claims are made of.

The typical steps one would take in a matter like this are
1) a chat
2) next, a personal letter
3) a formal letter (demand note with a time limit: i.e. pay within 7-days)
4) file a claim in small claims court

These are important steps because it shows a judge that you have tried to be reasonable.

Have you called to speak with the client about this yet?




David Roth Weiss
Director/Editor
David Weiss Productions, Inc.
Los Angeles

POST-PRODUCTION WITHOUT THE USUAL INSANITY ™


A forum host of Creative COW's Apple Final Cut Pro, Business & Marketing, and Indie Film & Documentary forums.


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Bryce Leverich
Re: Withholding payment until "Do-Not-Compete" is signed
on Oct 13, 2008 at 6:55:40 pm

David,
I understand that this is a small amount. But at this time, it pays the mortgage/groceries/insurance/etc.

As far as your steps are concerned, I am on step two :) I will send a personal letter this week.

Again, thanks for your advice, it is greatly appreciated!


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grinner hester
Re: Withholding payment until "Do-Not-Compete" is signed
on Oct 13, 2008 at 8:52:14 pm

No. If you did the work before they were presented, that is their bad. Their asking you to sign such a thing as a freelancer is just an invitation to never mess with them again.
Get your money and stay clear of em.



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Mick Haensler
Re: Withholding payment until "Do-Not-Compete" is signed
on Oct 13, 2008 at 10:57:37 pm

Is the non compete agreement dated? And if so, is the date prior to or after your invoice dates?

Mick Haensler
Higher Ground Media



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Bryce Leverich
Re: Withholding payment until "Do-Not-Compete" is signed
on Oct 14, 2008 at 1:01:29 am

The contract is dated the 10th of this month, so no, the contract does not predate the prior work.

Bryce Leverich


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Tim Kolb
Re: Hold up...Withholding payment until "Do-Not-Compete" is signed
on Oct 14, 2008 at 2:34:40 am

Hmmm...

They are selling this product? Is this client a production company?

If not...is the non-compete simply to ensure you don't take info you learned during the production of said product and release a competing product?

...what exactly does the non-compete say?




TimK,
Director, Consultant
Kolb Productions,

CPO, Digieffects


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Mark Suszko
Re: Hold up...Withholding payment until "Do-Not-Compete" is signed
on Oct 14, 2008 at 3:59:46 am

I think I'm thinking along similar lines to Tim. I'm wondering, if we/they/you have the technical terms right, and we're really talking about a non-compete versus a non-disclosure agreement (NDA). You don't say what the "product" is, so let me suggest a fake example of a real-estate get-rich-quick kind of video. You should have little problem signing an NDA which only promises you don't give away the magician's trick, so to speak, that is, that you wouldn't tell anybody what the "secret method" is, becuase that's what the infomercial is selling: sign up for the course, get the special kit, blah blah blah.

You as a video editor are not in the real estate investment business, so the NDA could be a non-issue. If it is a non-compete, again, what is the agreement's definition? Does it mean, in my example, you agree not to make get-rich quick promos for anybody else in the county for 2 years? Or that you yourself won't dabble in that biz, knowing the "secrets"? The contract may not be as limiting as you fear, if that's the case.

The musician Thomas Dolby was in legal wrangles with the famed noise-reduction inventor Ray Dolby over the name usage. The musician joked about the final agreement: "He promises not to make pop music records, I promise not to sell noise-reduction technology".

If it's that kind of non-compete, it's a non-issue, sign it and cash the check immediately. Then find other clients. If they are actually telling you you need their permission to cut anything for anyone, well, you lost that client right there. You look like you have a strong case for small claims, just know that while I think it's worth it, it doesn't resolve as fast as Judge Judy and that process can take a long time and use up hours you'd rather spend working and making money. So do try all the diplomatic channels first, including going over that guy's head to some other boss. If you go ahead and sue, add in your court costs as well, for the extra trouble they put you through.

Finally, as a freelancer, never hand over the final anything until all the money is in your hand. That is usually your only leverage.






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Bryce Leverich
Re: Hold up...Withholding payment until "Do-Not-Compete" is signed
on Oct 14, 2008 at 4:00:18 am

Tim,
Yes, the client is a production company. The Non-Compete is pretty vague, it states that I cannot take their employees away from them (not a problem). It also states that I cannot create any competing product (again, not planning on it). The non-compete also states that I cannot work with any client/production company/individual/or the like, that creates a product that "company X" considers competition. It's very vague as to what the "competition" is. Also there is a clause that states any ideas I come up with, or product that I design immediately becomes the property of the company. So it's a non-compete as well as a "work-for-hire" agreement. Meaning that any and all project files and raw graphics I use, immediately become property of the company.

I really do not plan on competing with them, or selling the product that I shoot. I just have a hard time signing something like this. Seems like it takes the "free" outta "freelance".


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moody glasgow
Re: Hold up...Withholding payment until "Do-Not-Compete" is signed
on Oct 14, 2008 at 4:13:39 am

The thing is, this little "surprise" they sprang on you, shows their true colors. Sooner or later we all have to deal with people who have a position of power in a deal, and will abuse that position for their own ends.
Personally, I wouldn't sign a Do Not Compete, it gives away moch of your power as a creative.

PS. This isn't related to your last topic is it??? It would explain alot, if it was.

moody glasgow
editing.compositing.design


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Mark Suszko
Re: Hold up...Withholding payment until "Do-Not-Compete" is signed
on Oct 14, 2008 at 4:16:01 am

[Bryce Leverich] " It's very vague as to what the "competition" is. Also there is a clause that states any ideas I come up with, or product that I design immediately becomes the property of the company. So it's a non-compete as well as a "work-for-hire" agreement. Meaning that any and all project files and raw graphics I use, immediately become property of the company.

I really do not plan on competing with them, or selling the product that I shoot. I just have a hard time signing something like this. Seems like it takes the "free" outta "freelance"."


Sad to see that, Bryce. Something must be really messed up if they feel like they need to put that in writing, where people in a better working relationship would just leave those things as assumed or not an issue in the first place. This reads like the moves of people that have been burned or expect to be burned, likely because people that burn others expect the same treatment.

Not a lawyer, but if you are telling us the whole story and the wording is right, I can't imagine a sane judge that would do anything with that agreement but wipe his nose with it. If you come up with a quirky piece of tradecraft like a stylish kind of alpha wipe, that's not really new, and creative ideas like that are generally not patentable, or how would Hollywood ever function?

Agree to sign the funny paper if they pay in full at signing, then do what you were going to do anyway, which I'm sure would be only the honorable thing. Then they would have to sue if they thought you broke the deal later. For them to come after you on that flimsy basis is going to cost them a lot of money to prove. If they are this tight over six grand, I'm guessing a lawsuit they can't possibly win is just a bluff on their part. So call and raise. This whole thing may just be a grinder's smoke and mirrors trick to avoid paying for as long as possible. I'm being pretty bold with YOUR money, but I say play them back and Color-Up.




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Tim Kolb
Re: Hold up...Withholding payment until "Do-Not-Compete" is signed
on Oct 14, 2008 at 4:38:34 am

[Bryce Leverich] "es, the client is a production company. The Non-Compete is pretty vague...It's very vague as to what the "competition" is. Also there is a clause that states any ideas I come up with, or product that I design immediately becomes the property of the company."

Yeah...sounds like time for some legal action, but of course, the client will certainly pull away after that.





TimK,
Director, Consultant
Kolb Productions,

CPO, Digieffects


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Steve Wargo
I would sign it
on Oct 15, 2008 at 8:00:34 am

Sign the paper.

Get your money.

Have an attorney send them a letter stating that you signed under duress and hereby declare the contract null and void.

Your relationship with them is over. They are going to take your signiture and tell you to take a hike. After all, what kind of working relationship will you have with them in the future?

Trade a check for the document.

Go on with your life and do what's best for you.





Steve Wargo
Tempe, Arizona
It's a dry heat!

Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD .


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Timothy J. Allen
Re: I would sign it
on Oct 15, 2008 at 8:06:57 pm

I don't think the relationship with the client is over. This could simply be a misunderstanding where they pass along something that their legal department or attorney told them they should give to all contractors.

It may still be a case where once you educate them to the differences between a non-compete and a non-disclosure agreement - or otherwise negotiate the agreement so that doesn't apply to your regular line of work, you could come to a sane agreement. Of course your approach needs to be calm and "helpful" rather than defensive.

If they don't work with you to come to something that makes sense, then there is a serious problem. They simply don't have a right to keep you from pursuing your chosen career.




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