Legal Question in Employment Law in California

I worked as a 1099 contractor for a non-profit that is now having financial problems, and they told me they will pay me about $3500 of my final invoice ($10K) if I sign an agreement that I will not pursue legal action for the remainder until such time that they are either back on their feet financially or have decided to declare bankruptcy and close their doors. Can such an agreement be legally binding? They do not dispute that they owe me the full amount of my invoice, just claim that they cannot pay it all now. Thanks.


Asked on 10/07/13, 1:10 pm

1 Answer from Attorneys

Sure it is. A covenant not to sue if certain conditions are met as agreed is perfectly legal. If you don't like the deal they are offering, you are free to reject it and sue for the full balance owed.

What may NOT be legal, even though you don't ask about it, is treating you as a 1099 contractor. I can't begin to tell you how many businesses, for profit and non-profit, TOTALLY don't understand how hard it is to contract for someone to work for them and have it be legal to treat them as a 1099 contractor instead of an employee. It is literally impossible to have a "contract employee," and nearly impossible to have someone do the work of an employee as a legally independent 1099 contractor.

The reason I bring this up is that employee wage claims have priority in bankruptcy over other creditors. So if you think these guys are going to go belly up, you may be a lot better off filing and settling a wage claim as an employee illegally treated as a contractor, than taking their deal. There is no way to tell however, via an internet Q&A like this. It would be well worth your time and money to spend an hour with a good employment lawyer to see what your best angle is.

Read more
Answered on 10/07/13, 1:32 pm


Related Questions & Answers

More Labor and Employment Law questions and answers in California