Legal Question in Business Law in Maryland

Payment to subcontractor

John Doe work for our company (SLC) as a subcontractor thru Company ABC. John Doe is an employee of Company XYZ. In past, John Doe's company XYZ was getting payment very late from company ABC. ABC always said they are in financial trouble. SLC has always paid company ABC on time.

When John Doe ended contract with ABC, he and his employer XYZ asked SLC to hold last 6 weeks payment and split the fund appropriately. SLC pays ABC $50/hour. ABC pays XYZ $40/hour. Can SLC pays ABC $10/hour and $40/hour to XYZ without any legal obligation to ABC? XYZ says they will give us a letter in writing that they will not try to collect money from ABC.

SLC (we) are holding payments for almost 3 months and would like to release it ASAP. Can SLC write two checks-- one for ABC and one for XYZ. This way both parties get paid what they suppose to get? ABC does NOT want to do this and want all fund. But XYZ want to do this so they will get paid without having to deal with ABC.

Is this possible? What other options does SLC has? Write one check to ABC and other check to pay to the order of ''ABC and XYZ''? Can SLC (we) do this legally?

Thru third pary who can split the amount.


Asked on 10/09/03, 5:28 pm

1 Answer from Attorneys
Lawrence Holzman Holzman Law Firm, LLC

Re: Payment to subcontractor

The answer is going to depend on the specifics of all agreements between the parties. Presumably, SLC has a contract directly with ABC and must pay ABC pursuant to that contract.

On the other hand, it also sounds as if there may be other agreements and/or "instructions" out there that SLC should consider. So-called independant contractor relationships can be difficult to sort out properly and definitively. Frequently, they provide opportunities for one party or the other to challenge the characterization as to independant contractor status; or as to the actual parties to any agreement.

The worst case result would be for SLC to pay out the full amount of its obligation (in any fashion) and then get sued because someone thinks that SLC did it wrong. The only way to guard against that will be either get written releases from all possible complainants; or to file an interpleader action and put the money into the court and let the court sort it out.

Either way, the only sensible thing to do is for your corporation to consult with its legal counsel to assess the options and draft proper papers for either avenue.

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Answered on 10/09/03, 5:43 pm


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