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Law Donut blog
When customers won't pay up
April 08, 2013
Chasing payment is part and parcel of running a small business, but when that tiny niggle becomes a major worry you need to know what power you have.
Before entering into any deal for services or products, having a written contract outlining payment procedures is essential. However, no amount of pre-emptive work can safeguard you from the non-paying client or customer.
So what can you do?
Step one
It might sound simple, but you’d be amazed at the power a solicitor’s letter has.
The first action a legal firm will take when instructed by a client on a debt case is to send a letter of claim to the other party — a recovery letter. It sets a specific timeframe for repayment, normally 28 days. And because it comes from a solicitor and not you, it will make the debtor sit up and take notice.
However, if there is no response within the stated time, a legal firm will lodge a claim. For amounts less than £10,000, this would go to the small claims court. Be warned, however, that if you instruct a legal firm at this stage, even if you win you will not get your legal costs back as the court considers the amount involved to be too small. For claims more than £10,000, you do get your legal costs back in the event of you winning the case.
Step two
So you’ve gone to court and the judge agrees that you are owed the money you say you are. Getting this judgment isn’t enough. The difficulty is enforcing it.
If more than £750 is owed, you can bankrupt the individual. However, this is a very serious action with long-standing repercussions for the person made bankrupt.
Another route is attachment of earnings. This would apply where an individual has made use of your company’s products or services and not paid. The court would send details of its judgment to this individual’s employer and every month, money is deducted from the employee’s salary until the debt is repaid.
Step three
There will always be a hardcore who do not pay up. The most common way a solicitor would proceed here is by instructing, on your behalf, a reputable debt management or debt collection firm. However, there is a third way.
An alternative approach is to instruct specialist agents. They can quickly recover the money owed to clients. Once a judgment is issued, these agents visit the premises or home of the defendant and get what is due.
This direct approach can be effective. I heard recently of an instance where agents visited an individual with a judgment against him. They asked him if the car parked outside belonged to him and what its value was. Within half an hour, a direct debit payment had been made to cover the debt. Getting your solicitor to instruct agents like these incurs a negligible fee and if they succeed, their fees are included in the overall amount owed.
Even the most successful small business can be crippled by non-payment, but swift and appropriate legal action, whether that’s a letter or court action followed up by a visit from reputable agents, can take that worry away. You’ve worked hard to build your business. Your solicitor should work just as hard to make sure you get what’s owed to you.
Wax Noor is a senior solicitor at Brilliant Law, which offers fixed price packages for SMEs covering debt management, recovery letters and county court claim forms.
Internet users are answerable to the law too
March 21, 2013
The internet is vast, it contains more information than any traditional library and it has made the world a smaller place. A person in Leicester, England, can speak freely with a person on the other side of the world in Sydney, Australia, in an instant. Real time pictures can be streamed to friends and people can discover and express new opinions and outlooks on life at the click of a button.
Unfortunately the internet draws people into a false sense of security. There are a growing number of internet users who consider the internet to be a place where the law does not apply or where a softer punishment will befall them if they are caught in disrepute.
This is not the case. Megaupload founder, Kim Dotcom, is currently fighting extradition to the United States from his home in New Zealand for breach of the USA’s various copyright laws for his file-sharing website. Sally Bercow (the wife of the Speaker of the Commons) is being pursued by Lord McAlpine for defamation arising from comments made by her on Twitter. Numerous people found themselves in breach of the ‘super injunction’ prohibiting people talking about the affair between Imogen Thomas and a well-known footballer.
Small businesses that regularly use social media (such as Twitter, LinkedIn and Facebook) need to be aware of the potential consequences for both the owners and employees of falling foul of the law. The simple act of re-Tweeting a defamatory comment could get you and your employee in legal hot water. Make sure you have clear company policies on social media use that all employees are aware of and stick to.
The truth is that no matter where you log on to the internet there are rules and laws that you may have to comply with. While case law is still setting precedent for sentencing and consequences of actions it is still good practice to err on the side of caution and be prudent about what content you upload to the internet.
Further information
Edward Webb is a solicitor with Edward Hands and Lewis based on the Litigation team.
The power of mediation
March 20, 2013
As of 1 April this year, the government is hoping to trim some £350m from the £2bn Legal Aid budget by scrapping almost all Legal Aid for private family law cases.
Legal Aid will only be available for Family Law cases involving allegations of domestic violence and abuse. The government is placing new emphasis on family mediation as a way to resolve family disputes, hoping that fewer of these cases will end up in court.
Family mediation is the process by which separating couples can side-step traumatic and divisive courtroom battles, by working with an independent mediator to resolve disagreements over arrangements for their children and how to divide up finances.
Quicker and cheaper
The government has said it will increase the amount of money it provides for legally aided family mediation, upping spending by £10m, taking the total spent on mediation to £25m. National Audit Office figures show that, on average, mediated cases are resolved around four-times quicker and cheaper than cases that go to court.
Family mediators are pleased by the change of direction, but worried about how people will access their services. Mediation is still relatively unknown to the general public. How will people know that public funding is available for mediation? And how will people find reputable qualified family mediators?
Judges are concerned that the cuts in public funding will mean there will be a rise in the number of litigants in person who inevitably take up more court time and may increase the backlog of family law cases. And some solicitors say that focusing legal aid on family law cases involving accusations of domestic violence may provide a perverse incentive for these allegations.
As someone who has worked as a family mediator for more than 15 years, I see this April as a time of uncertainty, but also of great possibility that in the future mediation will become the norm. Mediation will be first port of call for separating couples.
Another reason why mediation looks set to grow are rules that came into effect in April 2011, which meant that judges are supposed to ensure that all separating couples who are embarking on the court process have at least considered mediation.
Mediation information and assessment meeting
Couples are supposed to try what is called a ‘MIAM’ (a mediation information and assessment meeting), during which the benefits of mediation are explained and the couples' suitability for mediation assessed. In fact, in many parts of the country judges have been ignoring this directive and it is now thought that legislation may be needed to make MIAMs compulsory.
A Ministry of Justice study has shown that when couples use mediation first, before getting to court, they are more likely to be able to continue to mediate their disagreements. The report also showed that fewer people needed further assistance with arrangements for their children after using mediation.
As well as being quicker and cheaper, family mediation can provide solutions to peoples' disagreements that are tailor made to them as individuals, rather than court-imposed decisions that may not suit their needs.
Mediation can get into the small details of how a separation will work, in a way that a formal legal process never could, even to the extent of discussing nurseries, bedtimes, dropping off plans, holidays and extended families. Mediators can also work with parents on how to break the news of separation or divorce to their children.
Research suggests that 12 years after separation, couples who have gone through the mediation process are still reaping the rewards, with both parents more likely to have a good relationship with their children, and an ability to communicate as parents.
So rather than being seen simply as a way to cut costs, or to keep things out of court, the real value of mediation can be seen in the way in which it helps to improve genuine life-long communication between former partners. Divorce and parental separation is a fact of modern life which will not go away. Family mediation provides parents with an effective way of managing the process and its consequences. As one of my former clients once put it: “If it hadn't been for mediation, we’d still be fighting now.”
Frances Place is a qualified solicitor who works as a mediator at Progressive Mediation.
Frisky priests - and an employer's duty of care
March 07, 2013
Over the last few weeks it has been impossible to avoid stories in the news about frisky priests, lecherous politicians and, of course, Jimmy Savile allegedly abusing women and girls both at the BBC and various hospitals around the country. The common thread running through all these stories is the corporate cover up/glossing over of women's (and men's) claims that they were subjected to inappropriate behaviour in their place of work. In all these cases the victims tried to speak up about what they were being subjected to but their claims were not taken seriously by their employers or even the police.
Under the Equality Act 2010 employers have a duty to provide their employees with a working environment free from any sort of intimidating or unwanted behaviour – and that covers not only sexual or racial discrimination but discrimination on the grounds of colour or ethnic origin, gender, marital status (including civil partnership), pregnancy or childbirth, age, religious or philosophical belief and, most recently, discrimination against those undergoing gender re-assignment. Employers are also legally obliged to protect their employees from any sort of abusive or discriminatory behaviour by members of the public on their premises.
Employers can make their lives easier by ensuring that this is made clear to all employees when they join the company, and re-enforcing it in company handbooks and other literature. Many hospitals and other public buildings also have clear signs showing that they will not tolerate abusive behaviour towards their staff. However, it is also vital that employers provide an environment where employees can safely approach a manager if they feel they have been subjected to unwanted, inappropriate or discriminatory behaviour and that their claims will be taken seriously and investigated.
It would be great to think that in the 21st century we would no longer need legislation to protect staff in this way, but the truth is that discrimination and harrassment still exist and the law is there to remind employers of their responsibilities.
Further information:
How to manage a bad employee
March 04, 2013
Small businesses need every employee to pull their weight – especially in these hard times. The perfect workplace is full of cheerful, positive, skilled employees all pulling in the same direction for the success of the business. In the real world, however, we all know the corrosive effect even a single bad apple can have.
It might be a character trait that was not picked up at interview, inability to deal with customers and colleagues or persistent sloppiness, inaccuracy and time-keeping. However, once you have hired someone, you cannot simply get rid of them as soon as you realise they are not right for your business, without being mindful of potential discrimination claims.
So what can you do? Well, expert advice is out there, some of it free and some of it paid for.
Talk to ACAS
ACAS (the Advisory, Conciliation and Arbitration Service) exists to improve workplaces for both employers and employees – and keep everyone out of industrial tribunals. Specifically to help SMEs, it has a tool called the Model Workplace, which offers tips on maintaining good employment relations. Its advisers are also available to talk on a wide variety of disciplinary procedures, offer training to managers on dealing with problems and a free new ACAS early conciliation service can help resolve workplace problems that seem ‘impossible’. See www.acas.org.uk or call 08457 47 47 47 (8am-8pm Mon to Fri and 9am-1pm Sat).
Seek tailored legal advice
It’s vital to know exactly where you stand legally before embarking on any discussions or disciplinary procedures with any employee. While talking to a specialist employment lawyer may not come cheap when you’re counting every penny, it’s worth it.
Having a definitive set of grievance, disciplinary and conduct rules puts you on solid ground before you begin to tackle your problem and lets you see what is and isn’t possible. Most importantly, seek to avoid this kind of situation in the first place.
Get your recruitment right
We approach recruitment for each vacancy with real caution. We introduced temp-to-perm for three reasons: it provides a means for both parties to test each other out; employees like the transparency of this contract; and for those eager for a job, it’s a chance to prove their worth, driven by the end goal of a full-time position.
We also test our candidates. The depth of testing is proportional to the position, but always includes maths, English and problem solving. I’ve been bowled over in the past by an amazing interview, only to find out by day two that the candidate can’t read, write or follow a process.
Probationary period
Every new employee arrives with a probationary period attached, so use it. If you have to let someone go at the end of their probation, make sure you hold an exit interview during which you can discuss exactly where things went wrong. If you're letting someone go for behavioural reasons, stick to the facts and don’t let emotion cloud anything you say.
Monitor performance
Once you have recruited someone, stay on top of their performance. If there are any issues in the standard or application of what's being delivered, flag these up immediately. Don't let it slide. If these issues are not addressed formally, the employee isn't given the opportunity to improve and in the meantime, resentment and errors escalate. If the employee fails to improve, you have on record a consistent lack of delivery.
Pick your battles
You’re more than likely a good judge of character to have established a business on your own, so consider that very few people change in this life - it is very unlikely this person will ever become employee of the month, so at what point do you stop trying to mould them and cut your losses?
You are only as good as the people you employ, so don’t let the wrong kind of worker be the undoing of a business you’ve sweated blood to build up.
Ian Cowley is the managing director of www.cartridgesave.co.uk, the UK’s largest dedicated printer cartridge company.
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