Van Nuys, CA asked in Business Law for California

Q: Is it legal for a company to suspend paying affiliate independent owner operators?

Question breakdown:

Company A (large limo company)

Company B (small limo company hired by A when they need help)

Company A pays B every 2 weeks with a net 45.

Company A stops paying B for jobs done between 02/1/20-02/16/20 about 10k. With A giving any warning and using the covid crisis as excuse. A says if it pays B it will hurt there company and they might not be able to stay afloat. Is this legal? Company B needs the money aswell to save themselves aswell.

B has worked with A for 5+ years and has always been paid every 2 weeks.

A suspended payments to all the B’s

Saying they need to keep B’s money to stay afloat during covid 19 slowdown/shutdown

A has layed off alot of their own employees but has not completely closed their doors they are still operating.

Related Topics:
2 Lawyer Answers
Shawn R. Jackson Esq.
Shawn R. Jackson Esq.
Answered
  • Rohnert Park, CA
  • Licensed in California

A: The key to resolution in these types of situations is the initial "mitigation" protocols … in which company A would pay company B … some level of the amount owed. Second issue … is there a written agreement covering how company B is to be paid?

1 user found this answer helpful

Kenneth Sisco
Kenneth Sisco
PREMIUM
Answered
  • Norco, CA
  • Licensed in California

A: It isn't a matter of legality; it is a matter of practicality. We are all supposed to keep our promises and when we don't, we may get sued, and will probably get a judgment against us. But then what?

Yours truly, is in the same spot. Before Christmas, many of my clients chose to breach their promise to me, and pay Santa instead. After Christmas, most finally paid. Hopefully, your client will pay too; but keep in mind they are having to decide to pay you, or the rent, the utilities, payroll, etc. You are in a particularly weak position because their business is probably down, and they won't be needing you as much in the future. If they go out of business, a judgment against them will do you little good. Usually, it is best to maintain the relationship and hope for the best.

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