Dispute/Arbitration

georgepop2018 · ‎01-19-2021

Hi there everyone,

I've never asked for advice from this community yet, but I've seen plenty of great answers from very knowledgeable people. I hope someone could provide some quality advice, as I truly would appreciate that.

I tried not to be too lengthy here, but I also think this issue needs a bit of context.

The issue that I currently face:

I got contracted for $1,000 to do a Do-It-With-You consulting work package to help an insurance broker and ex. FINRA arbitrator ( the fact that he is an arbitrator is very relevant ) leverage LinkedIn as a platform, and learn to generate leads through a non-paid marketing approach.

The job post & scope of work were as follows:

**Edited for Community Guidelines**

I delivered a 26-page guide + workbook, which also included the flow chart - and a total of 3.5hrs of 1-on-1 screen share video meetings vs. the 1HR agreed upon ( out of my generosity, because I truly believe in going above & beyond for my clients ), to make sure the set-up & consulting work will be concluded successfully.

Client was seemingly happy when the work was done, the 2 funded milestones were approved & released at this stage, and I even offered BONUS support for another 14 days + a monthly check-in for the next 90 days to make sure the lead generation system I helped him set-up & coached on will work successfully for him.

However, within 48hrs later, I wake up to an open dispute from this client, where he request a full refund because apparently, I have never done my job. He's an ex. FINRA arbitrator himself, and is trying very hard to reach and make his case.

BUT not only did I over-deliver ( deliverables required + 3.5X more time than initially agreed upon ) - he's making false accusations ( which by the way blatantly contradict his own job post + our consulting time is video documented and proves his false claims ), he's also wanting to keep me responsible for things completely out of my control - such as a temporary hold on his account with the software tool I recommended ( most likely he did not follow the best practices recommended by me ), or the fact that he doesn't own anything.

I DO NOT own that software company I recommended, I do NOT own & control LinkedIn's choices for client's profile either, and most marketing agencies & freelancers have built their entire business on other people's platforms. It was well communicated from the outset, yet he's trying to make his case for a refund with silly points like this.

In this case - we couldn't get to an agreement in the mediation phase, and our mediation specialist suggests we escalate to arbitration.

I know I'm 100% within the scope of work & I delivered successfully, client seems to have a very 'litigious' attitude & practices lots of legal threats and intimidation tactics - but by no means I want to waste my time & money on an arbitration process where I can still lose money, even if I win, due to the arbitration fees.

My question, in this case, is - can I refuse the proposed agreements by our mediation specialist, and then also refuse to participate in the arbitration process? Or am I obligated to participate & pay arbitration fees if we did NOT reach a mutual agreement in the mediation phase?

I'm 99.9% sure arbitration would go in my favor - however, I do not want to waste money & time on the process, and have my Upwork account on temporary hold until the issue is being solved - but I also can't let a 'bully' client use intimidation tactics to obtain a refund, in the eventuality of 0.01% he'd win the arbitration just because he used to be a FINRA arbitrator himself and may know the 'ins & outs' of winning cases that are not even favorable to him.

I am NOT a lawyer or arbitrator, but I think we've all heard about judicial cases won not on true merit, but on the ability of the lawyers to get what they want. I'm thinking this client is an ex arbitrator and would be very persuasive to make his case - even though it would have to do impossible mental gymnastics in my opinion.

Looking forward to hearing your opinions on what options am I looking at, and what course of action would you suggest in this scenario.

Thanks a lot!

George

petra_r · ‎01-20-2021

George P wrote:
My question, in this case, is - can I refuse the proposed agreements by our mediation specialist, and then also refuse to participate in the arbitration process? Or am I obligated to participate & pay arbitration fees if we did NOT reach a mutual agreement in the mediation phase?

You would be obliged to participate. (See the terms of service) If the client goes ahead with arbitration and you refuse, your account is suspended.

That said, you get the chance to go for arbitration first, and once you do, it is entirely possible that the client, knowing that their bluff has been called, will decline, and you'd get to keep your money and your arbitration fee back.

If you are that certain that you're in the right, don't back down.

georgepop2018 · ‎01-20-2021

Petra, thank you for your response.

I understand your point of view. Probably I would not want to go initiate arbitration voluntarily, since technically I already got paid and have nothing to prove.

If client is bluffing - then he will not escalate. If he's not, then he will escalate and I'm 99.9% sure it will go in my favor. I think I will just wait and let him do the next move.

prestonhunter · ‎01-20-2021

George:

You made a tactical mistake.

In the future, do not agree to a $1000 fixed-price contract with someone you don't know.

As a freelancer AND as a client, it makes sense to start small.

No more than about an hour's worth of work for the first fixed-price contract. The client needs to demonstrate that she can be trusted to use the fixed-price contract model correctly. After the client demonstrates that she can be trusted... Then you can use increasingly larger contracts with that client.

If a client demonstrates that she doesn't use the fixed-price contract model correctly, worst case scenario would be that you can walk away from it without getting paid. Of course you don't want that to happen, but it is better to not get paid for an hour of work versus not getting paid work that took many days or weeks to do.

petra_r · ‎01-20-2021

Preston H wrote:
George:
You made a tactical mistake.

Preston, as you can see the money had already been released so that "mess about with chickenfeed contracts" stuff wouldn't have worked anyway. The client has 30 days from when a milestone was paid to dispute. No amount of chopping moderate sized contracts into itsy bitsy ones makes any difference in a case like this.

prestonhunter · ‎01-20-2021

I think it is always safer for clients to start with smaller fixed-price contracts so that they don't have so much money tied up in escrow if a freelancer turns out to be a bad fit for their project.

I think it is always safer for freelancers to start out with smaller fixed-price contracts to test clients to make sure that the client will use the fixed-price contract model properly.

The more that payment for past work has already been released to freelancers as part of closed contracts, the less likely it is that there will be a dispute of payment or an attempt to block funds from being released.

I can't say that these measures of initial engagement caution would have prevented the client in the original post situation from behaving the way that he did. But my suggestion to use small contracts initially is not going to hurt, and is something I recommend at all times with new unknown clients.

petra_r · ‎01-20-2021

Preston H wrote:
I think it is always safer for freelancers to start out with smaller fixed-price contracts

I'd really hate to be so terrified of my clients...

lysis10 · ‎01-20-2021

Preston H wrote:
George:
You made a tactical mistake.

In the future, do not agree to a $1000 fixed-price contract with someone you don't know.

As a freelancer AND as a client, it makes sense to start small.

No more than about an hour's worth of work for the first fixed-price contract. The client needs to demonstrate that she can be trusted to use the fixed-price contract model correctly. After the client demonstrates that she can be trusted... Then you can use increasingly larger contracts with that client.

If a client demonstrates that she doesn't use the fixed-price contract model correctly, worst case scenario would be that you can walk away from it without getting paid. Of course you don't want that to happen, but it is better to not get paid for an hour of work versus not getting paid work that took many days or weeks to do.

It doesn't matter how many small milestones you do when it gets to this point. The client can ask for the full contract money back. They will be asked why they released the milestone during arbitration, so it would be arguably difficult to explain why the client released when they weren't satisfied, but if it is a situation where the provider promised to do something in return for release, I would bet this would be taken into consideration.

But again, it doesn't matter how many milestones there are. The client can ask for a full refund, so you don't really protect yourself unless the milestones are individually separate from each other. But when milestones build onto each other and the end product is no good, clients will ask for all their money back and it doesn't matter how many milestones were completed.

prestonhunter · ‎01-20-2021

re: "It doesn't matter how many small milestones you do when it gets to this point"

I advise using multiple singe-milestone contracts.

Not because I am "terrified" of my clients. I get along great with my clients.

But when dealing with a complete stranger, it makes sense to start small. It makes sense for both sides.

Some of what you are worried about with a multiple-milestone contract is ameliorated using single-milestone contracts.

All of these ideas actually benefit the CLIENT even more than they benefit the freelancer.

It is good for a client to work on projects in a modular fashion, using milestones and individual contracts that all produce usable work, and which can be used with work contributed by multiple team members.

Any really substantial project is going to need to have multiple people working on it, and will benefit from being able to absorb personnel turnover,.

And it benefits a client to not have a ton of money tied up in escrow if a freelancer turns out to be a bad fit for the project. If a freelancer is terrible, there is no button that a client can click to automatically and unilaterally receive a refund. So the bigger the fixed-price milestone/contract amount... the more money that is at risk of never been recovered.

georgepop2018 · ‎01-20-2021

Preston - I truly appreciate your input.

I've noticed similar recommendations from you on other threads. And I agree with the philosophy of 'test-driving' the client relationship first and starting small with low risks.

Be it $100, $1,000 or $10,000 - what now, in this particular case? How well protected will I be as the freelancer in this equation, and how fair is the arbitration process?

My only concern is the fact that my client was a FINRA arbitrator himself, and he may be able to influence the decision in his favor based on knowing how the 'fair process of arbitration' goes.

I know it's far-fetched - but I've never had to deal with the arbitration process in the past 3 years being on Upwork.

wlyonsatl · ‎01-20-2021

George P.

As you may know, the process and procedures of arbitration are in some important ways very, very different than what a formal court case would involve. Going to law school may not be an advantage - the lawyer-arbitrators I know have told me many of their fellow lawyers would make terrible arbitrators.

If your client is a lawyer and has been an arbitrator himself, he has likely done whatever he could throughout his dealings with you to set up his side of things for success in a potential arbitration.

Of course, some lawyers are not as smart as they think they are, so he might be what the English call "clever" rather than actually being smart. And the facts of the case in non-legalese might clearly work in your favor - this is what a good arbitrator will sort out for you.

But if it's not worth your time and money to go through even a winning arbitration process,you might as well move on.

And consider using hourly projects in the future. The client can limit their potential cost by limiting your allowable work time and you are experienced enough to give the client a reasonable expectation of work time required. Hourly clients have no way to force you to use arbitration to resolve their request for a refund, as you've seen can happen with fixed price contracts.

Good luck!

georgepop2018 · ‎01-20-2021

Thank you for the pertinent feedback here, Will.

Up until now, I have never been involved with the arbitration process between me and a client here on Upwork for the past 3+ years.

I'm sure client has done everything in his abilities to set himself up for success. Even though I think a rational, objective arbitrator would need to perform serious mental gymnastics to see & agree with his point of view.

Now, it's definitely not worth my time and money to initiate an arbitration process myself. I over-delivered by measurable metrics and got paid. I would love to just move on, as you suggest, but seems I have no choice if the client decides to escalate into arbitration.

Anyways - I do appreciate your advice and I think hourly contracts would provide more security moving forward.

All the best!

a_lipsey · ‎01-20-2021

Will L wrote:

Of course, some lawyers are not as smart as they think they are, so he might be what the English call "clever" rather than actually being smart. And the facts of the case in non-legalese might clearly work in your favor - this is what a good arbitrator will sort out for you.

I don't think I've ever agreed with you, Will, but I 100% agree with this point. Many lawyers and arbitors but on a good show, but haven't got all their ducks in a row as they think. I just went through one such instance where a lawyer tried to scare me because "he's a lawyer". Being a lawyer or arbitrator doesn't mean they aren't wrong. Often they are betting that you won't fact check them.

I mean, Rudy Guiliani is a lawyer, and he gave a speech in front of a construction office...so...if you think you've got a case, I'd stick to your guns.

mwiggenhorn · ‎01-20-2021

George, FINRA arbitration is miles and miles away from a simple arbitration over an Upwork contract. Don't let his background scare you. If I were you, I would wait and see. If it comes to arbitration, go for it. I suspect you would win, either by default or on the merits. Just my opinion, take it for what it's worth.

tlbp · ‎01-20-2021

George P wrote:
Hi there everyone,

I've never asked for advice from this community yet, but I've seen plenty of great answers from very knowledgeable people. I hope someone could provide some quality advice, as I truly would appreciate that.

I tried not to be too lengthy here, but I also think this issue needs a bit of context.

The issue that I currently face:

I got contracted for $1,000 to do a Do-It-With-You consulting work package to help an insurance broker and ex. FINRA arbitrator ( the fact that he is an arbitrator is very relevant ) leverage LinkedIn as a platform, and learn to generate leads through a non-paid marketing approach.

The job post & scope of work were as follows:

**Edited for Community Guidelines**

I delivered a 26-page guide + workbook, which also included the flow chart - and a total of 3.5hrs of 1-on-1 screen share video meetings vs. the 1HR agreed upon ( out of my generosity, because I truly believe in going above & beyond for my clients ), to make sure the set-up & consulting work will be concluded successfully.

Client was seemingly happy when the work was done, the 2 funded milestones were approved & released at this stage, and I even offered BONUS support for another 14 days + a monthly check-in for the next 90 days to make sure the lead generation system I helped him set-up & coached on will work successfully for him.

However, within 48hrs later, I wake up to an open dispute from this client, where he request a full refund because apparently, I have never done my job. He's an ex. FINRA arbitrator himself, and is trying very hard to reach and make his case.

BUT not only did I over-deliver ( deliverables required + 3.5X more time than initially agreed upon ) - he's making false accusations ( which by the way blatantly contradict his own job post + our consulting time is video documented and proves his false claims ), he's also wanting to keep me responsible for things completely out of my control - such as a temporary hold on his account with the software tool I recommended ( most likely he did not follow the best practices recommended by me ), or the fact that he doesn't own anything.

I DO NOT own that software company I recommended, I do NOT own & control LinkedIn's choices for client's profile either, and most marketing agencies & freelancers have built their entire business on other people's platforms. It was well communicated from the outset, yet he's trying to make his case for a refund with silly points like this.

In this case - we couldn't get to an agreement in the mediation phase, and our mediation specialist suggests we escalate to arbitration.

I know I'm 100% within the scope of work & I delivered successfully, client seems to have a very 'litigious' attitude & practices lots of legal threats and intimidation tactics - but by no means I want to waste my time & money on an arbitration process where I can still lose money, even if I win, due to the arbitration fees.

My question, in this case, is - can I refuse the proposed agreements by our mediation specialist, and then also refuse to participate in the arbitration process? Or am I obligated to participate & pay arbitration fees if we did NOT reach a mutual agreement in the mediation phase?

I'm 99.9% sure arbitration would go in my favor - however, I do not want to waste money & time on the process, and have my Upwork account on temporary hold until the issue is being solved - but I also can't let a 'bully' client use intimidation tactics to obtain a refund, in the eventuality of 0.01% he'd win the arbitration just because he used to be a FINRA arbitrator himself and may know the 'ins & outs' of winning cases that are not even favorable to him.

I am NOT a lawyer or arbitrator, but I think we've all heard about judicial cases won not on true merit, but on the ability of the lawyers to get what they want. I'm thinking this client is an ex arbitrator and would be very persuasive to make his case - even though it would have to do impossible mental gymnastics in my opinion.

Looking forward to hearing your opinions on what options am I looking at, and what course of action would you suggest in this scenario.

Thanks a lot!

George

Once mediation is unsuccessful, each party must decide whether they will invest in arbitration or walk away. If the client pays the fee for arbitration and you do not, your Upwork 'career' will be over. So, the question is more--do you wait to see if the client pays for arbitration or put up the money yourself first and see if the client will also?

It seems like you over-delivered in an effort to provide good service to a bad client. They have taken your knowledge and now don't wish to pay because you can't make them popular on LI. 🙄

Look at your written or recorded communications. This is what can be most easily proven and defended. Pre-contractual negotiations are what is relevant when it comes to offer and acceptance. What was the actual bargain struck? Evaluate just the facts one by one. What did you promise, what was delivered. After you've done that, you'll be better able to decide whether you want to invest in arbitration.

georgepop2018 · ‎01-20-2021

Tonya, I hear you.

By the facts, pre-negotiation, and post-delivery - everything is congruent.

I definitely do not want to initiate an arbitration since I am happy with the current state of affairs. Was just unsure if I'm forced to accept an arbitration & pay my fees for a process I don't desire, since the proof of work is already provided and congruent.

Now I understand that Upwork actually does not decide on whether or not my work is aligned with the scope of work. But a 3rd party arbitrator will - and he needs to be paid by both parties regardless.

I will wait and let the client make his move. If he does decide to escalate, I have no problem paying my fee for the arbitrator and keep my Upwork account & reputation in good standing.

Thank you for your support so far.

prestonhunter · ‎01-20-2021

The best thing that any client can do to set themselves up for success in terms of completing a project, and also to save money, is to resolve from the onset that refunds, disputes and arbitration do not exist.

If a client can fully embrace this "reality":

Disputes do not exist.

Refunds to not exist.

Arbitration does not exist.

...then they have adopted the mental mindset that prevents really disastrous mistakes.

(Yes, I know these things DO exist in an emperical sense. I am saying that a mantra of a successful client is that these things do NOT exist.)

We see those mistakes over and over again in complaints by disappointed clients:

"I hired a freelancer and paid her a lot of money and I got nothing. Can I get my money back?"

Well... I most cases no, you can't get your money back.

Successful clients are thoughtful and proactive with regards to who they hire and how they manage their projects.

Rather than paying a freelancer $1000 for a website and then another $1000 and then finding they have nothing, successful clients (or their project managers) evaluate the work turned in by freelancers. They continue working with the best freelancers on their team, and then stop working with underperforming freelancers.

This seems so straightforward and simple that I almost feel silly typing these words. But I am constantly amazed by clients who end up sorry because they thought that maybe they could get money back from a freelancer who turned out to be completely wrong for the project. Sometimes the clients CAN get money back. If so, that may be good. Or it maybe bad. It is bad if they think they can do it the next time... And then the next time is much more costly and it turns out that they can't actually get any money back. A windfall refund of $50 from one freelancer could end up causing a client to be complacent. So he didn't check the work being done for three weeks by the next freelancer... and he ends up paying $3000 that he can't get back.

Think of it like this:
If a marathon runner, while training for his next marathon, darts in front of a car in order to avoid slowing his time by a few seconds, and then he gets hit... He CAN go to the hospital. There is a CHANCE that he can be patched up and be as good as new. Or maybe he will never walk again. Or maybe he will walk, but never again race competitively. So... Yes, empirically speaking, the hospital exists. But a SUCCESSFUL marathon runner doesn't dart in front of a car secure in the knowledge that hospitals exist. For a successful marathon runner, going to a hospital after getting hit by a car (in other words, seeking a refund/dispute/arbitration) will NEVER be part of a successful training strategy.

georgepop2018 · ‎01-20-2021

Preston - I understand your philosophy about approaching client work. And how "it should be". I really do.

But as you mentioned already yourself, this rarely happens in the real world. Personally, I'm adamant about setting client expectations right out of the gate + being hyper-specific about the Scope Of Work.

That's how you can avoid scope creep, unsatisfied clients, and in my opinion - have a strong case if the Client decides to ask for undeserved refunds.

But I do think adopting the mindset you propose would be beneficial.