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zelomi
Member

arbitration fee ?

 

 Hello:

 

 Reading through the forums I came across something called 'arbitration fee'. For what I understood (please correct me if I am wrong), this meant that in case of a dispute, both the client and freelancer had to pay a fee in order to have somebody to come and look at the case. And if you don't pay it, it automatically goes to the party that did pay the fee.

 

 Is this correct? If there is a dispute, I have to pay a fee in order for somebody to review the case?

 

 Sorry for the silly question, that's how I understood it from what I was reading. It seemed a bit strange and unfair to say the least. So I just wanted some clarification here. 

 

 Thanks!

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petra_r
Member

Due to Escrow legislation when there is a dispute over Escrow funds Upwork, as one of the parties, can not make a binding decision, only mediate to try and find a solution that both parties can agree to.

 

IF mediation fails, the only way to get a binding decision is to proceed to arbitration, which is an independent 3rd party not connected to Upwork or either party.

 

This costs all three parties $ 291 each (Upwork has to pay it too) and is non-refundable, unless the other party does not pay it, in which case no arbitration happens and the arbitration fee is returned.

 

This is ONLY for fixed rate contracts and ONLY for funds still in Escrow.

 

In general disputes should be avoided If at all possible, as they are time consuming, cost nerves, and do not represent a constructive use of time and effort.

 

Personally I would only dispute if someone was trying to scam me. 

 

Otherwise I vet my prospective clients carefully and trust my ability to handle somewhat tricky clients without having to resort to either disputes or mediation, let alone arbitration.

 

 

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32 REPLIES 32
petra_r
Member

Due to Escrow legislation when there is a dispute over Escrow funds Upwork, as one of the parties, can not make a binding decision, only mediate to try and find a solution that both parties can agree to.

 

IF mediation fails, the only way to get a binding decision is to proceed to arbitration, which is an independent 3rd party not connected to Upwork or either party.

 

This costs all three parties $ 291 each (Upwork has to pay it too) and is non-refundable, unless the other party does not pay it, in which case no arbitration happens and the arbitration fee is returned.

 

This is ONLY for fixed rate contracts and ONLY for funds still in Escrow.

 

In general disputes should be avoided If at all possible, as they are time consuming, cost nerves, and do not represent a constructive use of time and effort.

 

Personally I would only dispute if someone was trying to scam me. 

 

Otherwise I vet my prospective clients carefully and trust my ability to handle somewhat tricky clients without having to resort to either disputes or mediation, let alone arbitration.

 

 


@Petra R wrote:

Due to Escrow legislation when there is a dispute over Escrow funds Upwork, as one of the parties, can not make a binding decision, only mediate to try and find a solution that both parties can agree to.

 

IF mediation fails, the only way to get a binding decision is to proceed to arbitration, which is an independent 3rd party not connected to Upwork or either party.

 

 

 

 


 Ok, I understand it now. I somehow thought the fee was for any general dispute. I can see the difference. 

 

 


 

In general disputes should be avoided If at all possible, as they are time consuming, cost nerves, and do not represent a constructive use of time and effort.

 

Personally I would only dispute if someone was trying to scam me. 

 

Otherwise I vet my prospective clients carefully and trust my ability to handle somewhat tricky clients without having to resort to either disputes or mediation, let alone arbitration.

 

 


 Yes, I totally agree with you. I am not trying to dispute anything at all, nor have any intention. I just came across it and didn't fully understand it. That's all. 

 

 Thanks so much!


@Petra R wrote:

Due to Escrow legislation when there is a dispute over Escrow funds Upwork, as one of the parties, can not make a binding decision, only mediate to try and find a solution that both parties can agree to.

 

IF mediation fails, the only way to get a binding decision is to proceed to arbitration, which is an independent 3rd party not connected to Upwork or either party.

 

This costs all three parties $ 291 each (Upwork has to pay it too) and is non-refundable, unless the other party does not pay it, in which case no arbitration happens and the arbitration fee is returned.

 

This is ONLY for fixed rate contracts and ONLY for funds still in Escrow.

 

In general disputes should be avoided If at all possible, as they are time consuming, cost nerves, and do not represent a constructive use of time and effort.

 

Personally I would only dispute if someone was trying to scam me. 

 

Otherwise I vet my prospective clients carefully and trust my ability to handle somewhat tricky clients without having to resort to either disputes or mediation, let alone arbitration.

 

 


I asked Vladimir about this some time ago. It seems Upwork does not have to pay a third of the cost, but they do so as a courtesy to both parties to reduce the cost of arbitration.

 

 

Hi Petra,

I came across this conversation/your response, and I wanted to ask a related question.  I recently ended a contract with a client while there was still $30 in Escrow.  When I closed the contract, I approved the release of those funds back to the client.  There is now no money in Escrow.  But I then recieved notice from an Upwork mediator that the client is trying to dispute payments made to me through previous milestones that they had approved (those funds were already released from Escrow and deposited into my bank account.)  I have been trying to research this, and everything I read seems to say that the only money that could really be in dispute is that in the Escrow account still (which there is none), but I was told by the mediator: "Clients are able to dispute payments that were released up to 30 days ago and request a refund...The reason why dispute assistance is available to clients and freelancers who have had payments released within the last 30 days is that arbitration is still an option on those released payments.  We require full participation in disputes in order to get them resolved. So if the client elects to arbitrate and pays the fee, you do not, you violate the requirement of participation and action will be taken on your Upwork account until a resolution is reached with the client or until the arbitration fee is paid."   

 

This does not seem to go along with everything that I have read, or with your statement that "This is ONLY for fixed rate contracts and ONLY for funds still in Escrow," so I was hoping that you (or someone else) could help me to make sense of this.  Thank you in advance!

Hi Kimberly,

The client has the capacity to reach out to Upwork for a contract to be mediated if the funds were released within the last 30 days.You can read more details about this in our TOS under section 8.2 under the Dispute Assistance Policy .

If you have more questions about private details please post them on your ticket, the agent will answer them and assist you further. We can`t discuss private details publicly here in the Community.

~ Goran
Upwork

Thanks for responding Goran.  Section 8.2 seems to apply to Hourly, Bonus, and Expense Payment Agreements.  The contract in question was a fixed-price contract.  


@Kimberly B wrote:

Thanks for responding Goran.  Section 8.2 seems to apply to Hourly, Bonus, and Expense Payment Agreements.  The contract in question was a fixed-price contract.  


 ___________________________

Kimberly, I think too, that section 8.2 only applies to Hourly, Bonus and Expense payments. Have a look here which covers fixed-rate payments. I have just read through it, and I can't see anything about 30 days, but I may have missed something. https://www.upwork.com/legal/fp/

 

ETA: I don't think you should refund anything unless you feel your work was sub-standard. Although negative feedback will not show publicly if you refund, your JSS is still likely to take a hit.

 

Thanks Nichola. I don't plan to refund - the client reviewed and was happy with the work and chose to release the milestone (and actually gave me a bonus at the same time that she released that last milestone). But we then had a disagreement, and when I told her that we should go our separate ways and that I would be closing the contract, she decided to dispute.


@Kimberly B wrote:

Thanks Nichola. I don't plan to refund - the client reviewed and was happy with the work and chose to release the milestone (and actually gave me a bonus at the same time that she released that last milestone). But we then had a disagreement, and when I told her that we should go our separate ways and that I would be closing the contract, she decided to dispute.


 _________________________

In that case, and given that the 30 day "courtesy" extends to fixed-rate jobs, you will probably have to follow all the steps that involve the dispute process. If you are top rated and you decide to completely refund, you can use the TR perk to permanently remove all possible negative  feedback as a result of the dispute - or you can refuse to refund and take it to arbitration. The best solution, if this is at all possible, is to call a truce with your client and persuade her not to dispute. 

 

I do hope this works out for you.

Hi Kimberly,

I can confirm that the Dispute Assistance Policy extends this courtesy to Fixed-Price contracts as well. Non-binding dispute assistance (“Dispute Assistance”) is available within 30 days of the date of the last release of funds from Client to Freelancer.

~Nina

Thanks Nina.  I had read that too, but the part that is confusing me is that it says in section 5. DISPUTE ASSISTANCE PROGRAM - If Client and Freelancer fail to come to a mutual resolution by way of the Refund and Cancellation process as stated in Section 4, Upwork provides this Dispute Assistance Program as a mechanism to resolve the Dispute.  But when I read Section 4, it looks as if the Refund and Cancellation process was initiated in the manner that it needed to be by me returning the funds that were in Escrow.

 

4. REFUNDS AND CANCELLATIONS

Client and Freelancer are encouraged to come to a mutual agreement if refunds or cancellations are necessary. If there are no funds in escrow, Client or Freelancer can cancel the contract at any time by clicking to close the contract. If funds are held in escrow, refunds and cancellations must be initiated by Client or Freelancer by following the steps below.

4.1 CANCELLATION BY FREELANCER

If Freelancer wants to cancel a contract with funds held in escrow, Freelancer must click to close the contract. When Freelancer clicks to close the contract, Freelancer and Client agree that Upwork Escrow is authorized and irrevocably instructed to immediately release to Client all Escrow funds associated with the contract.

Nina, the page you linked doesn't apply to fixed priced milestones. The first sentence says as much.

 

EDIT: Mistakenly said "fixed priced contracts" instead of "fixed priced milestones."

Hi Luke,

I realize that the page I shared may seem confusing since it mentions Hourly, however I shared this because the information provided in section 8.2 applies to both Hourly and Fixed-Price contracts.

~Nina

Nina,

 

Again, the document itself says that it doesn't apply in the first sentence. 8.2 is governed by that statement as well.

 

In the one that applies to fixed price milestones, which is found here: https://www.upwork.com/legal/fp/ (conveniently titled "Fixed Priced Escrow Instructions"), the standard is 30 days from the last time the client was charged for a milestone. Further, the most significant possible resolution is the release of the remaining escrow to the client. There is no mention of refunding previously released funds. 

Nina, by the agreement's own terms (see below), a freelancer entering into a fixed price cotnract has not agreed to/accepted that policy. 

 

"By clicking to accept an Hourly Contract or make a bonus payment, Client and Freelancer are deemed to have executed this Agreement electronically, "

I think you might be missing the point. It’s a non-binding dispute assistance aka mediation. The client and/or freelancer are free to disagree with Upwork’s proposed resolution, in which case, they "must pursue the Dispute independently”. It doesn’t say anything about a $291 mandatory independent arbitration, so I guess “independently” means the client is free to sue the freelancer or whatever, and it’s none of Upwork’s business.

 

That’s for Fixed Price contacts at least. It seems Upwork is free to reverse payments on Hourly contracts within 30 days.

 

Can a moderator please clarify what “pursue the Dispute independently” means?

Sorry about the cofusion, Tiffany and Luke. 

 

Similar terms are stated in the Fixed-Price Escrow Instructions. Please, see sections 5.1:

 

“Dispute Assistance Deadline” means the date 30 days after the Client was billed for the last milestone.

 

and 5.2:

 

Dispute Assistance is only available (i) after initial funding of the Fixed Price Escrow Account associated with the Engagement, and (ii) prior to the Dispute Assistance Deadline. Dispute Assistance is not available to either the Freelancer or the Client via the Site after the Dispute Assistance Deadline.

~ Valeria
Upwork

Valeria, 

 

While those particular terms are similar, the fixed price agreement doesn't have any "clawback" provisions (which were the original issue and the reason the document was cited originally).

 

That is, money which is not in escrow is no longer refundable to the client according to the agreement, and the Upwork mediator should have informed Kimberly's client that they do not have the option for arbitration (as they've already received the maximum available award).

 

 

Thanks Luke-

That's the way I was reading the language on their terms of service (for fixed-price contracts) as well. But I was told by the mediator that arbitration is still an option on those already released payments, and that if the client elects to arbitrate and pays the fee, and I do not, I will be violating the "requirement of participation and action will be taken on your Upwork account" - meaning that they will suspend my account if I opt not to pay the $291. I cannot see how that is possibly the case. That would mean that any client could dispute any payment that they made within 30 days (after having had ample time to review the work, and then choosing to approve the milestone), and if the freelancer doesn't agree to the refund, they can insist on arbitration and force the freelancer to either pay or get their account suspended?

Unfortunately, on a close re-reading of both agreements in full, it turns out that freelancers have virtually no protection whatsoever.

 

The fixed price contract agreement does, in fact, allow a client to force the freelancer into arbitration if the freelancer refuses a refund, and that process can be initiated up to 30 days after initiation of a dispute, which can be initiated up to 30 days after the client is billed for the last milestone.

 

The net effect of this provision is that a freelancer has zero protection on fixed price contracts if he/she isn't willing and able to pay for arbitration (that much has always been clear, but previously most of us were under the impression that this applied only to funds in escrow). In fact, the entire fixed price contract appears to be at risk for 30 days after the last milestone is billed, and if an agreement isn't reached, the client can always force the freelancer to either pay for arbitration or make a refund.

 

Upshot: escrow provides no protection whatsoever, nor does release of funds in escrow, except in the case of a contract large enough that it is worthwhile for the freelancer to pay for arbitration.

 

 

There's ambiguity on what goes to arbitration; however, there's no reasonable reading of the agreement where it includes money that's already been released to the freelancer out of a fixed price milestone.

 

According to the agreement, the Upwork mediator doesn't have the authority to disperse any funds that aren't still in escrow. While the arbitrator's authority isn't outlined, no reasonable person would believe that you can appeal a decision that went as far in your favor as possible. That's not how appeals work. Further, any independent arbitrator would understand that "escrow" services mean the money can't be refunded after the fact; it's the whole point of escrow. You determine whether the milestones were met beforehand.

 

That is, after all, part of what Upwork's fees are supposed to be paying for.  There is no legitimate purpose for a client to be clawing back those funds, so including them would simply be helping clients scam freelancers, not "extending a courtesy."


@Luke T wrote:

There's ambiguity on what goes to arbitration; however, there's no reasonable reading of the agreement where it includes money that's already been released to the freelancer out of a fixed price milestone.

 

According to the agreement, the Upwork mediator doesn't have the authority to disperse any funds that aren't still in escrow. While the arbitrator's authority isn't outlined, no reasonable person would believe that you can appeal a decision that went as far in your favor as possible. That's not how appeals work. Further, any independent arbitrator would understand that "escrow" services mean the money can't be refunded after the fact; it's the whole point of escrow. You determine whether the milestones were met beforehand.

 

That is, after all, part of what Upwork's fees are supposed to be paying for.  There is no legitimate purpose for a client to be clawing back those funds, so including them would simply be helping clients scam freelancers, not "extending a courtesy."


 ______________________________

 

The problem is that since the 30-day "courtesy" period is (somewhat ambiguously) written into the ToS the freelancer's account could be put on hold until he or she has refunded the client. There are only two options and both are bad. There is a third possibility of persuading the client not to press for a refund, which seems unlikely in the circumstances.

If it were me I would not hesitate in taking it to arbitration. The client was not only pleased with the first lot of work done by this freelancer, but also gave her a bonus. I don't believe this opinion could be easily retracted.

Thank you all for the input/looking into this. I have absolutely no doubt that arbitration would fall in my favor, but the concept of paying $291 to dispute $30 seems ridiculous. Unless I am reading this part wrong, before arbitration takes place the client can only request a refund for milestones released within 30 days of the dispute. This was a 5+ month contract, but in the 30 days before the dispute only $30 had been released (and a $60 bonus, which I was told by Upwork's help center cannot be disputed). The only reason I would go to arbitration would be the principle of the thing, but I don't think it is in any way fair to be forced by Upwork into that situation. And if this is really their policy, I have to question if it even makes sense to be a freelancer on this platform.


@Kimberly B wrote:

Thank you all for the input/looking into this. I have absolutely no doubt that arbitration would fall in my favor, but the concept of paying $291 to dispute $30 seems ridiculous. Unless I am reading this part wrong, before arbitration takes place the client can only request a refund for milestones released within 30 days of the dispute. This was a 5+ month contract, but in the 30 days before the dispute only $30 had been released (and a $60 bonus, which I was told by Upwork's help center cannot be disputed). The only reason I would go to arbitration would be the principle of the thing, but I don't think it is in any way fair to be forced by Upwork into that situation. And if this is really their policy, I have to question if it even makes sense to be a freelancer on this platform.


 _____________________________

It really is a case of rock and a hard place - and it is not only unfair, it simply does not make sense and raises two more questions. What happens to the 20% (or 10%) service charge in the case of a refund? And if a client is allowed to demand a refund (in this case, most unfairly, and pinpoints the client's unprofessionalism) is the client then allowed to change the private feedback?

 

 

 


@Kimberly B wrote:

Thank you all for the input/looking into this. I have absolutely no doubt that arbitration would fall in my favor, but the concept of paying $291 to dispute $30 seems ridiculous. Unless I am reading this part wrong, before arbitration takes place the client can only request a refund for milestones released within 30 days of the dispute. This was a 5+ month contract, but in the 30 days before the dispute only $30 had been released (and a $60 bonus, which I was told by Upwork's help center cannot be disputed). The only reason I would go to arbitration would be the principle of the thing, but I don't think it is in any way fair to be forced by Upwork into that situation. And if this is really their policy, I have to question if it even makes sense to be a freelancer on this platform.


 Kimberly, I'm not at all sure your reading is correct here. The language isn't entirely clear, but given that it says 30 days after the client is "billed for the last milestone," it seems as if the dispute may encompass the entire contract. I know that contradicts what moderators have repeatedly stated here in the forums, but so does the 30-day window. And, at least one other freelancer who has gone to arbitration posted that the arbitrator said the whole contract was potentially fair game.


@Tiffany S wrote:


 Kimberly, I'm not at all sure your reading is correct here. The language isn't entirely clear, but given that it says 30 days after the client is "billed for the last milestone," it seems as if the dispute may encompass the entire contract. I know that contradicts what moderators have repeatedly stated here in the forums, but so does the 30-day window. And, at least one other freelancer who has gone to arbitration posted that the arbitrator said the whole contract was potentially fair game.


 There are so many concerning things about this.  Fortunately, I have not had a dispute yet. But the possibilities...

 

I originally started freelancing through platforms like Upwork because I thought they were lower risk. The commentary from staff and documentations imply it may even be more risky to freelance through Upwork than out in the "wilds."  I can't imagine that is true, but it would be by worst-case interpretation.

 

I am reconsidering my long-term contracts. If someone has an open contract for over a year and receives monthly payments, does that mean that the client can dispute 12 months of payments? This makes it sound like long-term contracts are kind of risky. Should I be closing the contract every month to limit the damage to the past 30 days? I can't imagine this would be good for client satisfaction or convenience. I can see a courtesy period of maybe 30 days, but this sounds like that courtesy period goes back indefinitely for long-term contracts? Surely there should be a limitation.

 

It also makes me wonder what's the point of the "bring your own client" promotion? After reading this, I certainly would not bring a client here if that makes the contract higher risk than working with that client directly. (I am not talking about circumvention, just bringing clients I meet elsewhere here). 

I was told by someone on the call-in help line that until it goes to arbitration, the client can only request a refund of funds released in that last 30 days. But that during the arbitration process, they can argue over the entire amount that they have paid on the contract. I'm not sure if this is really accurate though, as I have been told differing things from the help line and the mediator (about other issues - such as whether or not arbitration is even possible with no money in escrow, not about this specific issue of what money is in question for the 30 day rule). If that is true though, it's a question of refunding $30 or paying $291 for arbitration. The obvious answer would seem to be to refund $30, but honestly, I just don't think I am willing to do that.

Luke, I believe you are overlooking these provisions from the general terms of service:

 

Notwithstanding any other provision of the Terms of Service or the Escrow Instructions, and except as prohibited by applicable law, if we determine in our sole discretion that you have violated the conditions and restrictions of the Site or the Terms of Service, Upwork Escrow may hold the disbursement of the Freelancer Fees.  Additionally, Upwork Escrow may also hold the disbursement of the Freelancer Fees if: (a) we require additional information, such as Freelancer’s tax information, government-issued identification, address, or date of birth; (b) we have reason to believe the Freelancer Fees may be subject to dispute or chargeback; (c) we suspect fraud; (d) we believe there are reasonable grounds for insecurity with respect to the performance of obligations under a Service Contract, this Agreement, or other Terms of Service; (e) we deem it necessary in connection with any investigation; or (f) required by applicable law.

In cases of fraud, abuse, or violation of the Terms of Service, Upwork reserves the right to revoke any payments and instruct Upwork Escrow to (and Upwork Escrow will have the right to) hold and reclaim from Upwork Escrow all Freelancer Fees due to Freelancer (not just the Freelancer Fees from the Service Contract(s) under investigation) unless prohibited by applicable law.  In addition, we reserve the right to seek reimbursement from you, and you will reimburse us, if we suspect fraud or criminal activity associated with your payment, withdrawal, or Engagement; if we discover erroneous or duplicate transactions; or if we have supplied our services in accordance with this Agreement yet we receive any chargeback from the Payment Method used by you, or used by your Client if you are a Freelancer.  You agree that we have the right to obtain such reimbursement by instructing Upwork Escrow to (and Upwork Escrow will have the right to) charge an applicable Escrow Account, and any other accounts you hold with us, offsetting any amounts determined to be owing, deducting amounts from future payments or withdrawals, charging your Payment Method, or obtaining reimbursement from you by any other lawful means.  Failure to pay for reimbursements of chargebacks is cause for termination of the applicable Escrow Account and revocation of your access to the Site.

Tiffany,

 

That only allows clawbacks for "cases of fraud, abuse, or violation of the Terms of Service" or chargebacks.

 

There's nothing about arbitration in there.


@Luke T wrote:

Tiffany,

 

That only allows clawbacks for "cases of fraud, abuse, or violation of the Terms of Service" or chargebacks.

 

There's nothing about arbitration in there.


 Not cooperating with or complying with the outcome of arbitration is a TOS violation.

Apparently, it's not 'only' for funds held in Escrow. I have a client who has raised arbitration after approving work where no funds are held in escrow. He was refunded his escrow when the job was closed and I delivered all the files and all the work (even for the final milestone). Upwork is saying that if I don't enter into arbitration that my account will be suspended. So, here is a situation where the client has received 100% of the work and is free to hire someone else to make the additional changes he was trying to get me to make for free during the final milestone. He has been handed over all of the work that had been agreed upon and there is nothing in escrow. Yet, upwork is saying this needs to go to arbitration. 

Indiana, you do have to agree to it I'm afraid otherwise your account will be suspended - there is no room for argument here. Don't forget you may well win the case and I very much hope you do. Just give all the evidence you have and pay the whack and see what happens. It does seem quite outrageous that you have refunded the money in escrow, and that the client seems to be pursuing for more. But everything might well go your way - morally - if not financially. 

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