Contractors' Questions: Any advice for unpaid 2e2 contractors?

Contractor’s Question: Following the announcement that 2e2 has been placed into administration, is there any advice on what to do next as a contractor?

Expert’s Answer:  While each situation depends on its own facts and it’s hard to generalise, contractors affected by the administration of 2e2 are likely to have two main concerns: payment of back pay and payment in the future.

Getting money owed

If you are operating through an agency to 2e2:

If you have not opted out of the Agency Conduct Regulations 2003, you should be paid even if the agency is not (regulation 12(a)). Seek any outstanding monies from them first. If they hide behind a clause that says you only get paid when the agency does, point out the above regulation. If the contract contradicts it, that clause is unenforceable and they should [still] pay.

If you are opted out, look at the contract you have with them. Does it actually say the agency pays you when it is paid?

a) If so, the agency will be a creditor and payment is unlikely so payment to you is unlikely too. Remember the agency may have insurance they can claim the money on so ask about this.

b) If not, depending on the contract the agency may need to pay you anyway and claim as a creditor to 2e2 themselves.

If you are contracted directly to 2e2, your claim is against them and you become a creditor. Your chances of recovery appear slim. Note however, there is a Claim Form in the administrators’ letter and do look at any insurance coverage you have which may be triggered by 2e2 entering into administration and notify any insurers as soon as possible.

If you contract with a client directly and 2e2 just take a separate introduction charge through a separate contract with 2e2, i.e. your invoices are rendered directly to a client, the client should pay as they have done. The administration will only affect the client’s payments to 2e2, not to you.

Going forward

This comes down to your contract.

If it allows for immediate termination because of administration (NOTE: insolvency is not administration), you may just want to terminate and look elsewhere for work. If not, and you might understandably not want to risk working with a company in administration, be careful about breaching your contract by ignoring notice periods as the administrators could in theory try to enforce them. The company is however in administration.

If you can get out of your 2e2 contract, if applicable, look to the client you are placed with. They may be happy to continue or direct you to a new PSL. Sometimes the client will make up money lost because 2e2 has failed to pay however, unless you contract direct with the client (see above), they have no direct obligation to pay old invoices. Things can then continue provided there are no restrictions preventing you from going direct.

If there are restrictions, they may be unenforceable again if you have not opted out of the Agency Conduct Regulations (regulation 6). The same is not true for the client so they may be slightly more reticent of breaching any restrictions in their terms with 2e2. If you have opted out, breaching these may result in a claim by 2e2 for loss of revenue. Again, however, any action is a matter for the administrators.

The expert was David Buckle, consultant employment solicitor at Cubism Law.


Thursday 31st Jan 2013
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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