Contractor Payment Hold: Options for Resolution

What are the potential courses of action available to the contractor if the employer withholds the entire invoice amount while the disagreement concerns only 5% of the invoice payment? Should the employer withhold the entire payment invoice or take action to release the payment that is not in dispute?

When an employer withholds the full invoice amount due to a disagreement over small portion of the payment, the contractor has several options to consider:

1. Negotiation: The contractor can initiate negotiations with the employer to release the undisputed portion of the payment while the disagreement is being resolved. By presenting evidence and addressing the employer's concerns, the contractor may convince the employer to release the withheld amount.

2. Formal Notice: The contractor can issue a formal notice to the employer, highlighting that the dispute pertains to only a small portion of the invoice and requesting immediate release of the undisputed payment. This notice can emphasize the contractor's intention to pursue legal remedies if the payment is not released promptly.

3. Legal Action: If negotiation and formal notice fail to yield results, the contractor may choose to take legal action against the employer. This could involve filing a lawsuit or initiating dispute resolution proceedings as outlined in the contract, such as mediation, arbitration, or adjudication.

4. Acceptance under Protest: In some cases, the contractor may accept the full payment under protest, explicitly stating that acceptance does not waive their right to pursue the disputed amount through legal channels. This allows the contractor to mitigate cash flow issues while still preserving their legal rights.

5. Contractual Remedies: Reviewing the contract terms may reveal specific remedies available to the contractor in the event of payment disputes. This could include provisions for interest on overdue payments, suspension of work, or termination of the contract.

Ultimately, the best course of action will depend on the specific circumstances of the dispute, the contractual provisions, and the willingness of both parties to reach a resolution. Open communication and a proactive approach to resolving disagreements are essential to maintaining a positive working relationship between the contractor and the employer.