WA Contractor - Pay Deducted to Pay Off Personal Loan?

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19 March 2015
I was a self employed delivery contractor and was paid fortnightly via invoice. Previous pay was advised that I had been overpaid due to person putting in the pay (primary contractor) entering payment twice. He rings me to tell me that I had been overpaid.
Today is pay day however he tells me that he has deducted the overpayment without repayment arrangement. I had invoiced him for 2 weeks work and should have 1100.00 odd dollars due.
I had a personal loan given to me by other primary contractor of 4700.00 repayments at 250.00 per fortnight.
Last week I had to finish work. As we don't get paid for days off I would have had to have several days off for doctors appointments which I would need to make. I made the decision to leave work which I did Friday last. I had been employed there since November 2012.
I rung him and asked if he was putting my pay in, he tells me no that he had deducted the full amount owing and the balance of my pay was being held until personal loan paid.
Please advise.

Sarah J

Well-Known Member
16 July 2014
Melbourne, Victoria
Hi Alvareta,

As far as I know:

  1. As for your client deducting payments for previous overpayments, unless (i) your service agreement prevents this, or (ii) you dispute their claim that you were overpaid, there is not much you can do. Since if you initiate an action for debt recovery (to recover the amount deducted) they can claim a set-off against the amount their wrongfully paid you, which would leave you in your current position.
  2. As for whether or not your client (person A) can withhold payment for monies due by you to another contractor (person B), this will depend on (i) your service agreement with person A and (ii) your loan agreement with person B. Does either of the agreements allow the other side to withhold money for repayment of the loan? If not, then person A appears to be contractually bound to pay you. You can initiate an action for debt recovery with the WA Small Claims with the Magistrates' Court. See WA Legal Aid's "Going to court for a debt" article. Before you initiate action, you should send person A a letter of demand.
  3. However, you should arrange a repayment plan with person B regarding your loan.
Contact your client and negotiate a payment schedule with them. Tell them about your concerns and ask them to pay you your invoiced amount and then agree on a payment arrangement to repay them the amount they overpaid.
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