Good morning Shane,
As a 1099 employee, he operated as his own company, contracting with your company for jobs, and would be paid pursuant to the contractual agreement between the two of you.
I would presume that your contract provided that he be paid ONLY for jobs actually done, and not paid a retained simply because he was available for jobs, but did not do any work for your company.
That fact that he spent money trying to drum up business for your company, who would in turn, send him out on the jobs and each of you earn income---and to the extent that he did not earn any income because he did not provide you clients/customers with jobs to send him out on---you owe him nothing under the law.
You specifically asked: So is it safe to assume that I am not liable for any compensation? Base on all the fact that you have provided me, you are correct. You would not owe this 1099 contractor anything. You are not responsible for his own, personal business expenditures. Those expenses were his choice to incur and they were incurred for HIS business, in an attempt to get employment for himself. The fact that you too would have benefited by any customers that he found does not obligate you to pay for all or part of the expenses he chose to take on.
Unless your contract with him promises wages for work not done---which I would find rather hard to believe, then if he did not work for you, he is not entitled to any wages.
Finally, had he consulted with his local attorney and been told you owed him $10,000---I would have expected that you would hear this sort of threat of suit from his attorney---not from him---and I would have expected something more than just an assertion that you owe him money. I would have expected something like a legal justification for why you owe him money, how the amount of money he claims you owe is determined, and the law supporting his claim that you owe him money.
Yes, I think that this was simply a bluff. There is nothing you can do to stop the guy from complaining. All you can do is tell him that you are sorry, the agreement was that he would be paid for jobs he went out on, and as he didn’t go out on any, he was not paid, per the agreement. It really is that straightforward.
No, I don’t see any liability for you.
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