Recruitment agencies will be able to refuse clients a refund in certain cases, following  a key legal ruling.

The ruling relates to refunds for candidates who don’t stay with the company for a set period of time, typically 13 weeks. Clients will no longer be able to claim a refund if they did not pay the agency fee within by a certain time period, usually seven days. 

Euro London Appointments took Claessens International, a marketing agency, to the Court of Appeal regarding two placements it made for them in 2004. In both cases, the candidates left the employ of the client before the 13th week, and under the terms
of the employment contract, the client was entitled to a refund of the proportion of the fee provided they paid the invoice within seven days.
However, the client failed to pay the invoice at all and Euro London refused a refund. An initial judgement ruled in favour of Claessens and stated it was a disguised penalty clause and therefore unenforceable. The Court of Appeal judgement Euro London Appointments v Claessens International overturned this decision and found in Euro London’s favour, viewing the clause as a commercial necessity in order to act as an incentive for payment.

“We see this as a victory for all recruitment consultancies, the large majority of which have this clause in their terms and conditions,” said Euro London Appointments director Steve Shacklock.
Charles Boyle, a barrister for the Recruitment and Employment Confederation (REC), which backed Euro London Appointments, said: “This is great news for agencies, as it means that they are legally entitled to refuse a rebate if the client has not paid the introduction fee within the period set in the contract which expressly makes the rebate conditional on payment within that time.”

The REC added it was “delighted by this ruling because it recognises that employment agencies deserve appropriate compensation”.