Get recruitment fees nailed down to avoid legal disputes, lawyer warns recruiters

Legal scales

An employment lawyer is warning agency recruiters to ensure terms of business with clients are as watertight as possible due to a spike in disputes over recruitment fees over the last 12 months.

Bristol-based Menzies Law revealed in a statement it has noticed around a 25% increase in these cases over the past year.

Luke Menzies, solicitor, barrister and owner of Menzies Law, says these cases usually take the form of two particularly common scenarios.

These include the so-called ‘back-door’ hire, where an agency makes the introduction of a candidate to a client. The candidate is not hired at the time but is subsequently hired after a period of time, when the client directly contacts the candidate, usually without the agency being aware until afterwards. The agency then seeks to claim its fee as its terms of business state that the fee is due if the candidate is hired by the client for any reason within a certain period following their initial introduction.

The second scenario is known as the ‘fee fight’, where Agency 1 introduces a candidate but the candidate is not hired. Subsequently, Agency 2 introduces the same candidate to the same client and the candidate is taken on. Agency 2 requests its fee and is invariably paid. Agency 1 then hears about the hire and also demands its fee as its terms of business have the same sort of terms as mentioned above.

In such cases, Menzies recommends agency recruiters consider the following points:

  • Are an agent’s terms of business binding on the client? For terms of business to be binding, they must be communicated to the client and accepted by the client; proving this point is crucial to successful claims for fees.
  • The law of ‘effective cause’, meaning that, ordinarily, an agent can only demand a fee if it was the ‘effective cause’ of the hire. Usually this is going to be obvious on the facts of the case, since the recruiter will usually have worked out the client’s requirements, chosen the candidate, arranged the interview and possibly a lot more. But Menzies warns the facts are specific to each case, so nothing can be taken for granted.
  • Whether a recruiter’s terms override the law of ‘effective cause’ – a general principle in contract law that means the terms of a contract can override rules such as the ‘effective cause’ rule if the wording is clear enough.
  • Client’s evidence – disputes tend to turn on the wording of terms of business, whether these were binding on the client and then, crucially, how the hire of the candidate actually took place and what caused it. The client’s account of events, including the trail of emails and their attachments, and the timeline of events relating to the candidate’s introduction, interview, salary negotiation, offer and acceptance can all be critical in deciding the legal outcome.

Menzies offers agency recruiters the following tips:

  • Don’t speculatively spam employers – establish a relationship first and concentrate on carrying out the job properly.
  • Ensure your clients provide proper evidence that they have accepted your terms of business. Terms such as ‘You will be deemed to have accepted our terms of business if…’ are not 100% watertight and you would be much better off if you ask each client to simply email you to say they have read and accepted your terms.
  • Spend a couple of hours with your business lawyer going through your terms and ensure that they mean what you think – and what you want – them to say.
  • Be aware that the more ‘aggressive’ terms of business may not necessarily be as watertight as you’d hope. Pick your battles, get good legal advice early on, and be reasonable but don’t be afraid to pipe up where you feel you’ve clearly been shafted, and demand what you think is rightfully yours.
  • Some agencies charge a higher fee in a ‘back-door’ hire scenario than for a standard hire. This can be lawful, so long as your terms and the size of the fee is carefully considered.