The Allen Magic Collect-A-Fee System, Part 1

Oct 20, 2009

The Allen Magic Collect-A-Fee System was actually introduced over 30 years ago. It was unveiled at a California Association of Personnel Consultants convention on the day I was voted in as its General Counsel. The seminar was recorded, and over the next two decades, became the most popular title in the EMPLAW Audio Series. Since then, the 10-point system has been refined as the law, technology, and our business has evolved.

In one way or another, The Allen Magic Collect-A-Fee System is now used in thousands of offices every day. It has also been adapted to collect retainer balances and temp service fees. It’s impossible to know how much has been collected in well-earned fees, but the amount through use of that little $39.95 package is easily in the tens of millions of dollars.

The package came with the guarantee of a free collection from our offices if any recruiter who used the system wasn’t paid. To this day, nobody has ever needed the guarantee; nobody ever asked for a refund either. The system is out of print now, and only those who still have the package get the guarantee.

Here are the details:

1. Obtain any written confirmation of the fee from the employer.

This is done best by emailing or faxing a copy of your customized fee letter to the person responsible for the fee and requesting a signature. You can use a customized cover letter with a fee schedule, but we prefer the fee letter format because it’s more marketable and just as enforceable.

There’s still some reluctance to do this by recruiters, but those who won’t work the search without a signature have almost no receivables.

I don’t recommend Certified Mail Return Receipt Requested or overnight mail anymore because a fax signature and return is so easy to obtain. It’s also legally enforceable (but rarely contested).

A signature is more than just legal confirmation of delivery and acceptance; it’s a personal commitment, a person’s seal. People will argue about almost everything else, but when people sign something they’re instinctively accepting responsibility for it. They are “bound” by their “bond.”

Will an email that says, “I don’t agree to the terms of the fee schedule you sent” work? Absolutely – if you can show that the employer hired the candidate anyway! This is an implied-in-fact acceptance. (Like watching the painter paint your house after he gave you a written estimate.)

In my entire career — including working on both sides of the desk – I’ve never seen any employer object to signing a fee agreement who was serious about paying a fee. In fact, over 75% of the fee disputes we handle involve unsigned fee schedules.

When you’ve identified someone an employer thinks it needs, you can get whatever you want. Just don’t reveal contact information until that fee is shored up with a signature (no – yours doesn’t count). A signature of the person responsible for the fee is best, but even an “unauthorized hiring authority” will bind any employer (temps, copy machine technicians, janitors, security guards – as long as they can sign their names).

If you think this doesn’t matter because the employer has paid your fees before, you may be disappointed when they allege that as a defense. (“See judge? We pay fees –when they’re due!”)

. . . and please don’t ever email or fax a fee schedule with a signature line for the employer unless you won’t work the search without a signature. One of the best fee-avoidance techniques is simply, “If we’d agreed, we would have signed it!”

There are alternatives to this – if you can get return correspondence that acknowledges receipt of the schedule. This is difficult to obtain and not always the equivalent of “acceptance.”

The placement fee agreement is a unilateral contract. That means an act (making a placement) in exchange for a promise (to pay). No placement, no fee.

This differs from the ordinary bilateral contract where each party is obligated to do something (“mutuality of obligation”).

Actually, it’s a reverse unilateral contract since the offer (job order) is being solicited by the offeree (recruiter). This is why employer lawyers get so confused – there’s only one case on reverse unilateral contracts in the first-year contracts casebook.

Even the consideration (fee) is not ascertained at the time of the solicitation.

You’ll always have trouble with “An acceptance of referrals means acceptance of our fee schedule.” This is because the employer will simply deny it received the fee schedule at all! No receipt – no communication of the offer – therefore, no acceptance.

I’m going to lay out the contingency-fee placement process. At what point do you think the relationship “ripens” into a contractual obligation on the part of the employer?

Cold Call–Solicit Job Order–Verbally Confirm Fee–Send Fee Schedule—Receive Written Confirmation of Receipt of Fee Schedule—Receive Verbal Agreement to Written Fee Schedule—Receive Signed Fee Schedule—Present Candidate—Arrange Interview—Request to Check References—Assist with Offer—Receive Offer Letter—Receive Notification of Acceptance—Candidate Starts—Invoice Sent

The answer is nowhere prior to the start (Candidate Starts) is there an executed (completed) contract! If that doesn’t have you drawing signature lines, nothing will.

2. Don’t reduce your fee prior to a placement.

I know this is easier said than done, but here’s a statistic that speaks for itself: Over 90% of all fee collections we handle involve reduced fees.

Lower your fee if you must. Have several fee letters if you must. But if you allow some “client” who’s on a contingency-fee basis in the first place to give you some nonsense about “fee ceilings,” volume hiring, placing you on the “preferred list,” or anything else, truly you’re headed for a fee fight.

They just know they can take advantage of you.

3. Confirm the interview in writing.

Some of the ways to do this include:

  • Interview confirmation emails.
  • Sendout slips to the employer and candidate.
  • Updates on the status of the interviewing process to the candidate.
  • Updates on the candidate’s temperature to the employer.

The more communication in writing regarding the placement, the better. Judges love evidence – yet they see so little of it. When they see something that’s actually relevant, that fee is yours.

4. Build a file connecting your business with the candidate.

Here are some examples (in order of importance):

  • A letter from the candidate requesting that you represent him. This includes website references.
  • A letter from you to the candidate acknowledging your representation.
  • Database entries regarding the candidate.
  • A worksheet on the candidate.
  • A resume from the candidate.
  • Reference checks and employment verifications.

The candidate is the subject matter of the contract. Demonstrate your efforts while you can. Build up that file with email confirmations, sendout slips, interview confirmation letters, and anything else you can. The more the better.

5. Confirm the hire by a letter to the employer.

A copy to the candidate is fine. The letter should include:

  • The date employment will commence.
  • The job title.
  • The starting salary.
  • And the fee (almost forgot!).

This is far more than congratulations – it’s confirmation.

Legally, there are two presumptions working here that shift the burden of proof to the employer:

  • Under the original “common law,” a letter sent by First Class Mail, properly addressed and postpaid, is deemed delivered and accepted by the addressee. Today, email and fax transmissions are generally considered within the presumption, too.
  • Silence to an offer where a reasonable person would accept is deemed an acceptance.

Knowing this alone can save an otherwise uncollectible fee. It’s based on the common knowledge that emails can be deleted by a wrong “click,” faxes in large companies are lost every day, the post office can goof, and busy people who are hiring often don’t answer their correspondence immediately.

HR managers and supervisors must take lessons in how to say, “We get so much paper from these headhunters that we just toss most of it out.” When they say it under oath, you get a full fee.

Keep in mind that this won’t work at the fee confirmation stage. You need to do more than just allege that you sent a fee letter or schedule to establish agreement to the terms of a contract.

Editor’s note: Look for part 2 tomorrow!

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