Hi Jeff,
Firstly, what a great website — instantly saved on my favourites after having found you!
And now, a little bit about me. I’ve been in recruitment for 16 years, love the rewards and challenges immensely and have worked and lived in South Africa, and now in New Zealand.
A new quandary has surfaced and I am not sure how to deal with it. It’s a first for me. Maybe you could provide a solution?
My client has used our services for two year,s and I have successfully placed most of his staff. Great relationship, until now.
Earlier this year I placed a sales person who did not last their three month trial period. I was asked to replace the candidate. At the same time I was asked to place a senior manager for the same company, which I did in a short space of time.
I billed the client for the senior manager’s role as per normal.
Whilst I was in the process of recruiting a replacement for the sales person, which was taking a little longer than anticipated, the client asked me if they could split the senior manager fee, and pay the balance once the sales person was secured. I agreed to that, confident that the replacement was imminent.
The client paid half as they said they would. All good.
I successfully replaced the sales person a few weeks later, and I requested the balance of the fee that we agreed would be now due. No such luck, they simply ignored by reminders and telephonic requests.
Just short of the senior manager’s three month trial, they asked him to move on as they could not afford to keep him on due to cash flow issues. I was gutted, my senior manager candidate was gutted, and I was really worried that this client had taken me for a sucker.
On calling my client to ask what was going on, he said that the senior manager that I placed there was useless, terrible, cost him a fortune, and decided to move him on. He is now refusing to pay the balance of the placement fee.
I don’t know what to do. Could you point me in the right direction here?
Please know that I am good at my job. I place high caliber people in a wide range of roles across a variety of companies, and do due diligence on both the client and candidate. I care about the people I place and I don’t like being made a fool of.
Thanks very much indeed.
Jenny P.
Jeff Responds
Hi Jenny,
We’re so glad you’ve discovered the JOC column!
If you think it’s a “favourite” now, just wait ’til we start pumpin’ your placin’.
Whether you’re in South Africa, New Zealand or anywhere else on the placement planet, we’ll be on your screen with some new technique to help.
Here’s my new reader gift to you. Just:
- Shout, “I won’t be fooled any more!”
- Go to www.placementlaw.com.
- Click the red JEFF’S ON CALL! button.
- Type Forty Phony Fee Fighters in the Subject field.
- Click Send.
I’ll reply with the Forty Phony Five-Figure Fee Fighters.
Our name for this phony fee fighter is a forced guarantee. Setting up your fee properly and standing your ground are the ways to get paid when it’s attempted.
Here’s how:
1. Use a pro-rata refund guarantee.
The forced guarantee can only happen with a replacement guarantee.
Please don’t promise to “replace” one unique human being subjectively selected by another who owes nothing for his mistakes, miscalculations and misfits. The only recruiters who like replacement guarantees are the ones who’ve never had the pleasure of spending endless hours and angst trying to please a capricious, cranky “client.”
Think of it as receiving a full retainer to do a search after you’ve already done a completed search without being paid. Only worse. Now the “client” is blaming you for its loss of time and business, and now the “client” wants a full refund. It’s just got to be clever to extract it from you when the contract has no refund provision.
The opening is cold and old, the specs have changed, and some manager’s trying to justify why you were paid. So there’s every motivation to engage in five-figure fooling.
It gets worse. A replacement guarantee is essentially a warranty. You’re warranting (unconditionally and continuously promising) that the stranger (“client”) will be absolutely and continually satisfied (reasonably or even unreasonably) with the other stranger (candidate) in a situation you can’t control.
But a simple 30-day pro-rata refund guarantee gives you a terrific marketing tool. Employers love it because it’s unconditional. Sophisticated placers love it because (1) a short payment leash gets the cash fast (or no guarantee), and (2) they don’t write a refund check (30 days isn’t usually enough time for firing or quitting).
Since every state is different (and of course, every country), check with a New Zealand attorney for the proper wording. Be absolutely sure is doesn’t conflict in any way – expressly or impliedly – with the rest of the agreement. (If it does, you’ll create an ambiguity that will be construed against you.)
2. Make continued services contingent upon full payment.
This is legally a condition precedent. That means the condition (event) of payment in full must precede (occur before) you perform any more services.
No games here: Ongoing services are provided only if every penny of every outstanding invoice for every service has been paid in full. You fell for this one, Jenny. It’s so easy to do with a “valued client,” but your valued dependents must come first. A photo on your desk of your loved ones helps. I’d suggest a screensaver, but using our free Recruiter Screensaver downloadable at www.placementlaw.com is just too lucrative to pass up.
Then — even if you haven’t set up the payment term properly . . .
3. Stop all work immediately.
No games here either: Be very disciplined about this and be very obvious. When you stop work it’s a bold, unequivocal statement. So state it in writing, and don’t waste any more time negotiating with people who’ve “fooled you once.” Deferred payment for a completed placement? No way. No games.
You’re being faced with an anticipatory breach of contract when a client does a dollar dance. An anticipatory breach (also called more accurately an anticipatory repudiation) legally allows you to stop work. This is because you’re not required to wait and worry while you work. You’ve lost the reasonable expectancy of contractually promised payment.
4. Enforce payment immediately.
If it makes you feel better, send a “final” statement. Just be sure to include every penny of the amount of every service you performed and every other charge (usually only interest). If you don’t (so often the case), you run the risk that the client will allege you waived (voluntarily relinquished) your right to anything more. (This happens frequently when discounts for prompt payment are reiterated in a futile attempt to nurse payment from a “silent client.”)
An anticipatory breach of contract also gives you the right to immediately file a lawsuit for breach of contract. So when the “silent client” just ignores you – an unequivocal statement louder than you wrote when you stopped work – understand it.
Jenny, the biggest mistake you made was agreeing to that half (“split”) payment from this client while continuing to perform services. Essentially you said, “I care about getting paid only half as much as you care about making sure you made the right hiring decision.”
It makes no difference what reason you’re given for no payment. True or false, right or wrong, intentional or negligent, even serious or bluffing.
This client has now gone from paying you for solving its problem to solving its problem by not paying you. That just wasn’t the deal.
Doing any further work in the face of an anticipatory breach – even on pending placements – truly says, “I don’t care about getting paid at all.” Unfortunately, you won’t.
There’s always some reason to kid yourself: Other pending placements (as here), a track record of past placements (as here), past payment (as here), promised business (as here), a “friend,” fear of losing the client, believing your own recruiting rhetoric about the client, whatever. Always some justification to defer the inevitable. Anger, criticism. insults, confrontation, threats, blame.
A forced guarantee is really a contradiction in terms. If you’re forced to do something with no separate consideration (benefit) in return, you haven’t agreed. Ergo, no duty to perform (the replacement placement). A contract is an agreement supported by consideration.
So a forced guarantee doesn’t work legally for the employer. It only works practically for it by your consent.
Before we’re done, everyone please:
- Go to www.placementlaw.com.
- Click the Placement Fee Collection Quiz at the beginning of the bottom row.
- Take the PFCQ.
- Click the Answers to Placement Law Quizzes at the end of the bottom row.
- Grade yourself.
Now you’re sure to be better at this nasty collection business.
There you have it, Jenny. To New Zealand and the rest of the placement places with best wishes from your “favourite” for many more years of paid success!
Jeff
