Jeff on Call: The Rainmaker’s Followers

Feb 18, 2010

Q: Jeff, I think this may be at least a two-part question.

First, once you recruit a “rainmaker” or leader of a company and you know this candidate will want to bring other staff (the successful placement may even be based on whether other staff will follow), what is the proper/legal approach the recruiter should follow to minimize any legal action for himself and/or the hiring company?

When a candidate is recruited and you know at least one assistant will follow because the candidate told you so, you do not have the contact information of the assistant because the candidate is unwilling to give it up at that time but will leave my contact for the assistant with directions to call me when he walks out the door, and this information is made known to the hiring authority when introducing the candidate, should the recruiter get credit for the placement? In this case, the candidate, who was hired, definitely planned on bringing the assistant; this was known and agreed to with the hiring authority early in the process. Within two days after the candidate had resigned and started his new position, the assistant was terminated, the candidate called the hiring authority and give him the contact information rather than myself. The hiring authority and I had previously verbally agreed that whoever followed up with the assistant, it was OK; I thought that he was just saying “let’s expedite the process” rather than, if he calls the assistant, “there is no fee.” The hiring authority kept me informed of his process and asked me not to intervene. My assumption was that there was initial concern of “collusion” on the part of the candidate and his agreement with the former employer.

As it stands, I am working with this company with multiple locations on other recruiting projects for which there may be teams coming over. This is in fact the direction of the hiring authority, “to recruit individuals or teams who can bring a minimum of $500,000 revenue” or “don’t call.” When you work with candidates who control books of business from $1-3 million in revenue, it’s a given that they want their team in place to continue to handle the business. How is this best handled? (At this point, we’re talking fees on compensation packages of $200,000 to over $1M ($50,000 to $250,000 per placement or team).

Terrific questions — actually three!

Let’s cover them in order:

  1. There are no reported cases where a “magnetic candidate” (what you call a “rainmaker”) had vicariously (acting as a conduit) invoked liability for a corporate raid by the recruiter. The three basic tort (non-contractual civil) theories are inducing breach of contract (between the candidate and the source), interference with contractual relations, and interference with prospective economic advantage. But these are intentional torts (not negligent ones), so require a recruiter actively marching in the parade, rather than passively watching it. Now, on to getting paid:
  2. If you tell me a magnetic candidate referred a former coworker directly to one of your clients, I ask you “WHY?” Every candidate (magnetic or not) should be: A. Wrung dry of all possible leads on other candidates. That means every name, address, phone number, fax number, and e-mail address along with the title and experience of each. You should be ve-r-r-r-y aggressive here. Recruit each one, obtaining their background. Whether you run with them or not, these leads must be in your database. B: Instructed to inform the client to contact you for information on each one they are interested in hiring. If there is an employee referral fee, tell Maggie Magnet you’ll pay her triple the amount if a referred candidate is hired. The typical employer bounty is so small that paying triple for a placement is no big deal. Then tell Maggie that the little bit of money and political gain is no gift if she ever needs a reference from her former employer. Direct referrals of former employees cause nasty lawsuits too. The majority of employment agreements include a “non-solicitation” clause. The bottom line for you is the bottom line. You can prevent direct candidate referrals by doing what you do best — recruiting. And finally:
  3. Your fee schedule (or more-marketable fee letter) must say something like: In the event you engage a candidate, or any person a candidate refers, to perform services, whether as an employee or independent contractor, the fee shall be due.

Be extremely careful when you insert this sentence in your fee schedule. The clause must be consistent with the rest of the document. This is a big deal, since any ambiguities, whether latent (hidden) or patent (obvious) will be construed against you since it’s your document.

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