Jeff on Call: They Decided Not to Hire

Jan 27, 2010

Q: The client signed a “retingency” agreement. The search begins on September 2008 and goes until October 15, 2009, more than one year later, when the client suddenly informs us after 16 candidate submissions and 10 interviews, that they have decided to not hire for the position.

Facts: There were two interested and qualified candidates they were speaking with at the time they decided to not hire for the position.

  • Our firm worked diligently through the recession to identify qualified candidates and client gave no notice of its intentions until October 15, 2009.
  • The 13-month search drained much more resources than the initial “retainer” of $18,000.
  • We asked for the second half of payment as we had interested and qualified candidates per client’s request, and they had decided suddenly to not hire for the position.
  • We also offered to apply the second payment as a credit toward any future search, however, client’s position is that they are expecting us to keep the first half of the total fee for one year’s work and no further payment is due.
  • There is no clause in the contract that addresses this situation of “client not hiring for the position.”

First, deciding not to hire for a position invokes the equitable (“conscience of the court”) theory of prevention.

Let’s say you pay a painter a deposit to paint your house. He buys the paint, hires a crew, and drives the truck to your house to start work. You lock the gate while everyone’s out on a beer break in your front yard.

You prevented their performance, so you owe them the balance for the job.

A second theory is promissory estoppel. The painter “reasonably relied” to his “detriment” on your promise to pay for the paint job. His reliance damages are his expenses, and whatever else the contract provides (attorney’s fees to collect, court costs, etc.).

Why? You are estopped (legally stopped) from asserting that no contract existed because you caused him to rely on its terms.

Then a third theory is breach of the implied covenant of good faith and fair dealing. The painter’s contract didn’t say you promised to leave the gate open. But a court will just assume that it was implied because painters don’t reasonably expect to be locked out of a house in the midst of a paint job.

Under any of these three theories, you’re entitled to the balance of your retainer. Your performance was rendered impossible by the client (prevention), you relied on the promise of full payment to your detriment (promissory estoppel), and the employer failed to cooperate with you so you could complete your performance (breach of the implied covenant of good faith and fair dealing).

If there are no additional facts, that fee is yours!

This and the other question you had were great questions. The answers are worth two well-earned placement fees. Best wishes in collecting them!

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