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Jeff’s On Call!: Candidates Paying Back Fees

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Oct 31, 2011

This week’s inquiry comes from Tim Burkhart:

Hello Jeff — really enjoy your industry input and availability via The Fordyce Letter. Always helpful.

I have been in the placement industry since 1984. Always on the perm staffing side of the business. Our company focus is in the accounting and finance area.

Quick question: a candidate of mine living in the city where I work has taken a job out of state via another recruiter. The candidate shows up for his first day of work and gets surprised with a ‘please sign this if you leave in the first year’ agreement. Basically, it states ‘if you leave our employ in the first year(12 months) you have to pay back the fee.’ That was never discussed by the recruiter (ever) or the client (ever) during the whole interview/offer /acceptance process. Is this legal or is he truly bound firmly to the agreement? He feels he signed this under duress for fearing his job offer would be rescinded.

Tim

Hi Tim,

It’s so great to hear from you.

My first “Placements and The Law” article rolled off The Fordyce Letter presses only a few months before you became a subscriber. In the headhunter’s jungle, you’re one of the respected elders. It’s our pleasure to still be with you as you approach 30 successful years of agony and ecstasy!

We’re delighted you’re now also benefiting from the JOC’s. With the help of Fordycers like you sharing your questions, we’re beaming placement law information worldwide.

Now – down to business:

Employee payback agreements (EPA’s) have been around since I worked a desk in the mid-60’s. The early ones can be traced to the days when APF (applicant-pay-fee) employment agencies morphed into EPF (employer-pay-fee) executive recruiters. They were a way for recruiters to close deals with employers by shifting the risk of loss to the candidate.

The short answer to your question is that EPA’s are legal. As we speak, I’m involved in hassles with several employers over attempts to recover the fees from falloffs. They won’t.

The reason isn’t the legality of the agreements. It’s the enforceability of them.

I’ll explain:

EPA’s are considered employment agreements. As such, they’re disfavored under the law. That’s a professional way of saying they’re disliked by judges and juries. So if the employer lawyer didn’t draft the EPA exactly right, it will be subject to attack by the ex’s lawyer. (That’s why we’re so careful to prepare our recruiter employment agreements properly. Then we even update them at no charge if the laws governing enforceability change.)

Are there patent (obvious) or latent (hidden) ambiguities (unclear terms)? Does the EPA reflect that the new hire knew and understood the terms? Does it prevent allegations of fraud (intentional misrepresentation), undue influence (coercion), or duress (threats)? How about allegations of mistake (caused by the ambiguities)? In this case surprise too, since the new hire didn’t have notice (a clue).

This should help your candidate. But without scoping out the EPA, I can’t tell you for sure.

Now – let’s quickly move on to something about EPA’s that you didn’t ask:

What if that other recruiter knew about or participated in presenting the EPA to the candidate on his start date?

In the famous word of Fordyce Founding Father Paul Hawkinson, “Hooboy!”

EPA’s seem so nifty as a marketing tool for recruiters.

In fact, if you don’t know the law, they’re as simple as A-B-C:

A. A job offer is accepted.
B. The candidate signs the EPA agreeing to pay back all or part of the fee if he leaves within a certain period.
C. The client pays you, figuring it gets the candidate to “stay or pay.”

Not simple if you know the law. That recruiter didn’t. Please don’t get involved in this trap. No fee is worth the grief with the candidate and the client!

We covered the dangers in Chapter 47 of The Placement Strategy Handbook entitled “The Employee Payback: Stay Back, Way Back!” It’s one of 60 chapters that make the PSH the bestselling recruiting aid of all time. It can be ordered for $32.50 at www.SearchResearchInstitute.com.

Thanks again for the great question, Tim. This should help your candidate and our readers.

Best wishes for continued success as you approach your 30th!

Jeff


If you have a legal question you’d like to have Jeff answer here on The Fordyce Letter, check out Jeff’s On Call! and submit your question.

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