Jeff’s On Call!: Employer PSA Limitations

This week’s inquiry comes from Michael Evdemon II:

Jeff,

I am a veteran recruiter for 2 ½ decades in the insurance industry. During that time, I’ve benefited tremendously from your writing, legal knowledge, and improvement of our profession.

My concern is that many of the employer PSA’s (placement service agreements) mandate that the search is only for the specific position. This cuts our effectiveness and ability to make additional placements by at least half — before we even pick up the phone or send an email.

It also undercuts what a professional search firm should be doing for a client. The recruiter is prevented from presenting highly-qualified candidates that have been determined to be an asset to the client. Why would a quality search firm be denied to inform an organization like that?

From your writing, it seems this is legal as long as the exclusion is job-related. But what can we do about it?

Thanks for your anticipated reply!

Sincerely,

Michael

Hi Michael,

Great to hear from one of the search superstars of the insurance industry!

My assistant Beverly still has the thoughtful thank-you letter you wrote her on March 13, 1996 when you were just starting your business. You were a class act from the beginning, and it’s undoubtedly a major reason for your 2½-decade success.

I have great news for you and all the other recruiters who think they’re bound by position-specific PSA’s (placement service agreements). But first, let’s review what they do:

These employer-generated masterpieces attempt to give the client total control over the placement process. They contractually foreclose referrals for other positions two ways:

Expressly by stating that payment for referrals of candidates for any other position won’t be honored.
Impliedly by simply identifying the target job or by a “through HR only” procedure that enables HR to block any attempt to refer candidates for other positions.

If you understand the mindset of an employer lawyer, you know why this happens. It’s among the many unintended consequences of an overwritten agreement.

HR types ask employer lawyers to draft PSA’s for political reasons. It can take years to get one of these babies done, so it’s job security for years. The result is contractual power they don’t have naturally. As an HR manager for almost a decade, I can give you all the business reasons for PSA’s (runaway recruiters, outrageous placement fees, wild supervisors, whatever). But no manager really concerned about the bottom line cares about that nonsense. He wants the most productive people possible working at capacity.

That brings us to the two reasons you can get paid for presenting anyone you like to anyone you like at any PSA’ed client. These reasons are based on common law principles. That means common-sense, judge-made, fair judicial precedents (tradition) in the United States. Common law principles permeate our entire system of laws.

The two that apply here are:

The rule of construction.

This says simply that any ambiguities (uncertainties) in a contract are construed (interpreted) against the maker of the contract.

Now that you know this, look at any position-specific PSA. (1) What does it say about foreclosing non-position referrals? Nothing? (2) What does it require the client to do if a non-position referral occurs? Nothing? (3) What does it say about notifying the recruiter that the candidate for a non-position isn’t being considered? Nothing?

See what I mean? And I haven’t even seen the PSA!

Waiver and estoppel.

A waiver is the voluntary relinquishment of a known right. Estoppel means that when a party waives the right, it is estopped (stopped or prevented) from asserting that right.

This occurs when you send a resume directly to a hiring authority. The PSA clearly says “through HR only.” No ambiguity, but a positive response to the resume overrides the contract term. Actions speak louder than words. Common law common sense. Waiver of the contract right, ergo estoppel preventing it as a defense to payment of a full fee upon hire.

So I’m delighted to post this reply along with my wishes to you for another 2½ decades of continued success!

Best always,

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.