The “Other Division” Fee-Avoiding Forward Pass

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Jul 14, 2014
This article is part of a series called Jeff's On Call.

Editor’s note: Jeff Allen has heard every employer excuse that you can imagine for not paying up — and dozens more that defy imagination. A few years ago he began documenting them in a weekly collections column. Because of the importance of collections, Fordyce will periodically reprise the most common situations he addressed. The complete collection is here.

What Client Says:

The candidate was hired by another division.

How Client Pays:

This is a “forward pass” situation — sendout to A, hire by B.

The first issue is how the other division learned of the candidate. Then the legal analysis is usually:

  • You can prove an agreement to pay the fee by the client, but it didn’t hire.
  • You can prove a hire by the other division, but it didn’t agree to pay the fee.
  • You can’t enforce rights against either by fee schedules that say “hired directly or indirectly through the employer or any of its affiliates.”

The most important contractual question is whether the ultimate employer is a separate corporation.  If so, it’s a separate legal entity.  That means it’s not on the hook unless you can show there was a conspiracy to avoid payment of the fee.

Absent that, you’ll be asking the court for equitable relief based on the judge or jury’s idea of fairness.  The usual words are unjust enrichment — the client will be unjustly enriched by hiring without paying the fee. You must show that the division knew or should have known you were involved.  You do that by staying close to every candidate.

Treat candidates like your “stock in trade,” dusting them off regularly.  You’ll routinely pick up all of these fees!

This article is part of a series called Jeff's On Call.
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