Corporate Recruiting Ethics: An Ongoing Threat

Major corporations are adopting and monitoring codes of ethics with increasing frequency. In a Business Roundtable Special Report entitled “Corporate Ethics: A Prime Business Asset” it was noted that one of the major areas of concern is “attention to values and ethics in recruiting and hiring”.You don’t need a Recruiter’s Roundtable to know employers are tightening the clamps. PSA’s (placement service agreements) almost always contain some ambiguous, generic, flag-waving words about “openness” and “honesty” in recruiting practices. Some even expressly prohibit “soliciting” employees of “competitors.”Most recruiters sign them with a smile. But most recruiters would be cutting their phone cords if they tried to live with them. Cold-calling, motivating, and arranging interviews for happily employed people just aren’t mentioned in annual reports.Jeffrey Lant noted in Tricks of The Trade:

One of the reasons why organizations hire advisors is because the client decision maker needs a scapegoat for a decision that has already been made and that he needs to camouflage. This is reality and if you walk into this situation knowing what needs to be done, and accept the challenge of the assignment, you should be prepared for what follows.

These self-imposed codes are almost always initiated by top management. The typical large corporation CEO is highly paid, highly visible and highly vulnerable to attack from management, the government, consumers and the public. The typical CEO also has a history of tough, street-wise exploitation.In Realistic Leadership, Madeline Daniels profiled the classic mindset of those who reach the top:

Even when the original belief is false, people make it come true. People prefer that other people behave as they expect them to, and they will modify or distort reality until it conforms to their expectations.

Whether motivated by guilt feelings, noble desire, public relations or fear, top brass wants the organization to “be ethical.” Nobody argues with them. But nobody believes them either.There are two primary ways internal codes of ethics are affecting the placement industry:1. RETAINED SEARCHES ARE BEING CURTAILED“Retained search” sounds good and enhances your credibility. But the chances are you never received a retainer from any employer.Some may disagree, but some credible trackers estimated during 2000 that less than 20% of our industry has received some form of payment prior to beginning a search. Most of the time this was only a phone or travel expense advance or a small engagement fee. Today, any prepayment probably occurs even less frequently.So many employers and recruiters were burned by “search assignments” that weren’t completed, the retained concept proved unworkable. The “free market” of contingency search results in placements. It’s accepted because it works.Now, the ethics fad is making it even harder to get a retainer from major corporations. They don’t want to be considered “clients.” They don’t want you to legally be their “agent.” That way they can disavow any knowledge that you were violating their great-sounding codes. In fact, they can even deny that the “job order” was an “order” at all — the hiring authority merely “mentioned” the “possibility” of a “future” opening. Whenever they can, they distance themselves from what we do and how we do it.”The consistently successful placers are contingency-fee ones anyway. They need the ability to market candidates and recruit for employers who want to play, not just leave their chips on the “pass line.” They don’t want to be bound by corporate doubletalk and abstract philosophy. The stakes are high, but so are the takes.Lant also noted:

We live in an age where more and more people want less and less to be identified with the decisions they make… Bringing in an outside advisor can well be used to appease individuals who really want to provoke change when the decision maker himself is resolutely opposed to it.

…Not only do senior executives need a candid friend. They also need old-fashioned structure. The higher any executive moves in any organization, the less structure there is and the greater the opportunity to get lost and fail to achieve further success. Thus the need for an independent goal-oriented advisor.

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2. PROPRIETARY RIGHTS ARE BEING ENFORCEDCorporations have become extremely nervous about losing key employees. However, unless there is a premeditated corporate raid by a single competitor and its actual hiring of a group of individuals in a particular section, there is no way to restrain a recruit.So corporate lawyers have attempted to use their internal policies as a way of limiting their employees from considering other opportunities. They usually charge employees with breach of contract, breach of fiduciary duty, and conversion (theft). In doing so, they are including recruiters under the theories of inducing breach of contract, interference with contractual relations, interference with prospective economic advantage, solicitation and conspiracy. We’re not talking here about a PSA that you sign. We’re talking about an internal code of ethics that the employee signs.No sophisticated corporation would expressly limit its entire workforce from considering other jobs. So they couch their codes in terms of prohibiting “outside interests,” “conflicts of interest,” “disclosure of confidential information,” “misuse of proprietary information,” “misuse of trade secrets,” “unfair competition,” “activities which tend to impair effectiveness on the job,” etc.There is no limit to the ways these words can be used to frighten and bludgeon an employee. For example, one major corporation considers the names and titles of its employees a “trade secret.” Another requires the submission of detailed reports of any outside calls to employees within one business day of their receipt. Switchboard operators, mail and copy room employees, receptionists, secretaries and other gatekeepers are encouraged to report any “suspicious” conduct. Emails are monitored. The result is often a full- scale undercover investigation by corporate security offices. Increasingly, temporary restraining orders and preliminary injunctions are being sought.Codes of ethics are internal corporate “laws.” Employees are bound by them because they consented — either expressly (by signing them) or impliedly (just by working for the company). The legal issues don’t usually revolve around consent. They revolve around whether the wording is specific enough to be enforceable, whether communication with the recruiter is included, and whether the act itself is something the employer can limit.Internally, ethics boards, security officers or staff attorneys monitor compliance. In the words of the Business Roundtable Report:

The process . . . involves a serious and continuous attention of line managers at all levels and the employees of every division. Wide-ranging activities and methods are used, focusing on the values of the company and their applicability in specific locations . . . The theme that employees not only should report violations but also should feel it is their duty to do so comes through loud and clear in well-developed programs. . . Some programs include honors for employees with exemplary performance.

Externally, courts are asked to enforce the employer’s rights based upon the codes being considered legally-binding contracts. You are considered an indispensable party (solicitor and co-conspirator) to the breach of contract, breach of fiduciary duty or conversion (theft). These intentional tort theories invoke punitive (punishment) and exemplary (to make an example) damages in an unlimited amount. At present, the corporation has to prove you had actual knowledge of the codes. However, intentional conduct (meaning you intended to recruit) would probably be sufficient if you participated in a wholesale raid.We can’t tell you how to absolutely defend yourself unless we know the allegations. However, the following items should be considered to cause a retreat in a recruiter revolt:

  1. No recruiter can “steal” someone who doesn’t want to be “stolen.” (We know — you like to think you can, but human beings aren’t that cooperative.)
  2. The employer should be using its management time in positive ways to reduce employee turnover. This includes motivating and engendering loyalty in its employees. Erecting fences only makes the grass look greener on the other side.
  3. The morale of employees suffers when they are shackled. That’s why the lowest productivity exists in countries with the least personal freedom.
  4. Send the employer a copy of a U.S. Chamber of Commerce survey that will reveal employees want (in usual order of importance):
    1. Job security.
    2. Competitive wages.
    3. Appreciation.
    4. Inclusion in decisions affecting
    5. Interesting work.
    6. Pleasant office surroundings.
    7. Promotion and development potential within the company.
    8. Tactful discipline.
    9. Sympathetic understanding.
    10. Loyalty.
  5. Ask the employer whether it’s willing to take an anonymous survey asking whether employees think their supervisors:
    1. Ignore their achievements.
    2. Criticize them too often.
    3. Fail to do their share of the work.
    4. Review, give raises, and promote equitably.
    5. Discipline firmly, fairly and consistently.
    6. Set a good example.
    7. Assign, delegate and monitor work realistically.
    8. Encourage them.
    9. Support them.
  6. Tell the employer you intend to cross-complain for an outplacement fee! (That’s right — you helped the employer remove undiscovered malcontents. How much is that worth?)
  7. Would the source employer prefer that you place a very specific ad in a local newspaper or billboard? How about leaving flyers at local restaurants? Almost any generally-distributed information is perfectly legal (and reaches everyone).

The placement industry is concerned about ethics too. It shouldn’t be a fad either — self-regulation elevates all of us. That’s why every profession monitors itself.Those ambiguous, generic, flag-waving words in a PSA are funny. The more a recruiter touts their own ethical behavior in brochures or on the phone, the more comical they sound to an employer. Recruiters are supposed to find the right candidate as quickly and quietly as possible. Those “ethical” employers pay for results, not rhetoric.No questions asked.

More than thirty-five years ago, Jeffrey G. Allen, J.D., C.P.C. turned a decade of recruiting and human resources management into the legal specialty of placement law. Since 1975, Jeff has collected more placement fees, litigated more trade secrets cases, and assisted more placement practitioners than anyone else. From individuals to multinational corporations in every phase of staffing, his name is synonymous with competent legal representation. Jeff holds four certifications in placement and is the author of 24 popular books in the career field, including bestsellers How to Turn an Interview into a Job, The Complete Q&A Job Interview Book and the revolutionary Instant Interviews. As the world?s leading placement lawyer, Jeff?s experience includes: Thirty-five years of law practice specializing in representation of staffing businesses and practitioners; Author of ?The Allen Law?--the only placement information trade secrets law in the United States; Expert witness on employment and placement matters; Recruiter and staffing service office manager; Human resources manager for major employers; Certified Personnel Consultant, Certified Placement Counselor, Certified Employment Specialist and Certified Search Specialist designations; Cofounder of the national Certified Search Specialist program; Special Advisor to the American Employment Association; General Counsel to the California Association of Personnel Consultants (honorary lifetime membership conferred); Founder and Director of the National Placement Law Center; Recipient of the Staffing Industry Lifetime Achievement Award; Advisor to national, regional and state trade associations on legal, ethics and legislative matters; Author of The Placement Strategy Handbook, Placement Management, The National Placement Law Center Fee Collection Guide and The Best of Jeff Allen, published by Search Research Institute exclusively for the staffing industry; and Producer of the EMPLAW Audio Series on employment law matters. Email him at jeff@placementlaw.com.

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