85% Of Fee Agreements Are Defective. Is Yours?

Jeff,

Thank you for the opportunity to get a response.

I have been in the electrical industry for 23+ years, headhunting for 16+ years. I had a concurrent career as in the US Army, Colonel in the Army National Guard, and an Iraq War Veteran.

We have a small, highly effective search firm.

I’ve been reading your advice in The Fordyce Letter for 16+ years and have benefited too many times to recall. It is simply awesome.

Now to my question: When do you officially determine resignation?

Here are the facts:

  • Written agreement with 90 day “replace” guarantee.
  • Candidate verbally communicated intent to resign prior to 90 days and is talked off the ledge and stays.
  • Candidate presents after 90 days in writing intent to resign. Candidate’s last day of work is after the 90 days.
  • Company communicates to me after initial communication by candidate of intent to resign to initiate replacement search. Found replacement and hired.
  • HR offers 50% payment with rationale that there is a gray area because the intent to resign (verbal) and communication to initiate replacement was prior to 90 days.

Jeff, thank you so much for once again adding value to the recruiting industry. In 16+years in the business this was a unique one and once again you came through.

Appreciate you and your expertise.

Thank you!

Jim Pabis
President
Saratoga Source, LLC

 

Hi Jim,

Thanks for writing – and for your service in protecting us all. If it wasn’t for people like you, people like us would be – who knows?

I’m so proud to be assisting you, and appreciate you having a laugh with me in spite of your angst. Truly, the pleasure is mine.

Sorry it took a few days to answer, but I finally found my freshman psych textbook. That’s because you don’t have a legal problem. You have a psychological one. Psychology’s a little out of my line. (Right.)

You (and every other recruiter on the placement planet) identified with the so-called “client.” Here’s a legal term I just multisyllabled: It’s a unilateral courtship.

Unilateral because recruiters talk themselves into a one-way love affair so they can effectively recruit. I did it myself when I worked a desk – fantasizing about that faceless, fickle, behemoth. Internalizing its product ads, its recruiting pablum, its “corporate culture.” A fictional construct in my creative mind.

Every successful recruiter does this.

No returned phone calls? “No problem.” Can’t get back about emailed resumes? “Oh, you’re busy making money.” Goofy candidate rejections? “Sure.”

The more you indulge the Cleopatra contingency-fee client, the more you suffer.

All those sleepless nights bangin’ your gums on some hopeful recruit’s drums. All that time and effort to give the object of your affection a gift that will keep on giving. But capricious Cleo changed her fickle mind and threw it back in your face after a while.  

What did you do wrong? You just tried to please. It’s all your fault. You must make it right or else.

Then WHAM! A half fee – if you’re nice – for hiring two candidates to generate exponentially more in profit than they’re paid.

You’re jilted. Done. Toast.

Jim – I’m so sorry to be brutal here, but if I was treated like that, I’d forget that old psych book. I’d just Google PTSD. I, too, would be looking around for some convoluted definition of “candidate fired” that would let me make just one more call to Cleo. “Just cause.” “Wrongful termination.” “Reduction in force. (RIF).”

I’ll stop here, before I start Googling. I’ve already drenched the keyboard, and now I’m worrying about causing a short. Just give me a minute to gain my composure.

It’s okay. I’m better now. I’ll take it from here, Jim. Thanks for getting me worked up.

Let’s get down to legal business everyone.

If you think a replacement guarantee is nifty, then you’ve probably never had to honor one. You need to read my lips more, so check The Fordyce Letter archives.

But you contractually obligated yourself to the “replacement” of one human being by another. Did you include the condition precedent of payment in full for Placement No. 1? Oh, Placement No. 2 was a backup candidate so who cares?

It doesn’t work that way in Legaland. In Legaland, begging can be construed as an admission by conduct that Placement No. 1 is all your fault. So you, bad guy, are liable (responsible) for all the expenses caused by the hiring, training, supervision, and criminal acts caused by Placement No. 1.

Did you check references? Oh, you did? Well, I guess not well enough.

Isn’t this fun? Doesn’t it make you want to take anything the clowning client cares to pay? How about nothing?

That’s part of the craziness of replacement guarantees. But when you don’t get paid and replace, you find that E&O (errors and omissions) insurance isn’t retroactive. (That was a joke.) If you have it, enjoy the roller coaster ride.

The Best Possible Fee Agreement

Here’s a little idea to protect your retirement plan:

No contingency-fee recruiter should be picking up a phone or plunking a keyboard without the best possible fee agreement; one that’s marketable and enforceable to the limits of the law anywhere it may be needed.

Placers worldwide: Please don’t email me about sending you a “form.” That just tells me you’re not as serious about getting paid as the so-called “client” is about getting candidates. Any form is a static, feel-good, antiquated, untested waste of words.

When was your fee agreement – your FEE AGREEMENT! — last checked against the relevant statutes, cases, administrative rulings? In 50 states? Under federal law? Was it even enforceable when it was written? Did the person who prepared it even know? Is it warmed over from some one-size-fits-all franchise? Copied from some clever recruiter who thinks logic is what you need?

. . . and this is the foundation of your business?

Did you pay to have your fee agreement done by the most competent legal specialist you could find? Don’t answer – I’ll blow this keyboard for sure.

Every agreement works until you need to enforce it. Then you learn the difference between an agreement and a contract.

Who does business like that?

Defective Fee Agreements

Hear this:

Article Continues Below

Over 85% of the contingency-fee recruiter agreements we see have legal defects. Ambiguities, inconsistencies, illegal provisions, omissions . . . whatever.

If preparation of a decent “insurance policy” is a major buying decision for you, why are you driving on Placement Place?

That’s why we constantly scour the tons of statutes, cases and administrative rulings for our clients at no charge. Does any other lawyer in captivity do that? We modify them as needed at no charge too. (Gee – don’t I sell well?)

If your fee schedule is unambiguous as to liability for a full fee, there’s no contractual basis whatsoever to reduce the fee.

Is there a “practical basis”? No. Compromising your fee compromises more than just the amount.

It also:

  • Compromises Y-O-U. It exudes weakness, indecisiveness and helplessness.
  • Compromises that precious “client relationship” you’ve been kidding yourself that you had. The employer knows it can bully you effectively again.
  • Compromises any other recruiter who deals with that employer. The power of “practicing” a skilled profession is gone.
  • Compromises the entire industry. Bullies love to brag.

You need to eat. I totally get that. I totally got that when I was a new grad struggling to support a new family, still trying to totally understand how the phone system worked.

But I totally understood how the cash register worked too. Because I totally got that, totally giving my total meant totally totaling anyone who tried to total loved ones who totally depended on me for support. “Reputation,” “professional relationship,” and “keeping the client”? Totally ignored. Hand-wringing? I don’t think so.

I wasn’t obnoxious about it, and I didn’t have to say or do anything. It was just the way it was, because I cleared the fee up front, cleared the air up front, and cleared who was doing what up front — totally at my expense until payday.

So I totally got paid. When payday arrived.

The Only Mantra

My only mantra – totally from search assignment to placement — was some written variation of:

IF YOU HIRE, YOU OWE THE FULL FEE.

Or conversely:

IF YOU DON’T HIRE, YOU DON’T OWE ANYTHING.

The best way to get over this inferiority complex is to have two items blocking your view of the skyline:

  1. Your favorite photos of you and your loved ones (including pets). One of you alone doesn’t usually work.
  2. A reprint of “Why High Billers Are ‘Why’ Billers.”

It originally appeared on the front page of the August 2011 issue of The Fordyce Letter, and has become the most popular non-legal article I’ve ever written.

We’ve received tons of requests for reprints of that article, and you deserve to have it as a reminder of your calling.

To get a reprint,

  1. Say, “Sky-High Billings!”
  2. Go to www.placementlaw.com.
  3. Click the red JEFF’S ON CALL! button.
  4. Type Reprint of Why Biller Article in the Subject field.
  5. Click Send.

I’ll reply with the article.

Once you’re a “Why Biller,” you won’t have many fee collection problems. Employers will be grateful clients who’ll pay you because they’ll know you’re the best. You won’t say, you’ll convey.

But if you’re not there yet,

  1. Go to www.placementlaw.com,
  2. Click the Placement Fee Collection Quiz button in the middle of the bottom row.
  3. Take the PFCQ.
  4. Click the Placement Law Language Quiz button next on the bottom row.
  5. Take the PLLQ.
  6. Click the Answers to Placement Law Quizzes at the end of the bottom row.
  7. Grade yourself on the PFCQ and PLLQ.

When I passed the bar exam, I asked my very-wise lawyer-father how everyone would know I was a lawyer. He said, “They’ll know, son. They’ll know. They’ll know by the way you look, walk and talk.” They did. No games. That’s you.

Phil Ross, the first finders’ funnyman, instructed us a half-century ago to “Strut like a peacock!” What a wonderful trainer who totally got it. I’d run up to him with some complicated employer fee avoidance, and he’d quip “Doncha just love it!”

May you NEVER compromise a well-earned, full, total fee.

Thanks for the inquiry, Jim. For keeping us safe, for being a good sport, and for elevating all within the sound of our voices!

Yours for full fees always,

Jeff

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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