Hiring dispute cases increase by 25% in one year

The number of disputes over recruitment agency fees has risen by a quarter (25%) in the past year.

According to law firm Menzies, who reported an increase, there are two main reasons; the first being that clients are using more than one agency or recruitment consultant to fill a single role due to a talent shortage.

“Secondly, the recruitment sector has become increasingly competitive, and in some cases, we have seen some rather aggressive sales techniques, contracts and terms to bind clients,” adds Luke Menzies, Solicitor, Barrister and Owner of the firm.

He says there are two particularly common scenarios that Menzies Law have been approached with.   

  1. ‘Back-door’ hire – a recruitment agency introduces a candidate to a client, the candidate is not hired at the time, but later on (usually a few months later) the hire takes place by direct contact between the client and the candidate, usually without the recruitment agency being aware until afterwards.  It then wants to claim its fee because its terms of business state that the fee is due if the candidate is hired by the client for any reason within a certain period following the introduction.
  2. ‘Fee fight’ – One agency introduces a candidate but no hire takes place. Later, a different agency introduces the same candidate to the same client and the hire takes place. The first agency then hears about the hire and demands a fee also.

Menzies shares four key points of advice that both recruiters and clients should take heed of.

Binding terms

“In order for any terms of business to be binding, they have to be communicated to the client and accepted by the client. Proving this is crucial to a successful claim for fees. 

“I’ve seen some recruitment agency terms of business that say their terms are binding as soon as the client reads the CV that has been attached to the same email as the terms, regardless of whether the ‘client’ is at all interested in working with that particular agent. 

“This is, to a lawyer’s mind, fairly aggressive wording and can produce ludicrous results if followed through on.  For example, that candidate may have already been introduced to the employer by another route.”

Effective cause

“This means that, ordinarily, an agent can only demand a fee if it was the ‘effective cause’ of the hire.  Usually this is going to be obvious on the facts of the case, since the agent will usually have ascertained the client’s requirements, identified a candidate, arranged the interview and possibly a lot more.  But the facts of each case will be different.”

Overriding terms

“I’ve seen some agents’ terms of business which seek to override the ‘effective cause’ rule.  There is a general principle in contract law that express terms of a contract can override rules such as the ‘effective cause’ rule if the wording is clear enough.”

Client’s evidence

“Most disputes on agencies’ fees turn on the wording of their terms of business, whether these were binding on the client and then – crucially – how the hire of the candidate actually took place and what caused it.  That being the case, evidence from the client of what took place, including the trail of emails and their attachments, and the timeline of events relating to the candidate’s introduction, interview, salary negotiation, offer and acceptance can all be critical in deciding the legal outcome.”

Comments (0)
Tue, 21 Feb 2017 5:15pm GMT
We've had a couple of these back door recruitment situation in the last six months.

In house recruiters have to do something to justify their jobs. That "something" is often reducing agency spend. Recruiting an agency's candidates without paying them is one way to do this - provided you don't get caught.

I'm not surprised by these finding, in-house recruiters are being put under increasing pressure and frequently, being ex-recruiters, they'll know the odds of being found out are slim.

I'd recommend, at the very least, linking up with all your candidates so you can see when they moved. If they know they'll get caught, eventually, they'll stop doing it.
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