This is an easier question to ask than to answer. Perhaps that’s why we’re asked so often … and why we answer it differently almost every time.
It’s an important question, though, and one for which our industry must develop workable standards if the legal problems addressed in “Re-Recruiting A Placed Candidate” (TFL, 2/04) are to be avoided.
There are three questions within the question that combine to make each answer different: What constitutes a “former” client? What constitutes “recruiting?” and How long must you wait? Let’s look at them closely.
A. WHAT CONSTITUTES A”FORMER CLIENT?”
Or, more basically, what constitutes a “client?” There are two types:
1. Estoppel Clients
Freely deputizing employers as “clients” is one of the most dangerous practices in our industry. By doing so, even an employer who doesn’t pay placement fees can argue that the representation by the recruiter is sufficient to prevent him from denying that the “consultant-client” relationship exists. This is a legal concept known as estoppel. If the consultant:
a. Represents that the relationship exists; and
b. Candidates rely on the representation (as by forwarding their resumes, meeting with you, etc.).
c. The consultant can be estopped (stopped or prevented) from denying the employer is a client.
Of course, objectively, a non-paying employer isn’t a client. But the estoppel theory prevents you from successfully arguing it. In effect, the court will reason that since you obtained the benefit of the representation (by using it to recruit candidates, obtain job orders from other employers, etc.), you can’t deny it just because you don’t like the burden it imposed. You can’t have it both ways.
The estoppel theory has been around for centuries, and is often used to impose personal liability on agents who represent “nonexistent” or “fictitious” principals.
The legal encyclopedia American Jurisprudence, notes (3 AmJur2d 306, 309):
As a general rule, one who contracts as an agent in the name of a non-existent or fictitious principal … renders himself personally liable …
[A] purported agent [contingency-fee consultant] is not excused from personal liability … if he knew there was no such principal [employer-client]. [H]e should be held responsible because of positive fraud on the plainest [placement] principles of right …
Under the traditional view, a consultant who misrepresents is only liable to the candidate if injury occurs (loss of wages, job security, the job, etc.). However, the trend of the law is to impose liability for anything that is misrepresented (even if unintentional) to anyone (including the employer).
This estoppel client concept will be taking a lot of legal defense time in the future. We hope your lawyer won’t be spending it.
2. Actual Clients
Actually establishing a consultant-client relationship with the employer usually involves five major steps:
a. Receiving a non-exclusive, contingency-fee job order;
b. Clearing the fee;
c. Mailing a copy of your fee schedule;
d. Sending out the candidate for an interview; and
e. Placing the candidate.
Even if you do all of these things, ask any human resourcer whether their employer’s your client, and they’ll reflexively answer “No.” But they’ll change their answer almost as fast if:
a. They’re trying to prevent you from raiding their employer.
b. They want to impose liability on you for placing a candidate that couldn’t, wouldn’t or shouldn’t do the job.
c. They want to impose liability on you for the mistakes, misdeeds or mishaps of a placed candidate.
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d. They want you to do a little free industrial espionage for them about their employer’s competitors.
e. They want you to perform a free hiring and compensation survey from their employer’s competitors.
So, either by your representation or by actually going through the placement process, you owe some duty not to recruit from this employer we call a “client.”
B. WHAT CONSTITUTES “RECRUITING?”
Sooner or later, the distinction is made between passive and active recruiting:
1. Passive Recruiting
If an employee of a client (really) calls you without any solicitation, you’re only passively recruiting. It makes no difference whether they were a candidate in your files, received your name from a placed co-worker, or called you from your number on a company phone booth wall (as long as you didn’t write it there). You can probably work him.
But should you tell your client? A good question in fact, much better than the answer: It depends. If you do, you risk jeopardizing their livelihood (and yours). If you don’t, you risk only jeopardizing yours.
Our advice is to tell the candidate that you’ll only refer them if they tell your client that they’re looking, and obtains the client’s consent to your assistance. A phone call is fine as long as either the client or you confirm it with a letter.
Poof! You’re an outplacer.
2. Active Recruiting
If the call from the employee is (really) just a coincidence, have them obtain the client’s consent (again confirmed by letter), and you can work them even if there’s a pending placement with the client. But if you’re using the confidential company directory that you received during an executive strategy meeting at the client’s underground R & D lab, it’s never headhunting season.
C. HOW LONG MUST YOU WAIT?
Here’s how to compute the waiting time from the date of last deputizing the estoppel client, last job order, or last placement:
1. Wait 3 months before recruiting from any estoppel client. (See Item A.1.)
2. Wait 6 months before recruiting from any actual client. (See Item A.2.)
3. Add no time for passive recruiting with the client’s consent.
4. Add 1 month for passive recruiting without the client’s consent.
5. Add 3 – 6 months for active recruiting depending on your aggressiveness.
We told you it was easier to ask than to answer, but workable guidelines are essential to allow the industry to standardize its codes of conduct.