Legal Updates

Here are some more legal questions that I am frequently asked by recruiting and staffing professionals. The answers are by necessity brief and simplified, and should by no means be taken as a substitute for thorough legal advice. Maybe, however, they will give you an idea as to when you need to go further in consulting an attorney.

Q. I don’t have clients sign my fee schedule, but the schedule contains a provision that the client accepts its terms by interviewing someone I refer. That’s as good as a signed contract, isn’t it?

A. No, it isn’t. You still have to prove that the client orally agreed to the provision that it will accept your terms in this fashion. The client will no doubt say something like “I never got the fee schedule” or “I told him I had to run this by legal” or “I never read the thing, so how could I agree to it [a client has no duty to read what you send him]?” While having a mutually signed agreement is not a guarantee of success, it is always, always, better to get the contract signed by the client.

Q. I’m in temporary staffing, and I have a provision on my time card that explains that I am owed a fee if my client hires the candidate. Since my client signs the time card, this should be clearly enforceable, right?

A. Not necessarily. Many time cards are signed by a foreman or another direct supervisor of the temp. At least one court case has held that such an individual only had the authority to certify as to the hours worked, the ostensible primary purpose of the time card, and did not have apparent authority to agree to the other provisions commonly inserted on a time card, such as a conversion fee. If you think the possible lack of authority on the part of the person signing the contract may be a problem, you may wish to have a master agreement with the client to deal with issues other than verification of hours worked.

Q. I am in IT staffing. Most of my assigned employees are skilled computer professionals. I pay them hourly, but all of them earn at least $27.63 an hour. Therefore, I don’t have to pay them time and a half for overtime, right?

A. It is very possible you have to pay them overtime. It is true that by paying skilled computer professionals at least $27.63 an hour, you are not required, under federal law, to pay the overtime premium, but you may be required to do so under state law. Although Congress has amended the Fair Labor Standards Act to exempt computer professionals making at least $27.63 an hour, very few states have followed suit. In those states, IT staffing firms are presented with the much more difficult, and unclear, question of whether these professionals are exempt administrative employees.

Q. I know it’s a violation of the NAPS Code of Ethics for me to recruit a placed candidate unless the candidate requests my assistance. I just saw my placed candidate’s résumé on one of the job boards. Is that the same as the candidate’s requesting assistance?

A. No, it is not, and it would be a violation of the NAPS Code of Ethics for you to recruit the candidate. The NAPS Ethics Committee considered this issue a few years ago and decided that the candidate must “directly” request the recruiter’s assistance if the recruiter is to have the ethical right to place the candidate.

Q. My client is requiring that all employees be able to speak English, and that they speak only English on the job. Is that OK?

A. The requirement that the employees speak English is probably lawful if the employer can demonstrate that it is necessary to speak English to communicate with supervisors and other employees. However, rules that would prohibit employees from speaking to each other in languages other than English are impermissible, unless the restriction is confined to areas where customers are.

Q. I have a great candidate, but one small problem. The candidate has signed an agreement with his soon-to-be-former employer that he will not compete with them within a certain area for a certain period of time. I’ve discussed this with other recruiters, and we all know these things are unenforceable, right?

A. With the exception of a couple of states that prohibit enforcement of non-competes by statute, it is impossible to make a broad generalization. The enforceability of these agreements can vary greatly not only from state to state, but also from judge to judge within a state, and the issue is always very dependent on the facts of the particular case. If your candidate mentions that he has one of these agreements, you should make certain that he discusses it with your client. Otherwise, either the former employer or the client, or both, could make sure you are a party to any ensuing litigation.

Q. Here’s one that should give you a laugh. I had a staffing client that I was billing $5,000 a week. They stopped paying me, and I fired them. Shortly thereafter, they filed a petition under Chapter 11 of the Bankruptcy Act. Now, I get a letter from the trustee in bankruptcy that not only fails to mention the $15,000 they owe me, but insists that I return $50,000 that they previously paid me. Can they really do that?

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A. I’m not laughing, and neither should you be. The general rule is that when a company goes into bankruptcy, any payment it has made to creditors within the 90 days prior to the filing must be returned. This prevents a failing company from picking and choosing which debts it will pay. However, there is an exception for payments made in the ordinary course of business. If the company had been paying you regularly, with relative promptness, you might beat back the trustee’s attempt to recover the payments. On the other hand, if payments were significantly delayed and sporadic, in varying amounts, it looks like you may have a real problem. If you find yourself in that situation, keep in mind that you frequently will be able to negotiate a payment schedule and/or a reduced payment amount.

Q. I pay commissions to my recruiters, but for various reasons, different recruiters are paid at different rates. Sometimes it’s just because I pay each one the least I think I can get away with. If this ever gets out, I’m afraid the lower-paid recruiters will quit. Therefore, I have a rule that any employee who discusses his or her compensation with any other employee is subject to immediate termination. OK?

A. No, not OK. First of all, any employer who believes that its employees do not discuss their compensation with each other is living in a dream world. More importantly, a rule prohibiting employees from discussing wages with each other violates the National Labor Relations Act. This is the statute that allows employees, including non-unionized employees, to bargain collectively. The logic is that they can’t very well bargain collectively if they don’t know how much each other is getting paid.

Q. My candidate left during the guarantee period. I have a replacement guarantee, but the client promoted the replacement from within. Now, the client wants a refund. Do I owe it?

A. I can’t tell without looking at your contract. The situation you describe is one of the most frequent sources of disputes between recruiters and their clients because too many contracts just trumpet a “replacement guarantee” without specifying what that means. You may wish to consider a provision that states specifically that your obligation is met if the client replaces the candidate from any source. Alternatively, you may wish to choose to state that your sole obligation under the guarantee is to submit X number of candidates who meet the specifications in the job order.

Q. My client has given me a contract that states I will not place any of its employees during the term of the contract and for one year thereafter. I guess that’s fair enough, right?

A. Is it? First of all, both you and the employer are referring to this company as a “client.” What kind of “client” is this? They don’t have to hire any of your candidates. They don’t have to interview anyone you send them. They don’t even have to return any of your telephone calls or emails. The chances are that they’ll never pay you a dime. If I have too many “clients” like that, I’m out of business, and so are you. Ideally, I’d like you to limit your responsibilities to compliance with the NAPS Code of Ethics – you will not recruit placed candidates, nor will you recruit their employees at the location you placed them, for one year following your most recent placement. If you have to do more than that, OK, but try very hard to date your restrictions from the date of your last placement, so you at least know you’re making these promises to a real “client.” Be very careful of a restriction like this that dates from the day the contract is terminated. In your business, contracts, like old soldiers, just fade away. Have you ever formally terminated one?

If you have any questions about any of the above, or just want to vent your frustrations, feel free to contact Bob Style, NAPS Counsel, at rpstyle@sprynet.com.

Robert P. Style was a well-known attorney specializing in the search and placement industry for nearly 40 years. He served as General Counsel for the National Association of Personnel Services from 1977 until 2011. Mr. Style authored "The Certified Personnel Consultants' Legal Manual" and co-authored "Temporary Help Service Operations: A Legal Manual." He was a graduate of the University of Pittsburgh Law School in 1968 where he was Editor-in-Chief of the University of Pittsburgh Law Review. Mr. Style passed away on July 18, 2011.

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2 Comments on “Legal Updates

  1. A few years ago you wrote an article about a law that prohibits employees from using their computers at work for personal use. Can you re-print that for me? Thank you in advance.

  2. A few years ago you wrote an article about a law that prohibits employees from using their computers at work for personal use. Can you re-print that for me? Thank you in advance.

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