Texas Court Rules For Placement Firm in Fee Dispute

The Court of Appeals of Texas has upheld a lower court ruling that a placement firm was entitled to collect its fee of twenty-five percent of a candidate’s salary from its client, even though it was not clear whether the parties had specifically agreed upon the amount of the fee to be charged.In Burnside Air Conditioning and Heating vs. T.S. Young Corporation and Jimmy J. Smith, the Court considered a scenario where Burnside sought to hire an operations manager, and asked its accountant, Smith, to assist. Apparently, Burnside did not want its identity as the employer to be known until it had found a good candidate. Smith contacted T.S. Young, a recruiter, and engaged it to refer candidates for the position at Burnside.According to Young, it told Smith that its fee would be twenty-five percent of the placement, and Smith responded by saying “Okay.” Smith testified that, in effect, he was saying, “Okay, I hear you” and not “Okay, I agree to your fee.”The Court of Appeals found that, first, there was sufficient evidence from which it could be concluded that the parties had agreed upon a fee of twenty-five percent of the candidate’s compensation, and second, that even if there were no such specific agreement, that lack of agreement would not necessarily render the contract so indefinite as to be unenforceable. “In the case before us, there was evidence that Smith hired Young to find a manager, that Young did so, and Burnside indicated his acceptance of the manager by hiring him. . . . Even if the parties did not specifically agree upon a fee, a reasonable price could be supplied. . . . The record reflects testimony that the fees charged by Young were the usual and customary fees charged in the industry and were reasonable.”

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Paul Hawkinson is the editor of The Fordyce Letter, a publication for third-party recruiters that's part of ERE Media. He entered the personnel consulting industry in the late 1950's and began publishing for the industry in the 1970's. During his tenure as a practitioner, he personally billed over $5 million in both contingency and retainer assignments. He formed the Kimberly Organization and purchased The Fordyce Letter in 1980.


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