Unplacement Liability and the Case of the Renegade Recruiter

Hi Jeff,

Thank you for the great job you are doing in writing the Jeff’s On Call! column.

I have the following problem: A headhunter put me in contact with a firm I suggested to him, and after a couple of rounds of interviews I received an indicative offer.

In the meantime, the client’s Executive Committee voted against paying this particular fee. The client claims that he told the recruiter from the beginning that there might be a difficulty in getting this fee paid as they usually only pay for headhunting partner-level hires.

The headhunter now threatens to sue the customer if they sign a contract with me without paying him the fees. I am very motivated to accept the offer, but the company will not hire me if there is a potential lawsuit.

Interestingly, in the beginning of the process the customer was presented with a contract with the headhunter, but has not signed it. There is a framework agreement from a previous assignment, which the recruiter insists still is in place. The customer is a large global firm and the relationship is potentially a very valuable one.

What can I do as a candidate?

Best regards,

John Smythe

Jeff’s Response

Hi John,

Thanks for your JOC inquiry. Yours is one of many similar ones we’ve received.

You shouldn’t be held hostage in this hiring holdup by a renegade recruiter.

So while my reply is intended for our recruiter readers globally, I hope it helps you and other hostage candidates too.

Here we go:

Social networks (primarily LinkedIn) have made collecting discovered placements the hottest area of placement law. Many of these are well-earned fees intentionally avoided by employers. When disputes result in hiring holdups by renegade recruiters, we call the legal repercussions unplacement liability.

Unplacement liability is caused when a renegade recruiter ignites an explosive mixture known as BDU. The formula has three active ingredients:

  1. Betrayed,
  2. Delayed, and
  3. Unpaid

The BDU Fact Recipe

The fact recipe to create BDU is usually this:

  • The recruiter discovers that a referred candidate is about to be (or was) hired by the “client.”
  • The recruiter was not informed about the hire, and received no placement fee.
  • The recruiter calls the candidate with effusive congratulations. (“Gotcha!).
  • The candidate is less than appreciative.
  • The recruiter counters with the “assumption” or reminder of the candidate’s referral to the “client.”
  • The candidate is somewhere between forgetful and hostile.
  • The recruiter calls (or sometimes emails) the “client” with effusive congratulations. (“Gotcha!).
  • The “client” is somewhere between forgetful and hostile.

No problem – yet. But here’s where the recruiter turns renegade. He ignites the BDU.

Do the facts surrounding the placement matter? Not really. So legal causation principles (who or what “caused” the placement), a contract referral period, or some other collection convincer doesn’t matter either.

Proof Goes Poof

But the recruiter thinks they do. I did. I got as infuriated as you do when proof goes poof! Then when I became an HR manager, I saw how easy it was to manipulate those “facts.”

Virtually all of the relevant documentary evidence surrounding the hire is within the “possession and control” of the employer. If the recruiter asks for it, the employer rep laughs. Sometimes out loud. Sometimes by referring the recruiter to the employer lawyer. Never since Quick Draw McGraw shot Baba Looey (Google it, podnuh!) has any employer voluntarily turned over personnel files to a third-party recruiter.

The Percipient Witness

It’s tragically comical to see how any percipient witness (conning candidate, employee of the “client,” other paid recruiter, and anyone else around) gets with the program too. Even ex-employees need a reference, so contacting them just fans the flames. It frustrates the recruiter even more. (They then instinctively call their old bosses with the news. This turns them into additional percipient witnesses.)

Have a “phantom recruiter” (unidentified) in the process, and it gets too hot to hold.

Okay, we’re done here. The desperate desperado goes renegade. He ignites the arsenal of BDU to start the explosion. It really doesn’t matter how cool he is, or the exact way he strikes the match. A firestorm ensues that includes threats of a lawsuit (always, as here), insults to the employer reps and candidate, and appeals to employer top management.

The facts (truth) may be legally relevant to establishing that a full fee is due. Only the problem isn’t establishing that a full fee is due. The problem is the unplacement liability exposure of the renegade recruiter for pursuing it by interfering with the candidate’s gig.

When collateral damage occurs by the candidate losing his job (even if it’s only at the offer stage), the following unplacement liability can arise:

1. Inducing Breach of Contract

This is not the same as breach of contract. It is causing someone to breach a contract. (Like an employer with a candidate or even with an “at-will” employee.) The difference is huge – it’s the amount of damages available to the non-breaching party.

Okay, big words. Let’s back up a minute.

When someone breaches a contract, what does the good guy get? Money! How much? The same amount as he would have received if the good guy had paid him in the first place.

You make a placement. The employer doesn’t pay. You sue for your fee and receive it. So why aren’t you excited? Because you only received the “benefit of the bargain.” You just received compensatory damages to compensate you for the contractually-agreed loss.

Inducing breach of contract is an intentional tort. (It can also be a negligent tort if you can show that you didn’t know you’d be costing the candidate the job. Good luck with that one. Luck will also be needed to convince your insurance carrier that E&O stands for something other than “errors and omissions.”)

So being an intentional tort (a non-contractual civil wrong), inducing breach of contract invokes punitive and exemplary damages. Punitive to punish, exemplary to make an example of the recruiter. Damages meaning “consequences.” Bi-i-i-i-g numbers.

These are unlimited in amount, so the candidate will be looking for more than just the compensatory amount of a lost raise, bonus or income “flowing from the breach.” (Now you know why – there was no contract with you that was breached. It’s causing the breach with the employer that the candidate will allege.)

Understanding this makes the rest of the intentional torts pieces of cake.

2. Interference with Contractual Relations

Interference with contractual relations is the tortious extension of what occurs after an inducement to breach a contract occurs.

The allegation is that you necessarily interfered with the contractual relationship between the candidate and the employer.

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This tort is sometimes called interference with business advantage, reflecting that the establishment of a legally-binding contract appears less important than the damages established from the wrongdoing.

Those damages can escalate as coworkers and others find out about the dispute, the candidate is treated differently by management, or other consequences flowing from the interference occur.

3. Interference with Prospective Economic Advantage

Here, the interference with prospective advantage takes the disruption caused by the tortious conduct into the stratosphere. Actuaries are great expert witnesses. They know how to spell “in-fin-i-ty.”

There’s no way to determine how long a candidate would have been employed, so just the compensatory damages (wage and related monetary loss) could extend to retirement age. Yes, the employment contract is terminable at will by either party on relatively short notice. But try to prove either party would have terminated it.

Since no pending or recently-placed candidate is looking for a job, you might suggest the following statement for use by your lawyer to budge a judge:

Life is a temporary assignment. 

Humor is great to help you relax too. You’ll need it.

4. Slander

If your spoken words about the candidate effectively disparage him in his occupation, you’re now in the strict liability world of slander per se. It’s a complicated intentional tort theory that we’ve covered before.

I’m mentioning slander because it is so easy for others to allege that you made a disparaging remark, and it’s even easier for you to do so in the heat of battle while being

Betrayed,

Delayed, and

Unpaid

All you need to know about slander per se is that if the derogatory statement about work was made, you will be liable for the damages it causes the candidate.

Strict liability with unlimited punitive and exemplary damage exposure.

5. Libel

Written words are the basis for libel per se. This is sometimes called trade libel when it affects a person’s occupation.

BDU reactions can get really nasty. Life may be a temporary assignment, but e-mails are forever.

Again, strict liability with unlimited punitive and exemplary damage exposure.

Before we leave unplacement liability (Please!), let’s get you lawyered:

  • Say, “I promise to obtain as much information as possible surrounding a discovered placement before making any move to collect the fee. I’ll investigate discreetly, indirectly and thoroughly, then consult with my attorney before I act.”
  • Go to www.placementlaw.com,
  • Click the Placement Fee Collection Quiz button in the middle of the bottom row.
  • Take the PFCQ.
  • Click the Answers to Placement Law Quizzes at the end of the bottom row.
  • Grade yourself.

Thanks for asking, John. The other question is, “Why doesn’t the employer want to pay for your hire?” I’d suggest you ask the hirer that, and carefully consider the answer.

Tens of thousands of recruiters worldwide are dedicated to the success of people just like you. They’re equally dedicated to getting paid for the underrated, misunderstood magic they perform. Only if they perform. Any overreaction should be understood in that context.

May our recruiter readers extinguish any BDU fires, may their candidates be successful, and may they get paid!

Best 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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