Thanks for all the help you give through your column in The Fordyce Letter and elsewhere. I enjoy reading your advice in the Jeff’s On Call! column and would appreciate any help you could offer about a current situation.
I’ve been in personnel consulting business since 1983 and have some long-standing relationships with other colleagues and friends in our specialty area.
Currently, a situation has come up between me and one of these colleagues, Dean, and we are having difficulty resolving it so it is a “win-win” agreement.
Here’s the scenario:
Dean submitted a candidate back in August/September 2013 on a job order he took for a position at a company that we both do work for from time to time. The client did not hire the candidate at that time for that position. Dean’s submittal policy gives him credit for the referral for 12 months from the time of the initial referral.
In November 2013 I took a job order from the same client company for a different position, but in a similar skill set area. I submitted the same candidate as Dean did in August/September for this new position. This candidate went through the interview process (with some delays for the holiday season) and started work at the company in January 2014.
Credit was considered completely mine by the hiring manager during the process, and at the time of the start. I received payment for the placement fee.
Dean got a call the last week of January from the hiring manager acknowledging the double submittal. The manager (director of HR) had been out of the office during much of the process and discovered the double submittal after the candidate started. Dean called me right away and said I should pay him 1/3 of the fee and I should keep 2/3.
So, here’s the dilemma. Dean believes the company is still obligated to honor his 12 month referral policy because a candidate he submitted was hired within the 12 month period. He does not intend to pursue legal action to collect a fee, but strongly feels I should pay him 1/3 of the fee since he submitted the candidate earlier. I believe the placement should be considered mine 100% because Dean did not refer the candidate to me or have any involvement in the placement that resulted in the fee. My basis for this is the “but for” concept. That is, apart from my efforts (“but for”) the placement would not have occurred.
Do you have any insight into this situation that might help us resolve things fairly and amicably?
Thanks again for your excellent column and for any help you could offer.
GHP Consultants, Inc.
Thanks for giving me your compliments and your confidence. Now let me help you find your headhunter’s compass! You and Detour Dean both lost your way in Headhunter’s Jungle.
Then you fell head-first into the split-fee trap, spearing and sparring with each other about one fee. The mismanaged client (giggling from behind a bush) is enjoying the fight, since its employer lawyer opined that in the civilized world two full fees are due.
So why did Dean waive (relinquish) his right to sue the client? I dunno. Did he inform the client of this magnanimous gift? Where was he when I was in HR? Truly – a headhunter more interested in helping the jobless than in being jobless himself.
Not that you’ve found your way, though. Did you know you had a silent partner on the deal?
This is a HooBoy
Speaking of partners, my not-so-silent partner Paul Hawkinson (Fordyce founding father) had one word for sitches like this: “HOOBOY!”
Before we get into the collection issues you raised, let’s get everyone in the mood for a feefight.
- Say, “But for, WHAT FOR?”
- Go to www.placementlaw.com.
- Click the Placement Fee Collection Quiz at the beginning of the bottom row.
- Take the PFCQ.
- Click the Placement Law Language Quiz button in the middle of the bottom row.
- Take the PLLQ.
- Click the Answers to Placement Law Quizzes at the end of the bottom row.
- Grade yourself on the PFCQ and PLLQ.
Okay, we’re ready to rumble in the jungle. A few bars of Jungle Boogie, and let’s war dance!
Craig — You overanalyzed this tricky “causation” matrix by locking yourself into the linear “but for” probe. It’s linear because you are drawing an imaginary straight line between your referral (the “cause”) and the hire (the “effect”). The legal phrase for that straight line (between cause and effect) is efficient procuring cause.
But recruiting reality rarely presents a linear fact pattern. Very few linear ones happen on the practical placement planet. Recruiters lock into that “but for” scenario in an attempt to persuade fee-avoiding employers to pay. Then their lawyers find reported cases that invoke the so-called “but for rule.”
When you start a fee collection with, “But for my referral . . .” it will likely end with, “. . . farewell five figure fee.”
I have no idea why you’re even uttering the words “but for.” Who’s arguing that you didn’t make the placement? The client? Nope. You’ve got the cash. Dean? Doesn’t sound that way – he’s bludgeoning everyone in sight with his referral period.
Hokay fine. Hooboy.
Detour Into ‘But For’ Lore
Now it’s my turn to detour. I’m going to go through the paces about the “but for rule” because it’s so misunderstood. (Maybe I’ll even find Dean and bring him back to civilization.
The question isn’t whether the “but for” rule is “good law.” It is. The question is, “Good for whom?” If the answer is, “The employer,” ask yourself, “Why am I using it?”
Limited facts are known by the recruiter, since these cases usually arise after they’ve stopped working on the search. The so-called “client” refuses to pay. The “turncoat candidate” doesn’t even return calls. Now the abandoned, betrayed headhunter gets furious. He can’t even get anyone’s attention, so he whips out his blowgun and pumps the employer wildly with limited factual darts to “prove” that “but for” his involvement, a placement wouldn’t have occurred.
. . . and he simultaneously blows the fee.
What the Employer’s Lawyer Says
Here’s your basic employer lawyer reply to a “but for” demand:
Your letter references the “well-settled” law that applies to this situation. As you know, New Jersey [where the employer is located] has only one reported decision in this area. In Michele Matthews, Inc. v. Kroll & Tract, 645 A2d 798, the court utilized the “efficient procuring cause” test to determine whether an employment agency has earned a fee.
In other words, to prevail (the recruiter) must be able to establish by a preponderance of the evidence (the plaintiff’s burden of proof) that it caused (the candidate and the employer) to negotiate, and that (the candidate) was hired by (the employer) as a result of its efforts. As you know, Illinois law (where the recruiter is located) would provide for the same result. . .
He just set up the legal trap. Now he’ll spring it with a factual “Snap!”
Crouch down with me, Craig. We’re not pre-placers. We’ve got headhunter hearing. Now, good ear to the ground. Here it comes. One . . . two . . . three … and . . . Snap!:
[T]he correspondence between our clients does not clearly support the allegations that (the recruiter) or his office were the efficient procuring cause of (the candidate’s) employment.
Can you hear what just happened in this very typical case? The “but for”rule isn’t getting a recruiter paid. It’s being used as a defense to payment. The employer lawyer figured out how to scribble that straight line going from the referral (cause) to the hire (effect). A one-sentence defense works when company employees (including the candidate) depend on the employer for survival.
If you’ve never made a placement, a “but for” cause-and-effect sounds reasonable enough. That’s why pre-placers think making placements is like bowling. All you have to do is pick up the ball (candidate), roll it down the alley, and make a strike (a hire). It may bend slightly, but essentially it’s an uninterrupted straight line.
But once you’ve worked long enough to cash that first draw check, you figure out that making placements is far more like pinball. You pull the plunger, shoot the ball, work the flippers, watch as it rolls around and hits the big bumper (and lights up – an interview!), rolls, spins, ricochets, delays, slides, and takes twists and turns like no other play you’ve ever made. You watch from the outside-in as these events take place, and eventually the ball reaches the jackpot (a hire).
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Guide: Practical Tips for Remote Hiring
Legally, each one of those bumps, rolls, spins, ricochets, delays, slides, twists and turns is called an intervening act. Simple enough. Something that happens after you shoot the ball.
Not so fast. There are two types of intervening acts.
A dependent intervening act is one caused by you. Pulling the plunger or working the flippers. Everything between that and the jackpot is a causation question. Was hitting the big bumper (an interview) caused by you? If it was caused by a ricochet (let’s say an employee referral), the employer’s argument is that it was an independent intervening act. It had nothing to do with you. The “turncoat candidate” and employer agree. There may even be a document trail that “substantiates” this.
No sale. So someone tells you about the ol’ “but for” rule. Yeah, that’s it! You say, “‘But for’ me pulling the plunger, the ball would have never been on the playing field.”
Independent Intervening ‘But Fors’
It’s an open invitation for a fee-avoiding employer to set up a variety of factual defenses. “But for” the candidate meeting someone from the employer at a trade show, “but for” the resume already in the employer’s data base, “but for” your failure to obtain the candidate’s consent to the referral, “but for” the employee referrer convincing the candidate to interview, and an infinite number of other ” but-for bumpers” that will have you flipping your five-figure fee into the forest. It’s the ultimate headhunter’s ambush.
Pinball, not bowling.
So if you hadn’t been paid (or the client is claiming the bounty back), “but for” would have stirred up even more junglejive.
Now let’s look at what we’ve got here, Craig:
1. The first recruiter.
Whatever Dean did before your involvement was not an intervening act, so has no effect on the causation issue. The first recruiter may be entitled to a full fee contractually due to the one-year referral period. But that’s a contract with the employer. If you also have a contract with the employer, it may well be liable for two fees.
Just don’t get involved in any discussions with the first recruiter (Oops, Craig!), or you risk getting maneuvered into a split-fee deal.
2. The referral period.
Dean? Dean? Oh, there you are! Waiving wildly.
The one-year referral period in your fee schedule is a one-year “legal time expiration.” But it has a strict liability feature that collects placement fees like crazy.
Strict liability means you don’t have to prove legal causation (as Craig did with the belabored “but for”).
In fact, you don’t have to prove any hire as a “result of your effort,” Dean! You just have to prove:
- A referral of this candidate to the client, and;
- A hire within one year.
Craig’s in too, but why not? The client goofed by having two separate contracts. Craig’s term “double submittal” doesn’t go far enough – it’s double liability. Yes, two full fees happen. Sometimes by an honorable client, sometimes by a settlement, and sometimes by a court order. But basically because the employer is liable for two fees emanating from the same placement.
In the words of a judge to an employer lawyer that I’ll never forget:
Counsel, do you expect this court to fix your client’s management problems?
So hopefully you’ve found your way before the client spied you waiving your five-figure right.
Since you hunters have been pretending this is a split-fee deal, I’ll give everyone the opportunity to get our famous Recruiter Split-Fee Agreement.
Everyone within the sound of my voice must promise me the following:
YOU WILL NOT SPLIT A FEE WITH ANYONE UNLESS YOU HAVE A WRITTEN, ENFORCEABLE SPLIT-FEE AGREEMENT.
No excuses. Just:
- Say, “I solemnly promise to never do a split fee with anyone unless I have a written, enforceable SFA.”
- Go to www.placementlaw.com.
- Click the red JEFF’S ON CALL! button.
- Type Recruiter Split-Fee Agreement in the Subject field.
- Click Send.
- I’ll reply with the SFA.
You’ll reap with many more placements and many more payments!
Craig and Dean – How’s that for a compass? May you collect both of these full fees!
Thanks for sharing and being good sports,