Your Candidate + A Prior Referral = The Phantom Recruiter Defense

Dear Jeff –

We are working with a manager who wanted to present an offer to one of our candidates. The manager then called back and mentioned the candidate was presented to the company in February and, of course, the resume was presented through another search firm.

Here is the problem:The candidate was presented for a different role prior to this manager starting with company. There is more to the situation. The candidate was not aware that the company existed until we made him aware. The candidate has written a letter that was presented to the company through CPS (our company). He mentioned he was unaware of the company prior to us (CPS) notifying him about the role.

The manager explained that the other company’s fee agreement is ironclad and is uncomfortable with whole situation.

What can we do to put him at ease and of course, make sure the outcome is in our favor?

Jeff Williams

Manager CPS IT

Jeff Responds: It’s a Classic Phantom Defense

Hi Jeff,

We call these phantom recruiter cases, and this is a good one to analyze for our readers. Although I haven’t seen your file, this is how we approach them.

Invariably, the phantom recruiter defense arises from:

  1. A fee agreement with an earlier recruiter that contains a referral period. 
  2. An employer who doesn’t hire from the earlier referral, and;
  3. No knowledge of the earlier referral by the later recruiter.

Whenever you get one of these, you must move fast. If you don’t and the phantom is paid, you’ll lose your leverage.

This really has nothing to do with your right to payment, but the phantom recruiter defense is the finale to a completed placement play. By that time, the employer and the phantom have justified payment to the phantom legally. Opinion hardens into conclusion. “Rubberclad” morphs into “ironclad.”

JeffOnCall logoBefore we proceed, let’s review how fee collections work.

  1. Go to www.placementlaw.com,
  2. Click the Placement Fee Collection Quiz button in the middle of the bottom row.
  3. Take the PFCQ.
  4. Click the Placement Law Language Quiz button next on the bottom row.
  5. Take the PLLQ.
  6. Click the Answers to Placement Law Quizzes at the end of the bottom row.
  7. Grade yourself on the PFCQ and PLLQ.

Now back to our phantom recruiter defense.

As you know from my writing, referral periods can indeed be “ironclad.” However, many are not. They’re often poorly-worded, inconsistent with other terms and conditions (requirements), and don’t cover what occurred in this deal.

So here’s what to do:

Immediately request a copy of the earlier fee agreement.

Requesting this nicely, but persistently from the employer tends to stop any pending payment to the phantom. That’s good, because you deserve to be a part of the conversation before a final decision is made.

You don’t want your valued client to be liable for two fees if it’s not necessary. You’re not going to walk from a well-earned fee if a placement goes down, but what’s the big secret about requesting the copy?

This:

  • The request is taken seriously by the employer, since it figures you will be having your lawyer review the case. (Of course, you didn’t say anything about that.)
  • It signals you are as interested in getting paid as you are with “retaining a valued client.”
  • It requires identifying the phantom.
  • Questions the legal efficacy (enforceability) of the phantom’s agreement.
  • Challenges the person (probably an employer lawyer) who gave that “ironclad” opinion.
  • Undermines the job security of the employee(s) responsible for not catching the duplicate referral and working with you.

This request tends to really move the collection along. It’s the first one to make, because of its strategic

Request details about the earlier referral.

Once you have the phantom’s “ironclad” agreement, you need facts about the earlier referral. (We’re looking for “additional facts,” but keep that to yourself.)

Again, nicely ask the employer.

Most recruiters ask the candidate first. If the candidate is cooperative, this generates a self-serving scenario that usually only hurts the collection. That’s because even if the candidate says you were the only recruiter he ever knew, the phantom’s contractual referral period may apply. In fact, the phantom’s referral could have even caused the hire without the candidate’s knowledge or consent.

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It’s easier to talk to the candidate (assuming he’ll talk), but the candidate isn’t a contracting party. At best, he’s an interested witness (biased observer), and the subject matter of the contract. No sale there.

Talking to the phantom is a mess. Please let him stay in the shadows unless you’re interested in a split-fee deal.

Let’s say the basis for the phantom’s claim is a referral period. Why do you even care? Because right or wrong, the employer has raised it as a defense. So you want to check it out and make sure the phantom is entitled to get paid.

How is “referral” defined in the phantom’s agreement?

Was there an “HR only” requirement? Was it necessary to discuss the candidate before submitting the referral? How about a candidate consent requirement? A resume submission requirement? A fee-clearance requirement for each submission? An agreement for one gig and a submission for another? (Jeff, that looks like what happened here. Now the question is whether the agreement precludes payment.)

Using the phantom’s agreement and plugging in the facts lets you know whether he has a valid claim.

That’s extremely helpful if he doesn’t, because it frees up the money for you. If he does, it’s legally still irrelevant.

Present the “additional facts” to the employer.

Notice I haven’t advised legally attacking the “ironclad” conclusion. That rarely works without legal representation.

I like using “additional facts” because it gives the decision-makers cover to unmake their decision. “Additional facts” work because considering them doesn’t jeopardize the jobs of the politicos who caused the double-or-nothing dilemma in the first place. They also enable you to sidestep the legal argument that paying the phantom somehow forecloses your claim.

If you’ve really worked hard on the search, this can be coupled with a thorough review of your efforts. Our Pre-Placement Activities Worksheet really helps to organize your approach. It’s yours for the clicking.

To get it:

  • Go to www.placementlaw.com.
  • Click the red JEFF’S ON CALL! button.
  • Type Pre-Placement Activities Worksheet in the Subject field.
  • Click Send.

I’ll reply with the Worksheet.

Thanks for the inquiry, Jeff!

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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