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The Fordyce Letter

Straight Talk for the Recruiting Profession

Articles tagged 'legal issues'

Jeff's On Call!

Jeff’s On Call!: Corporate Raiding


This week’s inquiry comes from Dave Glaser:

Dear Jeff,

Thank you so much for your great column and advice over the years.  I am a long time subscriber to Fordyce and have used your office successfully in the past.

In running a small search firm of 6 people, we occasionally run into problems where companies are not too thrilled about us contacting their employees.  We specialize in the high net worth/wealth management area, so often we are recruiting talent from large accounting firms and financial service firms.  We have been contacted via email and phone calls with threats of law suits for raiding their firms, enticing their staff with other employment, etc.  Can you please expound on where we stand from a legal perspective?

Thank you!

Dave Glaser, President
ECG Resources, Inc.

Social Media

Social Media + Legal Reality & Perspective = Caution for Recruiters


As search professionals and recruiters, we are learning more about the benefits of leveraging social media and integrating it as a trusted recruiting tool in identifying talent for our clients. It should be a critical component to sourcing combined with other proven methods. After all, our clients and candidates use it and so should we. I see social networking becoming more of a key component to recruiting as we can reach out to more people using social networks. It is also critical that we understand the powerful opportunity it presents for corporations to engage in real-time dialogue with customers, stakeholders, and candidates, and use it similarly with our clients as well.

Using social networks can give us a competitive edge in identifying and engaging the best candidates available, however, these sourcing options also bring potential legal pitfalls that we need to be aware of. For example, what happens when a candidate has revealed protected information via their social profiles?

Jeff's On Call!

Jeff’s On Call!: Cease and Desist


This post’s inquiry comes from Coy Fite:


What should one say and do if a mad target company’s attorney (a company you’re recruiting from) calls or corresponds that you should “cease and desist”… not call their employees? A company could take legal action, I assume.

We’ve gotten similar calls in years past, and may again in the near future. I want to know how to respond if and when it happens. And how might one defend oneself in this situation?

I appreciate your help. Your advice has been helpful over the years…I still have copies of a couple of your books from 25-30 years ago and have enjoyed your articles in the Fordyce Letter for years.


Coy Fite”

Hi Coy,

…and we appreciate hearing from such a long-standing member of the Fordyce family! So glad you’ve benefited from our help, and now we can help many more.

Irate employers have been trying to stop recruiters from sourcing ever since the first recruiter sourced. Fear and anger are counterproductive responses.

Let’s script a reply. (No, it’s not “You’re either a client or a source!”):

Jeff's On Call!

Jeff’s On Call!: Recruiter Compensation


This post’s inquiry comes from Neil McNulty:

“My thanks to Jeff for his clarification on compensating placement consultants who are employees. I have always been instructed in my 26 years in this business that consultants must be on a fixed base of minimum wage plus commission, or, minimum wage draw against commission…they cannot be 100% straight commission (which most owners would love in order to lower costs), even if the consultants preferred 100% commission. I raised that question because I had an attorney here in VA tell me that as long as the total earnings in commissions, divided by 2,080 (number of working hours in a year), came out to be greater than the minimum wage, we were OK with the law. I told him that we would love that, but that he was incorrect; that for our industry…even if they make $500k in commissions, they still must be receiving either a base of minimum wage, or minimum wage draw against those commissions. Of course, he was not pleased that I questioned his advice because I am not an attorney. Jeff, what are your thoughts on this?

Thanks again, Jeff!”

Hi Neil,

. . . and thanks to you for giving me the opportunity to save so many search businesses out there.

The federal and state wage-and-hour audits, back pay, penalties, and interest awards can be devastating.  Then the government compliance agencies can investigate anything “like or related to a claim.”  Meaning everyone else’s compensation.  So it’s really not clever to avoid the labor laws.

This reply is nasty, but it’s necessary.  So as Grandma Allen would say, “Better a quick pain.”  Read well, Fordyce friends…


How to Spot Hiring Authorities With Higher Priorities, Part 2


Yesterday in part one I discussed the first three ways to know if your “hiring authority” is hiring — and an authority at all.

Today we discuss the final three ways:

4. The Weakling
Most recruiters take the inflated term “hiring authority” literally. This causes them to forget, completely, that they’re literally “consultants.”

Middle-management supervisors are undoubtedly among the most emotionally fragile people in the working world. Their “authority” is constantly questioned from above, below, and even from lateral supervisors.


How to Spot Hiring Authorities With Higher Priorities, Part 1


“Getting a job order.”

“Obtaining a search assignment.”

The very words imply that you need to talk someone into something. Or even worse — out of something. The object is writing up the almighty JO. Some offices even have quotas for them. Contests. Awards.

But are they hot? Are they even real?

Let’s look at a few other reasons you might have received one:

  1. The hiring authority wants to get you off the phone.
  2. The hiring authority is “window shopping” with the idea of hiring if Beyonce Rambo Einstein, M.B.A. is recruited.
  3. The hiring authority is “always looking for the best people.”
  4. The hiring authority wants to conduct a little industrial espionage on the competition.
  5. The hiring authority is looking to network with colleagues without leaving his office (on company time).
  6. The hiring authority thinks a contract won’t be awarded, but wants to have qualified candidates available if it is.
  7. The hiring authority is just trying to impress you with his power.
  8. The hiring authority is looking for a job and wants to draw you into presenting him.

Higher Priorities of Hiring Authorities: Certainly Higher Than Hiring

There are hidden agendas you’ll never write on your JO. You, everyone else in the office, and even your networkers will waste an incalculable number of hours only to discover that the hot new JO is cold and old. But you were told — you were just too bold and sold to listen.

“Hiring authorities” — it sounds so official. Maybe one of our trade associations should make up badges so we could deputize them, swearing them in formally at meetings.

In fact, maybe we should certify them like we certify recruiters.


CA Court: Kelly Services Must Pay for Interview Time


Are staffing firms liable for employees’ interview time?

A judge in California has ruled against Kelly Services, claiming it must pay for time spent in job-placement interviews. The defendant argued that she was not compensated for time spent preparing and traveling to and from four interviews with three Kelly Services clients. The judge rejected Kelly’s defense, which claimed that its applicants attend interviews voluntarily and for their own benefit.

Although the judge agreed that travel and debriefing time were not worthy of compensation, it found that Kelly must compensate its employees for their time spent interviewing.


The Allen Magic Collect-A-Fee System, Part 2


Editor’s note: Yesterday, in part 1 of this 2-part article, attorney Jeff Allen shared the first five tips for collecting more fees. The article concludes below.

6. Send your invoice the day employment commences.

Earlier is too aggressive, while later risks the employer questioning the hire or obtaining the candidate’s cooperation to avoid the fee.

7. Discount the fee for prompt payment.

It’s a well-established business practice, but don’t discount the fee for late payment! This must be strictly an inducement to accelerate the payment.

Whatever discount you want to use is legally acceptable. However, you must also indicate the full fee on your invoice and when it is due. Otherwise, it’s virtually impossible to obtain it later.

8. If the account becomes past due, pursue collection personally.

Why do you think this is recommended?

There are six reasons:

  • Preserving the rapport between your recruiter and the client is important in the future.
  • The further away from the dispute your recruiter is, the better a witness he will make.
  • The recruiter is personally involved, often hungry, and probably worked very hard to make the placement.
  • The recruiter is probably not qualified to collect the fee.
  • Sometimes a different personality can close the deal.
  • It’s your responsibility.

9. Don’t send your placement file to the employer.

More fees are lost by doing this than all of the other mistakes combined.

This is like playing poker with your cards backwards. The result is a complete defense to the employer. This includes a sanitized file and a turncoat candidate.

Whenever some human resourcer says, “Show me why we owe a fee and we’ll pay it,” understand the translation: “Show me why we owe a fee and we’ll show you we can avoid it.”

If you ever feel the compulsion to do this, just ask the employer for its file. That will make you a believer.

10. Refer the matter for collection when it is 30 days past due.

Almost any change in circumstances weakens your position. What can happen?

  • Termination of the employee.
  • Termination of the person responsible for the fee.
  • Promotion or transfer of the employee.
  • Termination of your recruiter (maybe over this issue).
  • Sale of assets of the employer.
  • Insolvency or bankruptcy of the employer.
  • Change in corporate structure of the employer (merger, acquisition, etc.)
  • Time is always on the employer’s side.

Here are the typical defenses to placement fees (in order of frequency):

  • The recruiter did not make the placement (this includes split-fee disputes with other recruiters)…………………………………….30%
  • The placement fee is “too high”……………………………….20%
  • A fee schedule was not received……………………………….20%
  • A trial period was promised (or is customary)…………………10%
  • The lower base starting salary does not include commissions, bonuses, or incentives (“salary” versus “compensation”)………….10%
  • An invoice was not received……………………………………..5%
  • The employer cannot afford to pay………………………………5%

With the exception of the defense that the employer cannot afford to pay (asserted only 5% of the time and often solved by a little patience), The Allen Magic Collect-A-Fee System will help you avoid all of these problems.


The Allen Magic Collect-A-Fee System, Part 1


The Allen Magic Collect-A-Fee System was actually introduced over 30 years ago. It was unveiled at a California Association of Personnel Consultants convention on the day I was voted in as its General Counsel. The seminar was recorded, and over the next two decades, became the most popular title in the EMPLAW Audio Series. Since then, the 10-point system has been refined as the law, technology, and our business has evolved.

In one way or another, The Allen Magic Collect-A-Fee System is now used in thousands of offices every day. It has also been adapted to collect retainer balances and temp service fees. It’s impossible to know how much has been collected in well-earned fees, but the amount through use of that little $39.95 package is easily in the tens of millions of dollars.

The package came with the guarantee of a free collection from our offices if any recruiter who used the system wasn’t paid. To this day, nobody has ever needed the guarantee; nobody ever asked for a refund either. The system is out of print now, and only those who still have the package get the guarantee.

Here are the details:

1. Obtain any written confirmation of the fee from the employer.

This is done best by emailing or faxing a copy of your customized fee letter to the person responsible for the fee and requesting a signature. You can use a customized cover letter with a fee schedule, but we prefer the fee letter format because it’s more marketable and just as enforceable.

There’s still some reluctance to do this by recruiters, but those who won’t work the search without a signature have almost no receivables.


Keeping the Fee On a No-Show Director of Nursing


A hospital in Tennessee has filed a lawsuit against an Atlanta search firm after a new employee’s start date came and went, the director of nursing was a no-show, and the firm kept its $23,000 fee.

Is Management Search Inc. International entitled to the 25% fee? According to this article, the hospital was open to working with the firm to find another candidate for the director of nursing position, but Management Search allegedly never found a qualified replacement.

Any bets on how this lawsuit will pan out?