Costly disputes with clients: how vulnerable are you?

In my adult life I have been at the centre of three significant disputes; all having occurred across a three year period when I was in my late thirties.

One was as an employee and the others were as a business owner. Each dispute took months to resolve. Each dispute drained both my energy and my bank account. Dealing with each dispute took my focus away from other important areas of my life.

I vowed to learn from these debilitating experiences.

Thankfully, in the 15 years since the last of these disputes was resolved I have avoided another commercial dispute.

Anybody who has experienced a significant commercial dispute will be able to relate to what I went through.

These three disputes have significantly shaped my approach to working with owners and recruiters with respect to the ethics and commercial terms of the recruitment industry.

Currently, I make a small, but broader, contribution through my membership of the RCSA’s Professional Practice Council. The Council helps develop, sustain and improve the ethical and professional practises and behaviour of our industry.

Agreeing to abide by the RCSA Code of Professional Conduct is an integral part of becoming a corporate or individual member of the RCSA.

In just under four weeks’ time, on 8 August 2020, the revised Code comes into effect.

I urge you, and any employee you have responsibility for, to familiarise yourself with the Code, not just as a compliance issue but as an important step in avoiding a potential drain on your company’s resources.

Minimising debilitating disputes with clients, candidates and competitors is an important part of a recruitment leader’s role.

Disputes drain resources such as time, energy, focus, reputation, morale and money.

This year is one in which you can least afford to have any of your resources diverted into avoidable dispute resolution.

It is impossible to avoid ethical or commercial disputes however there are many things you can do to minimise the likelihood that they occur.

The following is not a substitute for reading and understanding the new Code (and also having seeking industry-specific legal advice) however I offer these recommendations as an incomplete check list to help you assess your ‘dispute vulnerability’ with a client in the four areas I most :

1. Validity of a candidate introduction: Not being paid for making an ethical introduction of a candidate who is subsequently hired by your client, or related party, without your knowledge, is the ultimate frustration for an agency recruiter. This might mean you are dealing with an a**hole or might it mean you have failed to adequately educate your client about your services and what constitutes your agency’s intellectual property.

Consider the following to maximise the likelihood you are paid for introducing a candidate who is subsequently hired:

a) A verbal introduction is just as valid as one in writing. Sound practise includes sending an email confirming the date and time of a verbal introduction, so as to create a digital footprint substantiating every verbal introduction of a candidate.

b) A common area of dispute is the introduction of a candidate twice (or more) to the same role or company by different agencies; each of whom claims a fee.

Contrary to the belief of many hiring managers, internal recruiters and agency recruiters, candidate ownership for an introduction is not automatically ‘first resume received’. Issues of candidate permission with respect to privacy and confidentiality are important factors in who ‘owns’ the candidate introduction.

An email containing evidence of the introduced candidate providing you with specific permission to represent them to the specific role and company you are recruiting for, will greatly help you avoid disputes in both (a) and (b), above.

c) They-are-already-on-our-database is a common reason a client won’t pay a placement fee for an ethically introduced candidate. The specific issue is explained, with some suggested preventative actions, in this May 2011 blog. I then published the range of responses from recruiters in the following week’s blog.

In short you should have this potential situation specifically addressed in your terms of business and also ensure that you verbally communicate this aspect of your terms to the client when the job is being taken.

2. Part-time permanent placements: If you expect to charge a placement fee calculated on the full-time equivalent salary of a part-time employee then ensure your terms specifically state this, otherwise most clients will interpret ‘annualised salary’ in your terms as applying pro-rata for part-time placements.

3. Replacements or credits: Guarantee periods are rarely an issue of dispute however the number of times a replacement will be provided is an area of dispute, as is the consequences of no replacement being required, or made.

I recommend your guarantee state words to the effect of; ‘one replacement is provided subject to the original placement fee having been paid within the agreed payment period’. Within what time period must the client avail themselves of the replacement service before it is void?

If you are unable to provide a satisfactory replacement for any reason, including the client declining to replace the role, then clarity with respect to what happens (eg transferable credit value, non-transferable credit value, full refund, pro-rata refund or no further obligation) may avoid disputes about what is ‘fair’ in such circumstances.

4. Acceptance of terms of business: As per this November 2019 ShortList story ($ subscriber access required) simply attaching your terms of business to an email along with a resume is unlikely to be sufficient to prove your terms have been accepted by a client or will be sufficient to withstand a legal challenge in the event of fee dispute.

Signed terms of business will minimise the likelihood of any dispute as to what constitutes an acceptance of your agency’s terms of business.

Education and training of an agency’s recruiters with respect to their employer’s written terms of business, and how these terms apply to the most common aspects of an agency’s service, is the responsibility of an agency’s leadership team.

I recommend this education and training comprise the following:

• the specific terms and conditions of the service delivered by the employee,
• when, and how, these terms are raised and explained to the client, and
• how to request the client’s signing of the terms (or commit to having the terms signed, and returned, by the authorised person).

I encourage all recruiters to take the steps necessary to minimise the likelihood of disputes occurring (free RCSA member training is provided via seven 30 minute webinar sessions across 21 July – 1 September, details here)  

This training may not qualify as business development or revenue generating however I would argue it is just as important in potentially saving costs and improving profitability.

The long term benefits of being known as an ethical recruitment agency, evidenced by operating in accordance with the RCSA’s Code for Professional Conduct, also far outweigh any direct or indirect costs incurred in the training required to fully understand and apply the Code.

 

Free RCSA member webinar to launch the new Code, 30 July at 11 am AEST. Register here  

RCSA Code for Professional Conduct can be viewed here

RCSA Professional Conduct Grievance Intervention Guidelines can be viewed here

What is Professionalism in Recruitment & Staffing webinar series details here  

Recommended recruitment industry-specific legal services available here

Recommended recruitment industry-specific dispute resolution services here

 

Related blogs

How do you know when your client is an a**hole?

Your fee: Don’t be a victim of the unfair, irrational or deluded

‘Sorry, they are already on our database’: The lazy corporate rip-off

‘Sorry, they are already on our database’ (Part 2): The solution?