Protect your Profit - Top 5 legal pitfalls to avoid for recruitment

From Shortlist reporting on Captain’s Table – 5 Legal Pitfalls

Inadequate and inarticulate terms of business are the chief source of disputes and disagreements with clients, according to a legal advisor.

It may “seem pretty basic”, but the actual terms of business – what recruiters do and get paid for – are not articulated very well to employers, says Corvus Group director and former Adecco general counsel Martin Richardson.

Part of the problem is that organisations outsource not only the writing of their business terms, but also the understanding, he told a recent Navigator Consulting Captains Table www.navigatorconsult.com

“Where did your terms of business come from, did you borrow them? That’s OK, but do you actually understand them?”

Instead of being “overawed by a legal document”, Richardson suggests creating Q&A-style documents for recruiters and clients, to ensure all parties understand the terms.

Terms of business should include robust clauses around the following:
*         What services are being provided – and how well is this articulated to clients about “what it is you get paid to do, and what it is your contractor is delivering onsite”?
*         Introductions and fees – How long is an introduction period? Is there a period of exclusivity? What is an introduction? What is an engagement? What are the client obligations?
*         Replacement policies – Are timeframes clear? What events give rise to a replacement, eg is it just termination? Are exemption terms and credit notes clear?
*         What costs are passed on to the client? And how are these passed on?
*         Supervising and managing contractors – when it comes to contractor performance and management, is it clear who controls the relationship?
*         Replacing contractors – What do terms say about passing through notice periods?
*         Safety – Are the obligations of both recruiter and client clear?
*         Who is liable for the acts and omissions of contractors? Richardson asks, “if you are not supervising and controlling your contractors, then should you be accepting liability, just because they’re your employee – does your margin cover that?”.
*         Non-poaching clauses – Is there an inclusion in the terms excluding poaching of client employees? He doesn’t recommend including these clauses: “I wouldn’t do it; your business is recruitment.”
*         Payment terms, including passing on interest and debt recovery costs – “More often than not, I see permanent invoices on commencement of employment. I don’t know why you do that… Why would you wait that long?” Instead, Richardson recommends payment terms that start when the candidate is supplied, and if they don’t work out, it is covered by the replacement policy.

He also suggests developing clear strategies around recovering bad debts, including a process with timeframes, scripts and templates, training staff on how to act on overdues, and knowing the “walkaway position”.

Importantly, contract terms cannot be introduced after commencing the transaction, Richards advises, recalling the case of a recruiter who sent a candidate’s details to a law firm, unsolicited, with the terms of business attached in a separate email.

“The law firm gladly took the candidate, on a six-figure salary, and in turn said ‘we’re not paying the fee because we didn’t agree to the terms’.”

That recruitment company took the dispute to court, where it was ruled in the client’s favour.