Part Two of Three
The principals, laws and ethics behind recruiting firm “non-solicitation” policies *Part Two of a Three Part Series
Frequently Asked Questions
It is highly doubtful any recruiting firm is counting the days so they can immediately start contacting your employees on the 366th day of the expiration of their non-compete obligations.
Nevertheless – If you wish to enhance the contract clause addressing this issue, most search firms are open to fair bargaining of a longer period of time or other revision providing:
a. You make a request for such
b. Compensation and fee rates justify the added service being provided
c. You are prepared to reconsider any previous cut rate or discount fee you may have been granted
If you negotiated intensely for the lowest rate possible when originally formulating your agreement … which many companies tend to do feeling they have accomplished a “Good Deal” … you may not get additional incentives under that bargain basement rate. You may succeed in obtaining added incentives such as an extended non-compete periods, or guarantee periods or other adjustments only if the fee is within more acceptable standards to justify such.
To use an analogy, most insurance companies will not permit you to purchase umbrella insurance for your house unless first the insurance underwriters approve you have high enough basic coverage to begin with.
While this may not benefit all companies, you should know some companies choose to invest in their search firm partnerships by paying a small “yearly stipend” during years where there is no recruiting activity.
This small fee, which can be around $5,000 or so and pales in comparison to the tens or hundreds of thousands in fees (and millions of salaries managed) many companies invest in recruiting services … is remitted by the company to the search firm for several beneficial reasons as follows:
According to American Lawyer and quoted case law, No, it is not illegal.(3) In fact this is the reason for the search firm’s very existence: To provide recruiting services to marketable candidates worthy of garnering a fee.
And no, there is no breach of fiduciary duty. (4)
In fact there is no fiduciary duty at all when it comes to contingency search although some search firms are so professional in their execution they mistakenly become considered “part of the company’s organization” by management due to the tight knit relationship that often evolves.
Can an insurance broker sell you auto insurance, then go sell similar auto insurance to the driver that totals your very own car the next day? Yes they can. That same insurance company can insure your auto and as well as sell the same auto insurance to the person who proceeds to wreck your car! In fact insurance companies get away with this every day – this is what they do: Sell Insurance.
Will Monster.com or Hotjobs allow someone to post a resume who happens to be employed by a company that is paying them tens of thousands for a national annual account with a bank of job slots? Yes they will permit that. In fact web-based job boards are in essence earning their fees from candidates (via their resume submission) which makes the value of their resume search functionality more sellable – quite often to the same companies those employees are contemplating leaving.
Whether “recruiting from within a client” makes sense from a long term business perspective however, is of an entirely different matter. This is evaluated on a case by case basis.
The legal requirement for “fiduciary duty” (5) requires that there is first, compensation; secondly the individual must have “decision making authority” which would require the recruiter actually choose who to hire and determine what salary to make the offer at.
No contingent search firm ever makes hiring decisions or chooses who should be hired or sets the salary. Since the search firm never makes such offers or decisions it has no fiduciary relationship. Period.
In our next issue we will supply tips you can provide to your hiring managers and hiring clients as well as additional resources on this subject.
Read Part One at:
- Frank G. Risalvato, Certified Personnel Consultant
Member of the National Association of Personnel Services Author, Speaker, Recruiter and Search Industry Veteran
Copyright, March, 2007