“We did not hire him as an employee. We hired him as a consultant.”
The excuse, “We do not owe you a fee because we did not hire them as an employee. We hired them as an independent contractor, consultant, part-time [or any other variation],” is the 2nd largest warning sign that your debtor had no intention of paying you. This reason is only second to my favorite excuse of “We did not sign anything”. If you compare the excuse, “I did not sign anything,” to premeditated murder then the excuse, “We did not hire them as an employee,” is second-degree murder or, at the very least, manslaughter. They may have had intentions of paying you in the beginning, but somewhere along the lines they took a look at your contract, or the lack of your contract, and decided to try to create an excuse in order to get out of your fee. This excuse, as a general rule, does not hold up very well if we have to get one of our forwarding attorneys involved. The reason it does not hold up very well is the attorneys are going to argue procuring cause which I have discussed at length in the previous chapters; some of you may know it as the “but therefore” clause. This, in plain English, means if it was not for your actions the candidate would not have been hired by the hiring company. The fallback position for our forwarding attorneys on this one is going to be “unjust enrichment.” The other reason this argument does not hold up is the debtor’s attorney typically knows that this is a weak defense, and we will try to nudge their client to make a respectable settlement offer. All of this is working off of the assumption that our client has gotten a signed agreement. I can assure you if you did not get a signed agreement, the first argument the debtor’s attorney is going to make is there was no agreement to have to pay.
His fallback position will be even if there was an agreement, the fact that it was not an employee and he was hired in a different capacity would justify their client not having to pay the fee. Assuming there is a signed agreement, most of these will resolve within two weeks of coming into collections with the debtor paying the full fee or a fee with a slight reduction. The most frustrating part about this type of argument is it could have been so easily avoided if our clients had taken just a few moments to make sure they had better wording in their contract. I cannot give you legal advice, but we typically find it is much easier to have these types of Backdoor Hires paid in full whenever the wording is specific, and our clients’ agreement states that if the candidate is hired in any capacity or position, full-time or part-time, as an employee, consultant, or independent contractor, a fee would be owed on their annual estimated salary or compensation. In my opinion, if you had this wording in your contract, it would eliminate 95% of these types of Backdoor Hires from having to be sent to my office for collections since the debtor would have paid to begin with because you have eliminated their ability to create an excuse later. The proper wording in your fee agreement will at least keep most hiring managers honest. At the risk of sounding like a broken record, the most important thing is to make sure you have a signed agreement because you can have your attorney create the most bulletproof fee agreement, but it is absolutely worthless if it is not signed.
I want you to remember this falls into our The “Litmus Test” of when you need to turn an account over to collections. If the hiring company told you we are not going to pay your invoice because “the candidate was not hired as an employee,” you need to get us, your attorney, or whoever you use involved ASAP because the debtor has said the magic words, “I am not going to pay you because.” Anything you say or do from that point forward could move a case from a slam dunk to a tough win.
If I were to give you some homework for this chapter, I would have you go through three reviews of your agreement and consult with your local attorney, or you can give me a call for referral interstate and have your agreement firmed up with that special wording.
Case Study Number One:
Mid-Sized 50 Million Dollar Company
Fee Owed: $16,000.00
Reason for the Dispute:The client presented a computer engineer. They set up several interviews, and the hiring company decided this would not be a long term position. Our client’s candidate was hired as a consultant, and the hiring company said they would not pay the fee because the agreement only covered employees, not consultants or independent contractors. The client had a signed contract, but it was very vague on what type of employment constituted a fee being owed.
Resolution: Resolution: The debtor got their attorney involved once the account was turned over for collection. After extensive arguing back and forth, the debtor increased their settlement offer from $2,000 to $13,000 and our client accepted.
Case Study Number Two:
Small-Sized 10 Million Dollar Company
Fee Owed: $29,000.00
Reason for Dispute: Our client had presented multiple candidates for a territory sales manager’s position, and our client found out that one of his candidates was hired six months later. The hiring company said they did not have to pay the fee because they did not hire the candidate as an employee. They hired them as an independent contractor, and we are paying them a draw vs. a commission.
Resolution: This particular debtor surprised me. Our client had a signed agreement that did say if they hired any candidate for any position a fee would be owed. The debtor wanted to argue the position was assuming it was an employee and not a consultant or independent contractor; their attorney tried to make the same argument. We sent this out to our forwarding attorney, and they sued the debtor and received judgment for the full balance plus attorney’s fees. The debtor still did not pay, and we finally had to enforce the judgment by garnishing their checking account and pulling the entire amount out of their account with the bank garnishment.
Wilson Cole is the founder and CEO of Adams, Evens & Ross, the nations largest credit and collection agency design exclusively for the staffing and recruiting industry. In 2008 he was inducted into INC Magazines, “INC 500” for being the CEO of Adams, Evens & Ross, the 307th fastest growing privately held company in America. This exclusive group of other INC 500 CEOs includes Bill Gates of Microsoft and Larry Ellison of Oracle.In 2007 Recruiting & Staffing Solutions Magazine’s Editorial Staff named him “ The Billion Dollar Man” due to the fact that he had collected or helped his clients collect more than 1 Billion dollars in past due debt over his career of almost 20 years as CEO of Adams, Evens & Ross.