“Yes, we hired them, but other candidates did not last as long as they should have so we are taking them as a credit.”
This argument is very similar to the argument discussed earlier in the book, “The candidate did not stay through the guarantee, therefore, we do not owe a fee”. The difference with this argument is it is often made by one of your larger clients that you have worked with for an extended period of time who you have made multiple placements with. The hiring company’s argument usually happens when you have, for example: a candidate that you place in the Southeast for a sales manager position who does not work out in the end. They decide to promote internally and not allow you to replace the position in the Southeast. Then, as you place a candidate in the Northeast position, they want to claim that this candidate is their replacement. The biggest question that our clients have to ask themselves is, do they want to have a dispute with their client over one position? That can sometimes be an absolute yes because this client has a history of paying slowly and is taking up too much of your time. To add insult to injury, they are not wanting to pay you for a completely different search in a different position.
In this chapter, we are going to assume that your scenario is you want your money, and you are willing to let the relationship go with this specific client. Again, I cannot emphasize this enough, 90% of these cases could be avoided and you would be able to collect your fee on your own without us getting involved, if you had a signed agreement that had very specific parameters on how the guarantee is utilized. In plain English, you want some wording that explains all guarantees for a specific position and guarantees on candidates cannot be offset by different positions. I recommend you get that specific with your clients because it is not only good from a collection standpoint but, in my opinion, it is very good from a client relationship standpoint. It spells out what those roles are, especially if you have a high level of turnover at a specific client. The best example I can give you is the one I used earlier in the book: you need to treat the guarantee and credits almost as a prenuptial agreement that states if things take a turn for the worse, then this is how we are going to solve the problem for you and your client.
I can tell you when we do run into these types of scenarios, it is almost always going to be some form of settlement vs. having these types of cases go through court. The reason I do not like these cases to go through the legal system is because they have a higher percentage of our clients being countersued in the midst of the legal process. This is because their attorney inevitably claims that you did not screen properly and caused your client significant harm by providing them with incompetent, unscreened, and unvetted candidates. In 25 years, we have only had one or two clients actually lose a countersuit. The problem with countersuits is that they create additional expenses for the defense portion of the attorney fees rather than having the attorney handle the collection on percent contingency. If you do run into these types of collections, please do not misunderstand me when I am saying we do not run it through the legal system as often. We still collect 75%-80% of these scenarios. I am just a bit reluctant for the client to run it through the legal system because the debtor is going to build a defense based on the same facts. If our clients carry Errors and Omissions Insurance, I am not as concerned about that because we have noted most policies cover the legal defense portion of those types of claims.
With this being the last chapter, scenarios, and case studies, I feel it is my duty to go back to our basic frame. You absolutely need to have a signed agreement and specifics on how things are handled when it comes to presenting candidates, hiring candidates, and what happens when candidates fall off. We often find these types of claims are the biggest dispute areas when there are splits done between recruiters. Make sure if you are doing a split with another recruiter, you get an agreement signed that guarantees are handled when there are multiple placements being made at the same company for different positions.
Case Study Number One:
Mid-Sized 25 Million Dollar Company
Fee Owed: $9,000.00
Reason for Dispute: Our client placed multiple mid-level sales people into a company in the US and Canada over an eight month period. This particular company had a poor reputation in the industry on how it treated its people and had a very high turnover rate. On the very last hire, the debtor informed our client they would not be paying for the last candidate that was placed in a different territory because they had a candidate fall off within the guarantee in one of the other territories. This was very problematic for the client because they worked with multiple recruiters on split fees that supplied the candidates in these specific areas. The candidate they were not wanting to pay for was supplied from a different recruiter than the one that was owed for the position that had fallen off. To make matters worse, our client did not have a signed agreement.
Resolution: We were able to collect $7,000 from the debtor only after we threatened to file suit by our contingency based attorney in their state. The $7,000 they paid was what their attorney told them it would cost to defend the suit.
Case Study Number Two:
Large-Sized 250 Million Dollar Company
Fee Owed: $14,500.00
Reason for Dispute: Our client placed multiple engineers into this particular hiring company over a 10-month period. The last placement was an electrical engineer, but they were not wanting to pay this fee because our client placed a mechanical engineer that had fallen off during the guarantee period.
Resolution: We were able to get involved and get 100% of the fee that was owed to our client. This was partly based on the fact that our client had a signed agreement that was specific on how the guarantees would work in the event that someone did not last through the guarantee period. Their attorney did not insist that our client sign an additional agreement stating they would present five qualified candidates within a three-month period to the hiring company, so they could replace the mechanical engineer that had fallen off during the guarantee period.
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.