Dear Jeff,
Thank you for the excellent advice that you give all of us recruiters. Your column, along with The Fordyce Letter, have guided me through many sticky situations that have come up throughout the years. You folks are the greatest!
I have been working on a contingency basis with a company that wanted to use the same recruitment agreement as a company that they had acquired. They gave me six sales jobs to work on.
I identified good candidates for three of the six territories and was starting to submit more applicants for the other three territories. I then received an email from the sales director that the company had just entered into an exclusive agreement with another recruiter, and I can only work on the three of the six territories that I have been working with. After all of this, only one of my applicants will be getting a job offer. Do you believe that I have any remedies? (They also suddenly want me to sign a new contract with the main company, although, the contract will be canceled immediately.)
Thank you Jeff. You’re the best!
Jack
Hi Jack,
WHAT? Paid when you didn’t make a placement?
Are you trying to start a recruiter revolt here? Even a recruiter revolution?
Fine. I’m in.
Thanks so much for your words of appreciation and your JOC inquiry.
I hope every contingency-fee recruiter reading this JOC gets their hands on Contract as Promise, by Harvard Law Professor Charles. Here’s why:
You’re asking about a “no-placement fee.” It gives me the opportunity to share the no-placement feegetter we introduced in Chapter 25 of The National Placement Law Center Fee Collection Guide (with Case Citations) (order at www.SearchResearchInstitute.com) entitled “A Simplified Legal Theory to Win Fee Collection Cases.” It’s helped many recruiters collect no-placement fees, legally known as reliance damages.
Promissory Estoppel
That five-figure feegetter is known as promissory estoppel, and every contingency-fee recruiter must know it well to collect no-placement fees.
Promissory estoppel was developed by legal scholars in the Restatement of Contracts, Section 90. It is a substitute for the consideration that merges with an offer and an acceptance to form the legally-enforceable agreement we call a contract.
So far, so good. But what is consideration? When I ask in a workshop, the answer is automatically “Money.” But there’s no money being paid by the employer, and you’re sure not paying anything to make the placement. So that’s not it.
Consideration refers to a benefit or detriment that is given in exchange for a promise. The employer’s promise to pay the fee. The benefit is your assistance in identifying and placing a candidate. The detriment is not working on other searches or not placing the candidate elsewhere. The purpose of consideration is merely to show that the parties intended to be bound; that they established an enforceable relationship of rights and liabilities – embodied in the employer’s PSA (placement service agreement).
So a substitute for consideration known as promissory estoppel arises when:
1. The employer makes a promise.
“If you access your data base, network, cold-call, contact, screen, qualify, recruit, motivate, refer and arrange interviews with qualified candidates completely at your own expense, we’ll seriously interview, reference check, extend competitive offers, hire those candidates, and pay you the agreed fee.”
2. You justifiably rely on that promise.
Justifiable reliance (acting on good-faith belief) by fully doing what the employer wanted with the reasonable expectancy of getting paid pursuant to the (very serious, legalistic) PSA. Those activities you did (as you’ll soon see) can be clearly documented. They are evidence of complete performance of the conditions precedent (requirements) to make the promise (of payment) enforceable.
3. The employer is estopped (legally stopped) from breaching the promise.
4. The court can enforce the promise to uphold your reasonable expectancy.
That means an order of the court to tender payment in full.
Not A Classic Contract
This is not a traditional contractual analysis, so be sure to share this JOC with your lawyer. You didn’t place anyone (yet) so under strict contract principles, there was no contract formed. That’s because there was no consideration (bargained-for benefit – a hire) received by the client. Promissory estoppel is invoked as a matter of fairness. Again, a substitute for consideration.
That’s why you wrote me, Jack. This treatment by the “client” is unfair. Here it led you on — even to the point of having you sign its gross PSA — and give you six openings to fill. What’s up with that?
Fully Perform Or Waive
You must be able to prove that you fully performed all terms (provisions) and conditions (other requirements) to getting paid, just as with any contract claim. If not, the terms must be waived or the conditions must be excused. Simply stated, this means the employer intentionally didn’t require compliance with them.
A typical example of waiver is the “only through HR” business. If the employer is sloppy and lets you communicate with hiring managers, you’re fine. It waived its right to insist on literal performance with the PSA. It is then estopped (again, legally stopped) from asserting that right.
Since you’ve been a fan for a long time, you’ve undoubtedly seen me take apart PSAs. I do so every so often just for fun because the provisions get crazier every time. The more draconian, onerous and unfair the terms, the more likely a court will find that a “capricious client” was acting in bad faith.
Couple this with the “Six openings . . . no, three openings . . . no, fagettaboutit we’re giving an exclusive to someone else.” and it sets up a case where a judge or jury is more likely to invoke promissory estoppel. The employer made it impossible for it to receive its bargained-for consideration.
What did you do wrong, Jack?
See what I mean?
Now, For the Damages
In these cases, it’s imperative to show the detrimental reliance on the promise. That’s how a court can compute the amount of your reliance damages.
Those damages are organized by using our unique Pre-Placement Activities Worksheet.
To get it:
- Say, “Charles Fried, friend in need!”
- Go to www.placementlaw.com.
- Click the red JEFF’S ON CALL! Button.
- Type Pre-Placement Activities Worksheet in the Subject field.
- Click Send.
- I’ll reply with the Worksheet.
Don’t forget that under the contract rules of construction that I’ve taught you in the past, any ambiguities (unclear provisions) in a PSA are construed against the employer. Scour the PSA for them. You may even find that an actual hire isn’t even required for you to be paid a full fee! PSAs are committee jobs. Need I say more?
The worksheet information should be itemized in the ve-r-r-y tough letter your lawyer writes to that “un-client” (immediately after reading this reply and Contract as Promise).
Let’s get you paid for all that time and effort!
I wouldn’t wait for that pipeline placement to go down. If it does, just subtract that fee when it’s paid from the total owed.
Best wishes for every success!
Jeff
JEFF’S ON CALL!
REPLY TO JACK ALESSI E-MAIL
DATED DECEMBER 21, 2012
Hi Jack,
WHAT? Paid when you didn’t make a placement?
Are you trying to start a recruiter revolt here? Even a recruiter revolution?
Fine. I’m in.
Thanks so much for your words of appreciation and your JOC inquiry.
I hope every contingency-fee recruiter reading this JOC gets their hands on Contract as Promise, by Harvard Law Professor Charles.
Here’s why:
You’re asking about a “no-placement fee.” It gives me the opportunity to share the no-placement feegetter we introduced in Chapter 25 of The National Placement Law Center Fee Collection Guide (with Case Citations) (order at www.SearchResearchInstitute.com) entitled “A Simplified Legal Theory to Win Fee Collection Cases.” It’s helped many recruiters collect no-placement fees, legally known as reliance damages.
That five-figure feegetter is known as promissory estoppel, and every contingency-fee recruiter must know it well to collect no-placement fees.
Promissory estoppel was developed by legal scholars in the Restatement of Contracts, Section 90. It is a substitute for the consideration that merges with an offer and an acceptance to form the legally-enforceable agreement we call a contract.
So far, so good. But what is consideration? When I ask in a workshop, the answer is automatically “Money.” But there’s no money being paid by the employer, and you’re sure not paying anything to make the placement. So that’s not it.
Consideration refers to a benefit or detriment that is given in exchange for a promise. The employer’s promise to pay the fee. The benefit is your assistance in identifying and placing a candidate. The detriment is not working on other searches or not placing the candidate elsewhere. The purpose of consideration is merely to show that the parties intended to be bound. . . That they established an enforceable relationship of rights and liabilities – embodied in the employer’s PSA (placement service agreement).
So a substitute for consideration known as promissory estoppel arises when:
1. The employer makes a promise.
“If you access your data base, network, cold-call, contact, screen, qualify, recruit, motivate, refer and arrange interviews with qualified candidates completely at your own expense, we’ll seriously interview, reference check, extend competitive offers, hire those candidates, and pay you the agreed fee.”
2. You justifiably rely on that promise.
Justifiable reliance (acting on good-faith belief) by fully doing what the employer wanted with the reasonable expectancy of getting paid pursuant to the (very serious, legalistic) PSA. Those activities you did (as you’ll soon see) can be clearly documented. They are evidence of complete performance of the conditions precedent (requirements) to make the promise (of payment) enforceable.
3. The employer is estopped (legally stopped) from breaching the promise.
4. The court can enforce the promise to uphold your reasonable expectancy.
That means an order of the court to tender payment in full.
This is not a traditional contractual analysis, so be sure to share this JOC with your lawyer. You didn’t place anyone (yet) so under strict contract principles, there was no contract formed. That’s because there was no consideration (bargained-for benefit – a hire) received by the client. Promissory estoppel is invoked as a matter of fairness. Again, a substitute for consideration.
That’s why you wrote me, Jack. This treatment by the “client” is unfair. Here it led you on – even to the point of having you sign its gross PSA — and give you six openings to fill. What’s up with that?
You must be able to prove that you fully performed all terms (provisions) and conditions (other requirements) to getting paid, just as with any contract claim. If not, the terms must be waived or the conditions must be excused. Simply stated, this means the employer intentionally didn’t require compliance with them.
A typical example of waiver is the “only through HR” business. If the employer is sloppy and lets you communicate with hiring managers, you’re fine. It waived its right to insist on literal performance with the PSA. It is then estopped (again, legally stopped) from asserting that right.
Since you’ve been a fan for a long time, you’ve undoubtedly seen me take apart PSA’s. I do so every so often just for fun because the provisions get crazier every time. The more draconian, onerous and unfair the terms, the more likely a court will find that a “capricious client” was acting in bad faith.
Couple this with the “Six openings . . . no, three openings . . . no, fagettaboutit we’re giving an exclusive to someone else.” and it sets up a case where a judge or jury is more likely to invoke promissory estoppel. The employer made it impossible for it to receive its bargained-for consideration.
What did you do wrong, Jack?
See what I mean?
In these cases, it’s imperative to show the detrimental reliance on the promise. That’s how a court can compute the amount of your reliance damages.
Those damages are organized by using our unique Pre-Placement Activities Worksheet.
To get it:
- Say, “Charles Fried, friend in need!”
- Go to www.placementlaw.com.
- Click the red JEFF’S ON CALL! Button.
- Type Pre-Placement Activities Worksheet in the Subject field.
- Click Send.
- I’ll reply with the Worksheet.
Don’t forget that under the contract rules of construction that I’ve taught you in the past, any ambiguities (unclear provisions) in a PSA are construed against the employer. Scour the PSA for them. You may even find that an actual hire isn’t even required for you to be paid a full fee! PSA’s are committee jobs. Need I say more?
The Worksheet information should be itemized in the ve-r-r-y tough letter your lawyer writes to that “un-client” (immediately after reading this reply and Contract as Promise).
Let’s get you paid for all that time and effort!
I wouldn’t wait for that pipeline placement to go down. If it does, just subtract that fee when it’s paid from the total owed.
Best wishes for every success!
Jeff