Back-door hire: a case study

This case study illustrates a situation that we are asked to help with often, namely a ‘back-door hire’ where a recruitment agency has introduced a candidate to a client; the client has not hired the candidate at that time; but a short time later the client hires the candidate directly, usually without telling the agency.

Occasionally the reason for what looks like a back-door hire can be explained and justifiable.  Examples include where the candidate is already well-known to the client (see our case study on ‘effective cause‘) or where the candidate has already been introduced to the client via another agency.  But, for the most part, it just amounts to naughty behaviour on the part of the client.

Sometimes this naughty behaviour is because the client is too small and commercially inexperienced to appreciate that it is doing anything very wrong or legally risky.  It may sound somewhat unlikely, but our experience is that a lot of owners of really small businesses are too busy to read suppliers’ terms and conditions (at least that’s what they tell us when they ask for our help).   Others dispute that they accepted an agency’s terms of business or that they should be treated as having accepted them.  “If we didn’t open the attachment containing the terms, how can we be treated as having read and accepted them?” they ask.

The challenge

In this particular case, we advised a small, niche international recruitment agency and helped it pursue a very sizeable fee of £200,000 that it was due.

Our client the agency was asked to find candidates for a well-paid position in a financial institution.  A suitable candidate was identified after a round of interviews that our client helped run.  The financial institution offered the candidate the job and pay negotiations then took place over several days.  Eventually they were unable to reach agreement and the appointment did not take place.  That’s the last that our client heard until 6 months later, when it followed up with the candidate as a matter of routine (always very well worth doing, as this case study proves!) and was shocked to find that he had been in post for a month with the same financial institution, in a role that wasn’t identical to the post that the agency had worked on but very similar.  Another recruitment agency had apparently been involved in putting him forward for this new role but hadn’t done much more than that.

Our client had a good set of terms of business and these included the now common ‘anti-back-door hire’ clause, which requires its client to pay the full fee if any candidate is introduced and is then hired within 12 months of the introduction, whether or not for the original role.  You might think that, armed with these terms, the financial institution would have paid up.  However, although unofficially someone in HR agreed that it was “not very fair”, its senior management refused to budge.  We suspected that this must be because the organisation had paid the second agency a large fee and was not willing to pay a similar fee all over again.

What happened?

We advised our client the agency that the financial institution had either messed up and overlooked the fact that it would need to pay our client as well as the other agency or perhaps had deliberately decided to take a risk and hope our client wouldn’t find out.  Either way, it was a large organisation with deep pockets and it certainly was capable of paying; and our client’s terms of business were clear, were not unreasonable and were likely to be upheld in court if we took things that far.  Our client decided it was up for the fight.

We wrote to the financial institution and a series of robust letters went back and forth between us.  With the involvement of their lawyers, they tried to argue every angle.  They claimed that our client’s terms of business had not been provided to them in the first place – but we sent them the original email as proof.  They asserted that the terms had not been accepted by them – but we reminded them that the terms said they were deemed to have been accepted if the candidates’ CV’s were requested, which had of course happened, and also that we were sure their Recruitment Manager would know this approach is industry standard nowadays.  They argued that it was unreasonable to expect them to pay two lots of fees – but we responded that this was their problem for trying to pull a fast one, not our client’s problem.  They said that our client was not the effective cause of the hire – but we countered with the fact that our client had done a lot to try to bring about the original hire and if either agency could be said to have been more of the effective cause, it had to be our client.  Moreover, the wording of our client’s terms of business meant that they overrode the traditional ‘effective cause’ argument anyway.

Outcome for our client

The result of these rounds of tough legal letters was that we were able to make the financial institution realise that it faced an imminent and high-risk court claim unless it accepted the situation and paid up.  We sent a final demand and requested a response within 7 days, failing which legal proceedings would commence.  We were pleased to receive a settlement offer the same day and, after some negotiations, our client agreed to accept £175,000 in settlement.

For the financial institution, it was an expensive lesson in paying attention to legal terms and that being a bully doesn’t tend to work in business.  For our client, it was confirmation that sticking to your guns and pursuing a case that you strongly believe in can be worth doing (and of course their terribly wise choice of engaging Menzies Law to help them).

Whatever your situation, we’d be pleased to help – enquiries@menzieslaw.co.uk.