Get in touch 0117 325 0526

Blog: Recruitment agency fee disputes

In recent years we’ve advised several businesses who have been in dispute over a recruitment agency fee.  We’ve seen it from the client’s point of view, and also from that of the first agency who introduced a candidate and from the second agency’s side too.  It’s clear that this is an area of frequent dispute and it’s well worth all those in, and who work with, the recruitment industry being fully aware of the issues and how to both avoid them and to strengthen their position should a dispute arise.

The number of such cases that our firm is being asked to deal with has increased recently, so I thought it would be worthwhile to share some key points with you.


There are two particularly common scenarios that we tend to get asked to help with.

The first is the so-called ‘back-door’ hire, where a recruitment agency introduces a candidate to a client, the candidate is not hired at the time, but later on (usually a few months later) the hire does take place by direct contact between the client and the candidate, usually without the recruitment agency being aware until afterwards.  It then wants to claim its fee because its terms of business state that the fee is due if the candidate is hired by the client for any reason within a certain period (often 6 months) following the introduction.

The other common scenario is what I’m going to call the ‘fee fight’, where agency 1 introduces a candidate but no hire takes place (at that time).  Later (sometimes days, sometimes months), agency 2 introduces the same candidate to the same client and the hire takes place.  Agency 2 asks for its fee and invariably it is paid.  Agency 1 then gets to hear about the hire and demands its fee too, because its terms of business have the same sort of term as mentioned above.

In the first scenario, the client is sometimes being cheeky and may at least ‘morally’ owe the fee to its (former) agent.  In the second scenario, however, it’s often possible to have a lot more sympathy for the client because invariably it will have already paid a (usually substantial) fee to agency 2 and simply cannot afford to pay the same sort of amount to agency 1 as well.  Often the client has just been naïve and probably not spotted a dispute looming.

We’ve advised agencies and employers alike, and what I can say with confidence is that each case – and therefore the likely legal outcome – is different, each time.  Employers quite rightly don’t want to have to pay fees that aren’t legitimately due, but at the same time each candidate has an understandable value to a recruitment agency and it’s reasonable for the agencies to want to take certain steps to protect themselves.

Key points to be aware of

There are four key points that I would suggest both recruitment agents and their clients should be aware of here:

  1. Are an agent’s terms of business binding on the client?
  2. The law of “effective cause”.
  3. Whether an agent’s terms override the law of “effective cause”.
  4. It all usually turns on the client’s evidence.

Binding terms

This is good old, basic contract law.  In order for any terms of business to be binding , they have to be communicated to the client and accepted by the client.  Proving this is crucial to a successful claim for fees.

I’ve seen some recruitment agency terms of business that say their terms are binding as soon as the client reads the CV that has been attached to the same email as the terms, regardless of whether the ‘client’ is at all interested in working with that particular agent.

This is, to a lawyer’s mind, fairly aggressive wording and can produce ludicrous results if followed through on.  For example, that candidate may have already been introduced to the employer by another route.  In one case that we handled, the recruitment agency speculatively sent a client manager the CV of his best friend, and then expected to take its fee, even though they’d been talking about the possibility of working together for a while. (As Americans say, “I don’t think so!“)

Effective cause

This is a fundamental legal principle of agency relationships.  It means that, ordinarily, an agent can only demand a fee if it was the ‘effective cause’ of the hire.  Usually this is going to be obvious on the facts of the case, since the agent will usually have ascertained the client’s requirements, identified a candidate, arranged the interview and possibly a lot more.  But the facts of each case will be different and nothing can be taken for granted.

Overriding terms

I’ve seen some agents’ terms of business which (again, I think fairly ‘aggressively’) seek to override the ‘effective cause’ rule.  There is a general principle in contract law that express terms of a contract can override rules such as the ‘effective cause’ rule if the wording is clear enough.  It’s worth looking out for this.

Client’s evidence

Most disputes on recruitment agencies’ fees turn on the wording of their terms of business, whether these were binding on the client and then – crucially – how the hire of the candidate actually took place and what caused it.  That being the case, evidence from the client of what took place, including the trail of emails and their attachments, and the timeline of events relating to the candidate’s introduction, interview, salary negotiation, offer and acceptance can all be critical in deciding the legal outcome.

Practical tips




Whether you are a recruitment agency or the client of one, if you are in any sort of fee dispute or wish to avoid them, do please get in touch and learn how we can help.

Luke Menzies

Email Luke Menzies

Share this...

Newsletter sign up

Review Solicitiors