B. Employment Agencies

Problems pertaining to employment agencies typically arise when the parties fail to specify clearly the arrangement regarding payment for services rendered and how fees are deemed to be earned. To avoid problems in this area, always study carefully agency agreements submitted to your company. Insist that any exceptions or contingencies be spelled out in writing. Be sure there is a clear understanding among the agency, your company and the applicant at the time of hire as to who pays what and when. If your company agrees to assume all or part of the fee for an applicant, this should be documented in writing. Request reimbursement of the fee if the employee only works a short time and get this guarantee of a rebate in writing for your protection.

Commission arrangements with employment agencies are subject to the same legal rules affecting other contracts. Ambiguous clauses or careless omissions can cause problems. When disputes arise and no clear written agreement exists to resolve the problem of fees, most courts will award fees to the agency when: (1) The agency discussed the applicant with the employer; (2) The employer agreed to interview the applicant; (3) The applicant agreed to interview with the employer; and (4) The agency or the employer set the arrangements in motion for the interview.

But what happens in the event an unsolicited resume or applicant from an employment agency winds up as a job offer? Can the absence of a signed agreement destroy an agency's right to a fee? Although each case depends on its particular facts, numerous cases reveal the entitlement of an agency to a fee under equitable theories, including quantum meruit, when a placement is made and it is unjust to allow a company to retain the benefit of the employee's services without paying an agency reasonable value for its services. In some instances, courts impose "quasi-contracts" to ensure that companies not enrich themselves unjustly at the agency's expense when a placement is made. However, the right to a fee does not extend indefinitely. In Illinois, for example, an employment agency which makes the first referral of a job candidate earns the recruitment fee if the applicant is offered the job within one year, notwithstanding an intervening referral by another agency.

What happens if the applicant leaves the job before the expiration of a 90-day probation period? Laws differ among the various states as to when and how an employer incurs a hiring agency fee. In some states payment is due upon employment and there is no statutory requirement for an employment agency to provide any guarantee period at all.

Counsel Comment #33: To protect your company from these and other problems, the following guidelines are recommended whenever hiring an employment agency:

1. Always negotiate the placement fee and confirm this in writing.
2. Receive stipulations in writing from employment agencies that fees are payable after the completion by the employee of a minimum period of employment. Specify what that period is. Negotiate for use of a sliding scale (i.e., 25% of the fee upon acceptance, 25% upon completion of initial 30 days etc.) for greater protection.
3. If the law in your state does not prohibit applicants from paying the fee, require the employee to pay the agency fee, to be reimbursed by the company if he/she is still on the job at the end of a specified period of time.
4. Although an agreement by an applicant to reimburse the employer for a portion of an agency fee if he resigns during a trial period may be legal, it cannot be enforced by deduc- tions from the worker's pay.
5. Always investigate the agency. Is it licensed and bonded? What services are you to receive? Does the agency check the history and reliability of the applicant? Will your company be indemnified and held harmless in the event the agency makes false representations to the applicant or fails to check applicant references carefully?
6. To avoid problems with competing agencies, hire only one or two at the same time. Institute a policy of time-stamping resumes so you will know how and when referrals were received. When several agencies submit the same resume, you are only obligated to pay the agency which submitted the resume first. Thus, have all resumes enter your company through one source so you can document when and how they were received, to prove your position.
7. Advise agencies you deal with that your company's policy is not to discriminate.

Outplacement Firms

Outplacement firms are typically retained by employers to help terminated employees move out. Fees for this service often range from a flat fee of several thousand dollars up to a small percentage of the employee's total annual compensation, depending on the extent of services provided. Outplacement firms typically ease the separation by providing professional career assessment, interview training techniques and helping develop a resume. Some firms even provide space for a desk and telephone to assist the terminated worker in calling on prospective employers.

Because not all outplacement firms are the same and some have better track records than others, always obtain references from candi- dates and companies who have used the service. Carefully scrutinize all contracts with outplacement firms before hiring and prepare written agreements. Discuss how additional fees may be incurred and resist these. If possible, try to structure a flat fee arrangement to limit costs and negotiate a discount in the event you terminate a number of employees who collectively wish to use the services of the firm.

TIP: Consider the possibility of offering paid out- placement firm services as a negotiating tool in designing the severance package. Since there is no legal obligation to provide a terminated worker with outplacement services paid for by the company, this employee benefit may be used to your advantage by requiring the employee to sign a release before you grant such a paid benefit.