Recruiters play an essential role in making sure the right candidates are hired for a given business. This article explains how, as a recruiter, you can resolve disputes with clients and protect yourself against future disputes arising.

Common Scenarios

1. There Was Never Any Binding Agreement

This situation arises when you start looking for candidates after speaking to a client, such as a business, either by email or over the phone. Even if nothing is in writing, if you have relied on what was said to you to commence work, this may indicate that a binding agreement has been formed. This doesn’t mean that the client has agreed to your specific terms and conditions, but it may give you some rights to stop them going back on their word. Where you have spent time and effort looking for candidates and passed on their names and details to the client, this indicates that they have taken the benefit of your work. 

2. We Never Agreed to Your Terms

Another common scenario occurs when a recruiter discovers (usually via LinkedIn) that a client has hired a candidate behind the recruiter’s back. Typically, the client may refuse to pay your fees because they ‘never signed your terms’ or they might insist that they found the candidate on their own. Again, because they have taken the benefit of your work, this can indicate that a binding agreement exists.

Ideally, the client should sign your terms and conditions of business before you begin the recruitment process. However, even without a signed, written terms and conditions, you may have a legally binding agreement. For example, any terms a client agrees to during a meeting or telephone conversation may be enforceable. Even without a written agreement, the client may need to honour the terms that they orally agreed to.

However, it can be difficult to prove ‘who said what’, especially when there is no record of the conversation. Therefore, it is good practice to send a follow-up email after any meetings or phone conversations regarding new client work.

Practical tip: As a recruiter, you should be monitoring your clients’ LinkedIn profiles to make sure they have not hired any of your candidates. If this issue arises, remember to keep communications with the candidate cordial as you may need them to give evidence for you further down the track.

Resolving Disputes With Clients

There are a number of steps you can take if you have a client who is refusing to pay your invoices.

1. Contact the Client

Your first step when an invoice remains unpaid should be to contact the payee. They may have simply forgotten the invoice was due or might be waiting for other payments to come through before they can pay your business. Stay polite and courteous no matter how frustrated you may be. Keep a record of your conversations with the client, as these may need to be used as evidence further down the track.

If you negotiate an alternative method of payment with your client (e.g. payment by instalments), it is a good idea to have this in writing. Without this, the only evidence may be your word against theirs.

2. Send a Letter of Demand

If the client has still not responded to your requests for payment, consider approaching a lawyer. A lawyer can assist you by drafting a letter of demand to encourage the other side to pay according to your agreement. A letter of demand is a formal, legal request for payment. Hopefully, upon seeing this formal, legal letter, the client will make the necessary payment knowing that you could take them to court.

3. Negotiate

If a letter of demand fails, a lawyer may still be able to negotiate a resolution on your behalf. Negotiation is a process that (ideally) will lead to a mutually agreeable outcome for both parties. Often, it requires both parties to compromise on their position. Having a lawyer conduct the negotiation on your behalf can help ensure that you don’t make unnecessary concessions.

4. Go to Court

Going to court over unpaid recruitment fees should be the last resort. It is always a good idea to try and resolve disputes without getting courts involved. This will save your business time, money and stress.

Some of the matters a lawyer will consider before advising you to take your matter to court include:

  • the strength of the evidence;
  • the amount of money in dispute;
  • the likelihood of achieving an out-of-court resolution; and
  • your ability to pay costs should the claim be unsuccessful.

Avoiding Disputes: How to Protect Your Business

As a recruiter, you should have a number of agreements in template form that you can use when negotiating with new clients. You should not commence work for a client until they have signed your terms and returned them to you. Many recruiter disputes arise because the recruitment agent sends the potential client their terms and conditions, but those terms were never signed. 

As a recruitment agency, you should have (as a bare minimum) a:

  • Recruitment Agreement (for prospective clients looking to hire); and
  • Candidate Agreement (for prospective clients looking to be hired).

Terms and conditions are essential to set out the terms between you and your clients from the get-go. This includes aspects such as the time frame for payment and how you should be paid.

Key Takeaways

Many disputes between recruiters and clients can be avoided by ensuring that the terms of the engagement are clear from the outset. As a recruitment agency you should avoid starting work for clients until they have signed your terms and sent them back to you. Make sure you keep proper records of any phone conversations about work and payment, as you may need to rely on these further down the track.

If your recruitment agency has clients unwilling to pay invoices or have any other questions, you can get in touch with LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page.

Stacey Stanley
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