By Anonymous | Wednesday December 27, 2012
Let's say it's a two-part agreement. The first part is the initial payment (deposit) upon commencing the search. The amounts vary widely (from a nominal expense advance to half the projected contingency fee). The second part is usually the contingency-fee balance computed when the placement is made. (Three-parters with an interim payment are also common. The analysis is the same.)
We call this deal a retained search, but technically it's a "retingency" or "container" agreement. It's a hybrid, non-standard deal that varies widely in its terms. It's not pure retainer (based on effort) or straight contingency (based on results).
The issue is invariably whether the client is still liable for the second payment because it prevented the reasonable expectancy of the recruiter (a placement) from occurring. For example, let's say the client changed the spec's in the middle of the search. Or closed the rec. Or hired from within. Or from another source. Or just stopped communicating.
Was the recruiter bargaining for the smoke (deposit) or the hire (full fee)? Of course, the hire.
That's why a carefully-worded agreement is essential for these deals. Among the many terms necessary, be sure your lawyer includes:
1. Whether the payments being made are refundable deposits or whether they're progress payments (non-refundable benchmark payments as the search progresses).
2. What the recruiter must do before each payment (including the final contingency one) is due.
3. What the client must do to effectuate the intent of the parties in facilitating a placement.
We don't use one-size-fits-all "boilerplate" agreements, since they're too often unenforceable. There is no substitute for a properly-worded, airtight, constantly-updated agreement. No recruiter should click a mouse or dial a phone without one.