An Employer's Relationship with Its Recruiting Firm - Something More than an Arm's-Length Transaction.

Authors

Hannah L. Hembree

Abstract

Taking advantage of the perfect storm created by an increased demand for professional services and a shortage of qualified candidates, recruiting firms search for permanent employees on behalf of employers across the nation. These searches are often characterized by non-exclusive contingency agreements wherein a recruiting firm’s entitlement to remuneration is directly tied to successful placement—ranging from 15% to 30% of a candidate’s first year salary. Though communication from interested applicants constitutes the easiest path to placement, passive candidates are quickly becoming the primary target of zealous recruiters. Passive candidates are those currently employed but open to the possibility of changing positions if presented with the right opportunity. These candidates are akin to the holy grail of the recruiting world for their exclusivity and knowledge. What the recruiting industry terms “recruiting passive candidates” though, others classify as “employee poaching.” The goal of this comment is not to berate recruiters for doing their jobs. From an economic or agency theory perspective, the pay-for-performance model of compensation offers the necessary incentive to align the objectives of the client-employer with its vendor-recruiting firm. Problems only arise when the most efficient use of a recruiting firm’s resources involves targeting one client’s employees for placement with a concurrent client. Damages result from this activity; yet the recruiting firm is not held legally responsible for its role in the injury. This may be because no legal basis exists for extending a search firm’s liability outside of a typical breach of contract claim. On the other hand, inadequate exploration of the legal duties a recruiting firm owes to its clients may explain the phenomenon—an inadequacy fueled by the complexity of the inquiry. Classification of the search firm-client relationship involves the murky intersection of agency, employment, contract, and tort law.

Publisher

St. Mary's University School of Law

Recommended Citation

Hannah L. Hembree, An Employer's Relationship with Its Recruiting Firm - Something More than an Arm's-Length Transaction., 46 St. Mary's L.J. (2015).
Available at: https://commons.stmarytx.edu/thestmaryslawjournal/vol46/iss2/4