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Battle of the Intrduction Fees

It can be rather frustrating when agencies find themselves in a position where introduction fees are disputed withtheir clients. This commonly occurs where an agency sends a candidate’s CV to a client and then other agencies send the same CV to the same client and it is not clear who is entitled to receive the fee or depending on the terms of business agreed between the parties the client might have to pay more than one fee.

The misconception that the first agency to submit the candidate’s CV gets the fee is not correct. This issue has been addressed in recent case law and it was established in the Foxtons Ltd v Pelkey Bicknell and another 2008 case (discussed further below) that the introduction by the agency must result in the engagement.

Under basic contract law, there are certain elements an agency has to establish in order to prove that there was an intention for the parties to enter into a legally binding contract. The agency has to demonstrate the following:

1.     They made an offer to the client to do business on certain terms. It could be the client’s terms or the    agency’s terms.

2.     The client accepted the agency’s offer on their terms or both parties agreed to change the terms.

3.     There is consideration or an exchange of promises where one party gives something and the other party gets something else in return.

4.     There is a clear intention to create legal relations between the parties.

It is essential that agencies send their terms of business and agree the terms with the clients before or at the very latest when they send a candidate’s CV. Although, terms are sometimes agreed orally which often happens particularly when time is of the essence and a client requires a candidate as soon as possible, agencies should ensure that the terms are agreed in writing and executed by the parties.

Under the Conduct of Employment Agencies and Employment Businesses Regulations 2003, after 1 October 2010, it is no longer a requirement for agencies that introduce permanent candidates to clients to agree terms before providing work-finding services.

However, the REC Code of Professional Practice requires our members to be transparent in their dealings with both clients and candidates therefore terms of engagement must be clearly and fully disclosed to clients prior to the acceptance of work being undertaken for the client. As stated above under contract law, an agency may not be able to charge a fee if they cannot prove that the terms were received and indeed agreed between the parties.

The agency has to demonstrate that the client has accepted the terms and that their introduction of the candidate to the client together with all the steps taken, i.e. arranging interviews, providing feedback, liaising with both parties throughout the process was the effective cause of the engagement of the candidate.

The “effective cause” has been reviewed in great detail in a few cases recently.