Contingent Recruiter Agreements by mip16155


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									The Recruiter’s Guide to Understanding
Non-Soliciation, Non-Compete, and Non-
Disclosure Agreements
By Saper Law | October 16, 2007

       Saper Law Offices assists a wide variety of businesses in the technology industry.
The following article is geared to the technology recruiting industry and serves as an
overview of several types of employment and recruitment-related contracts that in-house
recruiters or third party recruiting firms may encounter. If you are an HR professional, a
recruiter, or an employee seeking further advice on these topics, please call Saper Law
Offices for a consultation at (312) 641-0551 or contact us by email at
       The recruiting industry plays an important role, bringing companies together with
the competent and highly qualified individuals they desire. It is important that recruiters
fully understand the contracts they will encounter during the recruitment process before
they attempt to match their clients with certain candidates. This article will address three
of these important contractual agreements: non-solicitation agreements, non-compete
agreements, and non-disclosure agreements. Though they are all related, there are
important distinctions between these agreements that one must understand to determine
how best to proceed in different circumstances.

Non-Solicitation Agreements

        A non-solicitation agreement is a contract between a recruiter and a client stating
that the recruiter will not recruit any of the clients’ employees for employment elsewhere.
A non-solicitation agreement also typically states that if a recruiter has placed a candidate
with a company, the recruiter agrees not later to “re-recruit” or entice the candidate to
take a different job with another company. The scope of a non-solicitation agreement will
vary depending on whether the recruiter is retained by a company or works on a
contingency basis.

Retained Searches
        A recruiter retained by a company works under a formal “retained agreement”
where the company specifically hires a recruiter to fill a particular, typically higher-level,
position in the company. The company typically pays a large, nonrefundable deposit up
front and continues to pay the recruiter throughout the search, whether or not the position
is ultimately filled. The relationship is formal and exclusive, with duties and rights well
defined in the retainer agreement. The recruiter also owes the company duties of loyalty
and due care during the recruitment process. Non-solicitation agreements will almost
always be much stronger and longer lasting for retained recruiters, whether they can fill
the company’s positions or not.

Contingent Searches

         Recruiters hired on a contingency basis have a different relationship with the
company. The contingent recruiter is only paid when a candidate is placed with the client
company. There is no commitment between the recruiter and the company, as they are
enlisted on a non-exclusive basis. Contingent recruiters are not assured payment unless
they make a successful placement and may move on to other searches if the current
search becomes unprofitable. When the recruiter does not place a candidate with the
client company, no money changes hands, and there is no contractual relationship. If no
non-solicitation agreement is made between the contingent recruiter and the company, the
recruiter is free to contact the company’s other employees to fill positions for other
clients, even while they are trying to fill a position for the company. With contingent
recruiters, a the non-solicitation agreement will typically not last as long as it would in a
“retained agreement.”

Non-Compete Agreements

        A company will sometimes require a new employee to sign a non-compete
agreement. In a non-compete agreement, the new employee agrees not to pursue
employment in the same or similar capacity, or perform the same duties and job function
in a similar field or profession, in direct competition with the original employer. Non-
compete agreements affect recruiters because a potential candidate may have signed such
an agreement with his or her current employer. A recruiter cannot place a candidate in a
new job if doing so would violate a valid non-compete agreement. However, just because
there is a non-compete agreement in place, doesn’t necessarily mean that the agreement is
valid and the candidate is off limits.

         A non-compete agreement must strike the right balance to be effective. If it is too
restrictive, a court may strike it down as unreasonable and overly burdensome. If it does
not give enough detail about the restrictions, another company may take advantage of
loopholes to get around the agreement. Non-compete agreements must be reasonable
both in time and scope. Reasonableness means that the agreement generally should not
be enforceable for more than one year after termination of employment, and should be
limited to the similar jobs in the same field of employment. Any geographical restriction
should be limited to areas bearing a relation to where the employee actually does
business. An agreement that is reasonable in scope and duration should be sufficient for a
company to protect its business and goodwill, while giving recruiters and candidates the
freedom to pursue their own business opportunities without being unduly burdened. If the
agreement exceeds these boundaries, it will likely be considered null and void, leaving
the employee free to explore other opportunities, whether in direct competition or not.

Non-Disclosure Agreements

         A non-disclosure agreement is another agreement that may come up in the
recruitment process. A client company may require the recruiter to sign a non-disclosure
or confidentiality agreement, agreeing not to share any confidential or sensitive
information about the company to outsiders. Recruiters must learn enough about their
clients to match them with the most qualified individuals, and in doing so may learn
valuable ideas and information from the company. The non-disclosure agreement gives
client companies some protection by keeping recruiters from passing on sensitive
information to potential candidates unless and until the candidate is placed in the
company. It also aids client companies by keeping recruiters from sharing any sensitive
information with the companies’ competitors who may also be the recruiter’s clients.


         Each of the above agreements helps set boundaries for what companies,
recruiters, and candidates are allowed to do during the recruitment process. It is essential
for recruiters to understand these agreements so that they can continue doing business
without crossing legal or ethical boundaries. The relationships between recruiters and
their client companies or between candidates and their current employers vary because
different parties have different needs. These agreements play an important role in
determining the scope of what can and should occur during the process and will help each
party reach its desired result – money for the recruiter, and a highly qualified candidate
for the client company.

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