In an already challenging economic environment, recruiters are finding it increasingly difficult to collect fees. Many clients are looking at ways to avoid payment, and the practice of “backdooring” is becoming more common.
Although “backdooring” isn’t a formally-defined term, it refers to a situation where a client hires a candidate without paying the recruiter who introduced them. Often, the client will argue that the candidate was found through another channel, independent of the recruiter’s efforts. While this issue is most common in permanent recruitment, it can also occur with contractors or when candidates are hired by third parties. For simplicity, we’ll focus on permanent recruitment, though similar principles apply across all forms of backdooring.
Recruiters understandably find this practice frustrating, and often, they have every right to be frustrated. Typically (though not always), recruiters invest considerable time, effort, and resources into finding the right candidate. So, why should a client benefit from those efforts without paying the corresponding fee? We’ve observed a significant rise in backdooring cases recently, and while some instances are simply attempts to negotiate a lower fee, others can lead to prolonged and costly disputes, even litigation.
The Basics
At its core, the issue of backdooring revolves around contractual entitlement. It’s about determining whether that entitlement has arisen and, crucially in many cases, whether the recruiter was the “effective cause” of the candidate securing the job. Many – though not all – disputes hinge on the application of this ‘effective cause principle’, which is often where claims falter.
Each case must be analysed individually. This is critical, as no two situations are identical. When faced with a backdoor scenario, it’s essential to thoroughly investigate the circumstances to determine if there is a valid claim.
The first step is to examine the terms of the contract (assuming a contract exists, as contract formation is a complex topic on its own). Most recruiters use standard terms and conditions, covering the basics: an introduction leading to an engagement, with fee liability arising upon “Engagement.” It’s important to scrutinise the definitions—especially how “Engagement” is defined, whether it’s the acceptance of an offer, the signing of a contract, or when the candidate actually starts work.
Gathering Evidence
Next, confirm that the contractual events have been triggered. A well-documented paper trail is crucial here. You’ll need solid evidence that you introduced the candidate to the client, that the candidate consented, and that – in the majority of cases – your efforts led to their hire. Usually, this evidence exists in emails, text messages, WhatsApps, CRM entries, and so on. A diligent recruiter will have detailed records of their interactions with both the candidate and the client, from interviews to salary negotiations and start dates. Without this documentation, or if there are gaps, your claim could be jeopardised.
If all the necessary elements are in place, you can proceed with your claim (though the specifics of this process are a topic for another day, but it is advisable not to take drastic actions like ‘serving a winding-up order’ without legal advice).
Responding to Client Pushback
Often, the client’s response to a claim is to argue that someone else introduced the candidate—perhaps another recruiter, or through an internal referral. It’s essential to thoroughly investigate these claims, pressing the client for full details, including who the third party or referrer is, when they were involved, and all related documentation.
This stage is where you can put pressure on the non-paying client. A well-crafted disclosure request can be decisive, compelling the client to prove their case. If they have the necessary documents, and if those documents are helpful to their position, they’ll likely produce them quickly to resolve the matter. If they don’t, they may refuse to engage, indicating that their defence might be weak.
Your solicitors can apply pressure by threatening to take the matter to court, emphasising that the judge will be informed if the client fails to cooperate. While this threat doesn’t always carry weight, it’s often the best available option short of initiating court proceedings.
When the disclosure comes in, it needs to be analysed carefully. Is another agent involved? When were they instructed? When was the candidate engaged? Have you received all the relevant material? Are there any suspicious circumstances? In one recent case, a client became angry when our recruiter client wouldn’t reduce their fee. Shortly after, another agent was allegedly instructed and introduced the same candidate. We used the disclosure process to expose this as a fabrication and successfully recovered the recruiter’s full fee, plus legal costs.
Again, every case is unique and requires a thorough evaluation of all the circumstances. There’s a significant difference between a candidate being hired a month after an introduction versus 11 months later. The latter scenario often presents a more challenging fee claim, even with a standard 12-month ownership clause (which doesn’t guarantee protection). Additionally, the recruiter’s level of involvement plays a role—a recruiter who merely forwarded a CV may face more resistance, particularly if there was a significant delay before the candidate was hired and another agent became involved.
The Role of Effective Cause
The concept of “effective cause” is central to most backdoor cases. Unfortunately, the legal position is unsettled, with few recruitment-specific cases available (most relate to estate agency). The law generally requires:
- The agent to be the effective cause of the candidate’s engagement.
- The agent does not need to be the immediate cause, as long as there is a sufficient connection between their actions and the candidate’s eventual engagement.
In practice, determining effective cause can be complex, which is why this area of law is somewhat unclear and in need of further definition. This is why each case must be assessed on its own merits.
However, if you’ve invested in high-quality, bespoke terms and conditions, it’s possible to avoid getting caught up in effective cause arguments. Unambiguous terms can clarify when a fee entitlement arises, potentially eliminating the need for the court to imply an effective cause requirement.
It’s also possible for a client to be liable for two recruitment fees for the same candidate. We’ve seen this happen, so it shouldn’t be assumed that only one recruiter will earn a fee if another is involved.
Negotiation and Settlement
There’s always room for negotiation—splitting the fee with another recruiter is one option, albeit an unappealing one. However, it may be more commercially viable than a costly, drawn-out legal battle. Often, the goal of engaging in tough correspondence is to create enough doubt and concern in the client’s mind to encourage a settlement offer. Most backdoor cases settle before reaching court, which explains the lack of reported cases. The terms of the settlement depend on many factors, the most critical being the strengths and weaknesses of each party’s position, which is why establishing these from the outset is so important.
The Importance of Persistence
In difficult economic times, cash flow is vital, and recruiters are increasingly pursuing fees. However, backdoor claims rarely resolve quickly, often taking longer and incurring higher costs than straightforward debt claims. Persistence is crucial—you must convey that you won’t back down and that cost won’t deter you from pursuing what you’re owed.
That said, some may lack the resources for a prolonged legal dispute, especially in a tough economic climate. In such cases, delaying the fight until circumstances improve is an option, as you typically have six years to pursue your claim.
Backdoor claims are rarely simple and are almost never resolved overnight. They require careful attention and commitment from the recruiter, along with experienced legal advisors. Success often comes to those who persist, and the outcomes can be both financially rewarding and essential to a recruiter’s business. Additionally, consider the reputational risks of not pursuing fees when they’re due—can you afford to do nothing?
This article was written by Barney Laurence, a senior commercial litigator with 22 years of experience. Barney specialises in recruitment and franchising disputes, with expertise in business protection injunctions, civil fraud, and debt-related matters. He regularly handles High Court and Commercial Court litigation, and has been consistently rated in the Legal 500 and Chambers and Partners, including as a “Next Generation Partner” for the past four years.
