April 30, 2012

Can an employer charge you for quitting?

Filed under: For Managers, Hiring, Q&A, Readers' Forum

In the May 1, 2012 Ask The Headhunter Newsletter, an employer is out $6,000 when a new hire found through an agency jumps ship after 15 days. Can the employer charge the next employee for quitting?

We recently hired an employee using an agency through which he was temping for us. We paid the temp agency a fee of $6,000 (20%) of the person’s salary. After 45 days, the new employee resigned to move out of state. The temp agency says that he was here for more than 15 days, so they are not going to do anything about their fee.

We have a policy for encouraging continuing education. If an employee in good standing wants to take a course or go back to school at night or weekends, we will pay 70% of the costs, providing successful completion of the courses. If the employee leaves before two years, the employee must reimburse our company for the education expenses.

Because of this disagreeable experience with the agency, we are contemplating a similar policy: “If you leave before your second anniversary, you will need to reimburse some portion of the headhunter fee.”

What are your thoughts on this approach? It would make us feel more confident about using a placement service. Thank you in advance for your thoughts.

My Advice

Suppose you hired that employee without an agency’s involvement, and he quit after 45 days. Would you require him to refund part of the salary you paid him?

Of course not. Yet that’s what you’d be asking someone to do if you hired him through an agency: To pay you back out of their salary. Did you pay a fee to the employee so he’d come work for you? Of course not. So there’s nothing for the employee to refund.

(I’m not a lawyer, but my guess is it would be illegal for you to take back salary because someone quit a job.)

The agency, on the other hand, earned a fee for finding an employee for you. It’s up to you to work out a reasonable contract and financial arrangement with the agency, for the work it does for you (recruiting). The underlying problem is that you as the employer make the hiring decision — not the agency. The agency’s job is to deliver viable candidates. It’s duty ends there, or after some agreed-upon guarantee period. I don’t think any agency would guarantee a placement for two years, one year, or even six months.

I don’t like your idea at all because you’re making the employee responsible for your contract with the agency.

So what are your options as an employer? Let’s start with typical placement agreements, though of course they vary greatly. Commonly, a headhunter’s (or recruiter’s, or agency’s) fee is about 20% of the employee’s starting salary. Please note: The fee is not deducted from the employee’s pay. It’s merely calculated based on that salary. So it’s an additional cost to the employer. Employers that routinely use external recruiters usually budget for such fees. Negotiate the best fee you can.

It’s common for temporary placement agency agreements to permit you to change from “temp to hire” — that is, to hire the temp permanently. The fees and any guarantee period should be spelled out in the contract. To control your costs, you might negotiate a permanent placement fee that is progressively lower based on how long you’ve already been paying temp fees to the agency for that particular employee.

Whether it’s a temp agency or a headhunter you’re working with, the contract usually includes a guarantee period. Many recruiting firms offer guarantees for between 30-90 days. (Some offer no guarantee at all.) If the new hire “falls off” in that time, the agency will either replace the hire, or refund a prorated portion of the fee, or the fee is refunded completely. I’ve never heard of a 15-day guarantee period. It seems too short to be meaningful. But if that’s what you agreed to, it was your choice.

You might be able to negotiate a more aggressive refund guarantee with recruiters. Please keep in mind that it’s pretty unusual for a new hire to leave so quickly. (If it happens to you often, then you’ve got another problem!) Check a recruiter’s (or agency’s) references: Do they have a reputation for placements quitting early?

I want to caution you about charging placement fees back to your employees. If it’s not illegal, I think it’s unethical. It comes out of the employee’s salary, but (unlike education) the employee gets nothing in the bargain. I suggest you work this out with your agency or headhunter instead.

Has an employer ever charged you to quit your job? If you’re an employer, have you ever recovered a placement fee from a departing employee? Headhunters: How do you handle “fall offs?” How long is the typical “guarantee” on a placement?

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59 Comments on “Can an employer charge you for quitting?”
By Alison Green
April 30, 2012 at 9:50 pm

Nick is absolutely right. A couple of other things to consider too: Courts may interpret this as creating an obligation on your end as well — making it harder for you to fire this employee. Alternately, a court is likely to simply find this clause unenforceable. Furthermore, why on earth would you want an employee to stay if she wants to quit? Look to Zappos for the opposite end of this — they actually pay employees to quit if they don’t want to be there, because they so value having an engaged workforce.

This question seems rooted in a lack of understanding of how employment relationships work.

By Dave in NJ
May 1, 2012 at 12:29 am

Back in the early 90s recession, I took a job at a CAD/CAM software developer who made all new-hires sign a contract, requiring them to pay $2500 (I think it was) if they left in their first year or $1250 in the second year. This was to discourage what they said was a common industry practice of joining, taking their in-house product training and then quitting. Never mind that I took perhaps one course the whole 1.5 years I was there (I was a UNIX specialist and didn’t need CAD training). When I left to join a major UNIX hardware manufacturer, I probably could have gotten away with not paying, but ponied up the cash — I wanted them in my rear view mirror as fast as possible.

By Cathy
May 1, 2012 at 3:20 am

The $6,000 fee was 20% of the salary? This works out to a salary of $30,000 a year. I don’t know what kind of position this was but that is not a very high salary. Perhaps if the wage was higher, the employee might still be there.

By JohnBoy
May 1, 2012 at 5:00 am

Disclaimer: Not a lawyer. If you are seriously considering this “payback” policy, you definitely need to run it by a legal expert. Perhaps you are located in a “right to work” state wherein either party can choose to end employment for any reason. If so and you attempted to enforce such a “payback” policy as described, I don’t fancy your chances in court.

After rereading your question I’m left with this: Would I ever work for you considering your apparent attitude and philosophies? Absolutely not. I too would “move out of state” at the earliest possible moment.

By Jim
May 1, 2012 at 6:24 am

You would theoretically spell this out as part of some sort of offer letter or employment agreement so as not to have a breach of contract claim at the end of employment when you actually tried to take the money back from the exiting employee. Wow, great for motivating your new team member! Now, there are probably plenty of people in this labor market who would be more than willing to sign something like that, but an A player with skills and therefore options isn’t going to hang out for long in an environment like that. Seriously, negotiate a better deal with your search firm.

JohnBoy, I think you’re referring to an “at-will” state.

By Chris
May 1, 2012 at 6:51 am

Nick’s right. If you’re worried about headhunter fees, you need to negotiate that with the headhunter, not the employee. You cannot force a third party to honor some obligation between two other parties. Unless I get a cut of that recruiter’s fee, take it out of his/her hide, not mine.

Creating such a policy also opens a can of worms. Unless you write your job description correctly or explicitly list/exclude any facets of the job, the employee can claim misrepresentation.

And if you decide to press the issue, do you really think you’re going to get back your $6000 (plus legal fees less collections agency fees) from someone making $30,000/yr?

Finally, as others have noted, do you really want to create an environment like that? You’ll get clock watchers or people putting forth the minimum effort who are simply waiting for the cut off date to leave. And if you fire them, they’ll take you to court over the fact that they were fired in order to shake them down for the fee. (Disregard whether or not you’re in an at will state. Someone will end up suing or threatening to sue, and you’ll have to at least retain legal counsel to respond to the complaint.)

If you’re worried about the opportunity costs of an employee leaving early (transition time, training, etc.), then you could create some agreement that the employee signs, but you have to be very, very careful with this. As noted above, the employee could claim misrepresentation/fraud on your part to get out of it. If your recruitment brochure says you use the latest software and you’re actually using Windows 98, that’ll be exhibit one.

And no good employee is going to sign that agreement without something (beyond the job) in return: guaranteed bonus/raise, perks, vacation time, resources, etc. This may be something to consider for a high powered sales person or executive, but is it really worth it for a $30,000/yr position?

By Greg
May 1, 2012 at 6:56 am

Two words: Employment Contract.

Keep in mind that this will obligate the employer as well.

My other question is why do you have to pay someone to recruit for a $30k position? That is entry-level or slightly above.

By Don
May 1, 2012 at 7:50 am

I just recently went through a 4 month job hunt, started a new job in January. Frankly, I would not have considered working for a company that put this condition into my offer letter. If they treat the employees this poorly before you are hired, is it going to get better later?

Bottom line – as others have noted, don’t do it, re-negotiate with your recruiter.

By Jen @ SheBloggs
May 1, 2012 at 8:07 am

I’ve never heard of an employer making a previous employee pay a portion of the recruitment fee. Honestly, this would never work! It would also be impossible to find good candidates to work for a company with these types of policies.

Instead of trying to pass off this cost to the employee, the company should really negotiate their agreement with the agency. Fifteen days is way too short. As a headhunter, I give my clients a 3-month guarantee period. Anything less wouldn’t be fair.

By Nick Corcodilos
May 1, 2012 at 8:12 am

Employers that are not accustomed to using headhunters have a hard time accepting the fact that they paid for a service – recruiting. In this case, it was a relatively low-salary job, and the “headhunting fee” was really a “temp to perm” conversion fee, because the hire was someone who was working as a temp. I think 20% was steep under such circumstances — but the employer was free to decline the deal. It’s not very common for an employer to use a headhunter for positions at such a level, so my take is that the employer is new to using headhunters.

By Peter Miller
May 1, 2012 at 8:47 am

Nick:
Why would a temp-to-perm hire be guaranteed? During the temp. period the company has had time to observe the employee for competence, culture fit, and reliability. I assume either the temp. agency or the company did a reference & a background check. What is this guarantee period for?
Seems to me that the company doesn’t know much about recruiting or recruiters or for that matter working with temp.agencies. Could the problem be with the HR Department?

By Darker
May 1, 2012 at 8:59 am

If the employee were hired from out of state without a relo package, would this employer be willing to refund the relo expenses if the employee were terminated or otherwise laid-off in the first two years?

Somehow, I think not….

By Ken Cameron
May 1, 2012 at 9:02 am

This is between the company and the recruiting firm. If you really want some kind of “pay-back” in case an employee leaves quickly, I would negotiate a “replacement” clause. If the employee leaves within 6 months, the agency will supply replacement candidates for free. If the employee leaves 6-12 months, the agency will charge 50% of their normal fees. 1-2 years, 25% discount on replacement fees.

I guess you could also make it a credit against future fees.

Lastly, the company should look at their internal workings to understand WHY the employee left. Is there a broader retention problem?

By Suzanne C.
May 1, 2012 at 9:47 am

The logic of a tuition reembursement policy does not apply here. In that situation, the employee walks away with something tangible.

I think Ken Cameron’s suggestion about a “replacement” clause is a great idea. If I had a temp agency, I would do that as a marketing strategy.

By Peter
May 1, 2012 at 10:45 am

This was simply an expensive lesson for the hiring company. They NEED to revise their contract requirements for any agency they use in the future. Learn from this and be better prepared in the future.

I’m somewhat surprised that the agency didn’t offer some sort of compromise. Their firm stance could/should have consequences on future business dealings with this employer and others. Word gets around over time and while it may not have been addressed in the agreement, good faith helps to mend weakened relationships.

Best wishes and morning Greg

By Michelle
May 1, 2012 at 10:47 am

Most states are “employment at will” in which the employer and employee can terminate employment for any reason. Employers must follow EEOC rules when terminating employment. Employees generally are expected to give notice when leaving a position. If you were to enforce your “headhunter fee” reimbursement, you would be putting your company in a VERY BAD position, because you are then implying that there is an employment contract, which the employee needs to agree upon.

The valid relationship to question here is the recruiter/employer relationship. The employee may have had to move out of state to follow a spouse who found a better position. Not the employee’s fault!

The person was temping at this company, so had a good idea of what to expect, employee-wise.

Either change temp agencies or renegotiate future contracts. Fifteen days seems like a rather short time when most companies have a probationary period for all new hires.

The fault lies in the HR department. To even think of a thing like this makes me wonder what employment laws they’re not aware of?

By Dave
May 1, 2012 at 11:14 am

I have to agree with Nick and all the other commeters here. This is a morally/legally questionable gray area.

The first thing that comes to mind is why would someone quit so soon after they got hired? Was the work environment bad? Benefits package suck? Was it a temp tob? Depending on the answers, I could not blame someone for quitting so soon if they ended up getting someone better.

Secondly, I think the problem may be with the contract with your head hunter/agency/recruiter. Are you (the employer) and agency properly vetting employees? What’s their replacement policy? I think this points to hiring and negotiation issue.

In the end, I think the employee has the least/no blame in these cases. Especially in at will states…

By Pete
May 1, 2012 at 12:20 pm

In my experience dealing with temp agencies (e.g. Manpower, Addecco) that provide temporary (contract) employees the arrangement is that the individual is actually an employee of the agency. The agency and company agree to a billing rate for the person and the company pays the agency for the persons time. The bill rate includes a mark-up (fee)above the actual rate paid to the employee which covers what ever benefits the Temp Agency offers and the agency overhead and profit. The fee is collected as long as the individual continues “contracting” for the client company.

By Jeff
May 1, 2012 at 12:50 pm

Typically, for a temp position, the agreement with the headhunter carries only a 15 day replacement guarantee, because positions that I would call temp falls on the 3-6 month timeframe.

for a perm position, I insist on at least a 60 day replacement guarantee, and 6 months if I have enough pull with the agency.

I don’t do temp-to-hire, as I feel that is exploitive…

By Don Harkness
May 1, 2012 at 12:57 pm

Also fyi, the companies I went with that provided relo support had a payback clause in them as well. that was SOP pretty much everywhere.

As to this scenario, there’s a risk to every hire. As someone pointed out, the person could have left because it stunk to work there..or one of the many valid reasons. Everyone doesn’t want to leave a job they just got,,,family reasons is one common reason, e.g. a sick parent, sibling, kid etc that needs support.

There’s nothing unique that one can tie the departure to sourcing via an agency. The exact same thing could happen if they found their own candidate..then what? penalize themselves?

Recruiters, inside or outside can only get a candidate and the hiring mgr 75% there. The rest’s up to them. There’s a flip side to this story. How many recruiters have placed stellar candidates only to see the company handle them so poorly they have to leave? Yes you may have gotten paid, but professional recruiters do love to do a good job, and not have a good job spoiled by a senior idiot in charge.

Sounds like this company wants a zero risk hire. Sorry stuff happens. Best you can do is set up a process that you have faith in, and follow it.

I’m an in-house recruiter and it drives me nuts to work with managers who try to recruit with a crystal ball, devining that the person “won’t stick around, will tire of their commute, will be bored, i.e don’t have a mind of their own where they assess the job and the company. Only to see them pass a good candidate by, for someone they thing will stick around etc. …who leaves

By Omar Schmidlap
May 1, 2012 at 12:57 pm

Good grief, what you’re talking about here is indentured servitude, a form of slavery.

By Erika
May 1, 2012 at 2:44 pm

About 7-8 yrs ago, I had an interview for a forensic scientist position with the crime lab of the state police. They wanted the successful candidate to guarantee that they would work there for 5 yrs, due to extensive training given, and the fact that a neighboring, poorer state was infamous for poaching already trained scientists for their own crime lab, as opposed to training them extensively themselves. The penalty for leaving before the 5 yrs was up was giving back a large portion of salary. This did not work for me. They hired someone else. Don’t know if they stayed or not.

Employees also take risks when they take new jobs and no one compensates them for these risks (usually, except maybe relocation fees.) Make the pay ($30,000? ouch) and benefits better and maybe employees will stick around. And penalizing the former employee because the employer negotiated a poor agreement with a recruiter is beyond lame and symptomatic of the dysfunctional environment the employee departed from.

By G
May 1, 2012 at 3:14 pm

I was once offered a job with a very long contract to sign. The contract included a non-compete provision that was professionally outrageous and legally unenforceable, but the worst thing in it was a ‘fee’ of $1000 if the employee left within a year of hiring. I refused to sign it and looked elsewhere for a job because the company had two problems that marked them as a bad employer: 1) They treat their employees badly, and 2) They foolishly depend on grossly incompetent legal advice.

No, you can’t charge someone for leaving in an ‘at-will’ state. Employees can quit a job any time at will and employers can lay people off any time at will.

By Lynda Hallock, CEO LGH Recruitment
May 1, 2012 at 6:27 pm

The short answer is :1.) No,you absolutely can not!( exception: relocation fees) 2.) Find yourself a new agency! They are taking advantage of you!!( politely put)3.) If they were already a temp( for how long?) why are you paying that high of a fee?
For heavens sake find an agency that will work with you…do not blame the employee…

By marybeth
May 1, 2012 at 8:33 pm

Yikes, what a horrible proposal, and it doesn’t make any sense to penalize the former employee. Most states are at-will employment states, which means that the employer can fire you for any reason or for no reason, and you, the employee, can quit for any reason or for no reason. But I still don’t get why the employer would penalize the former employee for leaving. Who knows why he left? It could have been to follow a spouse, to return to school, to start a better-paying job, to spend time with a dying or ill parent, to care for a sick child. Or it could have been because the employer turned out to be not so great, although this person had temped for the employer, which means he got the inside view of what it is like to work there BEFORE coming on board as a permanent employee, so if there were issues with how the employer treated employees, ran the business, etc., they would have been apparent while this person was a temp (and he could have said “no” to the permanent job). Ditto for the employer–he got a good look at the temp, could see that he was a good worker, good cultural fit, etc.

Nor is it the recruiter’s fault. Once someone is hired, why is the recruiter still responsible? It sounds to me like the recruiter did his job–he got the former employee into the company as a temp, and then when a permanent job opened up, the temp applied for it, and, because the employer knew the temp and his work, hired him. Unless there was some kind of employment contract between the temp and the employer in which the temp agreed to stay x amount of time, I can’t see how the employer can even think that he can go after the former employee for the fee the employer paid to the recruiter. The recruiter’s job is to put good possible matches in front of the employer, not sign people up for indentured servitude.

I wonder where this employer’s legal counsel is…forget talking to HR unless HR has lawyers in the dept. And if the employer decides to go after the former employee, that sends a bad message to other employees and to recruiters–what recruiter would want to place anyone there in the future, either as a temp or as a possibility for a permanent hire?

It didn’t say how long the employee worked there as a temp, only that he left after 45 days to move out of state. Maybe he’d temped there for 6 months, 3 months, or longer. I wonder what this employer does with employees it finds without the recruiter–do they withhold wages if someone they hired on their own if that person quits?

There are plenty of employment agencies and recruiters if they don’t want to do the work themselves of looking to fill positions. And if they’re not happy with this recruiter, then they should negotiate fees on sliding scale if employees leave after a certain amount of time. Or find another agency. Or do the searching and hiring themselves.

This sounds like it could be a Three Stooges skit–Larry hits Curly, so Curly goes after Moe. It makes no sense.

By Lynda Hallock, CEO LGH Recruitment
May 1, 2012 at 8:57 pm

WOW!

By KahunaCFA
May 2, 2012 at 2:56 am

In 1974 I successfully transitioned from being a Data Processing Systems Analyst/Project Manager into being an Investment Analyst/Portfolio Maanger. My first full-time position in investments was the very difficult 1975-1976 Economy — just reovering from the 1972-1975 Recession and first Oil/Energy Shock. — Remember when gasoline used to cost about $0.349 per gal. Anyway, ever open Investment position required the ever-present three to five years of investment work experience.

From August 1974 – August 1975, I worked as a paid Intern in the Investment Department of a medium sized multi-line Insurance Company. I researched Technology Companies, Healthcare Companies and Food & Beverage Companies as well as some caital good companies.

The University of Wisconsin School of Business had a Placement Department which was of almost zero help for an entry-level investment position. I was not then experienced enough to attract the attention of Headhunters. I did it all by myself. —

Generated four offers: Miami, Cincinatti, Colorado Springs and Central Wisconsin. Compensation was similar for each position in 1976: $18K – $24K per year + Relocation for my family No headhunters, no fees, etc.

I stayed in my first position for four-years, including Wage & Price Controls. Because of Wage and Price Controls, my compensation even after 15% to 20% increases each year from 1976 – 1980, was no longer competitive.

An Investment Firm in another city in 1980 learned of my investment skills through a broker at a large brokerage and Investment Banking Firm. Called me, invited me for an initial interview.

Result, an offer fifty percent more than my then compensation, full relocation expenses, purchase of my three bedroom home, if necessary, , a way below-market mortgage rate on a new home in Chicago and ample stock options and bonus potential of up to 100% of my base compensation. One of my key accomplishments at the new Chicago Firm was the start-up of a Venture Capital Investment Portfolio. At the firm in 1977, I became a Venture Capital Portfolio Manager. Several significant start-up investments: Amdahl(AMDH, then AMD), Genentech(GENE), Amgen(AMGN), Sysco(SYY), Spectra-Physics(SPY), … and about eight or so others. Owned 22% of Sysco(SYY) as well.

My third investment position was back with the original 1976 Insurance Company. The Department Head was in Chicago, came to my office to visit. We talked for awhile, then he asked, Have you ever thought what it would take to get you to come back to our company? That was very easy since I really never wanted to leave in the first place in 1980. Here was the simple answer in that Friday afternoon in 1983: A 50% base salary increase, Vice President new Investment Department Division Head, Bonus based on new investment funds acquired by the new Pension Management Division, and an underground parking space. He was somewhat taken back by my almost instant response.

Monday morning, I received a call at my office, What are you doing this Friday, can you fly on the company airplane to visit us? I said yes. The next week Tuesday, I received a Federal Express Offer package with everything included, plus a company leased car that was not asked for during our discussions.

Life was so much less complex in the nineteen-eighties.

Kahuna,CFA
Venture Capital
General Partner
2012 – 2019

By Nic
May 2, 2012 at 6:15 am

Bottom-line this scenario, the fee structure apparently was clear, it was what it was and that was it, as Nick said, “Employers that are not accustomed to using headhunters have a hard time accepting the fact that they paid for a service – recruiting. ….In this case, it was a relatively low-salary job, and the “headhunting fee” was really a “temp to perm” conversion fee, because the hire was someone who was working as a temp.” END OF STORY.

By Nic
May 2, 2012 at 6:18 am

@marybeth said “It sounds to me like the recruiter did his job–he got the former employee into the company as a temp, and then when a permanent job opened up, the temp applied for it, and, because the employer knew the temp and his work, hired him.” The problem is HR. It appears to me that most HR today are not competent to understand that a temporary employee seeking full-time employment is going to be on guard, on their best behaviour, which is likely to change once a permanent position is gained. If something else better comes along they may take it. Again, END OF STORY. Unless otherwise in the contract there is no backstory here. It is clear as day.

By Nick Corcodilos
May 2, 2012 at 8:28 am

@Peter Miller: Good point. Why would a temp-to-perm be guaranteed? But it all depends on the contract. Both parties can ask for what’s important to them. But no matter what they work out, it makes no sense to encumber the employee.

By Nick Corcodilos
May 2, 2012 at 8:33 am

@Erika:

“Employees also take risks when they take new jobs and no one compensates them for these risks”

In the case you described, value must be exchanged for value. If the employer wants a guarantee the employee will stay for 5 years, that’s a valuable benefit to the employer. What does the employee get in return? I’d ask for guaranteed minimum raises and promotions based on very objectively defined criteria. I’d ask for a guaranteed severance package if they terminate me. We could have great fun with this…

By Nick Corcodilos
May 2, 2012 at 8:34 am

@Don Harkness:

“there’s a risk to every hire”

That’s wisdom every employer should consider. Whether you pay a search fee or not, anyone might quit any time. Just like any company might fire you.

By Dave
May 2, 2012 at 2:31 pm

@Nick

“What does the employee get in return? I’d ask for guaranteed minimum raises and promotions based on very objectively defined criteria. I’d ask for a guaranteed severance package if they terminate me.”

The cynical side of me says, “good luck trying to get this; you’d be better off squeezing blood from a stone.”

And you wonder why people complain about not getting good people or why no one wants their job?

(Mind you I am not what you’d consider pro labor/union)

By Omar Schmidlap
May 2, 2012 at 2:44 pm

Help wanted — the unemployed need not apply.

By Nick Corcodilos
May 2, 2012 at 4:16 pm

@Dave: Hey, all I’m doing is suggesting reasonable terms to ask for. Not that an employer is likely to agree. I look at it this way: The point behind good advice is to help people step back and look at a situation clearly. My point here is that if the employer wants something of value from you, you should figure out what value you want in exchange.

If a person suddenly sees this connection, and looks for it the next time they get an offer, they’re ahead of the game in any negotiation.

BTW — I agree with you. Good luck getting it. But if you can’t get it, why bother taking the job?

By M.L
May 2, 2012 at 8:21 pm

I second the call for retaining a new agency. I live in a big city (NYC) and the rate is more like 15% of the offered salary. Some agencies have deals that if you pay, just say, a minimium of 6 months in temp fees, the permanent transition fee will be lower. Also, assuming that the question writer is based in a small or mid-size market,$30,000 is a decent salary. The question writer should be mad at the employee not the agency. If he/she knew that they planned a move, they should not have accepted the permanent offer. The agency in this situation is foolish, they should have offered to return a portion of the fee and offered to replace the employee free of charge to retain the client’s business.

By J.S.
May 3, 2012 at 8:49 am

Thinking back to High School, the phrase “indentured servitude” comes to mind. That is what this is – having to buy out to get your freedom.
Apparently this company is a cutting-edge 18th century employer.

By marybeth
May 3, 2012 at 5:48 pm

@Nic: I agree that temps probably tend to be on their best behavior, but that’s true of all new employees, isn’t it? People want to make a good impression. Not everyone temps with the goal of getting a permanent job. Some people temp because their spouse moves every couple of years and they can’t get permanent jobs because no one will hire them, and temping is still a way to earn money, gain experience, build connections, etc. Some people temp when they can’t find permanent work–it’s meant to tide them over until they find a permanent job, and that job might not be with the company the agency placed them in. Still others temp as a way to test out an employer or possible career.

The other possibility is that the employee in Nick’s answer took the permanent job in good faith, but then something happened that caused/forced him to leave. Hey, it happens, and oftentimes it isn’t anything the employee can control. Of course, it is possible that he took the job knowing that he would be moving out of state in 45 days, but I find that a little hard to believe. For starters, in many companies, your benefits don’t kick in until you’re done with your probationary period, which could be 60 days or 90 days from your start date, so if that’s the case, this temp-to-permanent employee didn’t gain anything–benefits like health insurance and vacation time and sick time and paid holidays hadn’t kicked in yet, so there’s no benefit to taking the permanent job. The other reason is money–it is possible that even though the salary was quite low ($30,000 isn’t a living wage in some parts of the country), it was more money that he made as a temp, so he took the job.

I really don’t know, and the letter that Nick posted didn’t address this matter.

The other issue here is that I’m not sure the agency is on the hook for anything at this point. The agency got the employee into the company as a temp. When you’re a temp, even though you work at a company, you’re really the employee of the agency. The company pays the agency, the agency pays you. Once this person went from being a temp to being a permanent employee, there was no longer any relationship with the agency. The employee was employed by the company, not the agency. The company decided to hire him based on what they saw (from his performance, based on how he fit into the company’s culture, etc.). I saw nothing in the letter to indicate that the agency pushed this particular person to the company for the permanent job, but rather that the temp saw the job vacancy or might have even been told about it by a supervisor or colleague, applied for it, and got it. That was done without any help from the agency. The employee also had the opportunity to suss out the company, and apparently decided it was an okay place to work–otherwise you’d decide to remain a temp.

So I really think the company is sol. The employee left. Is that the first time an employee has left? Or left after a short period of time? Probably not, and most companies have dealt with employee turnover. People retire, leave to care for elderly parents, follow a spouse’s military career or job, take time off to have and raise children, leave to go back to school, and even leave for better jobs. But for the company to try to get money back from the employee, I still think that’s really, really bad.

By Lynda Hallock, CEO LGH Recruitment
May 3, 2012 at 7:04 pm

Very interesting conversations on this subject. Some so far off base I wondered if the subject had changed. Some rants some raves. My only comment is : It seems to me that the client has been left in the lurch more than once by this agency and is fed up. No ,he/she can not and should not think of charging an employee. However, the agency seems to be a particularly uncaring entity! They should have immediately apologized and offered to help their client with a replacement, gratis or for a very small fee. There are a few scenarios not addressed in this question: how long had the employee been a temp? ( more than 90 days: no conversion fee should be charged) Greedy, you already made your money during that time. If a shorter period of time a rate for conversion may have been set…then abide by it..6k seems pretty high unless 30/60 day for a 80k position at 15% fee. 15 day guarantee? What the heck does that say about the candidates you offer? Pathetic. Where did the 30k fee come from? I must have missed something. SO…if this were my client ( I offer 90 day guarantee if invoice paid in 15 days) I have never had an issue or a loss…but if I did I would be working double time to replace this person….if beyond guarantee ..a basic fee of 2k or something..I want to keep them as a client..I want them to trust me…if the employee left..he left for a million reasons or one we can not contemplate..or he was incompetent to begin with.SOMEONE did not do their due diligence???The employee may have disappointed..this is America…come and go as you please…unless you have a written contract( different game)This agency must be so successful( or arrogant) that they need not have apologized to anyone nor feel an obligation to ” just some client who got burned”…Greed is very unbecoming! This client needs a new agency!!!

By Omar Schmidlap
May 4, 2012 at 2:37 pm

Kudos to Don Harkness, marybeth, Dave, and Lynda Hallock — I especially liked what each of you had to say. (Note to Don Harkness, being on the receiving end of the “won’t stick around” no-hire excuse has been known to drive ME nuts.) Allow me to summarize in my own brief way:

What you’re talking about here is indentured servitude, a form of slavery. Sans a written contract to the contrary, there can be no doubt that a fee chargeback is illegal.

Being adversely affected by a facility closing makes one a terminated employee and, therefore, unemployable. I know!

Being adversely affected by a facility closing on multiple occasions makes one a job-hopper and, therefore, unemployable. I know!

Being labeled a job-hopping, terminated employee leads to employment gaps of several years’ duration and makes one even more unemployable. I know!

Working at one or more temp jobs is stigmatizing. I know!

College/University professors chant their never-ending mantra, “We need more engineers.”

Paraphrasing what Dave said, it’s known that some good jobs (e.g., skilled trades, technology, and engineering) go begging for warm bodies to fill them.

“Help wanted — the unemployed need not apply.”

In conclusion, you don’t have to be an idiot to be a boss (i.e., hiring manager); but it sure as hell seems to help!

By Don Harkness
May 4, 2012 at 5:15 pm

As I said with or without an agency, there’s no risk free hire. You can cut whatever contract you want with an agency, but it usually may offer some remedial salve, but it’s not necessarily going to reduce risk. Everyone involved is taking some risk and all you have to work with is your recruiting process, the savvy of the manager and candidate in effecting a meaningful interview, and managerial skills after the hire takes place.
We are making some progress in attitude where I work. When I joined 4 years ago the company had institutionalized a crystal ball in the recruiting process, ie. trying to foresee longevity, reading tealeaves in resumes e.g. Omar mentioned. We’ve since changed our philosophy. To negate neverending searches for perfection we’re all about value add. All we want is a good work day and that in that day you add value to your organization, and dependably doing what’s expected is considered adding value. If you do more great. If you stick around to retirement double great. But if you go, we’re not going to cop an attitude. And we’ve had that 15 day person. Did we like it..no. But it was a one off and we got over it. As I said we still have managers who have risk adversity in their hiring DNA, but we have license to ride herd on them.
There’s a lot of the chicken story in recruiting and hiring particularly when it comes to a hiring manager looking for Mr/Ms Perfect candidate.
If you’ve not heard it…A man goes to his butcher and says he wants a freshly dressed quality chicken. The butcher hands him a fresh chicken that seeming meets his need. The man picks it up, holds it every which way examining it closely with a sharp eye. Then he sniffs it. He tosses it back at the butcher and says “This chicken stinks!”. The Butcher replies “Can you pass a test like that?”
Hang in there Omar you’re looking for someone who doesn’t make assumptions and will actually talk with you and find the story behind the bullets.
Don

By marybeth
May 7, 2012 at 6:05 pm

@Don Harkness: you’re absolutely right. No hire is risk-free. It doesn’t matter if the employer hires someone to do the screening and hiring for him (such as an employment agency) or has his own HR dept. handle it, or leaves it to the hiring manager of whichever dept. needs the help (no input from HR). There’s no magic formula, and sometimes even a great deal of due diligence doesn’t guarantee that an employee will stay.

I like your analogy to a crystal ball, reading tea leaves, etc. It is a truism because that seems to be how some employers handle it, rather than look at employees leaving as a normal part of work.

By J_Mo
June 4, 2012 at 12:05 pm

Just a note: Temping does NOT always give a person a good picture of what it will be like to work somewhere.

Before I got my first permanent position at my current company, I temped here extensively. That went just fine. People were nice. We (workers–permanent and temp alike) were given the resources we needed to do and get ahead in our jobs.

When I got my first permanent position here, it was in a different group, and it was a TOTALLY different story. I don’t know if it was just bad luck or what, but I’ve now been with this company 11 years, three different groups. All of them have been awful, and I have not been treated well by any of them. I have been looking for a new job for a very long time.

If I’d had ANY clue what I was in for, I would not have taken that first permanent position, but it all seemed fine, and I really needed the stability at the time.

Now, I’m stuck, and I’ve been depressed for a long time.

Just like temps will be on their best behavior, so will the companies for which they are temping. ;)

By Lynda
June 4, 2012 at 2:30 pm

Oh my! J…11 years….you must be doing something right!!!

By J_Mo
June 4, 2012 at 2:37 pm

I don’t know. I’m not sure 11 years in a toxic environment is a good thing. :(

Been trying to get out for five.

By Stevie
December 14, 2012 at 4:49 pm

Hello,

I am the situation where i am ask to repay 70% or approximate $7k back to an employer for headhunter’s fees. I told my employer that was the money employer pay to find employee/candidate. It has nothing to do with me as i didn’t get any portion of that fee being pay to me.

I AM CRYING FOR HELP. I AM WORKING RESTLESS AND HAVE 1 HR WORTH OF SLEEP SOMETIME.

Is there any legal advise/state board to talk to in such state?

By Stevie
December 14, 2012 at 4:52 pm

EMPLOYER ASK EMPLOYEE TO PAY BACK HEADHUNTER’S FEES?

ISN’T THIS PRACTICALLY ADVERTISEMENT FEES EMPLOYER PAY TO ADVERTISEMENT AGENCY TO FIND THE RIGHT CANDIDATE FOR THEM?

REALLY

By Lynda Hallock
December 14, 2012 at 4:55 pm

Stevie,
That is shameful and inexcusable. Perhaps you want to reconsider working for these people. So sorry for your troubles. Best of luck to you. Do not loose sleep over this. they are not worth it…they can not take money legally from your pay.( you did not sign a contract with them or the agency to pay any part of this fee, correct) However, if they have that type of attitude I would not put it past them. Find a good headhunter.

By Stevie
December 15, 2012 at 10:07 pm

I am resigning my position and giving advance notice so they can better prepare for the transition.

My manager handed me a stack of paper about .5 inch thick and ask me to sign on my first day. I said it will take me a while to read this doc if you are sitting here and wait. I asked him is there anything i should be aware of other than the traditional rational and common sense stuff. He said the only critical thing is if they should send me to training/education and if i leave within the grace period then i’ve to pay some that portion back, which i totally agree. He didn’t mention anything about i have to pay employer back the money that they paid recruiter agency to locate a candidate. I’d never work for them if i was aware of this and probably no one would nor apply for the job. To me this shows how incompetent the managers at this employer are and what they said about them, how they treat employees, and if there is any true about the things they said.

This is fee that is common sense for every employers, large or small. Employee shouldn’t be asked to pay this money back.

THIS IS VERY IRRATIONAL AND UNETHICAL ESPECIALLY COMING FROM A CFO’s MOUTH IN ADDITION TO THE MANAGER.

By Stevie
December 15, 2012 at 10:13 pm

I LOSE ENOUGH SLEEP WORKING FOR THIS EMPLOYER, GOT CAR ACCIDENT ON THE JOB. WORKING RESTLESS. WHAT ELSE DO THEY WANT.

WTF

By Peter
April 23, 2013 at 5:58 am

The employer needs to shop around for a real temporary staffing agency, one that will invoice them weekly (or bi-weekly) for the temp. The staffing agency’s bill rate includes, in addition to some profit, FICA,Workers comp,, liability insurance, medicare, payroll administration and a few other alphabet payments.
What employer in his/her right mind is going to pay $6 grand, up-front for a low-level temporary employee. Of course the temp. will leave in a flash for a FT permanent job. Wouldn’t you?

By Julie
September 5, 2013 at 7:29 pm

I have a contract that states I need to repay 15K if I quit, I have already made the company 170 K so far. I thought the 15 K would come out of my expense account – before bonus, but now I read it should be paid lump sum – out of pocket after tax dollars!

I was also promised incentive compensation based on my production minus expenses, but have never seen overhead expenses disclosed. Everyone gets the same overhead attached, no breakdown of any kind, I only work part time and have never seen a bonus because of lack of proration. Very disappointing and I feel I should not be trapped into this.

I feel this fee is simply prohibitive to quit for the next 2 more years! Any way to contest this clause?

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By Brian
January 14, 2014 at 12:15 pm

Here’s a different wrinkle to this question…I’m a job seeker, and I’ve just started working with a recruiter who wants me to sign an agreement stating that I will reimburse him for his fee if I quit the job voluntarily within the first 90 days. I know this is common practice between employers and recruiters, but I have never heard of this between job seekers and recruiters. While I understand the motivations, it seems like this is pretty shady. Am I right that this is not something a reputable recruiter would do, or is this a more common practice than I think it is?

By Nick Corcodilos
January 14, 2014 at 1:32 pm

@Brian: This is not only shady, it’s unethical. My guess: This is a newbie recruiter who is terrified of the business. Tell the recruiter to take a hike. The recruiting contract is between him and the employer. You’re not part of it, you have no such liability. (Would he give you half the fee if you STAY on the job more than 90 days? Of course not. And that would be shady and unethical, too.) Feel free to tell him I said he should go suck rocks – and point him to this posting. If you really want some fun, call the employer’s HR VP and ask if they know about this “contingency” the recruiter has created. My guess: they’ll fire him, and he deserves to be fired.

By Brian
January 14, 2014 at 7:39 pm

Nick, thanks for the confirmation. He says his lawyer “made” him do it and that I’m the only person that has ever had a problem with signing the agreement. Pretty sleazy. I’ll take your advice and tell him to get lost. Thanks again!

By Julia
October 11, 2014 at 6:38 pm

I am slightly worried that I’m going to get charged for leaving my job. It’s only subway sandwich shop, but it says something in my contract about training costs of £200 needing to be repaid if you quit within a certain period. Will they take as much as they can out of my last paycheck? Or will I be required to pay the costs out of pocket?

By Nick Corcodilos
October 12, 2014 at 8:27 pm

@Julia: It’s hard to say. I don’t like that kind of clause in an employment contract. Oftentimes, employers put it in there to protect themselves in extreme cases, but do not always invoke it. It sounds like you are in the U.K. In the U.S., we have federal and state departments of labor and employment. If you’ve anything like that at your disposal, I suggest contacting them and asking whether this sort of obligation is even legal. If you are indeed required to repay the costs, I suggest you try to negotiate this with the employer to reduce it. I wish you the best. This is yet another way employers avoid training employees and instead implementing indentured servitude.

By Sue
October 27, 2014 at 9:10 pm

Employee’s, whether contract or full-time, are not indentured servants. People come and go as they need. Employer’s are free to fire At-Will and employee’s are free to quit as they see fit.

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