Why candidate liability clauses are bad for business

This time of year is critical for recruitment. Many companies are actively searching universities all over the country to secure the best candidates to join their graduate programmes. Similarly, many graduates are entering the job market for the first time and are navigating their way around the recruitment space, looking for the right recruitment agent to help them identify the best career opportunity.

However, in recent years there has been an increasing trend by recruiters to ask candidates to sign what has been called a Candidate Liability Clause. Given that a large number of graduate candidates are new to the recruitment industry, many assume that all components of these agreements are standard practice.

The most contentious component of these agreements is that if a candidate reneges on an offer after written acceptance, the recruitment agency claims damages against the candidate. Usually, the agency demands from the candidate an amount equal to the commission or fee they would have earned upon successful placement.

While this practice is not common, it has been in existence for some years. In 2012, the Federation of African Professional Staffing Organisations (APSO) amended its Code of Ethical and Professional Practice, banning the use of the Candidate Liability Clause. As such, it required all members of APSO to adhere to this ban and provided a candidate notification that informed candidates that an agency’s only right would be to seek damages in line with their legal rights.

However, the frequency of this Candidate Liability Clause practice suggests that there is still a lack of clarity around this issue and what is permitted.

Carmen Williams, General Manager: Talent Acquisition at Entelect, says, “At this time of year, graduates are planning for their first job. Many of them will be stepping into the recruitment space for the first time.”

She believes it is critical that candidates understand how the recruitment industry works so that they are not misled by unethical practices.

“Successful placements can only exist when a candidate wants to join a company, not because the candidate feels intimidated into joining by the prospect of incurring damages fees if they don’t.”

APSO has also joined the discussion in an attempt to provide clarity on the issue. While APSO recognises that some members may wish to seek damages in certain instances, it expressly prohibits recruitment agencies using a Candidate Liability Clause as a means of recovering these damages. Part of the problem, explains Roly Boardman, chairman of the APSO Ethics Committee, is that there is currently no requirement for recruitment agencies to be members of an industry body such as APSO.

“Membership of APSO would serve to monitor unethical practices and give candidates recourse when a dispute occurs,” he says.

So, why is this practice bad for business?

Firstly, contracting a candidate to cover damages should they decide to change their mind on an offer is not conducive to a successful placement. A candidate who feels bound to a job offer through fear of incurring damages fees is likely to enter that position in a negative state of mind and feel cheated out of their preferred choice. Jobs that start like this do not last and replacing these employees incurs more expense in the longer term.

Secondly, a large number of companies are not aware that potential candidates are asked to sign this document. Consequently, it can be a poor reflection on the companies these agencies represent, not to mention that this practice may be in stark contrast with the values of the organisations they serve.

Thirdly, this practice can result in a poorly matched placement. On the one hand, a company may lose out on an excellent candidate because he or she is unable to change their mind. On the other, a company may take on an employee who would have preferred to join another company.

Williams has a good view of both sides of the industry and believes that this issue points to the role of the recruiter.

“The role of the recruitment agent is to help both the candidate and the company make the best decision,” she explains. “If the recruiter is prepared to nurture this part of the process, damages fees should not be an issue.”

What should company’s and candidates look for?

1. When it comes to identifying the right candidate for the right role, the onus is on the recruiter to perform greater due diligence throughout the recruitment process. Boardman supports this view by asking the question, “Surely we cannot employ people without personal interaction?” He firmly believes that we need to bring personality back into the recruitment process, saying, “We simply cannot afford to miss out on good candidates because the right information was not discovered.”

2. Part of a recruiter’s process is to counsel candidates on what to do in case of a counter offer, helping them understand the pros and cons of accepting a counter offer. It is in the interest of all parties involved that the candidate takes the best career opportunity available to realise a successful recruitment process.

3. Candidates and companies should ask a potential recruitment agent whether they are a member of APSO. This way they know a code of ethics is being followed, and should there be any cause for recourse or dispute, all parties involved have the support of an independent party.

When engaging a recruitment agency’s service, companies and candidates should find out what the terms of engagement are. If an agency does indeed apply a damages fee, then companies need to consider how this may affect them.

“A candidate must be free of coercion of any sort to make the right decision for them,” concludes Williams. “It is important that companies start to determine the kind of practices they want from the recruitment industry, and start demanding it, or only work with those recruiters who share your organisation's values."