10th March 2025 | Aaron Heslop | Recruitment, Agency fees, Dispute Resolution

In the competitive recruitment industry, disputes over introduction fees are common when multiple agencies claim credit for placing the same candidate. These conflicts often hinge on the "effective cause" principle, which determines which agency's efforts were the primary reason for the candidate's placement.

What Is the Effective Cause Principle?The “effective cause” principle is crucial in resolving these disputes. Courts typically assess whether the agency claiming the fee was the one that actively facilitated the relationship between the candidate and the hirer. This approach ensures that the agency that played a significant role in the hiring process, rather than merely being the first to introduce the candidate, is compensated.

The Importance of Clear Terms and Conditions

Clear terms and conditions are key to prevent disputes. Agencies should explicitly outline the circumstances under which they are entitled to an introduction fee. These terms should specify:

  • The circumstances under which a fee is payable
  • What constitutes an effective cause in the hiring process
  • How long an agency can claim a right to payment after introducing a candidate

This clarity helps ensure that only the agency that significantly contributed to the placement process gets paid. In addition, whilst having clear terms and conditions is essential, agencies must do everything they can to ensure that they have drawn their terms and conditions to the attention of the hirer.

The ‘First to Introduce’ Rule

Generally, the courts do not favour the “first to introduce” rule. Instead, they look for the agency that was proactive in arranging interviews and negotiating terms. Agencies should follow up on candidate introductions promptly and manage the entire recruitment process actively to be recognized as the effective cause.

In conclusion, recruitment agencies can increase their chances of securing their fees by having clear terms and conditions, actively managing the recruitment process, and ensuring they are the effective cause of the candidate’s placement. This approach not only minimises disputes but also ensures fair compensation for the agency’s efforts.

 

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