Backdoor Hires: “We did not sign an agreement.”

Today’s guest blogger is Wilson Cole. He is the CEO of BackdoorHires.com and Adams, Evens & Ross, the nation’s largest credit and collection agency designed exclusively for the staffing and recruiting industry. In 2008 he was inducted into INC Magazine’s, “INC 500” for being the CEO of Adams, Evens & Ross, the 307th fastest-growing privately held company in America. Adams, Evens, & Ross has helped more than 3,000 staffing and recruiting firms recover more than $1 billion in past-due debt and is an NPAworldwide Endorsed Program.

“We did not sign an agreement.”

Nothing bothers me more than this excuse. Of all of the reasons for Backdoor Hires, this reason is the most frustrating because it is the easiest excuse to avoid. As I mentioned in my earlier chapters, one of the ways to recuse one-third of your Backdoor Hires and fee disputes is to get an agreement signed. Can we collect the account if you do not have a signed agreement? The answer is yes. Can I send this account to my forwarding attorney and have it sued? Well, it depends on the laws of that state and other mitigating factors. For example: in the state of Massachusetts, their supreme court has ruled that if you do not have a signed agreement then you do not have a claim. Luckily, most states are not as cut and dry on the subject, but it is just the best practice to get a signed agreement.

When your client uses the reason or defense of “I did not sign anything,” it speaks volumes of why you have not been paid in the first place and can be the SOLE factor on how we would internally proceed with our own collections activities. Let me also say this: when your client says they did not sign anything, I want you to understand that what they are really saying or screaming very loudly is our magic phrase of, “I am not going to pay you because ____.” You need to call me or whoever you use to collect your past debt because anything you say or do from this point threatens your ability to collect this invoice.

Let me share with you how we systemize our debt collection. We use debtor profiles; these profiles are essentially shortcuts that we use to identify the best way to collect our clients’ debts. We have 10 different profiles that we have developed over the last 25 years, and the phrase “We did not sign anything,” actually helps us identify 4 of these profiles. I do not want to confuse you when I say it identifies 4 out of the 10 profiles, but this one phrase will tell me all I need to know for about half of the backdoor hires we have successfully collected on. The difference between each profile is the context of how it is used. Let me give you 4 separate examples using the worst case scenario first.

Profile Example One:

When we call the debtor, they are usually small to mid-sized companies who instantly say, “We do not owe a fee, I did not sign anything, and if you have a signed contract send it over for my attorney to review.” This type of debtor is the worst of the worst because 90% of the time, the debtor NEVER intended on paying you a dime from the very beginning. You got played. If you look back at the very first conversation you had with the debtor, they may have been charming, but they typically did most of their communication with you on the phone and kept very little documentation. These guys just stole from you, and the worst part is that they planned it from the start. It is not uncommon that these debtors make a habit of not paying bills in general, and their credit reports are typically bad. In my opinion, these types of debtors are simply con men. These are the ones that we send a private investigator out to their location and start locating other creditors so we can threaten them for an involuntary bankruptcy. For over half of these debtors, we have to send the case out and have them sued because they are just bad news. They will wait until they are spending more defending this claim than they actually owe before they pay.

Profile Example Two:

When we called your client, they are a larger company, and we reach their HR department who says, “I did not have a signed agreement.” These guys are typically as bad as our first example, but they work for a larger company which means we have the option to go over their heads. At the end of the day, they may be trying to increase their own bonus for not using outside help, but ultimately they are not the ones who sign the checks. About 30% of these cases have to be sent out to our forwarding attorneys to sue.

Profile Example Three:

“We did not sign anything,” followed by “and the person they dealt with in HR is no longer here.” This profile is not as much about character as the first two profiles; it is more about confusion. The reason I like a signed agreement is that it breaks down the rules of the game. If I do X, then you owe me Y dollars. There is no good or bad guy. They just want proof that a fee is owed, and your word will typically not get the debtor to pay a large fee unless you have supporting documentation. With this type of profile, our client has to share the reasons they are not getting paid. Look at it from your client’s perspective: you call out of the blue and say you are owed a fee, and you can show that you presented the candidate, and the candidate was hired 9 months later; you look at it and say well it was within the 12 months. The problem is, they can look at it and say we only pay if they are hired within 6 months. This is why your fee agreement needs to spell out the rules. They do not have to prove they do not owe you; YOU have to prove that you are owed. About 80% of the time, we are able to get this resolved for our client assuming they have documentation showing they presented the candidate.

Profile Example Four:

Their attorney called us up and said, “There is no signed agreement.” Attorneys will point out the weakest point of your case. It is not a character issue; they are simply doing their job. If the attorney did not point out that we did not have a signed contract, he would be doing his client an injustice. This profile typically gives us the broadest response on our end because we have to check to see what documentation we do have. It also depends on what the laws are in the debtor’s state. Remember my example of Massachusetts? Now, for a word of caution on this example: if you ever find yourself with a debtor in the state of Massachusetts and do not have a signed agreement, please do not think nothing can be done. On the contrary, we can still run the account through the collections process because the bar for collections is much lower than a lawsuit. Keep in mind, we still have our forwarding attorney sue in the state of Massachusetts without a signed contract. It does not mean you cannot sue. Although it does mean if the debtor’s attorney is aware of the ruling by the Massachusetts Supreme Court and uses it as a defense, you will lose. You could also get hit with some of your client’s attorney fees. We get these resolved 50% of the time before they are sued.

The numbers speak for themselves. Look at the two case studies listed below. Without a signed contract, we are in a weaker position, and the client usually has to settle. In some cases, they have to sue, and even with litigation there are no guarantees, especially without a signed contract. Let this remind you, once again, it is always better to have a signed contract than not to have a signed contract.

Case Study Number One:

Small Company
Fee Owed: $22,000.00

Reason for the Dispute: The debtor did not sign the agreement and hired the candidate 60 days after the candidate was presented. In my opinion, the debtor had no intention on paying our client from day one.

Resolution: We hired a private investigator to locate other unpaid creditors. The debtor owed three other recruiters for fees he did not pay and countless other trade creditors. The debtor had his attorney get involved, and in an effort to keep the other creditors from being contacted, the attorney got his client to agree to pay a third of the fee which the client accepted. Two years later, the debtor was out of business.

Case Study Number Two:

Larger Public Company
Fee Owed: $35,000

Reason for the Dispute: There was no signed agreement, and the HR manager left three months after the hire and was no longer employed by the hiring company. The candidate was hired eleven months after the presentation.

Resolution: Our client had volumes of documentation showing they had presented the candidate, and the candidate was hired. The hiring company had an in-house attorney that got involved. The company had a good reputation. The issue was that they had a policy that recruiters only had a six-month claim on any candidate, and they had to be hired for the specific job which they were presented for. Neither our client nor the hiring company had any documentation showing the candidate presentation protection period was ever discussed. After weeks of discussion and all parties wanting to find a resolution, the client accepted their final offer of 50%.