Contract Pitfalls: What You Need To Know
As a staffing or recruiting professional, you must understand all agreements before you sign them. It is part of your responsibility to make sure that contracts are fair and it protects your business, but sometimes, transactions become time-strained and stress gets the best of you that it becomes too difficult to achieve a balance between closing the deals and being cautious.
For those who are just starting, you might find yourself overwhelmed with legal terminologies that you just resort to getting the deal done, but as you do, remember that contracts are binding agreements and you are expected to fulfill your end of the bargain.
But no matter how many years you have been in the staffing and recruiting industry, you need to always be extra careful when signing an agreement, especially in cases where you see something out of the ordinary.
Top 3 Contract Pitfalls That Could Cost You
In recent years, we’ve come across several perilous client contracts, but thankfully, our clients have been wise enough to steer clear of these traps. Here are the top three contract pitfalls that pose significant risks:
1. Confidentiality Agreement Restricting Legal Counsel
A confidentiality agreement, also known as a non-disclosure agreement (NDA) or secrecy agreement, is designed to protect sensitive information shared between parties. However, these agreements can become dangerous if they include overly restrictive clauses.
In one case, a debtor sent our client an email stating that their fees would be paid if they signed a new form. This form turned out to be a highly binding confidentiality agreement that prohibited our client from hiring legal counsel or discussing the matter openly. Such pitfalls can severely limit a client's ability to seek legal advice and protect their interests.
2. A contract protecting the staffing agency’s client from paying the bill.
Frankly, only lawyers come up with these types of predatory documents. A recent example was when a staffing agency brought us an agreement that their client wants them to sign. This document protects the latter from paying the bill and, if the agency attempts to collect, they would be legally obligated to pay their client instead.
The staffing agency dodged the trap by coming to us for advice. Still, it is quite disappointing for them especially when most of the clients who try to pull these ploys are high-end debtors.
3. A contract with a Master Service Agreement (MSA) that will not be fulfilled unless a separate fee was specified for each placement.
This incident happened between a recruitment company and their trusted client. It is disheartening that, to some people, an established relationship isn’t as valuable as the cost-cutting from actively seeking loopholes.
Our client came to us with a contract that they have been served with which included a Master Service Agreement that requires a new fee agreement every time there is a new position to fill. Thankfully, our client was wise enough and sent the document to us and we identified the trap.
Conclusion
The key takeaway can be concluded in one sentence: Do not sign anything that you do not fully understand.
These predatory companies will never run out of ways to trap staffing and recruiting firms into paying them. You need to be certain that every part of the contract that you are signing is fair and, if even a single paragraph is unfamiliar or questionable, have your lawyer look at it or consult us immediately.
One of the many benefits of dealing with Adams, Evens, and Ross is we do not have to learn how to collect your past-due staffing and recruiting debt. Our people are our secret. We are one of the few collection firms large enough to have Staff Attorneys on staff along with Seasoned Collectors, Asset Investigators, and world-class support staff. There is no doubt on why Adams, Evens, and Ross is the only collection firm in the world that is endorsed by 5 funding companies, 14 associations, and 10 recruiting and staffing trade magazines.
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