An employment agency is usually a company that matches an individual worker with a company that needs an employee. For example, employment agency X might find a job for worker A at Company H in exchange for being paid a fee. Sometimes, the worker will only be with an employer for a short time, or the position may be for permanent employment. Both individuals and employers like to use employment agencies as an easy way to find employment and fill vacant positions.

How Do Employment Agencies Make Money?

Generally speaking, there are four ways that an employment agency can make money. They include:

  • Charging an individual an up-front fee for finding them employment,
  • Taking a percentage of an individual person's salary from their new paycheck as a fee for an employment agency's service,
  • Charging the new employer a percentage of the individual worker's salary as a fee for an employment agency's service, or
  • Charging a company a lump-sum fee when they hire a worker the employment agency brought to them.

What Is Needed to Recover a Placement Fee?

Sometimes, the fee that an employment agency is entitled to for placing a worker with a company is not being paid. In these situations, an employment agency can sue the company or worker, depending on who is responsible for paying, for that fee. To be successful, the employment agency must prove:

  1. They complied with any applicable licensing or statutory requirements governing employment agency operations, including 5 USCA § 7342;
  2. The company had a contractual obligation to pay the employment agency a placement fee;
  3. A worker was referred by the employment agency, and was hired by the company;
  4. The employment agency was the reason the worker found the job and the other company hired them; and
  5. The the employment agency was not paid their appropriate fee.

What Is Recoverable?

Generally speaking, in a successful lawsuit to recover an employment agency's placement fee, a recovery can consist of:

  • Compensatory damages, usually for the value of the fee under the contract;
  • Penalties; and/or
  • Attorney's fees.

Are There Any Defenses?

In a lawsuit against a company or worker by an employment agency to recovery a placement fee, several defenses exist. They include:

  • The employment agency failed to comply with the applicable licensing or statutory requirements governing employment agency operations,
  • No placement contract existed,
  • The Statute of Frauds bars the enforcement of the contract,
  • The worker was not hired in an employment relationship,
  • The employment agency did not cause the worker to be hired by the company, or
  • The employment agency materially breached the placement contract.

Should I Contact an Attorney?

If you are concerned about the recovery of an outstanding placement fee to an employment agency, it is highly recommended for you to contact a business attorney. A qualified business attorney will be able to adequately explain the issues and assist in or prevent against the collection of an employment agency's placement fee.