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How to find the right legal partner for your staffing or recruitment firm

As a business owner, it is common practice to eventually need to seek outside legal counsel or hire a law firm to represent your organization. The staffing and recruitment industry is no different. In fact, I might argue based on my nearly 30 years in the industry, that finding the right legal fit for your business is even more important given all the nuances with regards to employment law…after all, we are in the ‘people’ business. After a couple of recent experiences with my clients, I thought it would be timely to offer some advice to avoid common pitfalls when hiring legal representation.

Let’s start with a few examples where my clients were given legal advice from attorneys that did not have experience in the staffing industry.

Case Study #1

An owner of a staffing business had a solid B player that took a job with a competitor. The business owner’s attorney advised to take legal action against the employee and the competitor. I suggested going to the competitor and asking for a fee to buyout the non-compete. The non-solicitation could remain but make some money on a buyout. The pursuant owner of the staffing business spent more than $100k and lost on all counts. I don’t know if this is true, but I heard that 9 out 10 non-compete litigations go in favor of the employee. Very difficult to stop someone from making a living as a recruiter or sales executive.

Case Study #2

An owner of a staffing firm generating $8 million in annual revenue was selling the firm. The owner had a very solid offer from a very ethical staffing business that was north of $100 million in annual revenue. The structure of the deal was 70% cash at closing and 30% in an earnout. The person that was selling had an attorney that had never assisted in the sale of a staffing firm. The attorney was adamant about a “personal guarantee” from the owner of the buying firm, a staffing firm north of $100 million in annual revenue, let me remind you. There are so many other ways to guarantee such a transaction. The deal went sideways. (and then what)? Perhaps we come up with it went sideways and the buyers pulled their offer?

Paying for outside support is not usually the top choice for any business owner, however, the cost avoidance when hiring an expert, is worth it in the long run and can actually save you money in many cases. I have seen many smaller firms where they will have their CFO or HR resource review legal matters, however you have to ask yourself depending on the matter, is the risk worth it? When matters get more serious and with ever changing laws in the employment world, it is smart to engage legal support. When hiring an attorney or contracting for legal services here are a few things to consider in order to find the right fit for your business.

  • Find an attorney and/or law firm that has staffing industry experience. An attorney and/or law firm that has staffing industry experience is extremely valuable. This is likely the most important criteria to use when choosing an attorney. Businesspeople not from the staffing industry look at the staffing industry as a “simple” business. Nothing could be farther from the truth. There are contracts and liabilities with buyers of staffing services. Be aware of the liability buyers attempt to push down to staffing firms. There are contracts between contractors and temporary employees as well as many legal requirements that need to be honored. Then there are internal employees with non-competes and non-solicitation agreements and compensation programs for senior level employees.
  • Trust your intuition. Years ago, a client of mine taught me that you must sense that your attorney is acting in your best interest. My client told me that it is not anything logical, but rather it was more of an intuitive sense otherwise known as gut instinct. He said, “The first time you start thinking your attorney is padding the hours, then that is a sign that something is not right.” Your attorney and/or law firm needs to be a trusted advisor in which you have total and complete trust.
  • One size does not fit all. Attorneys will specialize in areas of expertise such as workers compensation, mergers and acquisitions, human resources, general business, property, etc. Many small staffing firms will hire an attorney that is a “friend of a friend”. This is potentially a big mistake. Even a small staffing firm will likely need access to a handful of attorneys that specialize in various areas of specialty. One size does not fit all when it comes to legal advice. And reliably, high quality and professional legal advice is worth its weight in gold.
  • The American Staffing Association (ASA) has your back. For all those that own and operate staffing firms in the United States, a quick question or inquiry to the attorneys at ASA can go a long way in getting proper guidance. I am a long-time member of the ASA and the attorneys on their staff have provided tons of high-quality advice to the Visus Group clients over the years. In addition, when I reach out to the ASA attorneys, I consistently get a professional and prompt response. Don’t forget the great resources available to you at your fingertips.

At the Visus Group we have a few alliance relationships with attorneys that have multiple years of staffing industry experience. If this is an area of concern for you or your staffing firm, feel free to reach out to us. We work with many staffing firms through our RoundTable programs who spend time addressing and discussing legal issues they are facing as well as use our program to share their networks with our members.

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