What is a Right to Represent Agreement?
A Right to Represent Agreement is a mutual understanding between two parties regarding the services to be provided and the agreed upon compensation for said services, usually in relation to a recruiting professional who is attempting to find an employed position for a job seeker. A Right to Represent Agreement is used primarily by recruiting professionals in the staffing / employment industry, as well as by employers who recruit and hire directly.
Within the hiring context, the typical situation involves a recruiter or talent agent presenting one of its candidates to an employer for consideration . If the candidate is hired, the employer will pay to recruiter a placement fee, which is usually based on a percentage of the candidate’s first-year base compensation. The traditional R2R Agreement outlines the fee to be paid by the employer in the event the candidate is hired. A well-written R2R Agreement will also offer protections for both the candidate and the recruiter to account for the varying circumstances that can occur during the hiring process.
It is important to note that some professional services agreements, such as retainer agreements for legal services, are also called Right to Represent Agreements.
Key Components of a Right to Represent Agreement
A well-drafted Right to Represent Agreement should include the following components:
Parties to the agreement. It should clearly identify all parties prior to commencing negotiations.
Geography. Without restricting any future business or opportunity, the agreement should limit the geography or "territory" (within the United States or outside the United States) where the search is to be focused or alluded to.
Scope. The agreement should be limited by characteristics of the business that will be discussed or targeted such as size, type, industry and any other relevant restrictions.
Term. The agreement should define the appropriate terms of the representation. A one-year term is common when accompanied by a continuous, non-duplicative term that runs with the van.
Consent. The agreement should specifically state that no direct or indirect relationship or agency by the principal is created without consent in the future. This is best achieved by discreetly inserting the phrase "similar to the terms hereof" into the body of the agreement. For example:
"Should the Company accept the introduction (the "Introduction") or any other business referred by the Consultant, the Company agrees to compensate the Consultant on the same terms and conditions as set forth hereinwith, similar to the terms hereof."
It is the intention of the parties that the compensation provided hereunder shall be provided to the Consultant for any business derived from the Introduction or any other business referred by the Consultant.
Advantages of a Right to Represent Agreement
The advantages of a right to represent agreement are clear for both the retained or potential representative and for the client. A potential representative can avoid lack of clarity or misunderstandings that lead to a lack of confidence from the client. Like a good prenuptial agreement, the right to represent agreement can give rise to confidence which leads to a much better working relationship. When a representative receives a written right to represent from a prospective client, he or she can concentrate resources and time on the opportunity, giving a better chance for success. For the client who has signed the right to represent, there is no doubt on who the representative is. In addition, since the proposed opportunity has been rendered exclusive to the representative, it is likely that the representative will devote more time to the opportunity than would have been devoted in the absence of a right to represent, which may lead directly to a better outcome for the client.
Common Use Cases for Right to Represent Agreements
Right to Represent Agreements are commonly used in many different situations. One commonly used context is in recruitment for sales positions. Many staffing and employment agencies require candidates for a job to submit to a Right to Represent Agreement before they will actively pursue the position on behalf of the candidate. Likewise, many employers require potential employees to submit to a Right to Represent Agreement before they will pursue a candidate for the position open within their company.
Another area where Right to Represent Agreements are often used is in real estate transactions. Many real estate agents and brokers use a Right to Represent Agreement with their clients for several reasons. One is to clarify the relationship between the principal and the agent or broker.
A Right to Represent Agreement is commonly used when a seller is accepting multiple offers for the sale of real estate. Many sellers will seek to have a Right to Represent Agreement with all interested parties. This way if the seller gets a higher offer for the property, but is not able to close for various reasons, the seller can go back to the other interested parties seeking an offer now that the house is no longer under contract with another buyer.
There are countless uses for a Right to Represent Agreement; however, each use must be considered on a case by case basis.
Legal Implications of Right to Represent Agreements
In considering the contracting parties, if the client then discharges the broker without cause to avoid paying a fee, in Wyoming the broker’s best remedy is usually to sue the client. The broker loses compensation under a right to represent agreement in the event the starting date is before the effective date of the agreement, unless it is otherwise made effective by contract revisions that apply to it. If a broker has several right to represent agreements with the same client, request that the broker recommends a legal review of them by legal counsel to ensure their enforceability on the basis of how they were worded and the purposes for which they were drafted.
Wyoming will not enforce a right to represent agreement that bears any conditions, such as exclusive representation, that are not consistent with its statute governing real estate licensing and agency. The broker contractor should only write a right to represent agreement that is enforceable in Wyoming, which is generally straightforward, because contracting out of its requirements has scant chance of enforcement .
In addition to enforcing the terms of the contract, breaches of right to represent agreements are generally subject to the Wyoming Real Estate License Act, which imposes a fiduciary duty on brokers, and the Wyoming Consumer Protection Act, Wyo. Stat. ยง40-12-101 et seq., which requires contracts to be in a certain format.
In Wyoming a right to represent agreement is typically drafted to survive its termination, but there is no indication such agreements are typically enforceable under Idaho law, under which finalized sale negotiations commenced by an agent may or may not survive the representation agreement, depending on how they are worded.
The applicability of Canadian law will depend on the wording of a right to represent agreement, which, in the absence of specific language, is likely to be enforced according to the Wyoming state law that was apparently intended to be incorporated into it. If in international commercial setting, specific provisions of the foreign jurisdiction may be enforceable according to the contract, while others arguably would not.
How to Create a Right to Represent Agreement
To successfully represent a client, the right agreement is vital. The most essential and significant document in a recruiter’s arsenal is the Right to Represent Agreement (RRA) signed by the candidate. Without it, you are committing career suicide. So how do you draft this critical document?
Confidentiality and Timing
First, include a confidentiality clause that clearly states the RRA will not be in effect until the information exchanged is considered to be confidential and exclusive.
Then, make sure to include an expiration date for the offer, including when it must be signed. There should also be a provision that states if a candidate has received an offer from another source, the candidate has 24 hours to obtain permission for the offer to be submitted to your client company; or he/she must remove him/herself from consideration (this is called a "24-Hour Rule").
With regard to the actual offer being made to the candidate by the client company, a right to represent agreement should state the location of the job, the job title, and the compensation. It should also require the candidate to inform you immediately of any offer in writing, and when the offer letter is delivered. If he or she does not inform you, it is a breach of contract as you would have the right to represent the candidate to your client company.
Add Value to the Company; Share Your Insights
Here, assessments, interviews and professional opinions are important. In a detailed cover letter, outline three to four items the client company/contractor are unaware of. Such information will demonstrate that you do have value to add to the company.
By following the steps below, an RRA should be regarded as a win-win proposition for everyone concerned:
If the client company is receiving information about a candidate and can act quickly, that candidate can be hired faster than if the client company has to sift through a pool of unrepresented candidates.
What to Avoid
RRAs cannot be written like contracts for attorneys because they are not formalized or regulated contracts. It is easy to get carried away in drafting them and make them too complex. Since we are recruiters and not attorneys, we want our RRAs to be easily digestible and easy to understand and digest.
For example, it is very common to see a non-compete clause in a legal contract. While the intention is certainly good here to protect the agency, non-competes are far too specific and can easily be ignored if a candidate does not find a job with the client company within the specified time period. Such candidates are likely to go around, or just ignore, the non-compete clause.
A clause like this may be legal if you actually hire the candidate, but for recruiters it is a different. Candidates are both W-2 and 1099 workers who work on a contract basis. They are not employees, so including a non-compete clause in the RRA would not be enforceable against the candidate by the Staffing Agency.
No matter how you cut it, an RRA is an essential piece of the puzzle when it comes to representing clients and candidates.
Frequently Asked Questions on Right to Represent Agreements
To answer some of the most commonly asked questions about Right to Represent agreements:
How long does a Right to Represent agreement last?
The length of a Right to Represent agreement ranges. Typically, it lasts from 30 days to one year; however, contracts for a longer duration are not unusual. A longer agreement may prove particularly beneficial when you are starting on a new contract and desire to be at the front of the staffing firm’s placement queue.
Why do staffing agencies insist on using Right to Represent agreements?
Staffing agencies insist on using Right to Represent agreements for various reasons. For some, it acts as a protection, as clients and talent often attempt to deal with each other before, during and after the contract. If this type of issue arises, the Right to Represent agreement provides that you will go through the staffing firm and not attempt to contact the client directly. Attempting to contact the client directly in contravention of a Right to Represent agreement would very likely be considered a breach of contract, which can be written into the agreement with the staffing agency.
If I already have a relationship with the client, why do I have to sign a Right to Represent agreement?
It is for the protection of the staffing agency. Offering your services directly, not having a Right to Represent agreement in place, and being billed to your client under another party’s staffing agency will invariably create confusion. Specifically , if the staffing firm does not have a Right to Represent agreement in place and you offer your services directly, which are accepted, you will become a competitor instead of a supplier. In that situation, the staffing agency may not have your best interest in mind.
How do I know which staffing agency has a valid Right to Represent agreement with a client?
Most staffing agencies are required to enter into a contract directly with the client. Therefore, unless you are working directly with the client, the staffing agency should have a signed agreement in place.
What if I sign the Right to Represent agreement and then decide not to work with that agency?
Each agency has its own policy on this matter. Some require a thirty-day waiting period in which you cannot accept an offer, whereas others will allow you to take the first offer that comes. This is a matter you should discuss with your staffing agency directly.
How do I avoid duplication with multiple staffing agencies?
Your best method for avoiding duplication is to provide your staffing agencies with each other’s contact information and/or to communicate with your staffing agency. Some staffing agencies will share their client list with you in order to assist with this process.
What happens if I think that someone else is violating a Right to Represent agreement?
Notify the staffing agency immediately. Most staffing agencies will investigate these matters and take corrective actions to ensure that you are not excluded from an opportunity.