Executive search engagement letter: retained fee, guarantee and off-limits terms

A retained search is one where the client pays the firm in installments to run an exclusive search, whether or not the role is filled. By contrast, a contingent search pays only if the client hires a candidate the firm introduced. The letter for each looks different, so say in the first clause which one this is.

This template is for a retained search, one role per letter. The fee is usually a share of the hire’s first-year cash pay, or a fixed amount, with a stated minimum. Define the base, for example salary plus target bonus, so nobody argues later about whether a signing bonus counts.

Tie each installment to a moment both sides can see. A calendar date alone invites a dispute when the search stalls. A slate delivered, or an offer accepted, does not.

A replacement guarantee is the firm’s promise to run a new search for no further fee if the hire leaves within a set period. State the period and what voids it, such as a layoff, a change in the role or a restructuring. Say that the guarantee needs the client to have paid every installment on time.

The off-limits clause is the client’s protection. The firm agrees not to recruit the client’s employees for a set period after the search ends. Define who counts: all employees, or only those at a certain level.

Candidate ownership protects the firm. If the client hires someone the firm presented, for any role, within a set period after presentation, the fee is owed. Keep the list of presented candidates in writing, dated, so the clause can be checked.

Federal law sets the steps for background reports. A consumer report is a background report on a person prepared by a consumer reporting company, used here to screen a candidate. Before the report is obtained, the candidate must get a clear written disclosure, in a document consisting only of that disclosure, and must authorize it in writing (15 U.S.C. 1681b, Permissible purposes of consumer reports). Do not bury the consent in a candidate application: the EEOC and FTC guidance says the notice must be in a stand-alone format, not in an employment application (EEOC and FTC: Background checks, what employers need to know). Apply the same checks to every finalist for the role, since checking only some candidates can be evidence of discrimination (EEOC and FTC: Background checks, what employers need to know).

Adverse action belongs to the employer. Before turning down a candidate based on the report, the employer must give the candidate a copy of it and a written description of their rights (15 U.S.C. 1681b, Permissible purposes of consumer reports). Write that the client carries out these steps unless the firm has agreed to do them.

Search firms are covered by job discrimination law too. It is illegal for an employer or an employment agency to take race, color, religion, sex, national origin, age (40 or older), disability or genetic information into account in job referrals (EEOC: Prohibited employment policies and practices). The same law forbids recruiting in a way that discriminates on those grounds (EEOC: Prohibited employment policies and practices). The letter should commit both sides to job-related criteria.

Each finalist produces a small file of documents. List them in the letter so the client knows what it will receive and when. Keep pay history requests within what your state allows, since some states limit asking about it. Send the file through a secure upload, not as email attachments, because it holds identity and background data. Then delete what the client no longer needs when the search closes.

• Résumé and the firm’s candidate report.
• Signed background check disclosure and authorization, as a stand-alone form.
• Reference consent naming who may be contacted.
• Proof of education or licenses claimed, such as a diploma or professional license.
• Offer letter and the signed acceptance, which triggers the final installment.

• 15 U.S.C. 1681b, Permissible purposes of consumer reports: A consumer report for employment needs a stand-alone written disclosure and the consumer’s written authorization first; before adverse action, the person gives a copy and a summary of rights.
• EEOC: Prohibited employment policies and practices: Employers and employment agencies may not consider protected characteristics, including age (40 or older), in job referrals or recruit in a discriminatory way.
• EEOC and FTC: Background checks, what employers need to know: The background check notice must be in a stand-alone format, not in an employment application, and checks must be applied equally to everyone.