Do you know who your legal recruiter is?
As 2024 begins, so does the business of legal recruiting. And not surprisingly, we have already seen numerous transfers of law firm partners and groups. The market also anticipates several more major firm mergers this year. As we start this new year, I would like to broach the question, do you know who your legal recruiter is?
Top legal recruiters can make millions of dollars per year. Some of the larger recruiting firms are attached to massive corporations that produce billions, and yet no one is monitoring anyone. Transactions that include partners with portable business vary between tens of thousands to $2 million as a common cap for recruiting fees. These partners who manage active client books and their groups could be a value from hundreds of thousands to millions for recruiters. Associates and other attorneys can bring in tens of thousands in fees.
Firms are either targets or in business with recruiters. And in some cases, they are both, despite contractual obligations. Most agreements have a nonsolicitation period of at least six months. This is an agreement that the recruiter will not poach from their client they just made a placement with. However, some recruiting firms are finding creative ways to get around these promises.
Today, the legal recruiting industry has issues such as distinguishing a legit recruiter from a bot, working with recruiters who have an ethical compass, and those who do not. There are some recruiting firms that employ hundreds of legal recruiters, even more than there are Am Law firms, with a frenzy of conflicts to manage, all disguised by excellent PR teams.
As seen in court filings, some of these large legal recruiting firms poach candidates from their clients and work collegially with the other agencies under their corporate umbrellas to monetize sensitive information repeatedly.
The recruiting industry in the United Kingdom is highly regulated, with annual revenues around $140 billion. Various reports claim that the U.S. recruiting industry generates as much as $220 billion and has no organization overseeing much needed regulations.
Like financial advisers in a regulated industry, an attorney would be shown the door if they are found out looking at another firm without permission. This is why candidates’ identities are supposed to be protected. On the larger scale, when a firm becomes a candidate in a merger, the candidate firms can suffer if this information is exposed—just like leaked information on a publicly traded company. Merger information is safeguarded at corporations—just like it is at firms. If this information is unprotected, the value of a firm can be affected more so for the smaller acquired firm.
Bigger but not better
When recruiters are not following basic ethical rules and the law, it can disrupt the entire legal market. Many of the top recruiters in the world are courted by BigLaw, and when you have been around as long as I have, we choose who we work with and select carefully for many reasons. Firms should make similar careful choices and hesitate before they share too much of their confidential information. As a former financial adviser who had my entire life combed through by regulators, I can and will tell you who I am; will others?
Some larger recruiting firms admit that they are too large to manage all their client obligations, claiming that they are simply limited from pilfering from the office that they placed from in the standard six months hands-off period following the placement. I have only seen agreements that require the entire firm to be hands off for the specified time. Do you know a firm that is OK if a recruiter placed a partner in one city and then took a group from another city? Is there a firm that is OK if you placed an associate in one city but took a partner or group from another?
Firms that are vereins or have profit centers in each city still seek collective benefits, such as recruiting services. These firms often share administration and executive staff who manage these firm wide benefits. The firms that are vereins that I have agreements with also have firmwide nonsolicitation expectations for recruiters and do not allow office by office pillaging.
If the recruiting industry was regulated, we would see everyone’s skeletons—just like we do in other industries—like we do at firms. We would be able to track transactions and reduce litigation and disruption. Most large recruiting companies have mandatory arbitration clauses in their employment agreements with their recruiters, which shield the bad and sometimes arguably illegal behavior of the large search firms from the public through the confidential confines of binding arbitration.
Arbitration is nearly impossible to overturn on appeal and is a venue that frequently favors the larger company. These companies pay the arbitrator’s fee and choose the arbitrator, which enables these companies to shield and not be accountable for their illicit behavior.
President Joe Biden, through the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act in 2022, is taking action to eliminate mandatory arbitration agreements in employment agreements for the reasons stated. But it is not retroactive. Therefore, big recruiting firms are not in fear of their unethical behavior being exposed publicly and are not disincentivized to discontinue violating their contracts with firms.
While getting creative to avoid getting caught poaching from clients, some of these larger firms use pseudonyms to hide from obligations. Do you even know your recruiter? Is that something sophisticated firms are willing to deal with? Who is checking these recruiting firms?
The National Association of Legal Search Consultants is a social and networking club that hosts some of the top recruiters in the industry. This elite organization is an “honor system” ethics group that discusses trends in the industry and issues that plague legal recruiting. Unless you are a member, there is no authority to enforce the rules and guidelines that are required for members. These larger recruiting firms cannot belong to the NALSC because they will not abide by the basic ethics.
Legal recruiting is similar to trading assets only in an unregulated market. Legal recruiters have a free range to give ideas that benefit them the most. Some are conflicted out from certain firms or unable to bring certain firms to the table but are not required to disclose their conflicts. In many cases, especially from the larger recruiting firms, their clients are only getting a glimpse of the available market because of their many conflicts, and they do not even have to disclose this to their clients.
Some recruiters are obtaining private firm financial information, stashing it and using it to monetize later. This private information is being found on lists for sale and used in graphs for comparison. Here is an important news flash: Recruiters do not need firms’ delicate financial information to bring in that big candidate. You can do that part yourself and safeguard your sensitive information from future use by locking in a nondisclosure agreement before the candidate is informed. Attorneys can typically decipher the sensitive details, and if they need support, they can seek one of the many third-party consultants who do not have a million-dollar reason to show them a specific path that they benefit from.
In the firm marketplace, there are clients, partners and staff, entire communities and vendors. There are recruiters who are doing the right thing and then those who are not. The top recruiters are one degree from the most important people in the world. Who else thinks it is time there are some basic regulations or requirements in recruiting?
Kimberly Stockinger is the CEO of the Sweetbridge Group, a legal recruiting company, and has been a legal recruiter since 2010. Before this, she was a financial adviser and spent 15 years in the highly regulated financial industry in roles including leadership. Stockinger now works directly with law firm leaders on firm merger introductions and filling executive positions.
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