Why recruiters need professional indemnity
Any organisation that offers their knowledge, skills or advice as a service to clients opens the doors for complaints and compensation claims. If your client believes that the recruitment services you provided have led to financial loss or reputational damage, they may choose to take legal action against your agency. Despite your best intentions and all that time spent working to get a clear and complete brief from your client, mistakes can still happen.
Professional Indemnity insurance is a very common insurance for recruitment agencies. By your very nature, you are skilled and professional; your clients engage you to source their talent because of your experience and ability. If you fail to live up to what is expected of you or you make a mistake that is negligent, then you may be liable for the financial cost of any damage done. One of the best ways to understand an insurance in the context of your industry is to understand the common claims. There are three claims that highlight three risk areas that Professional Indemnity can protect:
The Bad Candidate
This situation is common with the placement of temporary workers, where it may be part of your recruitment agency’s responsibilities to vet the candidate before placing them. The ‘Bad Candidate’ scenario involves you finding a candidate but being negligent in your vetting of them and therefore placing someone who is unsuitable for the role. Any subsequent damages that the candidate causes due to your negligence in vetting them may come back to haunt you! An example of this would be failing to complete criminal record checks that were required by the client. When the candidate is caught stealing from a warehouse, they are found to have previous convictions that would have stopped the client accepting the candidate in the first place. You may now be liable for the losses incurred by the client due to your failure to vet the candidate.
The False Candidate
This is another example that involves vetting. If you are asked to source a candidate with particular skills, experience or other attribute and you do not confirm the validity of the candidate whom you put forward, you may be liable for any damages that arise due to their unsuitability for the role. For example, you’re asked to source a candidate with a minimum of 3 Bs at A-Level and an electrician’s certification – and you are required to verify their qualifications – and you have the perfect person on your books. You present the candidate to the client, who is glad to see 3 Bs and an electrician’s certification on their CV and so accepts your candidate. However, when your candidate sets a house alight with faulty wiring and is found to have no A-Levels and no electrician’s certificate, you may be liable as you were required to verify their suitability for the role.
Recruitment consultants are handling data every moment of every day; in the digital world that we live in, data management is a key skill for any professional. If you are not competent in the control and processing of data that you hold on candidates or clients and this leads to a loss, you may be liable. An example of this sort of claim is if you send a candidate’s CV to their current employer, thus indicating that they are looking to move on and therefore limit their earnings for the next year, you may be liable. Similarly, on the client-side, if you release a client briefing that contains confidential or proprietary information that then leads to loss, again, you may be liable. Professional Indemnity insurance isn’t a cover-all insurance; there are limits and exclusions that vary depending on the policy, insurer and your circumstances. However, this insurance is becoming more and more necessary for all professionals and, in particular, recruitment agencies.