Licenses, contracts, and the law

No federal license, some state ones

Recruiting has no federal license. Nobody in Washington issues you permission to place candidates. The regulation that exists is state-level, and it matters in a specific set of states.

The scope is roughly half the states, and the details vary enough that one flat list would lie to you. Harbor Compliance, which tracks all fifty, counts 24 states that issue employment agency licenses, with New York, Illinois, Massachusetts, New Jersey, South Carolina, and West Virginia among them, and marks California, Florida, Indiana, and Pennsylvania as states where an employment agency license is not required on the state level (Harbor Compliance). Manatal's guide tells it from the other side: no single federal license exists, the rules are state-level and depend on the model, and among the states it names, Massachusetts and New Jersey register agencies, Illinois requires a license, and California asks for a surety bond instead (Manatal). A few concrete examples of how differently states treat this:

• New York licenses employment agencies through the state Department of Labor, with New York City running its own separate licensing (NY DOL)
• South Carolina requires a license from the Secretary of State, renewed every two years (SC SOS)
• Massachusetts draws its line at who pays: an agency that charges job applicants or workers is the kind that must be licensed, while a placement agency paid only by employers registers instead, with both credentials running a year, and this course's model sits on the registration side (Mass.gov)

Do not memorize that list. Do this instead: before your first fee agreement, search your own state's Department of Labor and Secretary of State sites for "employment agency license" and read what applies. Two structural points make the check worth your half hour.

First, the state that matters may be your client's, not yours. State rules are commonly triggered by placing people into jobs located in that state, so a solo recruiter in an unregulated state working for a Massachusetts employer can fall under Massachusetts rules. When you sign a client in a new state, spend ten minutes on that state's labor department site.

Second, some regimes care about the model. A handful of states distinguish permanent placement from temp staffing in their rules, and the obligations (bonding, fee caps for candidate-facing services, reporting) attach differently. This course's model, employer-paid permanent placement, is the lightly touched version nearly everywhere, but "nearly" is doing work in that sentence.

The three documents that are your legal life

Your fee agreement: this is the contract that makes you money and its importance outranks everything else in this lesson. Signed before you submit a single candidate, it fixes the fee percentage, the guarantee, the payment terms, and, critically, ownership: how long your submitted candidate stays "yours" if the client hires them a year later. Its clauses get walked line by line later in this course. Until you have your own lawyer-reviewed version, work from a reputable model agreement; the American Staffing Association has published a model recruiting agreement developed with the National Association of Personnel Services (ASA/NAPS model).

Your engagement with candidates: you hold people's career histories, salaries, and phone numbers. Basic professional hygiene: store them behind a password, share a resume with a client only after the candidate says yes, and delete what you no longer need. Beyond being decent, it is what corporate clients' procurement teams ask about, and careless resume blasting is the fastest way to lose a candidate's trust, since candidates notice when their information shows up places they never approved.

Your entity paperwork: the LLC from "The lean stack: opening for under $1,000," kept clean: business bank account only for business money, fee revenue invoiced under the agency name, a simple bookkeeping habit. None of this is recruiting-specific. All of it becomes specific the first time a fee dispute or a guarantee refund lands in the same account as your mortgage payment. For many readers this paperwork is also the moment the corporate exit stops being theoretical, and leaving corporate work honestly is the catalog's guide for that side of the move.

When to spend on a lawyer

One hour of an attorney's time, once, is the correct legal budget for a lean launch. Spend it reviewing your fee agreement template, not on entity formation trivia. You want the lawyer to confirm three things: the fee and guarantee clauses are enforceable in your state, the candidate-ownership window is explicit, and nothing in it makes you an employer of your placed candidates. That last one matters because misclassification is the expensive version of a paperwork error, and it is exactly the line between this course's model and the temp staffing model you are deliberately not running.

A lawyer is also the right call the first time a client sends you their contract instead of signing yours. Procurement-drafted agreements quietly swap in net-90 payment terms, uncapped guarantees, and unilateral termination clauses. Reading the delta against your own agreement is a fifteen-minute exercise once you have a baseline.

Everything operational about the fee agreement, including which clauses to trade and which to defend, comes later in this course. And before any of it, there is a decision with more impact on your first-year income than any legal clause: what corner of the labor market you work.