A conversion clause that quietly grows more expensive as the relationship becomes more valuable

Take a two seat agreement signed with a VA agency in the spring. Two years later, bringing one of them in house directly triggers an exit cost of $9,400, right there in the document, plainly read at signing. The loss lives in how it's read. The clause: direct engagement of any personnel introduced by the agency, within 12 months of the end of the engagement, triggers a conversion fee equal to six months of the then-current bill rate. Say the bill rate is $1,565 per seat per month after two annual increases. Six months comes to $9,390. At signing, if the rate was $1,290, the clause might get priced at $7,740 in the buyer's head and judged tolerable. What's easy to miss is that the fee floats with the bill rate, so the agency's annual increase raises both the running cost and the exit cost at the same time. The clause gets more expensive precisely as the relationship gets more valuable. Two more years and it would run north of $11k. The second trap is the 12 month tail after the engagement ends. It's easy to assume, without basis, that a clean termination followed by a wait lapses the fee quickly. Twelve months of paying nothing while a strong hire waits is not a real option, so the tail effectively means there is no path to hiring the person except paying. Third, and this one is on the drafting rather than the reader: personnel introduced by the agency is often broader than the people who actually worked the account. It can cover candidates interviewed and rejected. Whether that would hold up, and how a non-solicitation term is enforced, varies by state and by how it's written, so that's a question for an attorney in the relevant state rather than a general answer. What it can cost: the fee itself plus weeks of indecision, during which a strong candidate takes a competing offer and forces a faster decision than planned. What holds up better: negotiate the conversion fee as a fixed dollar amount at signing rather than a multiple of a rate the counterparty controls. Ask for a step down, something like six months of billing in year one, three in year two, zero after that, which some agencies will do if asked before signing and none will do after. And read the fee clause against the escalation clause together, because separately they can both look fine.