Labor and Employment

NEW JERSEY EMPLOYMENT AGENCIES MUST BE LICENSED WITH THE STATE

By: Patrick T. Collins, M. Karen Thompson and Annmarie Simeone


Under a recent Appellate Division decision, if an employment agency is not licensed, registered and operating under applicable state statutes and regulations, it cannot maintain a lawsuit arising out of its business operations. In Data Informatics, Inc. v. Amerisource Partners, et al., the court barred an unlicensed and unregistered employment agency from pursuing both contract and tort claims arising out of its operations.

Data Informatics sued Amerisource when it placed Data Informatics’ contract employee directly with Data Informatics’ client, which allegedly violated agreements in place between them. Amerisource asserted that because Data Informatics had not complied with the Private Employment Agency Act, N.J.S.A. 34:8-43 to 66 (the "Act"), it was barred from proceeding on its claims. The courts agreed, thereby precluding Data Informatics’ lawsuit.

The Act and the accompanying regulations establish a comprehensive licensing scheme with which employment agencies must comply. An "employment agency" is broadly defined as "any person who, for a fee, charge or commission": (1) procures or obtains, or offers, promises or attempts to procure, obtain, or assist in procuring or obtaining employment for a job seeker or employer; or (2) supplies job seekers to employers seeking employees on a part-time or temporary assignment basis who has not filed notification with the Attorney General pursuant to the provisions of [N.J.S.A. 56:8-1.1]; or (3) acts as a placement firm . . . .

The primary statutory requirement is that, in order to open and conduct an employment agency, the owner must obtain a license from the Director of the State Division of Consumer Affairs. Among other things, the applicant must fully identify the business name, address and officers, identify the type of services to be provided to the public, submit affidavits of two New Jersey citizens who have known the applicant for at least five years and can attest to the applicant’s good moral character, and submit a disclosure statement setting forth whether the applicant has ever been convicted of a crime and if so, the nature of that crime. The applicant must also pass a written examination demonstrating knowledge of the statutes and regulations governing employment agencies, as well as knowledge of and experience in the fields of employment specified on the application. Once the written test is passed, the applicant must deposit a $10,000 bond with the State. The statutes and regulations also establish various requirements for fee schedules, record-keeping and posting notices and licenses.

The penalties for non-compliance can be sweeping. From a litigation perspective, an unlicensed and unregistered agency is precluded from litigating otherwise meritorious claims. From a business perspective, substantial monetary penalties can be imposed for each violation, such as a penalty of up to $2,000 for the first offense and up to $5,000 for any subsequent offense. In addition, the State can obtain a court order to prohibit an agency from continuing the practices in violation of the statutory scheme. If obtained and ultimately violated by the agency, another order can be entered which would, among other things, direct the agency to (a) cease and desist from such activities; (b) restore to any person any monies or property which they have paid as a result of these violations; and (c) pay for attorney’s fees and costs of investigation. If the State proves that a person or agency has violated an order requiring them to cease and desist from such improper activities, civil penalties ranging from $1,000 to $25,000 can be imposed.

October 2001