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Data Informatics, Inc. v. AmeriSOURCE Partners

338 N.J. Super. 61, 768 A.2d 210 (App. Div. 2001)

EMPLOYMENT AGENCIES—A consulting company that leases employees from an employment agency and then hires them out to its own customers must be licenced or registered, and failure to do so bars its right to collect fees for the use of those workers.

A computer programer entered into a one-year minimum employment contract with a computer consulting agency licensed and registered as an employment agency and placement firm. The programer signed a non-competition agreement prohibiting her concurrent or subsequent employment with any of the agency’s clients for a period of one year after leaving the agency’s employ. A computer company entered into agreement with the agency to supply the computer programer for programing services. In conjunction with that arrangement, the computer company and the agency entered into a “Master Service Contract.” That Master Service Contract stated that the contract personnel supplied by the agency would be employees of the agency, and not of the computer company. The computer company agreed not to solicit or enter into any agreement with any of the contract personnel supplied by the agency. The actual employee was assigned to work at a customer of the computer company. A time when came when the computer programer stopped submitting time sheets to the computer company, whereupon the computer company inquired of the agency about the status of the employee. Ultimately, the agency sent a letter to its customer telling the customer that the computer programer had been released from her obligations under the employment agreement and went to work for another company. A suit followed and the computer company claimed that both it and the agency were “engaged in the business of placement of contract personnel within other entities,” and that releasing by the agency of the computer programer from the computer consultant company’s employ was a breach on the agreement between the two companies. It also alleged that when the computer programer stopped submitting her time sheets,” she continued to work for the computer company’s customer and also that the company placed other employees at the outside location, in violation of the Master Service Contract. The agency alleged that the computer company was acting as an employment agency and was not licensed to do so. The lower court agreed and held that if the computer company was acting an employment agency or as a temporary help service, it was required to be licensed or registered. In response, the computer company claimed that at best it was a “temporary help service,” exempt from the requirements of the licensing act, and that even if it were an employment agency, it would not be precluded from pursuing its contract or tort claims. Further, it argued, even if it were precluded, the lower court had abused its discretion by failing to take “equitable considerations,” into account. New Jersey law requires private agencies that provide employment services to be licensed and registered. The law applies to “any person engaging in any of the activities regulated” by the Act, including persons whose residence or principal place of business is located outside of New Jersey. Essentially, employment agencies must be licensed, while temporary help service firms must be registered and the relevant Act requires licensing or registration as a condition precedent to an action for fees. The Court found that the “Legislature’s primary purpose in adopting the ... Act was to regulate the conduct of all employment agencies providing services to New Jersey employees and employers.” Under the Act, an employment agency is not an “employer,” except of its own employment agents. Clearly, the ultimate user of the computer programer’s services was that “employer.” The computer company received a “fee, charge, or commission” by direct payment of that portion of the computer programer’s wages from its customer for its service of procuring and providing the computer programer to its customer. Consequently, the computer company’s activities met the plain language definition of an “employment agency.” Further, it arranged the interview with the ultimate user of the computer programer’s services, it supplied the computer programer to its customer, and was compensated based on percentage of the wages paid. Consequently, the Act prohibited the computer company from collecting any fee and therefore it could not assert a damage claim against the employment agency that actually furnished the computer programer pursuant to the Master Service Contract. Lastly, the Court found the computer company’s alternative argument that it was not precluded from recovery on its tort and contract claims to be “disingenuous and contrary to the regulatory scheme designed to preclude unlicensed agencies or services from benefitting from unlawful conduct.”

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