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Gari v. Scosys, Inc.

A-1285-03T5 (N.J. Super. App. Div. 2004) (Unpublished)

EMPLOYMENT AGENCIES; CONTRACTS—The choice of law provision in an employments agency’s agreement should be given relatively little weight, if any, when determining in which state the services are actually being rendered.

Two companies entered into an agreement where one would provide the other with the services of employees, and the company receiving the services would make those employees available to work for its own client companies. The supplying company placed one such specialist with the receiving company, who in turn placed him with one of its client companies. The supplying company was a New York corporation; the receiving company was a Delaware corporation with offices in New Jersey; the employee lived in New York; and the receiving company’s client was a New York corporation. The client company then paid the receiving company a commission. The receiving company allegedly never paid the supplying company for the original placement. Thus, the supplying company sued the receiving company alleging that it had breached their agreement by failing to pay its commission.

The receiving company moved for summary judgment and contended that the claim against it was barred by the Private Employment Agency Act (Act). That Act provides that one shall not bring an action in New Jersey to collect for the performance of any employment agency activity regulated by the Act without alleging and proving licensure or registration at the time the alleged cause of action arose. The lower court agreed with the receiving company and dismissed the case. An essential issue was the weight given to the choice of law provision in the agreement. The lower court concluded that there was a sufficient nexus between the transaction and New Jersey to warrant application of the Act’s bar to suit. It held that the choice of law provision, together with the facts, barred the suit because of the Act.

The Appellate Division disagreed with the lower court’s conclusion, believing the lower court gave improper weight to the choice of law clause. The statutory bar only applies if the claim is one for performance of any service for which licensure or registration was required by the Act. The contractual choice of law provision added nothing relevant to the analysis. If an out-of-state employment agency was denied a remedy under the Act, it would be by virtue of the application of New Jersey law, regardless of whether the parties had entered into a choice of law clause in a particular transaction.

For that reason, the Court reversed the lower court’s decision, without prejudice, holding that the lower court needed to determine whether, under the law, there was a sufficient basis in the record for determining whether the services underlying the action were those for which licensure or registration was required by the statute, regardless of the choice of law provision.

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