The New Jersey Problem

In our September issue, we chronicled the fact that in order to collect a fee from a New Jersey company, you must be licensed (if you are in New Jersey) and you must be registered with the state (if you operate outside the state of New Jersey. Many have asked if other states have this restriction so we asked Robert Style, the legal counsel for the National Association of Personnel Services. His comments follow:”I am asked many times by clients who have run afoul of New Jersey’s requirement that out-of-state placement firms register with the State in order to do business with New Jersey employers, whether other state laws require such registration. New Jersey is the only state whose Employment Agency Act specifically requires the registration of out-of-state firms who make placements with New Jersey employers, even though those firms never physically enter the State.In the late 70s through the 80s, there were a number of cases in which employers facing suits for collection of a fee from an out-of-state placement firm defended on the grounds that the placement firm did not have a license in the state where the employer was located. For the most part, these defenses were unsuccessful.In Keeler Brass vs. Management Recruiters of Fayetteville, a Michigan court refused to require a North Carolina placement firm to obtain a Michigan license before collecting a fee from a Michigan employer. Similarly, in Schroeder vs. Ajax Corporation, an Illinois placement firm which made placements with employers in Wisconsin was not required to be licensed under the Wisconsin Private Employment Agency Act. In S.A.S. Personnel Consultants vs. Pat-Pan, a Maryland court held that a District of Columbia placement firm could make placements with Maryland employers without obtaining a license in Maryland.Ironically, even the New Jersey law was held at one time not to require licensing of out-of-state placement firms. In Robert Winzinger, Inc. vs. Management Recruiters of Bucks County, Inc., the Federal Third Circuit Court of Appeals held that a Pennsylvania placement firm could make placements with New Jersey employers without obtaining a New Jersey license. However, a subsequent New Jersey Supreme Court decision, and amendments to the New Jersey Private Employment Agency Law to specifically encompass the activities of out-of-state firms, have restored the requirement that out-of-state firms must be registered in New Jersey to collect a fee from New Jersey employers.Only the South Dakota Supreme Court, in Dunhill of Fargo vs. Lehman Manufacturing Company, required out-of-state placement firms to be licensed prior to making placements with South Dakota employers. Even that court decision has been rendered moot, however, by the subsequent repeal of the South Dakota licensing law.The question of the need for multi-state licenses is becoming increasingly moot because of the fact that fewer and fewer states require licensing for any placement firms who only charge employers. Currently, only the District of Columbia, Hawaii, Indiana, Nevada, New York (if you make placements for salaries of less than $20,000 per year), North Dakota, South Carolina, Utah, West Virginia, and Wyoming require licensing of employer fee-paid placement firms, even those located within that state. Additionally, Massachusetts, Minnesota, New Jersey, North Carolina, and Wisconsin require registration. However, none of these states other than New Jersey specifically purport to restrict the activities of firms who do not establish a physical presence within that state.With the notable exception of New Jersey, and barring a dramatic change in the direction of court decisions, there would appear to be no reason for a recruiter who does not establish a physical presence in a state other than its home state, to register or become licensed in any other state.”