Linwood Consultants, Ltd. v. Sharon Frank Associates, Inc.

• Court: New York City Court
• Writing for the Court: MICHAEL D. STALLMAN
• Citation: Linwood Consultants, Ltd. v. Sharon Frank Associates, Inc., 614 N.Y.S.2d 863, 161 Misc.2d 546 (N.Y. City Ct. 1994)
• Decision Date: 19 May 1994
• Parties: LINWOOD CONSULTANTS, LTD., Plaintiff, v. SHARON FRANK ASSOCIATES, INC., Defendant.

Page 863

614 N.Y.S.2d 863

161 Misc.2d 546

LINWOOD CONSULTANTS, LTD., Plaintiff, v. SHARON FRANK ASSOCIATES, INC., Defendant.

Civil Court of the City of New York,

New York County, Special Term,

Part I.

May 19, 1994.

Selig and Selig, P.C., North Bellmore, for plaintiff.

Milton Ellerin, New York City, for defendant.

MICHAEL D. STALLMAN, Judge:

In this contract action for an employment agency fee, defendant moves for summary judgment. Defendant's assertion of illegality compels analysis of recent amendments to the statutory scheme which regulates employment agencies. General Business L., Art. 11, § 170 et seq. Specifically, may an employer avoid paying an agency commission solely because the agency was not licensed?

Plaintiff, an "employer fee paid" employment agency, derives its income exclusively from the employers to whom plaintiff refers prospective employees. Defendant hired a receptionist through plaintiff. Plaintiff and defendant agree that they contracted orally, and that defendant agreed to pay plaintiff a fee, but they dispute the terms and conditions of the contract, including, inter alia, the percentage of plaintiff's commission and conditions precedent to entitlement. Plaintiff was not licensed at the time of the transaction. No contract term was reduced to a signed writing.

Defendant contends that the contract is void because plaintiff was not licensed as an employment agency. The General Business Law and the Rules of the City of New York generally require that employment agencies located in New York City be licensed by the Department of Consumer Affairs. GBL § 172; 6 RCNY Chapter 1 and Chapter 5, Subchapter M. However, GBL Sections 171(2)(e)(4) and 191, as amended in 1988, exempted from licensing, inter alia, "employer fee paid" employment agencies that place "Class B" employees for hire. L.1988, c. 617 §§ 2 and 9. Under GBL Section 191, an employer fee paid employment agency is defined as:

"... any person who on behalf of employers procures or attempts to procure employees for 'Class B' employment (as defined in section one hundred eighty-five of this article) and who in no instance charges a fee directly, or indirectly, to persons seeking such employment even though a fee may be charged to employers seeking the services of such employees, and who engages in no activity constituting the operation of an employment agency as defined in section one hundred seventy-one of this chapter and who in no instance enters into any arrangement through which the employer fee paid employment agency receives remuneration or any other thing of value from any person, firm or corporation which collects fees from applicants." GBL § 191 (as amended, L.1988, c. 617, § 9).

Under General Business Law Section 185(4), "Class B" employees include those engaged in "commercial, clerical, executive, administrative and professional employment, all employment outside the continental United States, and all other employment not included in classes "A", "A1", "C" and "D"." Plaintiff has demonstrated as a matter of law, that it is an employer fee paid agency as defined by law. It presents uncontroverted evidence that its income is derived exclusively from employers for placing "Class B" employees like the receptionist here. Plaintiff's undisputed evidence indicates that it does not charge employees for their placement.

Defendant relies on two cases decided before the 1988 statutory amendments. Friedkin v. Harry Walker, Inc., 90 Misc.2d 680, 395 N.Y.S.2d 611 (1977); Dorrell Assoc. v. Urb Products Corp., 67 Misc.2d 716, 324 N.Y.S.2d 507 (1971). Both cases are legally and factually inapposite to the situation at bar. The manifest purpose of GBL Section 191, as amended in 1988, was to exclude an employer fee paid employment agency like plaintiff from the GBL Section 185 licensing requirements. See, Sponsor's Memorandum (Senator L. Paul Kehoe) 1988 N.Y.Legis.Ann. 246, 247. The defendant in Friedkin was a theatrical booking agent not exempt from the statutory licensing requirement. 90 Misc.2d at 682, 395 N.Y.S.2d 611. Dorrell concerned the placement of a high level manager, not a "Class B" employee like the receptionist placed in the instant case. Unlike plaintiff here, who did not charge a fee to the employee whom it placed with defendant, the agency in Dorrell charged the employee a fee for its services. 67 Misc.2d at 718, 324 N.Y.S.2d 507.

The licensing requirement and other statutory restrictions on employment agencies were intended to protect...