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Peri Software Solutions, Inc. v. Aggarwal


May 1, 2007


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-4785-05.

Per curiam.


Argued Telephonically April 19, 2007

Before Judges S.L. Reisner, Seltzer and C.L. Miniman.

Plaintiff, Peri Software Solutions, Inc., appeals from an August 4, 2006, summary judgment dismissing its complaint seeking damages for the breach of contracts relating to the placement of defendant, Saurabh Aggarwal, with plaintiff's client, Morgan Stanley. We affirm.

The facts presented to the motion judge were uncontested. The judge described plaintiff as engaged in the business of "supplying [information technology] professionals on a temporary, but permanent basis to various other business clients." Defendant was employed by plaintiff which had facilitated his immigration to the United States on August 17, 2004. Their relationship was governed by two documents. The first, executed on June 30, 2004, was designated "TRAINEE-EMPLOYEE AGREEMENT."

The Trainee-Employment Agreement began on June 30, 2004, and expired "after one year of accumulated project time with company from Trainees completion of training." The document recited defendant's agreement "to perform services designated in the field of software design, develop[ment], QA, maintenance and documentation by the Company . . . at Compan[y's] premises and/or the client of company." In the event defendant failed to fulfill those obligations within the contract term, paragraph five of the agreement required defendant to "pay financial damages caused to company which includes inter alia but is not limited to legal and immigration fees, recruitment fees, airfare, cost of training and all expenses incurred with regards to his/her deployment in the U.S. Consequently, your visa will be cancelled immediately under applicable law."

The second agreement, titled "PERI SOFTWARE SOLUTIONS INC. EMPLOYMENT AGREEMENT," was executed October 25, 2004. That document recognized the validity of the June 30, 2004, agreement. It also contained a "Non-Compete and Non-Disclosure" provision prohibiting defendant from working "directly as an employee or as a consultant or as a contractor or indirectly through another agency or company with . . . Morgan Stanley . . . for a period of three (3) years after termination of the contract with Company."

On September 20, 2005, plaintiff filed a Law Division action alleging that defendant worked for plaintiff from October 25, 2004, until approximately the end of July, 2005, and that during this period he was assigned to work at Morgan Stanley. The complaint further alleged that when defendant left plaintiff's employ, less than one year later at the end of July 2005, he worked directly for Morgan Stanley. Plaintiff sought recovery of the damages specified in the Trainee-Employee Agreement and damages for breach of the restrictive covenant contained in the Employment Agreement. The complaint also sought damages for "Unjust Enrichment," "Promissory Estoppel," "Misappropriation of Confidential Information/Breach of Duty of Loyalty," and "Tortious interference with economic advantage." Defendant answered and filed a four-count counterclaim.

On defendant's motion for summary judgment, the motion judge found that plaintiff's complaint was barred because plaintiff had failed to register as required by the Private Employment Agency Act, N.J.S.A. 34:8-43 to -66 (the Act).*fn1 The Act prohibits any action "for the collection of a fee, charge or commission for the performance of any of the activities regulated by this act without alleging and proving licensure or registration, as appropriate, at the time the alleged cause of action arose." N.J.S.A. 34:8-45b. The judge concluded:

It is clear that this is an action to recover fees and charges under activities regulated by the act. The statute clearly contemplates barring any financial claims by employment agencies or temporary [help] services unless they have complied with the statutory requirements at the time that their cause of action arose.

An order dated August 4, 2006, memorialized the dismissal.*fn2

On appeal, plaintiff does not dispute that its activities are regulated by the Act or that it was required to, but did not, register in accordance with the Act's provisions. Rather, plaintiff asserts that barring its action "does not serve the purpose of the Act" and that in any event its suit is not barred because it does not seek to recover a "fee, charge or commission." We disagree.

Because this decision was reached on defendant's motion for summary judgment, we apply the same standard to resolve the issue as did the motion judge, Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998), without affording any special deference to the judge's interpretation of the law. Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 372 (1999); Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). That is, we review the record in the light most favorable to plaintiff and determine if the record thus viewed requires judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

We consider first plaintiff's claim that its suit did not seek to recover a "fee, charge or commission" and is not, therefore, barred by N.J.S.A. 34:8-45b. N.J.S.A. 34:8-43 defines the phrase as including "any payment of money, or promise to pay money to a person in consideration for performance of any service for which licensure or registration is required by this act." We recognize a cogent argument for construing an agreement to repay funds expended for training or immigration necessary for a "placement" regulated by the Act to be within the category of promises given in consideration for that placement. Slightly less compelling is the argument that the legally imposed obligation to pay damages for breach of a restrictive covenant also falls within the category of damages forbidden to be collected without registration or licensure under the Act.

Such an interpretation becomes more compelling when we obey the direction to construe a statutory phrase so as to further the legislative purpose expressed in the statute. See, e.g., Carpenter Tech. Corp. v. Admiral Ins. Co., 172 N.J. 504, 513 (2002) (noting that "words may be expanded or limited according to the manifest reason and obvious purpose of the law." (quoting State v. Ochoa, 314 N.J. Super. 168, 171-72 (App. Div. 1998)); Thomas Group, Inc. v. Wharton Senior Citizen Hous., Inc., 163 N.J. 507, 517 (2000) (directing a statutory phrase to be interpreted "in furtherance of the underlying legislative purpose"). The legislative policy here is "to preclude unlicensed agencies or services from benefiting from unlawful conduct." Data Informatics, Inc., supra, 338 N.J. Super. at 79. That purpose would be furthered by construing N.J.S.A. 34:8-45b to prohibit plaintiff's suit.

However, we need not determine if either damages for the breach of the restrictive covenant or the agreement to repay moneys expended in training defendant and facilitating his immigration constitutes a "promise to pay money" in return for defendant's placement. That decision is unnecessary because if the suit is not barred by N.J.S.A. 34:8-45b, it is barred by public policy.

The Act "is a regulatory measure intended to alleviate abuses in the employment-agency industry." Accountemps Div. of Robert Half of Philadelphia, Inc. v. Birch Tree Group, Ltd., 115 N.J. 614, 623 (1989). The "remedial purpose" of the Act is furthered by "the licensing of all entities" whose activities are regulated by the Act. Ibid. Moreover, "[o]ur courts have consistently held that public policy precludes enforcement of a contract entered into in violation of [a] licensing statute." Id. at 626.

In Data Informatics, Inc., supra, we considered whether a regulated but unlicensed and unregistered entity could maintain a claim for damages other than fees, charges or commissions. Data Informatics, Inc. (Data) had sued for damages relating to the placement of a computer programmer employed by AmeriSOURCE Partners with a third party. Id. at 64-65. The suit sought the same damages from both the programmer, Balawat, and AmeriSOURCE Partners that plaintiff seeks from defendant here; that is, damages for breach of contract, breach of a restrictive covenant, tortious interference, breach of a covenant of good faith, and unjust enrichment. Id. at 67. We found the suit barred because Data had not complied with the registration and licensing requirements of the Act. Id. at 78. We also rejected Data's alternative argument that even if its collection of a fee is barred by its failure to be licensed or registered, it is not precluded from recovering on its tort and contract claims. The argument is disingenuous and contrary to the regulatory scheme designed to preclude unlicensed agencies or services from benefiting from unlawful conduct. Because the Act is "regulatory and penal" in nature, any agreement between plaintiff and Alliance, and the agreements between plaintiff and AmeriSOURCE for Balawat's placement and to supply plaintiff with AmeriSOURCE employees to meet plaintiff's requirements are void as illegal, and unenforceable as a matter of public policy. Accountemps, 115 N.J. at 626 (collecting cases where failure to comply with licensing statutes precluded contract enforcement and recovery of fees); Nitta v. Yamamoto, 31 N.J. Super. 578, 584 (App. Div. 1954) (holding restrictive covenant unenforceable where plaintiff failed to obtain employment agency license); Saks Theatrical Agency v. Mentine, 24 N.J. Misc. 332, 333 (Dist. Ct. 1946). We will certainly not countenance plaintiff seeking to do by indirection, that which it cannot do directly, R.A. Intile Realty Co., Inc. v. F.P. Raho, 259 N.J. Super. 438, 474 (Law Div. 1992) (quoting Smith v. Cyprus Indus. Minerals Co., 178 N.J. Super. 7, 14 (App. Div. 1981)); McCann v. Biss, 65 N.J. 301, 310 (1974), especially in the face of a significant regulatory scheme designed to protect not only employees and employers, but the public as well. [Id. at 78-79.]

We perceive no substantive difference between this case and Data Informatics, Inc., nor do we find any basis to depart from either its analysis or result.

We have examined plaintiff's remaining contentions seeking to avoid the prohibition against this suit and find them without sufficient merit to justify discussion in a written opinion. R. 2:11-3(e)(1)(E). We add these brief comments.

Plaintiff's argument that it is a "temporary help service firm" rather than an "employment agency," even if correct, has no legal significance. It is true that the Act exempts from its scope a "temporary help service firm which does not . . .

[p]revent or inhibit, by contract, any of the individuals it employs from becoming employed by any other person[.]" N.J.S.A. 34:8-46h(2). The restrictive covenant that plaintiff seeks to enforce against defendant is a prohibition against employment that removes plaintiff from the statutory exemption. See Data Informatics, Inc., supra, 338 N.J. Super. at 78.

Similarly, we find no equities supporting plaintiff's attempt to avoid the penalty for failing to comply with the license and registration requirements of the statute, either because of the reduced burdens placed on a temporary help firm or because of the severity of the penalty. We rejected a similar claim in Data Informatics, Inc., id. at 79-80, and see no reason to revisit that result. Finally, while plaintiff may be subject to certain requirements imposed by the Immigration and Nationality Act of 1952 (INA), the different interests represented by the INA and the Act, as well as the mechanisms for enforcement as they apply to someone in defendant's position, do not militate in favor of excusing compliance with the Act.


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