No. 88-323

INTHE StJPREME COURT OF THE STATE OFMONTANA

1989

ROGER KOOPMAN, d/b/a CAREER CONCEPTS,
Plaintiff and Appellant,-vsPATRICIA FAGGETT, Defendant, Respondent and Cross-Appellant.

APPEAL FROM: DistrictCourtof theEighteenthJudicialDistrict, Inand forthe Countyof Gallatin, TheHonorableJoseph Gary, Judge presiding.

COUNSEL OF RECORD:

For Appellant:
White & Seel; KarlP. Seel, Rozeman, Montana
For Respondent: Landoe, Brown, Planalp & Kornrners; JamesM. Kommers, Bozeman, Montana

C, Filed:

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,. . Submittedon Briefs: Nov. 17, 1988

Decided: January 10,

3 ,-I ED SMITH

-- ClerkMr. Justice JohnC. Sheehy delivered theOpinion of the Court.

The District Court of the Eighteenth JudicialDistrict, Gallatin County,granted judgment after bench trial in favor of Roger Koopman, d/b/a CareerConcepts,and against Patricia Baggett on Koopman's claim based on an employment agency contract,but the District Court denied Koopman's claim for attorney's fees and costs. Koopman appealed to this Court from the denial of attorney's fees and costs, and Patricia Baggett cross-appealed from the judgment of the District Court that she was liable for an employment fee under the employment agency contract. 

### We reverse the DistrictCourt's determination that Koopmanwas entitled to an employment fee, affirm the denial of attorney's fees and costs to Koopman, direct that attorney's fees and costs be awarded to Patricia Baggett,and remand for thatpurpose. The principal issue is whether Koopman, d/b/a Career Concepts,is entitled to a fee for emplovmentagency services under the factsof this case. Patricia Baggettmoved to Montana fromGeorgia, with her husband, in November 1986. She entered into an applicant contract with Career Concepts on December 9, 1986. After entering into the written agreement with Career Concepts, Patricia Baggett also went to the Montana Job Service in Bozeman,Montana. On January 13,1987,Patricia Baggettheard on the radio about a job shemight be interested in through a Job Service advertisement. She called the Job Service to inquire. She attended a seminar that afternoon conducted by the Job Service where she learned that the opening was with KBOZ, a local Eozeman radio station. The next morning, January 14, 1987, Patricia Baggett went to the Job Service office,where she obtained a referral card. At 9 o'clock a.m. of the same morning, Harvey Hasler of Career Concepts telephoned the defendant to inform her 

### of the job opening atKROZ.At 11:30 a.m. of the same morning, Patricia Baggett telephoned KBOZ to setup an appointment. The KBOZ employee informed the defendant that Career Concepts had already called and set an interview for her at 

### 4 o'clock that afternoon. At about noon, Baggett learned from her husband that Career Concepts had called about the 4 p.m. interview. At 3:30 p.m. in the afternoon the Career Concepts employee again called Baggett and they discussed the KBOZ interview. From conflicting testimony, the District Court found that Career Concepts had arranged for the interview for Patricia Baggettprior to the time that she calledKBOZ. After the 

### 4 o'clock interview and a subsequent interview,Baggett accepted the positionwith KBOZ. When she refused to pay the fee und-erthe contract, Koopman, d/b/a Career Concepts, sued her for the employment fee in the Justice Court in Gallatin County. Baggett cross-claimed for an amount of damages outside the jurisdiction of the Justice Court,and sothe causewas removed to theDistrict Court for

a decision. There the District Courtdecided aswe have set out above, fromwhich this appeal has resulted. The legal issue in this case swirls around language in the employment contract signed by Baggett and prepared and formulated by Koopman. The essence of the argument is whether the Job Service could be construed as an "employment agency" under the terms of the contract so as topreclude the collection of the employment fee by Career Concepts. The District Court, relying on the definitions in S 39-5-502, MCA, determined that the Job Service was not an "employment agency;" that Career Concepts had completed its contract; that thereby Career Concepts was entitled to the employment fee, but not to an award of attorney's fees and costs. Although the employment contract provided for attorney's fees and costs to the prevailing party, the court considered thatprovision to be a penalty, and without sufficient notice being given to the person signing the employment contract that itwas contained in the contract. Free stateemployment servicesare conducted throughthe "Job Service" offices, as they are popularly called. The state employment offices exist because of the passage by Congress in 1933 of the United States Employment Act. (29 U.S.C.A., § 49 et seq.) Originally called theWagner-Peyser Act, theUnited StatesEmployment ServiceActwas intended to develop a national system of employment offices to assist persons in obtaining employment; its primary purpose is to connect an unemployed worker with a job. It is especially directed to migrant workers. See Frederick County Fruit Growers Association v. Marshall (1977 D.C. Virginia), 436 F.Supp. 218. The Wagner-Peyser Act provides for federal monies to be appropriated for the purposes of the Act, and that in order to obtain the benefits of appropriations under the Act, a. state shall, through its legislature, accept the provisions of the Act, and designate or authorize the creation of a state agency vested with all power necessary to cooperate with United States Employment Service Act. 29 U.S.C. S 49(c)

# . Further, any state desiring to receive the benefits of the Act, must submitdetailed plans for carrying out the provisions of the act within the state. 29 U.S.C., § 49(g). The establishmentof employment service offices through the several statesdid not come aboutby accident. InRibnik

v. McBride (1927),277 U.S. 350, 48 S.Ct. 545, 72 L.Ed. 93.3 the United States Supreme Court heard a case involving New Jersey's Employment Agency Law. The law prohibited the charging of fees by private employment agencies over a certain amount, and in effect was considered by the Supreme Court tobe price--fixing by the state. TheCourt invalidatedthe law on the basis of due process under the Fourteenth Amendment. Eowever a dissent in that case was written describing the evils of private employment agencies and suggested the creation of a federal system of public employmentagencies. The dissent in Ribnik echoes what was said by Justice ~randeisin Adams v. Tanner (1916), 244 U.S. 590, 37 S.Ct. 662, 61 L.Ed. 1336. There, the majority set aside a law of the state of Washington regulating employment agencies. JusticeBrandeis castigated inhis dissent the inequities and wrongful practices of private employment agencies at the time

# .In creating the United States Employment Bureau, under theAct, in 1933, Congress set out the scopeof the law in 29 U.S.C., § 49(b): It shall be the province and duty of the bureau to promote and develop a national system of employment offices for men, women and juniors who are legally qualified to engage in gainful occupations, including employment, counseling, and placement services for handicapped persons, to maintain a veterans service to be devoted to securing employment for veterans, to maintain a farm placement service, to maintain a public employment service for the District of Columbia, and assistand establish andmaintaining systemsof public employment offices in the several states.

# ..

# . The state of Montana joined in the national effort, in 1937, when the legislature passed what is now § 39-51-307, MCA, requiring the Montana Departmentof Labor to "establish and maintain free public employment offices in such number and in such places as may be necessary for the proper administration of this chapter and for the purpose of performing such duties as are within the purview of the act of conqressentitled [the Wagner-PeyserAct]

# ."In 1971, the legislature adopted "The Employment Agency Act" to regulateprivate employment agencies. Koopman, d/b/a Career Concepts, has qualified as a licensee under thatAct. Career Concepts is an "employment agency" under the Act because itsgross ornet income isderived from feesreceived from applicants for offering, promising, procuring or attempting to procure empl-oyment for applicants. Section 39-5-102

### (I),MCA. The Employment Agency Act also defines the term employmentagency as follows: (c) The term "employmentagency" does not include labor unions organizations, temporary service contractors, propriety schools, musical booking services, agents for professional athletes, or the Montana State Employment Agency. (Emphasis supplied.) Section 39-5-102(1)(c)

## ,MCA. Therein lies the nub of the controversyhere. The EmploymentAgency Act alsoprovides for thepayment of fees when an applicant is referredby two agencies. 39-5-310. Payment --- of fee when applicant referred 

### & two agencies. When an applicant is referred to the same position by two employment agencies, the fee shall be paid to the agency that first contacted the applicant considering the specific opening, provided that such agency has given the name of the employer to the applicant and has arranged an interview or submitted a resume to the employer within ten days of such contact with the applicant.
The contract signed by Patricia Baggett with the employment agency, Career Concepts, included a paragraph which mirrors S 39-5-310, MCA. The contractual provision follows: 7. When an applicant is referred to the same position by two employment agencies, the fee shall be paid to the agency that first contacted the applicant concerning the specificopening,provided

### that suchagencyhas given the name of the employer to the applicant and has arranged an interview or submitted 

### a resume to the employerwithin ten days of such contact with the applicant. Koopman contends, and the District Court agreed, that sinceby definition under the EmploymentAgencyAct, the Job Service Office acting as a Montana State Employment Agency, is not an "employment agency," that therefore the first reference to Baggett of this specific jobby the Job Service is of no concern. In effect the District Court held that Career Concepts was the only "employment agency" under the Act which referred her to the job opening and therefore she mustpay CareerConcepts. That interpretation of the term "employment agency" in the employment contract is wrong for two reasons: (1) 

### The purpose of the definition of "employment agency" under Montana's Employment Agency Act is to define those private agencies that must be licensed and regulated by the DepartmentofLabor. TheJob ServiceOffices,establishedby an act of the legislature requireno license;and (2) 

### public policy requires the recognition of the Job Service as a full employment agency on which applicants for employment can rely. A 

### review of the federaland state statutes relatingboth to the Job Service Offices existing 

### in Montana and private employment agencies shows that each of these exist for the

same ultimate purpose, to connect an unemployed applicant with a job. It is the public policy of this state that the Job Service Offices shall exist sideby sidewith any private employment agencies. Moreover, the Job Service agency is subsidized by the taxpayers as a free employment service which any citizen has the right to utilize. Therefore an interpretation of the employment contractwhich runs counterto the purpose for the existence of the state employment service runs counter to thepublic policy of the state. There is no question in this case that Koopman has insisted for quite some time that a Job Service referral is not a referral by an "employment agency" when the interpretation of his Career Concepts contract involves a collection of a fee where the Job Service office has also made a referral. On the basis of the contract,he has sued applicants in Justice Courts 112 times since 1983, and 12 times in the DistrictCourt. We do not know if all of those suits involved theprecise interpretationof the contracts in relation to the facts here, but if they do, they cause an intolerable burden to be placed upon the court system in GallatinCounty. We therefore interpret the State Employment Agency Act to mean that the State Employment Offices (Job Service offices), which "procure or attempt toprocure employment for applicants" are an "employment agency" even though they need not be licensed as an employment agency under the Employment Agency Act. Therefore, in construing Career Concepts1 contract, a Job Service referral must be regarded

as oneby an employment agency. When that is understood, the Career Concepts1 contract

canbe properly interpreted. To be entitled to a payment of a fee under 5 39-5-310, supra, Career Concepts must qualify on two of three possibilities when an applicant is referred to the same position by two employment agencies: One, Career Concepts must be the agency that first contacted the applicant concerning the specific opening, and two, it must give the

name of the employer to the applicant and arrange an interview, or three, submit a resume to the employer within 10day^ of such contact with the applicant.In this case, Career Concepts is not the agency that first contacted the applicant concerning the specific opening, since she first learned of it through the Job Service Office. Accordingly under the contract and the statute, Koopman, d/b/a Career Concepts, is not entitled to

an employment applicant's fee. The contract between Career Concepts and Patricia Baggett provides that Career Concepts, in the event of a breach of the agreement, is entitled to reasonable fees, costs, and expenses incurred including attorney's fees and court costs. Since it is not the prevailing party, in this case, Koopman, d/b/a Career Concepts, is not entitled to an attorney's fee,and his appeal must be denied. On the other hand, because of the reciprocity provisions of 

### 5 28-3-704, MCA, Raggett is entitled to attorney's fees and costs for which we remand for determination to the District Court. We deny Baggett's request to return the cause for determinationofpunitive damages. Accordingly, the judgment in favor of Koopman d/b/a Career Conceptsand against PatriciaBaggett isreversed;and the cause is remanded to the District Court for the determination 

### of attorney's fees and costs in favor of Patricia Ragqett

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We Concur: 1 1i Justice

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