South-Western Legal Studies in Business

Unlicensed Employment Agency Cannot Enforce Employment Placement Contracts
Description North Dakota high court held that because an employment agency had let its license with the state expire, which it was required to have to operate in that capacity, it could not enforce its contracts with persons it helped place in employment.
Topic Contracts
Key Words Public Policy; Licensing; Employment Agency
C A S E   S U M M A R Y
Facts Peterson signed an agreement with Preference Personnel (PP) which agreed to help Peterson find work. The employer would pay the placement fee, but if the employee quit the job in less than 90 days the employee was responsible for the fee, which was 20 percent of one year’s salary. Peterson was placed in a job with a salary of $60,000, so the fee was $12,000. He quit after one month. Peterson refused to pay PP the fee. PP sued for breach of contract. The district court dismissed the suit on the ground that the agreement was unenforceable. PP appealed.

Affirmed. As an employment agency, under state law PP must have a license from the Commissioner of Labor. Its license had expired more than a year before this matter arose, and it renewed its license only after this matter. Hence, it was unlicensed. As such, the agreement was unenforceable as it violated public policy.

Citation Preference Personnel, Inc. v. Peterson, 710 N.W.2d 383 (Sup. Ct., N.D., 2006)

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