Employment agencies provide an invaluable service helping individuals get jobs and companies find workers. However, as with any businesses, they must comply with various laws. New York State and New York City regulate state and local employment agencies, including establishing license qualifications, limits on fees, and other requirements. Anyone seeking to start an employment agency or already operating one, should seek legal advice regarding the rules that apply to such businesses to minimize the risk of liability.
What Is an Employment Agency?
Generally, an employment agency includes any person or business that charges a fee to place a candidate in employment with a third-party. However, there are exceptions as discussed further below.
What Are the Licensing Requirements for an Employment Agency?
New York State law requires that employment agencies obtain a license and prominently display the license on its premises. Agencies located in New York City must also apply for a license to the New York City Department of Consumer Affairs. Those outside of the city apply for a license to the New York State Department of Labor. A separate license is required for each location if the agency has multiple offices. There is a fee to apply and to renew the license annually.
Applicants must meet the following qualifications to obtain a license:
- Have at least two years of verifiable work experience in a licensed employment agency doing placements or other similar qualifying work experience; or
- If an applicant does not have qualifying work experience, the applicant must hire a qualified person to direct the placement activities of the agency and submit an application for an Employment Agency Manager Permit along with the employment agency license application. Applicants must provide the Manager’s work history and other information to obtain a permit.
Two character statements must also be submitted with the Application for an Employment Agency License or Application for Agency Manager Permit.
Are There Limits on Fees that Employment Agencies Can Charge?
Employment agencies must comply with all fee-related requirements. These include the following:
- Fees generally. Employment agencies are only permitted to charge a fee (or anything else) to a job applicant (1) in accordance with a written contract (except for “Class A” or “Class A1” workers as set forth below), and (2) after the agency refers the applicant to an opportunity that results in the person being hired. The agency must give the applicant a copy of the contract.
- Maximum fees. New York law establishes maximum fees that vary depending on the nature of the job. There are three job categories: “Class A” – domestic, household employee, unskilled or untrained manual worker; “Class A1” – non-professional trained or skilled industrial worker or mechanic; and “Class B” – most other jobs, except theatrical and nursing jobs which have special rules.
- Agencies are not allowed to charge just to register an applicant. However, they may require a deposit or advance fee for “Class A” or “Class A1” workers only, provided the agency return that deposit or advance fee immediately on demand if the job applicant has not yet found a job, and refund any excess above the maximum legal fee immediately when a job is found.
- Applicants must be given a signed receipt for any fee or deposit. The receipt must include the applicant’s name, name and address of the employment agency, date and amount of the fee or deposit, and the purpose of the fee or deposit.
What Other Requirements Must Employment Agencies Meet?
Employment agencies must comply with the New York State Human Rights Law. The law prohibits businesses from discriminating against applicants based on their age, race, religion, national origin, sexual orientation, military status, sex, disability, or marital status.
In addition, agencies cannot refer an applicant to a job that the agency knows or reasonably should have known pays less than the minimum wage or is violating other state or federal wage or child labor laws, including overtime laws.
When Is an Employment Agency License Not Required?
Employment agencies located in New York City that fall into one of the following categories are not required to have a license:
- Temporary Employment Agency. The agency is the employer and contracts out its employees, all of whom receive a W-2 form from the agency at the end of the year and the agency meets the criteria of an employer.
- Theatrical Personal Manager. The individual’s primary business is managing artists. (Note that if the individual’s primary business is finding employment or engagements for artists for a fee, the individual is a “theatrical employment agency” and must have an Employment Agency License.)
- Certain Executive Search Firms and Employer Fee Paid Agencies. The agency places only commercial, clerical, executive, administrative, and professional applicants, and never charges the applicant a fee of any kind. However, while a license is not required, the agency must still comply with the New York State Employment Agency Law relating to Employer Fee Paid Agencies.
Agencies that fail to comply with these rules are subject to fines and license suspension or revocation. As a result, it is important to consult an experienced attorney regarding setting up and operating your business.
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