                                                     No.    88-323

                     I N THE StJPREME COURT O F THE STATE O F MONTANA

                                                           1989




ROGER KOOPMAN,              d / b / a CAREER C O N C E P T S ,

                           P l a i n t i f f and A p p e l l a n t ,
          -vs-

P A T R I C I A FAGGETT,

                           Defendant,         R e s p o n d e n t and C r o s s - A p p e l l a n t .




A P P E A L FROM:          D i s t r i c t C o u r t of t h e E i g h t e e n t h J u d i c i a l D i s t r i c t ,
                           I n and f o r t h e C o u n t y of G a l l a t i n ,
                           T h e H o n o r a b l e J o s e p h G a r y , Judge p r e s i d i n g .

COUNSEL O F RECORD:

          For A p p e l l a n t :

                           White & S e e l ; K a r l P .          S e e l , Rozeman, Montana

          For R e s p o n d e n t :

                           L a n d o e , B r o w n , P l a n a l p & Kornrners;         J a m e s M.    Kommers,
                           Bozeman, Montana




                                                           S u b m i t t e d on B r i e f s :     Nov.    17,   1988

                                                              Decided:           January 1 0 ,
                     C,
Filed:   2           .
                     , .




                 3    ,-I
                                                         ED S M I T H
                      --                                  Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the Court.


     The District Court of the Eighteenth Judicial District,
Gallatin County, granted judgment after bench trial in favor
of Roger Koopman, d/b/a Career Concepts, 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 District Court's
determination that Koopman was 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 that purpose.
     The principal issue is whether Koopman, d/b/a Career
Concepts, is entitled to a fee for emplovment agency services
under the facts of this case.
     Patricia Baggett moved to Montana from Georgia, 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 Baggett heard on the radio
about a job she might 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 at KROZ.
     At 11:30 a.m. of the same morning, Patricia Baggett
telephoned KBOZ to set up 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
Baggett prior to the time that she called KBOZ.
     After the 4 o'clock interview and a subsequent
interview, Baggett accepted the position with KBOZ. When she
refused to pay the fee und-er the 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 so the cause was removed to the District Court for
a decision. There the District Court decided as we have set
out above, from which 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 to preclude 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 that
provision to be a penalty, and without sufficient notice
being given to the person signing the employment contract
that it was contained in the contract.
     Free state employment services are conducted through the
"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 the Wagner-Peyser
Act, the United States Employment Service Act was 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 submit detailed plans for carrying out the
provisions of the act within the state. 29 U.S.C., § 49(g).
     The establishment of employment service offices through
the several states did not come about by accident. In Ribnik
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 to be price--fixingby the state.   The Court invalidated
the 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
employment agencies.
     The dissent in Ribnik echoes what was said by Justice
~randeis in 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.
Justice Brandeis castigated in his dissent the inequities and
wrongful practices of private employment agencies at the
time.
      In creating the United States Employment Bureau, under
the Act, in 1933, Congress set out the scope of 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 assist and establish and maintaining systems of
      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 Department of 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 conqress entitled [the Wagner-Peyser Act] ."
     In 1971, the legislature adopted "The Employment Agency
Act" to regulate private employment agencies. Koopman, d/b/a
Career Concepts, has qualified as a licensee under that Act.
Career Concepts is an "employment agency" under the Act
because its gross or net income is derived from fees received
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
employment agency as follows:
     (c) The term "employment agency" 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 controversy here.
     The Employment Agency Act also provides for the payment
of fees when an applicant is referred by 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 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.
      Koopman contends, and the District Court agreed, that
since by definition under the Employment Agency Act, 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 job by 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
must pay Career Concepts.
      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
Department of Labor. The Job Service Offices, established by
an act of the legislature require no 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 federal and state statutes relating both
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 side by side with 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 contract which runs counter
to the purpose for the existence of the state employment
service runs counter to the public 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 District Court. We do not know if all of those
suits involved the precise interpretation of 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
Gallatin County.
     We therefore interpret the State Employment Agency Act
to mean that the State Employment Offices (Job Service
offices), which "procure or attempt to procure 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 one by an employment agency.
     When that is understood, the Career Concepts1 contract
can be 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
1 0 day^ 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
determination of punitive damages.
     Accordingly, the judgment in favor of Koopman d/b/a
Career Concepts and against Patricia Baggett is reversed; and
the cause is remanded to the District Court for the
determination of attorney's fees and costs in favor of
Patricia Ragqett .


                                       1 i   Justice
                                         I
We Concur:   1                     1    i
