Five plaintiffs (the services), each of which conducts an employment agency, by two bills in equity, seek declaratory relief and contest the constitutionality of
The Commonwealth's demurrer to the bill against it was sustained. From that interlocutory decree and from a final decree dismissing that bill, the services appeal. Both defendants appeal from an interlocutory decree overruling the demurrer to the bill against the department and the commissioner.
On the bill against the department and the commissioner, a Superior Court judge, after hearing, adopted his voluntary findings as a report of material facts. The final decree declared, among other matters, (1) that, in various general respects (mentioned below), the 1967 act is constitutional, but (2) that the maximum rates prescribed by § 46L, as amended by the 1967 act, "are unreasonable in that they deprive the ... [services] and others in a similar position of ... a fair rate on their property, and ... are ... confiscatory." From the final decree, all the parties appealed. The evidence is reported.
Private employment agencies were subjected to some regulation by St. 1964, c. 670, § 1, which inserted §§ 46A to 46R in G.L.c. 140. These provisions were revised by St. 1966, c. 729, but no maximum agency fees were then prescribed. By the 1967 act the regulatory provisions were again changed, particularly by including a schedule of maximum fees.
The commissioner is charged with administering these statutes. Section 46A (as amended by the 1967 act, and as again amended by St. 1968, c. 412, § 1, which became effective after the commencement of these suits) exempts from the definition of "employment agency" (1) firms (not engaged in furnishing domestic employees) whose fees are not paid directly or indirectly by any applicant for employment and (2) persons hiring individuals directly for the purpose of furnishing part-time or temporary help to others.
Section 46L (as amended by the 1967 act) prescribes maximum fees to be charged applicants for employment of various classifications and regulates the charging and collection of such fees in various respects. In general the maximum fees are expressed in percentages of salary or wages actually received by the employee for a relatively short period of service. It is explicitly stated that the portions of § 46L imposing maximum fees "shall not apply to applicants ... hired at an annual wage of over" $8,000, nor "shall they apply to any agency which is paid solely by employer clients."
1. The Commonwealth contends that the suit against it cannot be maintained because it has not consented to be sued in a controversy of this type. See Executive Air Serv. Inc. v. Division of Fisheries & Game, 342 Mass. 356, in which direct equitable relief was sought against the Commonwealth in an effort to try certain aspects of the title to land claimed by the Commonwealth. No constitutional claim appears there to have been asserted. Cf. Kenyon v. Chicopee, 320 Mass. 528, 532-536; P. B.I.C. Inc. v. District Atty. of Suffolk County, 357 Mass. 770.
The Commonwealth is not an indispensable party to the suit against the commissioner and the department, the enforcers
Similar bills for declaratory relief have been maintained with respect to other penal statutes. Hall-Omar Baking Co. v. Commissioner of Labor & Indus. 344 Mass. 695, 696. Sturgis v. Attorney Gen. ante, 37, 38-39. See Commissioner of Admn. v. Kelley, 350 Mass. 501, 506; Revere Housing Authy. v. Commonwealth, 351 Mass. 180, 182. See also Sun Oil Co. v. Director of Div. on the Necessaries of Life, 340 Mass. 235, 239; Demetropolos v. Commonwealth, 342 Mass. 658, 661 (where no question was raised by the Commonwealth about its joinder as a party and the issues, in any event, were adequately presented by other defendants); Commonwealth v. Baird, 355 Mass. 746, 755. In the light of these authorities, declaratory relief may be afforded against the enforcing officials, even if no specific intention to apply the allegedly unconstitutional statute to these plaintiffs has been asserted. Cf. Kelley v. Board of Registration in Optometry, 351 Mass. 187, 192 (suit not brought against official having power to regulate the plaintiffs' activities).
In the suit against the commissioner and the department, every issue presented in either suit can be decided. Accordingly, although urged to do so, we need not now decide whether the Executive Air Serv. Inc. case (342 Mass. 356) should be modified or limited to its precise facts. We thus do not modify the interlocutory decree sustaining the demurrer or the final decree in the case against the Commonwealth. In the other case, the demurrer was properly overruled.
2. The trial judge correctly rejected the services' contention that the statute is unconstitutional because too vague in various respects.
(a) Under c. 140, § 460 (a), it is provided that if the discharge of an applicant, within one month of entering upon
(b) Section 460 requires refunds "by employment agencies" of fees paid to them in certain circumstances. Subsection (f) provides that any "employer who ... obtains applicants from an employment agency shall not ... deduct any part of the fees paid to ... [the] agency from the wages ... of ... employees placed by such ... agency." The services argue that the employment agencies cannot be subjected to penal provisions for failure to make refunds because of employer conduct of which the agencies may know nothing and for which they are not responsible. Subsection (f) does not in terms require any refund by an employment agency in the event of a violation
(c) It is argued that portions of § 46L, e.g. subsecs. (C) (1) (b), (2), and (4) (c), may require that an employment agency enter into a written contract with each applicant and that the applicant also understand the contract. Section 46N requires explanation of the agency contract to the applicant and the execution of a statement by the applicant that he has "thoroughly read ... [his] contract with ... [the agency] and accept[s] its terms." The two sections are to be read together. We do not interpret the portions of § 46L just mentioned as requiring that an agency be certain that an applicant understands his contract. In any event, an agency may protect itself against allegations of failure to explain to applicants the terms of its contract with them by preserving proof of compliance with § 46N, with appropriate added written acknowledgments by the applicant of agency explanation of the contract to him.
(d) Under § 46N, in certain circumstances, collection of an agency's fees will be permitted, "provided the applicant's failure to report for duty or his voluntary resignation is not occasioned by extenuating circumstances" (emphasis supplied). What "constitutes `extenuating circumstances' shall be decided by the commissioner," who by another section (§ 46Q) is given power to prescribe regulations to carry out §§ 46B to 46R, inclusive. Although the quoted provision of § 46N is not precise, the term "extenuating circumstances" provides a standard which an administrative official should be able to apply, particularly if guided by appropriate regulations.
3. The services are not denied equal protection of the
4. The services contend that "price fixing" (a loose reference to the maximum fees set out in § 46L of the 1967 act) is beyond the power of the General Court. A comprehensive report of the Legislative Research Council in 1964 Senate Doc. No. 655 (see fn. 2, supra), states reasons for public concern about private employment agency fees. Olsen v. Nebraska, 313 U.S. 236, 244-246 (overruling Ribnik v. McBride, 277 U.S. 350, 360), settles the question of State power reasonably to regulate excessive employment agency fees. See Gold v. DiCarlo, 235 F.Supp. 817, 819 (S.D.N.Y.), affd. 380 U.S. 520; Gail Turner Nurses Agency, Inc. v. State, 17 Misc.2d (N.Y.) 273, 275-277; Murphy v. Eldridge, 201 Okla. 501, 502-504; Petstel, Inc. v. County of King, 77 Wn.2d 144, 155-156. Cf. Greene v. Mayor of Fitchburg, 219 Mass. 121, 126-127; and Marshal House, Inc. v. Rent Review & Grievance Bd. of Brookline, 357 Mass. 709, 719-720, where no legislation had authorized the local price or rent regulation there considered. Cf. also Boomer v. Olsen, 143 Neb. 579, 583, where maximum fees were held to be confiscatory, apparently without much specific consideration of pertinent evidence. For discussion of judicial consideration of the issue of confiscation, see Lowell Gas Co. v. Department
5. Finally we consider whether the trial judge was justified in concluding that the 1967 maximum rates (§ 46L) are confiscatory. The Legislature has not decided that, in the public interest, certain employment agencies, conducted for profit, must be completely forbidden. Indeed, it has provided that they shall be licensed (§§ 46B-46F) and otherwise regulated. The services performed by such agencies, if conducted reasonably and in conformity with the statute, have not been made unlawful. See Aetna Cas. & Sur. Co. v. Commissioner of Ins. ante, 272, 280-281.
The Legislature may itself prescribe reasonable, nonconfiscatory maximum fees or charges to be used by persons engaged in a lawful calling which is properly subjected to regulation. It need not, although it may, prescribe a statutory standard of fair and just rates. Cf. Massachusetts Bonding & Ins. Co. v. Commissioner of Ins. 329 Mass. 265, 269-273. It is not required to designate a rate-fixing board or official (such as the Department of Public Utilities for public service companies, or the Commissioner of Insurance for insurance). Nevertheless, such legislatively fixed fees and charges may not be set so low as to be confiscatory, and to make it impossible for a prudent, efficient person, association, or corporation, engaging reasonably in the regulated and lawful calling, to receive fair payment for its services and a fair return upon its investment. See Aetna Cas. & Sur. Co. v. Commissioner of Ins. ante, 272, 277-278. We summarize evidence relied upon by the services to show the maximum rates to be confiscatory.
6. There are about 250 to 300 private employment agencies, run for profit, in Massachusetts. They vary in methods of operation and areas of specialization. There are also public agencies and professional and college placement bureaus performing similar functions. Public and private agencies together make fifteen to twenty per cent of the permanent placements each year in Massachusetts. A survey of the employment agency situation was conducted in
A witness discussed S & S as an example of an agency's operation. In 1967, S & S placed 2,500 applicants. It uses newspaper and other advertising to obtain business. Applicants are interviewed by job counselors, who review and test each applicant's abilities and background and prepare him for job interviews. S & S employs one supervisor or manager for each eight or nine of its twenty-two or twenty-three job counselors. Even if no statutory maximum ceiling controls the fees which S & S may charge to an employer, the management of S & S thinks it will not be able to demand from an employer more than the statutory maximum fee chargeable to an applicant, because the employer will insist on payment of the statutory fee by the applicant and then reimburse him. The Massachusetts Employment Association "as an entity" concluded "[t]hat the private employment agency industry could not continue" under the maximum rates set in the 1967 act. The management of S & S is of opinion that S & S cannot do so. In the opinion of a witness from S & S, the "overall methods and procedures" of other agencies, "the overall picture of costs [and cost ratios], and the overall ratio of applicants to placements" run pretty much the same "across the country."
S & S turned all its 1967 invoices over to its accountant and had him compute from them a "projection" of what the fees for its actual 1967 placements would have been under
We assume, without deciding (a) that a considerable number of agencies, operating in the same manner in which they conducted their business in 1967, and having the same volume and character of business, would show (under the fee rates in the 1967 act) a material reduction in gross revenues from placements and substantial net losses from operations, (b) that these agencies would receive reduced income from placing low paid applicants,
We are not dealing with a telephone, electric, gas, or water utility, or a carrier, or an insurance company, subjected to intensive public regulation. Such companies are required
In the present cases, we have meager statistical, financial, and operating information about any employment agencies, and that little about only a small portion of the many employment agencies doing business in the Commonwealth. No uniform accounting system or central repository of fiscal information for such agencies is shown to exist. It has not adequately been proved (a) that the operating results of the plaintiffs are fairly representative of any substantial part of the employment agencies in the State; or (b) that the plaintiffs' methods of operation, and expenditures for salaries and other items are reasonable and proper,
The plaintiffs have not presented adequate evidence to justify the conclusion that application of the 1967 act to them, or to all employment agencies in the Commonwealth, will result in confiscation. Certainly, the facts relied upon by the trial judge, as shown by his findings, are not sufficient to establish confiscation.
7. In the case against the Commonwealth the interlocutory decree sustaining the demurrer and the final decree are affirmed. In the case against the department and the commissioner, the interlocutory decree overruling the demurrer is affirmed and the final decree is reversed. A new final decree is to be entered declaring that the maximum fee schedule set out in G.L.c. 140, § 46L, as amended by St. 1967, c. 896, § 4, has not been shown to result in confiscation and that no other part of the statute has been shown to be unconstitutional as applied to the plaintiffs.
Item Actual 1967 Projected 1967 (1) Fees $789,613 $550,911 (2) Expenses 693,986[*] 590,708[*] ________ ________ (3) Operating income 95,627 Loss ($ 39,797) (4) Nonemployment income 3,190 ______ (5) Income before Federal income tax 98,817 (6) Provision for Federal income tax 34,733 ______ (7) Net income $ 64,084
[*] The 1967 "actual" expenses included $372,228 of payroll expense, $31,664 of "franchise commissions and national advertising" and $174,701 of "other operating expenses." "Actual" 1967 payroll broke down into "officers" $85,000; "other" $287,228. The 1967 "projected" expenses showed among other items
Item E-1 Franchise commissions and national advertising $ 22,036 E-2 Management fees $ 55,091 E-3 Payroll — (a) counselors $147,728 (b) others 164,693 ________ (c) total payroll $312,421
The accountant for S & S did not make any independent chock with other companies of the reasonableness of the costs shown as S & S's expenses.
1967 "Actual" Profit (or loss) Gross income before taxes G & M Employment Service, Inc. $101,114.89 $4,541.45 Abbott's of Boston (F.Y. 6-30-68) 166,764. Loss (28,677. ) B.E.J. Corporation 38,8.2170 Loss ( 1,816.50) Walter F. Matson (1965 figures) d.b.a. White's Employment Service 23,122.59 5,000. (approx.) 1967 "Projected" Loss before Gross Income Taxes G & M Employment Service, Inc. $, 80,804.09 ($16,000. ) Abbott's of Boston (F.Y. 6-30-68) 137,901. Loss (53,187. ) B.E.J. Corporation 27,426.51 Loss ( 8,290.81) Walter F. Matson d.b.a. White's Employment Service 6,898.49 Substantial loss