Providing Developments & Insight on Trending Topics in Employment Law

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Providing Developments &amp; Insight on Trending Topics in Employment Law

New Jersey companies utilizing the services of temporary workers contracted through a staffing agency or temporary help service firm should be aware that additional state-mandated protections covering certain temporary workers took effect on Saturday, August 5, 2023. These protections (collectively known as the “Temporary Workers’ Bill of Rights”) require staffing agencies to, among other things, provide equal pay, detailed wage statements, and assignment disclosure forms to the temporary workers. Notably, New Jersey is the first state that requires that temporary workers be paid at least the average pay (including the cost of employee benefits) of their permanent counterparts.<a href="#_ftn1" id="_ftnref1">[1]</a>

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Covered Temporary Workers

The Temporary Workers’ Bill of Rights protects laborers in specified classifications designated by the Bureau of Labor Statistics of the United States Department of Labor as follows:

33-90000 – Other Protective Service Workers;

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35-0000 – Food Preparation and Serving Related Occupations;

37-0000 – Building and Grounds Cleaning and Maintenance Occupations;

39-0000 – Personal Care and Service Occupations;

47-30000 – Helpers, Construction Trades;

49-0000 – Installation, Maintenance, and Repair Occupations;

53-0000 – Transportation and Material Moving Occupations; and

Any successor categories as the Bureau of Labor Statistics may designate.

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Under the Temporary Workers’ Bill of Rights, temporary workers in the above classifications are entitled to the same pay as their permanent counterparts, detailed notices and pay stubs about each job, four hours of payment for last-minute job cancellations, and limited deductions for meals and transportation.

In conjunction with the law, the NJDOL has published <a href="https://assets.law360news.com/1703000/1703006/regulations.pdf">proposed rules</a> that will be used to implement the law’s provisions. These proposed rules address various requirements such as mandatory recordkeeping, safety provisions, penalties for noncompliance, and pay equity, among other topics. The proposed rules are currently open for public comment and are not yet final, but they serve as a guidepost for what companies and staffing agencies can reasonably expect in terms of necessary steps to comply with this law’s multifaceted obligations.

The Temporary Workers’ Bill of Rights requires that staffing agencies pay covered temporary workers no less than the average rate of pay – and average cost of benefits (or their cash equivalent) – of the companies’ permanent employees performing the same or substantially similar work on jobs requiring equal skill, effort, and responsibility and that are performed under similar working conditions at the time the temporary laborer is assigned to work at the company, i.e., “comparator employees.” When determining who is a comparator employee, the proposed rules explain that the analysis should focus on the actual duties undertaken by the employees to assess whether they are performing substantially similar work. While job titles or descriptions may be helpful in this analysis, they are not dispositive.

The proposed rules also provide guidance on calculating the hourly wage rate and the value of benefits that must be paid to temporary workers. The average rate of pay and benefits is calculated as of the date the staffing agency contracts with the company for the services of its temporary worker and is based upon information the company must provide to the staffing agency. In order to calculate the cost of benefits per hour, the total annual cost to the company for the comparator employee’s benefits is divided by 2,080. Additional calculations will need to be performed in order to come to the “average” rate and benefit value for the at-issue position, as well as any offsets with respect to any benefits that are provided by the staffing agency to the temporary worker.

Additional Requirements for Staffing Agencies

In addition to equal pay, the Temporary Workers’ Bill of Rights requires that the wage statements issued by the staffing firms include a significant amount of information, including (i) the name, address, and contact information of all third-party clients that employed the worker; (ii) the number of hours worked each day; (iii) the rate of pay, including bonuses and overtime; (iv) the amount of each applicable deduction; (v) total pay earnings; (vi) the maximum amount of a placement fee that may be charged to the company should it wish to directly hire the temporary worker; (vii) the amount charged by the staffing agency to the company for the worker’s services during the pay period; and (viii) the cost to the staffing agency of benefits provided to the worker during the pay period.

The staffing agencies are also now required to provide temporary workers with assignment disclosure forms upon placement in a new position. This form must include specifics about the nature of the work, the worksite, and contact information, along with whether meals will be provided, particular equipment or clothes that will be needed, and whether any training is provided. Multiday assignments also require known schedules to be shared with the temporary workers, along with the length of each assignment. Failure to provide the requisite notice may result in a civil penalty for the staffing agency of $500 to $1,000 per violation.

The Temporary Workers’ Bill of Rights prohibits a staffing agency from restricting temporary workers from becoming permanent employees of the company to which they were providing temporary services. However, the staffing agency is permitted to charge the company a placement fee, which is capped at the equivalent of the total daily commission rate the staffing agency would have received over a 60-day period, reduced by the equivalent of the daily commission rate the staffing agency would have received for each day the worker performed work for the staffing agency in the preceding 12 months.

Requiring pay equity with respect to both the hourly wage and the benefits provided will likely have unintended negative consequences that may even discourage companies from using staffing agencies. In practice, the equal pay requirement means that temporary workers may actually receive higher wages than their permanent employee counterparts because the temporary workers will likely receive cash equivalents for the benefits element of their compensation. If a regular company worker earns $20/hour and the equivalent cost of benefits is $5/hour, then the temporary worker must receive either $20/hour and comparable benefits or $25/hour. And that is before the staffing agency’s markup.

First, this process could make the cost of using a staffing agency’s temporary workers prohibitively expensive, thereby reducing demand for temporary workers in New Jersey.

Second, in the scenario where temporary workers earn more than their permanent company employee counterparts (through receipt of cash equivalents for benefits in addition to the same hourly rate), it may be reasonable to expect that the company’s workers will be unhappy that the temps earn more than they do. This result could prompt union organizing efforts, as the company’s regular workers demand increased pay to match what the temporary workers receive.

Third, any increase in permanent employee compensation would necessarily result in increased wages that must be paid to the temporary workers, which would either eat into the staffing agencies’ margins or be offset by increasing the amount the company is required to pay to the staffing agency for the temporary worker. Paying temporary employees more than permanent employees could create a spiral of discontent in the workforce.

Impact on Employers and Next Steps

Significantly, with respect to pay equity, the law imposes joint and several liability on the staffing agency and its client, i.e., the company, for noncompliance. Consequently, staffing agency agreements will almost certainly need to be amended to account for this new law. Companies seeking to protect themselves should contractually require the staffing agency to comply with the New Jersey law, which means paying temporary workers the required wage, including the cost of benefits. However, directing and controlling wages is a hallmark of joint employment under other wage-and-hour laws. This creates a potential problem. To thread the needle, companies should require their staffing agencies to pay workers the required wage but only to the extent required by the Temporary Workers’ Bill of Rights. Requiring compliance with laws is usually not considered the type of control that drives a joint employment determination.

Companies using staffing agencies to build out their workforce will be required to make disclosures about the job title, pay, and benefits of similarly situated permanent employees to ensure that temporary workers receive at least equal wages and benefits from the staffing agencies. Companies should also be prepared to provide all requisite information to their staffing agencies to permit the staffing agencies to provide compliant wage statements and assignment disclosure forms to temporary workers.

If you have questions about New Jersey’s Temporary Workers’ Bill of Rights and its potential impact on your business, or if you would like us to review your current staffing agency agreements, the BakerHostetler Labor and Employment Practice Group is available to assist.

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<a id="_ftn1" href="#_ftnref1">[1]</a> According to the New Jersey Department of Labor’s (NJDOL) <a href="https://www.nj.gov/labor/worker-protections/myworkrights/temporaryworkers.shtml">recently published FAQs</a>, temporary workers who fall within a designated classification and are employed by staffing agencies within New Jersey but are assigned to work outside of New Jersey are nonetheless entitled to the law’s protections so long as the worker’s primary residence is in New Jersey.

New Jersey Companies Beware: New Requirements for Temporary Workers