Implications of the Illinois Day and Temporary Labor Services Act Ruling

A recent ruling in March by the U.S. District Court for the Northern District of Illinois has significant implications for both staffing agencies and the companies they serve, according to an article by Duane Morris. The ruling prohibits the enforcement of the Illinois Day and Temporary Labor Services Act (DTLSA) in a case known as Staffing Services Association of Illinois et al. v. Flanagan.

The Act required staffing companies to pay temporary workers who work more than 90 days within twelve months at a client company the same wages and “equivalent benefits” as the lowest paid, comparable, directly-hired employee at the company. The equivalent benefits could alternatively be paid in cash.

It also imposed information-sharing requirements. Companies utilizing temporary workers had to give staffing companies relevant information about their employees’ job duties, pay, and benefits to facilitate compliance with DTLSA. “Interested parties” (organizations that monitor compliance with worker safety laws, wage and hour requirements) could bring actions under the law.

In its decision, the Court leaned heavily on ERISA provisions that preempt laws requiring providers to structure benefits plans in particular ways and concluded that the plaintiffs’ argument that ERISA preempts the Illinois Day and Temporary Labor Services Act provision is likely to succeed.

It ruled that the equivalent benefits provision forces staffing agencies to “determine the value of many different benefit plans and then determine whether to provide the value in cash or the benefits themselves by modifying their plans or adopting new ones.” That, it said, undermines agencies’ ability to administer ERISA plans uniformly.

Duane Morris notes that the enforced cooperation and information-sharing regime the Act envisioned concerning employee benefits was unprecedented, and a source of concern for both staffing agencies and their client companies. The decision didn’t technically affect such disclosures, but the firm says that a challenge by a staffing company’s client will likely succeed.