At a Glance

Illinois temp agencies that were gearing up to pay temp workers benefits equal to directly hired employees starting April 1, 2024, can now table those efforts. The federal court in Chicago has halted the benefits-related part of the amendments to the Day and Temporary Labor Services Act (the “DTLSA” or the “Act”), preventing it from taking effect.

Had this part of the amendments been implemented as planned, it would have required staffing agencies to pay temporary workers who are placed at a client company for 90 days, the “hourly cash equivalent” of benefits offered to the client company’s directly hired employees. This requirement was part of the “Equal Pay For Equal Work” provision of the DTLSA, one of many amendments to the Act last year. It was scheduled to take effect April 1, 2024.

Not so anymore. The federal court in Staffing Serv. Assn. of IL, et al. v. Flanagan, No. 23-CV-16208 (N.D. Ill.), ruled that this benefits cash equivalency requirement is inconsistent with — and pre-empted by — federal benefits law (ERISA). The court concluded as much because the benefits cash equivalency requirement prevents staffing agencies from administering their “ERISA plans uniformly.”

What This Means for Staffing Agencies and Their Client Companies

As of March 11, 2024 — the date of the federal court’s injunction — staffing agencies are no longer required to provide temporary workers with the hourly cash equivalent of benefits. Moreover, the Illinois General Assembly likely will be unable to amend the DTLSA further to fix the ERISA pre-emption flaw.

Accordingly,

• Temp agencies should stop charging their client companies for those benefit costs as of March 11, 2024, so they do not have to expend energy and resources locating and refunding those costs down the road;
• Client companies who contract for day or temporary labor from staffing agencies should ensure those agencies have stopped including the benefits equivalency costs in the rates charged to the client company. If not, consider demanding that the vendor stop passing on those costs and refund any the company paid after March 11, 2024.

All other provisions and amendments to the DTLSA continue in effect. The remaining requirements of the “Equal Pay for Equal Work” provision — including the mandate to pay temporary workers wages equal to directly hired employees after 90 days at a client company — will take effect on April 1, 2024, as planned.

Staffing agencies and the companies that contract with them should work with counsel to review and update policies, practices, and contracts relating to day and temporary laborers to ensure they comply with the updated law. Contact a member of the Taft Employment and Labor Relations team to do so.