On July 24, 2024, the United States Court of Appeals for the Third Circuit affirmed a decision from the District of New Jersey Court, refusing to block New Jersey’s 2023 law, which awards temporary workers equal pay and benefits as their direct employee counterparts.

New Jersey Temporary Workers Bill of Rights

New Jersey Governor Phil Murphy signed Assembly Bill No. A1474 / S511,1 commonly known as the “Temporary Workers’ Bill of Rights,” on February 6, 2023. The Bill of Rights provides numerous labor and employment protections for large portions of New Jersey’s more than 125,000 temporary workers.

Its practical implications are far-reaching, adding new requirements regarding state registration, pay frequency and wage statements, and recordkeeping for covered “temporary help service firms” that employ, directly or indirectly, “temporary laborers” in “designed classification placements.” The Bill of Rights’ penalties are steep and provide strong incentive for employers to ensure compliance.

Legal Challenge

On May 8, 2023, several industry groups filed a request for a preliminary injunction, alleging irreparable harm to the staffing industry in New Jersey if the Bill of Rights took effect. The District of New Jersey Court denied the industry groups’ request for a preliminary injunction in late July 2023, and the Bill of Rights went into full effect on August 5, 2023, as scheduled.

Before a decision was issued on the preliminary injunction, the New Jersey Department of Labor issued Temporary Rules for businesses to follow to ensure compliance with the Bill of Rights. Shortly thereafter, the district court denied the industry groups’ preliminary injunction request, holding that the industry groups were unlikely to succeed on the merits of their claims.

The industry groups appealed to the Third Circuit, and argued the Bill of Rights sets wage standards for temporary workers that disproportionately affect in-state staffing firms over out-of-state firms that do not have to comply, creating a burden on interstate commerce by essentially creating a tariff to operate a staffing firm in New Jersey. They also asserted the terms “benefits” and “same or substantially similar work” in the equal pay provisions were unduly vague.

The Third Circuit disagreed, reasoning that any economic impact of the Bill of Rights is merely incidental to creating consistency between full-time and temporary workers. The panel further found the Bill of Rights could not constitute a violation of the Dormant Commerce Clause since it does not favor in-state commerce over out-of-state commerce.

In addition, the panel held that neither the definition of “benefits” nor “same or substantially similar work” is so vague as to void the Bill of Rights. The panel noted “[t]he presence of ‘some ambiguities’ does not prevent enforcement of an economic regulation; rather, it is void for vagueness only if it is ‘so vague as to be no rule or standard at all.’”

Although the Third Circuit decision is a blow to the industry groups and their members operating in New Jersey, the lower court case is still active and the industry groups have amended their complaint to challenge the Bill of Rights based on ERISA preemption. The amended complaint alleges that the Bill of Rights benefits provisions conflict with ERISA, which preempts “any and all” state laws that relate to an employee benefit plan. They have also once again sought a preliminary injunction, this time “to halt operation and enforcement of the benefits requirement” of the Bill of Rights. That issue has been fully briefed and argued, and a decision is expected soon.

Key Takeaways

The Third Circuit ruling means that the Bill of Rights remains in full force. The New Jersey Department of Labor has begun conducting audits for compliance with the law, so staffing firms and employers which use temporary workers need to consider the law’s obligations and review their practices and agreements to ensure compliance.

The Temporary Rules issued by the state agency in July 2023 are the best available current guidance for compliance, but staffing firms and employers that contract with temporary workers should continue to look for news on a finalized set of rules for compliance with the Bill of Rights.