{"id":1291,"date":"2024-03-14T11:43:19","date_gmt":"2024-03-14T15:43:19","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1291"},"modified":"2024-03-14T11:43:19","modified_gmt":"2024-03-14T15:43:19","slug":"illinois-federal-court-enjoins-equivalent-benefit-provision-of-day-and-temporary-labor-services-act-in-significant-win-for-staffing-agencies-and-their-company-clients","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/03\/14\/illinois-federal-court-enjoins-equivalent-benefit-provision-of-day-and-temporary-labor-services-act-in-significant-win-for-staffing-agencies-and-their-company-clients\/","title":{"rendered":"Illinois Federal Court Enjoins \u201cEquivalent Benefit\u201d Provision Of Day And Temporary Labor Services Act In Significant Win For Staffing Agencies And Their Company Clients"},"content":{"rendered":"

\"\"<\/a>By Gerald L. Maatman, Jr., Jennifer A. Riley, and Gregory Tsonis <\/b><\/p>\n

Duane Morris Takeaways<\/i><\/b>: In a consequential ruling on March 11, 2024, Judge Thomas M. Durkin of the U.S. District Court for the Northern District of Illinois granted in part and denied in part<\/a> a motion for a preliminary injunction concerning amendments to the Illinois Day and Temporary Labor Services Act (\u201cDTLSA\u201d) in Staffing Services Association of Illinois et al. v. Flanagan, Case No. 23-CV-16208 (N.D. Ill. Mar. 11, 2023).\u00a0 The ruling is significant as it enjoins enforcement of the DTLSA provision requiring staffing agencies to provide equivalent benefits as directly-hired, comparable client company employees.\u00a0 The decision does not, however, affect the DTLSA requirement that staffing agencies provide equal wages after 90 days of work at a client.\u00a0 However, this opinion and order indicates that the DTLSA\u2019s equal benefits requirement \u2013 considered by many to be the most onerous portion of the recent DTLSA amendments \u2013 appears likely to be preempted by the Employment Retirement Income Security Act (\u201cERISA\u201d) and may never go into effect at all.<\/i><\/p>\n

Background<\/b><\/p>\n

In May 2023, the Illinois General Assembly amended the DTLSA to include several new and significant provisions, which Governor Pritzker signed into law on August 4, 2023.\u00a0 See<\/i> 820 ILCS 175\/et seq. \u00a0Section 42 of the amended DTLSA, titled \u201cEqual Pay for Equal Work,\u201d included the obligation that staffing companies pay temporary workers that work more than 90 days within a twelve-month period at a client company the same wages and \u201cequivalent benefits\u201d as the lowest paid, comparable, directly-hired employee at the client company.\u00a0 Staffing agencies also could opt to pay the \u201chourly cash equivalent\u201d of benefits owed under the law. \u00a0Section 42 also imposed information-sharing requirements on third-party companies utilizing temporary workers, requiring them to provide staffing agencies with \u201call necessary information related to job duties, pay, and benefits of directly hired employees\u201d to facilitate compliance by staffing agencies.<\/p>\n

The amended DTLSA also required staffing agencies to disclose to temporary workers prior to the start of any assignment whether the work site was experiencing any \u201cstrike, lockout, or other labor trouble\u201d and gave the worker the right to refuse the assignment without prejudice to receiving another assignment.\u00a0 See<\/i> 820 ILCS 175\/11.\u00a0 Section 67 of the DTLSA includes a private right of action, allowing \u201cinterested parties\u201d to bring actions against staffing agencies or their company clients for violations of the DTLSA.\u00a0 An \u201cinterested party\u201d is defined in the Act as \u201can organization that monitors or is attentive to compliance with public or worker safety laws, wage and hour requirements, or other statutory requirements.\u201d\u00a0 See<\/i> 820 ILCS 175\/5, 67.\u00a0 A comprehensive breakdown of the 2023 amendments to the DTLSA and the law\u2019s significant new requirements can be found here<\/a>.<\/p>\n

The Illinois Department of Labor published emergency rules and proposed final rules in August 2023.\u00a0 The emergency rules expired on January 4, 2024, and the proposed final rules remain pending.\u00a0 Further legislation in November 2023 delayed the start of the 90-day calculation period necessary to trigger the equal pay and benefits provision in Section 42 the DTLSA until April 1, 2024.<\/p>\n

In December 2023, the Staffing Services Association of Illinois, the American Staffing Association, and three staffing agencies brought suit in federal court against the director of the Illinois Department of Labor (\u201cIDOL\u201d) and sought a preliminary injunction preventing the enforcement of \u00a7\u00a7 11, 42, and 67 of the amended DTLSA and related regulations.\u00a0 On February 7, 2024, the Court held a hearing on the motion and heard testimony from the three plaintiff staffing agencies.<\/p>\n

The Court\u2019s Decision<\/b><\/p>\n

The Court\u2019s opinion first summarized the relevant provisions of the DTLSA and relief sought by the plaintiffs.\u00a0 The Court noted that the plaintiffs did not challenge the equal wage requirement in \u00a7 42 of the DTLSA.\u00a0 Id<\/i>. at 2 n.1.\u00a0 As to the DTLSA regulations, the Court denied plaintiffs\u2019 motion for an injunction against the emergency rules in light of their January 2024 expiration, and further declined to enjoin the proposed final DTLSA rules that plaintiffs sought to enjoin given that they were subject to and likely to change.<\/p>\n

To grant a preliminary injunction, the Court noted that plaintiffs must establish that they are likely to succeed on the merits, are likely to suffer irreparable harm absent an injunction, and that the balance of equities tip in their favor and that an injunction is in the public interest.\u00a0 Turning to \u00a7 42 of the DTLSA, the Court began its analysis by assessing plaintiffs\u2019 likelihood of success on the merits.\u00a0 Noting that the ERISA preempts laws that \u201crequire providers to structure benefit plans in particular ways,\u201d id<\/i>. at 5, the Court ultimately concluded that plaintiffs\u2019 argument that the ERISA preempts the DTLSA provision is likely to succeed.\u00a0 The Court reasoned that the \u201cequivalent benefits\u201d provision forces 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,” which prohibits a staffing agency in its \u201cability to administer ERISA plans uniformly.\u201d\u00a0 Id<\/i>. at 7.\u00a0 The Court also rejected the IDOL\u2019s argument that the option to pay the cash value of benefits avoids preemption by the ERISA, noting that for staffing agencies with employee working in different states, \u00a7 42 \u201cdenies agencies the ability to administer its ERISA plans uniformly\u201d and even the cash option \u201crequires agencies to make judgment calls about employees\u2019 eligibility and level of benefits on an individualized and ongoing basis.\u201d\u00a0 Id<\/i>. at 8.<\/p>\n

Having found that plaintiffs are likely to succeed on the merits as to the \u201cequivalent benefits\u201d provision, the Court turned to the analysis of irreparable harm from \u00a7 42.\u00a0 The Court noted the clear \u201cexpense and burden of determining the relevant values of benefits and creating, selecting, modifying, or supplementing existing ERISA plans or paying the difference\u201d that staffing agencies would be forced to incur.\u00a0 Id<\/i>. at 18.\u00a0 Additionally, the Court credited evidence offered by the staffing agencies of reduced revenue, lost clients, and the administrative burdens that would force one staffing agency to cease doing business altogether.\u00a0 Id<\/i>.\u00a0 As a result, the Court found that staffing agencies had demonstrated far more than the \u201cmere possibility\u201d of irreparable harm to support an injunction.\u00a0 Id<\/i>. at 20.<\/p>\n

Finally, the Court evaluated the balance of the equities and public interest and concluded that plaintiffs\u2019 showing that they are likely to succeed on the merits and the irreparable harm that would result from \u00a7 42 outweighed the IDOL\u2019s goal of ending \u201cpermatemping,\u201d or the long-term hiring of temporary workers without offering them a permanent position with corresponding wages and benefits of directly-hired employees.\u00a0 Id<\/i>. at 21.<\/p>\n

Notably, the staffing agency plaintiffs also sought to invalidate the portion of \u00a7 42 of the DTLSA requiring client companies to disclose pay and benefit data.\u00a0 The Court held that the plaintiffs lacked standing to assert that challenge. However, it observed in a footnote that \u201c[t]he challenge to this part of Section 42 should come from the agencies\u2019 third-party clients.\u201d\u00a0 Id<\/i>. at 5 n.3.<\/p>\n

Next, the Court analyzed plaintiffs\u2019 challenge to \u00a7 11 of the DTLSA, which requires staffing agencies to disclose to temporary workers prior to beginning an assignment of any \u201cstrike, lockout, or other labor trouble\u201d at a client site.\u00a0 Id<\/i>. at 11.\u00a0 The staffing entity plaintiffs argued that the provision is preempted by the National Labor Relations Act (\u201cNLRA\u201d) and applicable U.S. Supreme Court precedent interpreting the NLRA.\u00a0 Ultimately, the Court disagreed, holding that \u00a7 11 of the DTLSA regulates disclosure and work assignments, given the employee\u2019s right to refuse the assignment, while the relevant section of the NLRA protects an employee\u2019s right to \u201cjoin, or assist labor organizations; collectively bargain through a representative of the employee\u2019s choosing; engage in concerted activity, e.g., striking or picketing; or refrain from engaging in such activities.\u201d\u00a0 Id<\/i>. at 12-13.\u00a0 That \u00a7 11 of the DTLSA and the rights protected by the NLRA \u201cmight arise in the same setting,\u201d the Court concluded, does not mean that \u00a7 11 is precluded outright.\u00a0 Id<\/i>. at 14.\u00a0 The Court similarly rejected plaintiffs\u2019 argument that the right to hire replacement workers is an \u201ceconomic weapon\u201d afforded by the NLRA, which the DTLSA curtails through the right of refusal, reasoning that the DTLSA \u201cmerely requires agencies to give their employees information about a potential work site and the right to an alternative assignment.\u201d\u00a0 Id<\/i>. at 15.<\/p>\n

Finally, the Court analyzed plaintiffs\u2019 contention that \u00a7 67 of the DTLSA, which gives a private right of action to any \u201cinterested party,\u201d violates constitutional due process guarantees because the \u201cinterested party\u201d may not be injured by any violation.\u00a0 The Court noted the existence of other statutes giving private rights of action to interested parties, ultimately concluding that plaintiffs\u2019 argument is one of standing, which the Court declined to address in a hypothetical scenario.\u00a0 Id<\/i>. at 17.<\/p>\n

Implications For Employers<\/b><\/p>\n

This decision is hugely consequential for both staffing agencies and the companies that use them.<\/p>\n

The ongoing coordination and information-sharing regime envisioned by the DTLSA concerning employee benefits is unprecedented, and was the source of significant concern for staffing agencies and third-party company clients alike.\u00a0 This Court\u2019s ruling not only prevents enforcement of the \u201cequivalent benefits\u201d requirement of the DTLSA indefinitely, but also indicates that the benefits provision in \u00a7 42 of the DTLSA is unlikely to survive at all.\u00a0 Though technically unaffected by this decision, the \u00a7 42 requirement requiring companies to disclose benefit-related data may await a similar fate if and when a challenge by a staffing company client is brought.\u00a0 While undoubtedly litigation over the DTLSA will continue, including possibly an appeal of the Court\u2019s opinion and order, this decision prevents the application of the most onerous provision in the DTLSA and the imposition of a burdensome administrative regime on staffing agencies and their clients for at least the foreseeable future.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Gregory Tsonis Duane Morris Takeaways: In a consequential ruling on March 11, 2024, Judge Thomas M. Durkin of the U.S. District Court for the Northern District of Illinois granted in part and denied in part a motion for a preliminary injunction concerning amendments to the Illinois … <\/p>\n

Continue reading “Illinois Federal Court Enjoins \u201cEquivalent Benefit\u201d Provision Of Day And Temporary Labor Services Act In Significant Win For Staffing Agencies And Their Company Clients”<\/span><\/a><\/p>\n","protected":false},"author":583,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[97],"tags":[],"ppma_author":[30],"class_list":["post-1291","post","type-post","status-publish","format-standard","hentry","category-erisa-class-actions"],"authors":[{"term_id":30,"user_id":583,"is_guest":0,"slug":"classactiondefense","display_name":"Class Action Defense","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2020\/10\/dmlogo.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1291","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/users\/583"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/comments?post=1291"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1291\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/media?parent=1291"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/categories?post=1291"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/tags?post=1291"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/ppma_author?post=1291"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}