The third-party client must determine who is a comparator employee for purposes of the Temporary Laborers’ Bill of Rights’ pay equity requirement.

Effective August 5, 2023, temporary help service firms in New Jersey―and their third-party clients―must comply with several requirements of the Temporary Laborers’ Bill of Rights, including those related to recordkeeping, registration, wages and benefits. The most noteworthy provision requires covered temporary laborers to be paid the same average rate of pay and the average cost of benefits as a permanent employee of a third-party employer “performing the same or substantially similar work on jobs the performance of which requires equal skill, effort and responsibility, and which are performed under similar working conditions.” (N.J.S.A. 34:8D-7) To comply with the pay equity requirement, temporary help service firms and third-party clients must understand what is considered substantially similar work and how to calculate the average rate of pay and the average cost of benefits.

On July 21, 2023, the New Jersey Department of Labor and Workforce Development posted on its website a notice of proposal with rules to implement Sections 1 through 7 and Section 10 of the Temporary Laborers’ Bill of Rights. The department also submitted the proposed rules for publication in the New Jersey Register. The proposal is open to public comment until October 20, 2023. This Alert focuses on the proposed pay equity rules in Section 7. For additional information about the Temporary Laborers’ Bill of Rights, see our prior Alert.

Proposed Rule N.J.A.C. 12:72-7.3: Principles to Determine If Work Is Substantially Similar

The third-party client must determine who is a comparator employee for purposes of the Temporary Laborers’ Bill of Rights’ pay equity requirement. Proposed rule N.J.A.C. 12:72-7.3 lists 12 principles for third-party clients to determine whether a temporary laborer and a third-party client’s employee are performing substantially similar work, including:

• Job titles and job descriptions are relevant but not dispositive.
• The determination focuses on actual job duties performed.
• The functions and job duties need not be identical to be substantially similar.

This proposed rule requires the third-party client to provide the temporary help service firm with a listing of the hourly rate of pay and cost per hour of benefits for each of its employees that the third-party client determines would be a comparator employee. As described below, the temporary help service firm uses this information to determine the temporary laborer’s hourly rate of pay.

Proposed Rule N.J.A.C. 12:72-7.2: Steps to Calculate Rate of Pay and Cost of Benefits

To comply with the Temporary Laborers’ Bill of Rights, a temporary service firm must pay a covered temporary laborer based on the average rate of pay and average cost of benefits of comparator employees of the third-party client. Proposed rule N.J.A.C. 12:72-7.2 provides detailed instructions for calculating the average rate of pay and average cost of benefits for purposes of the pay equity requirement.

The temporary help service firm should use the list of pay and benefits information provided by the third-party client to determine the temporary laborer’s hourly rate of pay.

According to this proposed rule’s subsections (c) and (d), if a comparator employee is paid on a salary basis, the hourly rate of pay is calculated by dividing the annual salary paid by 2,080 hours. Similarly, the cost per hour of benefits is calculated by dividing the annual cost to the employer by 2,080 hours.

To determine the appropriate hourly rate for a temporary laborer, the temporary help service firm should:

• Add the hourly rates for the third-party client’s comparator employees and divide by the number of comparator employees to determine the average hourly rate.
• Add the cost per hour of benefits for comparator employees and divide by number of comparator employees to determine the average cost per hour of benefits.
• Add the hourly rate of pay of the third-party client’s comparator employees and the average cost per hour of benefits.
• Subtract the cost per hour of benefits provided by the temporary help service firm to the temporary laborer. This answer is the hourly rate the temporary help service firm should pay for work.

Additional Proposed Rules

Additionally, the proposed rules provide definitions and guidance for complying with various sections of the law, including details for:

• Notification requirements, e.g., what the assignment notification should include and a description of the notice of change for multiday assignments (N.J.A.C. 12:72-3).
• Recordkeeping requirements, e.g., which records must be made available for inspection by the labor commissioner and which should be available for copying by temporary laborers (N.J.A.C. 12:72-4).
• Requirements and restrictions regarding transportation of temporary laborers (N.J.A.C. 12:72-5).
• The prohibition on post-employment restrictions and the cap on the placement fee a temporary help service firm can charge (N.J.A.C. 12:72-6).
• Restrictions on charges and payroll deductions (N.J.A.C. 12:72-8).
• Additional responsibilities, e.g., the detailed itemized statement and annual earnings statement that must be provided to temporary laborers (N.J.A.C. 12:72-9).
• The requirement that a third-party client reimburse the temporary help service firm wages and related payroll taxes (N.J.A.C. 12:72-10).

What the Guidance Means for Employers

Until final rules are published, temporary help service firms and third-party clients can demonstrate their efforts to comply with the Temporary Laborers’ Bill of Rights by following the proposed rules. For the pay equity requirement, proposed rules N.J.A.C. 12:72-7.2 and N.J.A.C. 12:72-7.3 help temporary service firms determine comparator employees and the average rate of pay and average cost of benefits.

For More Information

If you have any questions about this Alert, please contact Michael R. Futterman, Patrice E. LeTourneau, any of our attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.