Following intense lobbying, a multitude of setbacks and clerical errors, one conditional veto, and fiercely debated revisions, on Feb. 6, New Jersey Gov. Phil Murphy signed into law A.B. 1474/S. 511, known as the Temporary Laborers' Bill of Rights.

The bill creates numerous protections for New Jersey's 127,000 temporary workers, but its implications cannot be overstated. It places significantly onerous burdens on temporary help service firms and their third-party clients operating in the state. Compliance will be time-consuming and expensive; penalties will be steep.

The bill was highly controversial from the get-go and faced strong opposition from employer advocacy groups including, among others, the New Jersey Business and Industry Association and the New Jersey Staffing Alliance, who contend that it "will decimate segments of an industry that provides greatly for New Jersey's economy, which will harm the workers it's trying to help in the long run."[1]

However, the bill was lauded by workers' rights groups, who claim that temporary workers in the state have long been underpaid, denied benefits and forced to work in unsafe conditions without proper redress.

Whichever side one is on, one thing is clear: In a state where businesses are already subject to some of the nation's most burdensome regulations, the Temporary Laborers' Bill of Rights is one more hurdle employers must overcome.

While most of the bill's provisions will take effect 180 days after enactment on Aug. 5, several provisions including the requisite hire notices and anti-retaliation prohibitions will be effective 90 days after signing on May 7. Some of the more notable provisions are listed below.

Who Does It Cover?

The law applies to staffing firms that assign individuals to assist the firm's customers in the handling of the [their] temporary, excess or special workloads, and who, in addition to the payment of wages or salaries to the employed individuals, pays federal social security taxes and State and federal unemployment insurance; carries workers' compensation insurance … and sustains responsibility for the actions of the employed individuals while they render services to the firm's customers. Notably, the bill as enacted does not apply to all temporary positions, due to Murphy's conditional veto. While early versions were all-encompassing, Murphy proposed several changes on Sept. 22, 2022, including narrowing the definition of temporary laborers:

My suggested amendments also hone the definition of temporary laborers to more clearly delineate the occupations covered by the bill, tailoring the application of the bill to those positions in the workforce at greatest risk of exploitation. This will ease the compliance burdens placed on the temporary help service industry, while ensuring that laborers in certain occupations subject to more extreme hardships receive due protection and consideration in enforcement.[2]

The final version of the bill now covers only certain designated classification placements, which correspond to specific occupational categories designated by the U.S. Department of Labor's Bureau of Labor Statistics. These covered occupations include:

• Some protective service jobs;
• Food preparation and serving;
• Building and grounds cleaning and maintenance;
• Personal care and service;
• Construction labor and help;
• Installation, maintenance and repair occupations;
• Production work;
• Transportation and material moving; and
• Any successor categories the Bureau of Labor Statistics may designate.

What Is Required?

Wage and Benefit Requirements: Effective Aug. 5

The most controversial provision of the bill requires that temporary laborers receive the same average rate of pay and benefits as permanent employees of a third-party client who are "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."

This equal-pay-equal-benefit provision is the first of its kind and will undoubtedly cause issues. From an administrative perspective, employers often determine rate of pay based on factors such as seniority and length of service, factors that are generally inapplicable to temporary laborers. Coupled with the fact that the DOL has yet to issue guidance regarding calculating the average rate of pay or equivalent benefits, implementation could prove quite difficult.

Likewise, temporary help service firms contract with multiple businesses, all of which likely offer a variety of benefits packages from the routine, such as 401(k), health insurance, life insurance and paid time off, to the unique, such as student loan forgiveness, fertility treatments, catered meals and Kindle e-readers.

The requirement that these benefits somehow be homogenized across all of a firm's clients will prove logistically challenging if not impossible — not to mention, the benefit obligation as a whole may be preempted by the Employee Retirement Income Security Act.

Of course, these logistical nightmares pale in comparison to the substantially increased costs that will result. These costs will be passed on to third-party clients, undermining the primary reason businesses seek temporary laborers in the first place, disincentivizing the use of staffing firms and potentially causing their exodus from the state, as opponents of the bill have warned.

As a result of Murphy's conditional veto, at the request of a temporary laborer, staffing firms must hold daily wages of the laborer and instead make biweekly or semimonthly payments in a single check or through direct deposit, so the laborer can avoid check-cashing fees.

While certainly important, this new obligation, like those above, will inevitably cause administrative issues as staffing firms now have to grapple with various payroll cycles, where any mistakes will subject them to Wage Theft Prevention Act penalties.

The bill also prohibits deducting wages for transportation, background checks and paycheck chasing. Costs of meals and equipment can still be deducted as long as a laborer's hourly rate does not fall below the minimum wage.

Finally, if a temporary laborer is contracted to work at a third-party client but not used, that worker must be paid a minimum of four hours, unless the laborer is sent to another location during the same shift, in which case the laborer must be paid a minimum of two hours.

Registration: Effective Aug. 5

Compliance with the new law requires mandatory certification with the Division of Consumer Affairs, an annual fee and a surety bond of no less than $200,000. Failure to register with the state could result in a fine of $5,000 per day, suspension or debarment.

Likewise, third-party clients are prohibited from entering into contracts with unregistered firms and could face penalties for doing so.

Record-Keeping Requirements: Effective Aug. 5

Under the bill, temporary help service firms will be required to keep certain records for six years.

These records include, among others, contact information for third-party clients and temporary laborers, specific qualifications or attributes of temporary laborers, copies of all contracts and employment notices, and any deductions and verification of the actual cost of any equipment or meals charged.

Firms will be required to make these records, as well as the number of hours billed to a client, available to a temporary laborer within five days following a written request.

Notice Requirements: Effective May 7

Firms must begin providing temporary laborers with a written statement in English and in the worker's primary language that includes the:

• Names of the third-party client and workers compensation carrier;
• Nature of the work to be performed;
• Wages and terms of transportation;
• Cost of any meal or equipment provided;
• Schedule and length of the assignment;
• Any special clothing, protective equipment or training required; and
• Amount of sick leave available under New Jersey law, and the terms of its use.

This notice must be provided to a laborer on the first day of an assignment, when any of the terms are changed and when there is a new assignment. Firms must also give the temporary laborer written notice of any change in the schedule, shift or location of a multiday assignment within 48 hours.

Firms are required to provide each temporary laborer a detailed itemized statement on their paycheck stub, or on a form approved by the commissioner, that lists the:

• Contact information for the third-party client;
• Number of hours worked and the rate of pay;
• Total pay period earnings and any deductions;
• Maximum placement fee that the firm may charge to a client to directly hire the worker; and

The total amount of actual charges to the client for the worker during each pay period compared to the total compensation cost for the worker, including costs of any benefits provided.

For each temporary laborer who is contracted to work a single day, the third-party client must, at the end of the workday, provide the temporary laborer with a work verification form that contains the date, the temporary laborer's name, the work location and the hours worked on that day.

Finally, firms must post a notice of the bill's requirements and a notice that informs the public of a toll-free telephone number operated by the DOL where workers and the public may file wage dispute complaints and other alleged violations. Notices must be in English and any other language generally understood at the firm.

Placement Fees: Effective Aug 5

The new law prohibits any restrictions on a temporary laborer's ability to accept or be offered a permanent position with the third-party client. However, temporary help service firms may charge a placement fee, subject to a cap provided in the bill.

Retaliation and Noncompliance

The bill makes it unlawful to retaliate against a worker for exercising their rights under the law. This includes complaints to the staffing firm or the third-party client, as well as instituting or participating in any proceeding related to the new law. If a temporary laborer is terminated or disciplined within 90 days of exercising their rights under the law, it will establish a rebuttable presumption of retaliation.

Given the statutory burden shifting — effectively removing one key hurdle — this will likely result in an increase in litigation against staffing firms and their clients.

The law provides for a private right of action with no exhaustion requirement, expressly provides that actions can be brought as class actions, and carries significant penalties for violations, ranging from $500 to $5,000 per violation.

Significantly, the bill makes employers that contract with temporary help service firms jointly and severally liable for any violations.

What Does This Mean for New Jersey Employers?

While the law's intentions are certainly laudable, the highly controversial Temporary Laborers' Bill of Rights places numerous significant obligations on temporary help service firms and their third-party clients.

That said, there are no more vetoes and the bill is here to stay, at least until opponents find enough votes to make changes. Staffing firms should immediately start thinking about these issues and planning for implementation including the following:

1. Start planning — from a legal and business perspective — for the equal-pay-equal-benefits requirement. This includes reviewing and analyzing wages and benefits of temporary laborers and the permanent workers that they supplant, talking with third-party clients about the new wage requirements and determining a business plan that dissuades clients from directly hiring employees to avoid the new rules.

2. Register with the commissioner and obtain a $200,000 surety bond.

3. Review employment policies and practices to ensure compliance.

4. Make sure to have notices and enhanced wage statements prepared. New notices are mandatory as of May 7.

5. Review existing contracts with third-party clients to ensure statutory compliance.

6. Train personnel on the various mandates. This includes the law's rebuttable presumption of retaliation, which may require some extra analysis before disciplining a temporary laborer who has recently complained.

Given the law's steep penalties and onerous requirements, it would behoove staffing firms and their clients to plan well in advance of the May 7 and Aug. 5 effective dates.

Among the additions made to the law by Murphy's conditional veto was an appropriation of $1 million "to ensure robust enforcement."[3] Employers in New Jersey should understand that the New Jersey Department of Labor and Workforce Development fully intends to prosecute noncompliance.

References

[1] Alexis Bailey, Denise Downing, NJ Spotlight News, Feb. 2, 2023 (Op-Ed: NJ needs to find a middle ground on temp. workers bill | NJ Spotlight News). https://www.njspotlightnews.org/2023/02/op-ed-temp-workers-bill-lacks-balance/.
[2] See Gov. Murphy's September 22, 2022, Veto State available at https://d31hzlhk6di2h5.cloudfront.net/20220922/2f/aa/b4/91/86ea6d30870e10639fb9dbde/A1474CV.pdf.
[3] Id.

 

Reprinted with permission of Law360.