Illinois Set to Join New Jersey in the War on Staffing

Manufacturers ask Governor to veto House Bill (HB) 2862 before August 15 effective date

Pending amendments to the Illinois Day and Temporary Labor Services Act are predicted to have dire consequences for industrial staffing agencies serving Illinois. Similar to the recently enacted New Jersey legislation that I wrote about last week, the new law will require industrial staffing firms to match the average pay and benefits of similarly situated employees of their clients. The "equal pay" obligation begins 90 days after the temporary assignment begins rather than immediately as in New Jersey.

HB 2862 applies to “work performed by a day or temporary laborer at a third-party client,” and excludes work “of a professional or clerical nature.” This effectively covers 100% of non-office temporary workers, unlike the New Jersey bill, which applies to eight specific categories of blue-collar labor.

It is highly unlikely that staffing clients will disclose their internal pay and benefit rates to staffing firms. It is even less likely that they will tolerate the higher staffing firm billing rates that will be required under the law, rates that necessarily would include a staffing firm markup and cause staffed labor to cost more than the client's internal labor.

The law also adds new regulatory requirements. Staffing firms must inform their workers if the client is undergoing “a strike, a lockout, or other labor trouble." There are new safety and training obligations for both staffing firms and their clients, and substantially increased penalties for violations of the law.

The only way laws like this make sense is if the true goal is to effectively eliminate industrial staffing in the state. The Illinois Manufacturing Association wrote a letter to Governor Pritzker (copy attached below) laying out the problems with the law and asking him to veto it, although this is not expected to happen. The objections raised by the letter include:

[The law] will only impede Illinois’ competitiveness by mandating a new pay and benefit scale for temporary workers after 90 days of employment. This will make it more expensive to operate in Illinois and create an advantage for companies located outside our state or abroad.

While [the law] attempts to provide additional rights and protections for day and temporary workers, it may, in fact, have the opposite effect for these employees. The bill encourages Illinois companies, including manufacturers, retailers, office workers and more, to refrain from extending job opportunities to temporary workers after 90 days of work. Temporary workers who are in positions may find themselves out of a job.

There is indeed a very real chance that the law will cause more harm than good to the temporary workforce. "Ninety days and out" may become new normal for Illinois temps.

Some Illinois staffing firms are making attempts to align their operations with the new law. Here is an example from the website of one family-owned firm:

The Bill will go into effect on August 15th, 2023, or immediately upon signature by Governor Pritzker. We are acting now to prepare for its implementation and are actively engaging with industry experts, legal advisors, and relevant authorities to stay updated on any additional guidelines or clarifications that may be issued.

Upon reaching the 90-day threshold, you have several options to ensure compliance with the amendment while aligning with your specific business needs. We are committed to finding unique solutions that best suit your requirements including adjusted compensation, conversion to direct employees, and assignment transition.

There are hundreds of industrial staffing firms in Illinois, many of them family-owned franchise operations. They may be all at risk because of this law. These businesses employ workers and pay taxes in a state that desperately needs jobs and revenues. According to a recent report by the non-profit research organization Wirepoints, the state in April 2023 had the 5th worse unemployment rate in nation, along with some of the nation's highest taxes:

If the law goes into effect, as expected, there will be damage to workers, businesses and the Illinois economy - a legislative trifecta of bad policy that will help ensure the state's continued decline.