Amendments To Illinois Day and Temporary Labor Services Act Impact Both Staffing Agencies and Their Clients Who Engage Contingent Workers for Work That Is Not Professional or Clerical

On May 19, 2023, both Houses of the Illinois General Assembly passed HB2862, which amends the Day and Temporary Labor Services Act, 820 ILCS 175/. On June 16, 2023, the bill was sent to the Governor, with an effective date that is the later of July 1, 2023, or the date it is signed by the Governor. If the Governor has not signed or vetoed the bill by August 15, 2023, it will become law automatically.

The bill makes significant changes to the Act that will impact both staffing agencies that employ day or temporary laborers and the clients who engage their services. As detailed below, the amendment:

• Requires that laborers assigned to a client for more than 90 calendar days receive “equal pay for equal work,” including benefits, as compared to direct employees of the client, and that clients share information with the staffing agency sufficient to ensure that requirement is met.
• Requires notice to laborers when the assignment is to a site experiencing a strike, lockout, or “other labor trouble.”
• Requires staffing agencies to make inquiries about safety at the client worksite, advise the client of any existing job hazards, provide training to its laborers placed on assignment, and provide information about the training to its client.
• Requires clients to disclose information about anticipated job hazards, review the staffing agency’s training, provide training tailored to the site, and permit the agency to visit the site to observe safety practices.
• Increases fees charged to staffing agencies and penalties for staffing agencies and clients who commit notice violations.
• Provides third-party organizations the ability to file civil actions to enforce compliance with the Act.

Covered “Day and Temporary Labor”

The Act’s definition of “day and temporary labor” remains unchanged. As before, it refers to “work performed by a day or temporary laborer at a third party client,” but specifically excludes work “of a professional or clerical nature.” (820 ILCS 175/5.) In other words, staffing agencies that assign their employees only to professional or clerical roles, or their client companies that use temporary staffing only for professional or clerical work need not be concerned with the Act’s requirements.

As before, staffing agencies that place day and temporary laborers on assignment must register with the Illinois Department of Labor. (820 ILCS 175/45.) The process and requirements for doing so have not changed, but the amendment increased the fees charged for registration. The amendment also gives the Illinois Attorney General the authority to ask a circuit court to suspend or revoke registration “when warranted by public health concern or violations” of the Act (820 ILCS 175/50) and increases by threefold the amount of penalties that may be assessed for violations discovered during audits. (820 ILCS 175/70.)

Also as before, laborers who are contracted for a single day assignment must be provided a Work Verification Form. (820 ILCS 175/30.) The client is responsible for ensuring this requirement is satisfied, and the penalties for failure to provide the form have increased. Before, clients were subject to a civil penalty of no more than $500; now, the penalty may range from $100-$1,500. Clients are also responsible for ensuring that any staffing agency that provides covered laborers has registered with the state and may be penalized $100-$1,500 for each day it contracts with a staffing agency that should be registered but has not done so. (820 ILCS 175/85.)

Laborers On Assignment More Than 90 Days Are Entitled To “Equal Pay For Equal Work”

For covered laborers, the Act imposes significant new requirements that will require coordination between staffing agencies and their clients. Under the new law, laborers who have been on assignment for more than 90 calendar days are entitled to “equal pay for equal work” as performed by those employed directly by clients. (820 ILCS 175/42.) The language of the amendment presents numerous practical challenges for both staffing agencies and clients.

The first challenge is defining “equal work.” Under the Act, the laborer must be paid at least as much as the client’s “lowest paid directly hired employee:”

• Who has “the same level of seniority at the company”
• Who is “performing the same or substantially similar work on jobs the performance of which requires substantially similar skill, effort, and responsibility”
• Where the work is “performed under similar working conditions.”

If a “comparative employee” is not identified, then the laborer is to be paid at least the same amount as “the lowest paid direct hired employee at the [client] with the closest level of seniority.”

A second challenge is defining “equal pay.” Under the Act, equal pay includes both “the rate of pay and equivalent benefits.” However, staffing companies “may pay the hourly cash equivalent of the actual cost benefits in lieu of benefits required.” This would require the client to share information about the benefits it provides and the value of those benefits. Further complicating this analysis is the fact that the Act does not explain what “benefits” are included. For example, do the requirements apply only to health and welfare benefits, or are other fringe benefits included? And what about staffing agencies that offer health and welfare benefits to their employees: are they required to compare the value of their plans to those offered by their clients and to offer pay to make up any difference?

Typically, only the client would be in possession of much of the information needed to make these assessments, and under the Act clients are “obligated to timely provide” the staffing agency “with all necessary information related to job duties, pay, and benefits of directly hired employees necessary” for the staffing agency to comply. A client who fails to provide the information has committed a “notice violation” for which it may be liable for compensatory damages, a penalty charge in an amount up to $500, and attorney’s fees and costs. (820 ILCS 175/95.)

New Jersey passed a law with similar requirements earlier this year. (N.J.P.L.2023, c.10.) The constitutionality of the law is being challenged in federal court.

Laborers Must Receive Advance Written Notice Of Job Site Strikes, Lockouts, Or “Other Labor Trouble”

The amended Act includes a new section aimed at giving laborers the right to refuse assignment to a site where there is a labor dispute. (820 ILCS 175/11.) Specifically, if the assignment is to “a place where a strike, a lockout, or other labor trouble exists,” then the staffing agency must provide “a statement, in writing” to the laborer no later than the time of dispatch. The writing may be electronic, but the staffing agency bears the burden to show the notice was in fact provided. Moreover, that written statement must be provided “in a language that the [laborer] understands” that informs the laborer “of the labor dispute” as well as the laborer’s “right to refuse the assignment, without prejudice to receiving another assignment.”

The phrase “other labor trouble” is vague, and the Act fails to offer any explanation what types of activities other than a strike or lockout might need to be communicated to laborers. The Act also fails to explain how much detail must be provided to “inform” the laborer of the dispute.

As a practical matter, staffing agencies and clients will need to cooperate to share information in order to comply with these new requirements. Nonetheless, the Act places accountability for any violations on the staffing agency. The Act treats every instance of failure to provide satisfactory notice as a separate violation. Here, too, the notice penalties include compensatory damages, a penalty charge in an amount up to $500, and attorney’s fees and costs. (820 ILCS 175/95.)

Both Covered Staffing Agencies And Clients Must Take Additional Action Regarding Safety

The amendment adds significant new provisions related to safety that will require staffing agencies and clients to take independent actions and to coordinate with each other.

Staffing agencies must “inquire” before any assignment begins to learn about the client’s safety and health practices at the workplace where the laborer will be assigned. This inquiry must include an assessment of safety conditions, worker tasks, and the client’s safety programs, and may include visiting the worksite.

If during the inquiry the staffing agency “becomes aware of existing job hazards that are not mitigated by the client company,” it must make the client aware, urge the client to correct the hazard, and document its efforts, and remove the laborer if the hazards are not corrected.

Staffing agencies also must provide “general awareness safety training for recognized industry hazards” that may be encountered at the client’s worksite. The training must be free for the laborer and provided in the laborer’s “preferred language.” The staffing company must maintain records of the date the training was delivered and the content of the training.

Staffing agencies also need to communicate these training efforts to their clients at the start of the contract between the two parties. This requirement includes providing a general description of the topics that were covered.

Finally, staffing agencies must provide laborers with information about how to report a safety concern at the workplace as well as the Illinois Department of Labor hotline number.

Clients face their own new requirements. Before any laborer begins work, the client must “document and inform” the staffing agency of any anticipated job hazards, and review the safety training that the staffing agency provided. The client must provide its own “specific training tailored to the particular hazards” at its worksite, document and maintain records of the training, and provide confirmation to the staffing agency within three days that the training was completed.

If the job tasks or work location change and new hazards are presented, then the client must inform both the staffing agency and the laborer, then provide new training and personal protective equipment before the new work begins.

The client also must allow the staffing agency to visit any worksite to observe and confirm the client’s training, and to obtain information about the job tasks, safety and health practices, and hazards at the site.

On the one hand, these new requirements generally align with the Temporary Worker Initiative guidance published by the Federal Occupational Safety and Health Administration (OSHA). However, that guidance has not been codified. The amendment to the Illinois law raises the stakes for staffing firms and their clients in Illinois and transforms what was once guidance into prescriptive obligations with attendant penalties for noncompliance. 

Third-Parties May File Private Actions To Enforce Compliance

The amendment also creates new rights for any “interested party,” which is defined broadly to include any “organization that monitors or is attentive to compliance with public or worker safety laws, wage and hour requirements, or other statutory requirements.” (820 ILCS 175/5.)

These “interested parties” are now empowered to initiate civil actions against both staffing agencies and clients if they have a “reasonable belief” that there has been a violation of the Act within the preceding three years. The interested parties must first submit a complaint to the Illinois Department of Labor, which then advises the staffing agency or client of the complaint. However, even if the Department of Labor finds the complaint to be unjustified or outside of its jurisdiction, or if the staffing agency or client cures the alleged violation, the interested party will receive a notice of right to sue. An interested party that prevails in a civil action is entitled to 10% of the statutory penalties assessed, as well as its attorney’s fees and expenses incurred.

Conclusion

The Illinois General Assembly’s amendment of the Day and Temporary Labor Services Act imposes significant new obligations on staffing agencies and their clients, and provides little time to put in place the steps needed to comply. The General Assembly has left the Department of Labor flat-footed as well, and no regulations or guidance have been provided to clarify the often ambiguous terms added to the Act. Both staffing agencies and their clients should revisit their policies and practices in light of these new requirements, and aim to work cooperatively with each other to navigate these new requirements in good faith while awaiting further guidance how the Act should be construed. Staffing agencies and clients also should make sure that their services agreements include provisions that protect the confidentiality of the information each much share. If you need additional information, please do not hesitate to contact us.