Illinois may not require industrial staffing firms to provide temporary workers with benefits equal to directly employed workers at this time, a federal judge ruled on March 11. The prohibition will last at least until the end of a court fight, which will decide whether such a regulation is legal.

The equal benefits requirement is part of a series of new regulations on industrial staffing providers approved by the Illinois General Assembly in 2023 when it updated the Illinois Day and Temporary Labor Services Act.

One new regulation called for temporary employees to receive equal pay and equivalent benefits after working at a client site for 90 days in a 12-month period. A staffing firm could also instead opt to provide the hourly cash equivalent of the actual cost of benefits.

While the regulation was set to take effect April 1, a lawsuit was filed against that provision and two others on November 2023. Plaintiffs are the American Staffing Association, the Staffing Services Association of Illinois and three staffing firms.

In allowing for the hold on the equal benefits provision, US District Judge Thomas Durkin wrote that plaintiffs “demonstrated more than a mere possibility of irreparable harm.”

Durkin continued, “Plaintiffs will be forced to incur the expense and burden of determining the relevant values of benefits and creating, selecting, modifying or supplementing existing ERISA plans or paying the difference. Plaintiffs anticipate having to develop new administrative systems and processes and augment their human resources staff to accomplish these tasks, the costs of which at least one agency cannot absorb.”

Staffing firms have already had business losses because of the regulation, according to a filing in the case. One staffing firm’s revenue is down 8% compared to the same period last year, and five clients have stopped using the firm entirely, accounting for 100 employees. In addition, three clients have transitioned to full-time employees or restricted assignments to less than 90 days.

“The clients explained that they were ending temporary assignments because they did not want to share sensitive information with the agencies, as required by the law,” according to the filing.

Two other changes to the Day and Temporary Labor Services Act are being challenged in this case as well. One requires that temporary workers receive written notice when being assigned to a location where a “strike, lockout or other labor trouble exists.” Workers would also be allowed to decline such assignments and opt for other assignments. The other change gave right of legal action to interested third parties.

“The staffing industry successfully enforced its rights in the Illinois action,” Matthew Furton, a partner with Locke Lord LLP, who represents the staffing industry, said in a note to SIA regarding the decision by the judge. “The court’s decision reflects the reality that the law imposed extraordinary burdens on staffing agencies and their clients. It also recognizes that the federal government is the exclusive regulator of retirement and other benefit plans. “

Furton continued. “In the long run, the staffing industry stands to do well on both the labor disputes and so-called interested parties aspect of the law. Any staffing agency facing a claim under the Labor Disputes provision or a claim by a so-called ‘interested party’ can use the research and advocacy we presented in this case as a means of defeating those claims. Indeed, it is doubtful other states will copy these provisions because the briefing demonstrates that an obligation to disclose labor disputes and a grant of authority to sue to interested parties are unlikely to survive legal challenges in direct litigation.”

When contacted by SIA, the state of Illinois said it does not have comment on this case at this time as it is still ongoing.

The staffing industry’s lawsuit does not challenge the equal wages requirement.

Staffing Services Association of Illinois et al vs. Jane R. Flanagan, solely in her capacity as the director of the Illinois Department of Labor, US District Court for the Northern District of Illinois, 1:23-cv-16208