On July 24, 2024, the U.S. Court of Appeals for the Third Circuit declined to block a New Jersey law aimed at equalizing the pay of temporary workers with that of direct employees.

Quick Hits

• The Third Circuit affirmed a lower court’s ruling declining to block New Jersey’s Temporary Workers Bill of Rights Law, which seeks to equalize pay for temporary workers to that of permanent workers, in a challenge by industry groups.
• The appellate court ruled that the law does not unlawfully burden out-of-state businesses or exceed the state’s police power, and that it is not unlawfully vague.
• The groups are still seeking a partial preliminary injunction in the lower courts on a new claim and oral arguments are set for July 29, 2024.

The Third Circuit, in New Jersey Staffing Alliance v. Fais, affirmed a July 2023 lower court ruling denying a preliminary injunction in a suit brought by a staffing industry group and other business groups to prohibit enforcement of the New Jersey Temporary Workers Bill of Rights (TWBR or the Act), which took effect on August 5, 2023.

The Third Circuit ruled that the business groups were not entitled to a preliminary injunction because they were not likely to succeed on the merits of any of its arguments. However, the underlying case is still proceeding in the trial court.

New Jersey Temporary Workers Bill of Rights

The TWBR, signed by Governor Phil Murphy on February 6, 2023, imposes a host of obligations on staffing firms that provide temporary workers in New Jersey. Most notably, the act requires firms to pay temporary workers no less than the average rate of pay and cost of benefits provided to direct employees in similar positions. To comply with the law, staffing firms must obtain pay and benefits information from their third-party clients.

The NJ Staffing Alliance plaintiffs have argued that the TWBR violates the dormant Commerce Clause and is an unreasonable exercise of state police power because it acts like a “minimum pricing” and a tariff on out-of-state businesses. The groups further argued that the Act’s equal pay provision is void for vagueness because it fails to properly define the terms “benefits” or “same or substantially similar work.”

Dormant Commerce Clause and Vagueness

The Third Circuit ruled that the TWBR does not violate the dormant Commerce Clause as the Act does not benefit in-state economic interests by burdening out-of-state competitors. The court found that the Act applies equally to both in-state and out-of-state temporary service agencies. Regarding the state’s police power, the court found that the state has a legitimate interest in protecting temporary workers and that the provisions of the Act are “rationally related” to those interests.

The court also held that neither the definition of “benefits” nor “same or substantially similar work” is so vague as to void the act. The court noted that “[t]he presence of ‘some ambiguities’ does not prevent enforcement of an economic regulation; rather, it is void for vagueness only if it is ‘so vague as to be no rule or standard at all.’”

With respect to the term “same or substantially similar work,” the court explained that the act is not vague because it contains criteria such as “equal skill, effort, and responsibility” to assist in determining whether a temporary worker is performing the same or substantially similar work to a permanent employee.

Moreover, the court stated that “[t]he word ‘benefits’ … is not impermissibly vague either” as “business people of ordinary intelligence,” such as those in the same industry as the challengers, know what the word means “as a matter of ordinary commercial knowledge.” The business groups “inadvertently demonstrated” as much, the court noted, when, in their briefing, they discussed “specific workability concerns on issues like 401(k) waiting periods and employees who decline employer-sponsored healthcare.”

Next Steps

Despite the Third Circuit’s ruling, the business groups are still pursuing their legal challenge to the TWBR in the lower court. In May 2024, they filed an amended complaint that added a preemption claim under the Employee Retirement Income Security Act of 1974 (ERISA) with respect to the benefits requirement in the Act. They have also filed a motion seeking a preliminary injunction “to halt operation and enforcement of the benefits requirement” of the act on the basis of ERISA preemption. That motion has been fully briefed, and oral argument is scheduled to occur on July 29, 2024.

Notwithstanding the limited preliminary injunction motion pending before the lower court, the Third Circuit ruling means that the TWBR is still in force. Staffing firms and employers that use temporary workers may want to consider the act’s obligations and review their practices and agreements.