New Jersey Law Threatens Entire Staffing Industry in the State

Judge Holding Gavel, Hitting Sound Block And Pronouncing Sentenc

After passing the New Jersey Assembly and Senate, a controversial piece of legislation (A1474/S511) was signed by N.J. Governor Phil Murphy on February 6, 2023,and became law. Although the main requirements of the law do not go into effect until August 20, 2023, some provisions have already become effective as of May 7, 2023.

Very quickly the new law became the subject of a lawsuit filed in a federal court on May 5, 2023, by significant stakeholders in the Staffing Industry in New Jersey. The law is expected to affect over 127,000 temporary workers supplied by the staffing industry to their clients.

The staffing companies are seeking a permanent injunction against implementation of the law and especially those requirements which, they argue, are actually an existential threat to the entire staffing industry in New Jersey.

As evidence, they point to the law’s requirement that temporary workers are to be paid “no less than the average rate of pay and cost of benefits provided to regular (permanent) employees in similar positions”.  The time and money spent for them to simply follow this requirement alone will make it virtually impossible for them to continue to do business in the state. Not a single other state, they note, has any similar regulations.

They also point to peculiar anomalies to this payment formula, where newly hired temporary workers would need to be paid more than preexisting permanent employees.

Although the law covers Temp Workers in many job categories, it does not say that it covers all Temp Workers. So, there may be “carve-outs” for some particular jobs.

The exact wording says that the law “specifically applies to Temp Workers placed with third party employers through staffing agencies or Temp Work firms in Security, Restaurant, Personal Care, Cleaning, Maintenance, Construction, Repair, Transportation, Production and Material Moving occupations.”

It does not seem to include technicians in Web Development, Software development or other professionals like Accountants, Engineers, Attorneys, Nurses, etc.

An area where I see some other difficulties is in the situation where a Temp employee is offered a permanent position and a fee is usually charged by the staffing company. Although this will still be allowed, the new law will restrict the amount. (My emphasis – without any change in the wording).

Some of the increased record keeping and making it available is troublesome and also adds a burden to software developers to modify existing software to enable secure compliance. This may be nothing new, but it simply adds additional work and costs that staffing firms and their suppliers need to pay for. No mention is made of the obvious impact on inflation.

With regard to this habit of governments simply passing on significant costs, I remember a law passed years ago in the NY State legislature, where any new law that made requirements of a local government, those laws needed to include an equal appropriation of state funds to pay for these local governmental entities to implement.

No mention is made of the traditional flexibility that staffing firms provide workers in terms of building job experience and having jobs with great flexibility. Some of these opportunities will certainly be lost if employers decide the added burden and expense is not worth making such jobs available.

In this regard we have the recent news from Walmart that they are cutting back on seasonal hires and planning for regular staff to pick up the slack in extra working hours. It should be noted that many employees of Walmart look at this as a good thing in the sense that before others are hired, the extra hours are offered to existing employees first.

However, it does seem like this New Jersey legislation can have unintended negative consequences for not only the staffing industry, and their clients, but also for the temporary workers this law is intended to benefit.

We will continue to follow this lawsuit as it progresses over the coming months and report on both developments and the final outcome.

As always, stay safe and pray for Ukraine!