On July 24, 2024, the Third Circuit Court of Appeals affirmed the denial of a preliminary injunction blocking enforcement of New Jersey’s Temporary Workers’ Bill of Rights Law (the “Law”). The Circuit Court held that the Law does not violate the dormant Commerce Clause of the U.S. Constitution, which prohibits states from taking measures that discriminate against or unduly burden the states.

The law, which became fully effective on August 5, 2023, provides expanded protections for certain temporary workers in New Jersey.

Rights of temporary workers

The law applies to any temporary worker employed by a covered staffing agency who: (1) is assigned by the company to work in a designated classification location within New Jersey; or (2) is assigned by the company to work in a designated classification location outside of New Jersey, but who has his or her primary residence in New Jersey. Among the law’s provisions are recordkeeping requirements, state certification, and joint liability for staffing agencies and their clients. Specifically for employers, the law also requires that temporary workers receive the same average compensation rate and average cost of “benefits” (or cash equivalent) that are comparable to permanent employees performing “the same or similar substantial work” for the client company. More details on the law’s scope can be found in our prior blog here.

Third Circuit Judgment

After a New Jersey District Court denied a preliminary injunction, a coalition of temporary staffing companies argued on appeal that the law violates the dormant Commerce Clause and is a state overreach. Specifically, the groups argued that the law imposes an undue burden on interstate commerce by effectively setting wage standards for temporary workers that disproportionately affect in-state staffing companies compared to out-of-state companies that are not required to comply with the law. The groups further argued that the law is akin to an abusive price restraint that functions as a tariff. They also claimed that the terms “benefits” and “the same or substantially similar work” in the equal pay provisions are unnecessarily vague.

The Third Circuit panel disagreed. The panel reasoned that any economic impact of the law is incidental and that price controls are intended only to create consistency between full-time and temporary workers, although the panel acknowledged that an out-of-state consumer may choose an out-of-state staffing agency that does not have to comply with the law. The panel further held that the law could not violate the dormant Commerce Clause because it does not favor intrastate commerce over out-of-state commerce.

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

Implications for employers

While the law remains in full force and effect at this time, the Third Circuit’s decision isn’t the end of the story. The industry groups recently filed an amended complaint in the district court alleging that the law is preempted under the Employee Retirement Income Security Act of 1974 (ERISA) for the law’s benefit requirements. A motion to bar the benefit provisions is currently pending.

Additionally, as previously discussed, the New Jersey Department of Labor & Workforce Development (the “Department”) has proposed regulations to implement the Act. Employers and staffing agencies subject to the Act should be sure to consult the Department’s website and stay up-to-date on the proposed regulations to ensure continued compliance.