We previously reported that the New Jersey Department of Labor and Workforce Development (“NJDOL”) issued proposed regulations to implement New Jersey’s Temporary Workers’ Bill of Rights (the “Act”), including its pay equity requirement.

On September 16, 2024, the NJDOL adopted N.J.A.C. 12:72 (the “Regulations”) implementing sections 1 through 7, and 10 of the Act, pertaining to “workplace protections, as well as temporary help service firm and third-party client responsibilities.” The key provisions are summarized below.

Pay Equity Requirement

Significantly, the Regulations provide a formula for calculating the minimum hourly rate of pay for temporary workers, which under the Act is determined by “the average rate of pay and average cost of benefits” of comparator employees, i.e., employees of the third-party client who perform:

the same or substantially similar work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions for the third-party client at the time the temporary laborer is assigned to work at the third-party client.

While the Regulations define “Benefits” - a term that was left undefined in the Act - the definition is open ended, stating: 

Benefits means: employee fringe benefits, including, but not limited to, health insurance, life insurance, disability insurance, paid time off (including vacation, holidays, personal leave, and sick leave in excess of what is required by law), training, and pension. The term “benefits” does not include employee fringe benefits that an employer is required by law to provide to its employees (for example, earned sick leave pursuant to N.J.S.A. 34:11D-1 et seq.). [Emphasis added.]

What other things an employer might provide to its employees that would fall under the “employee fringe benefits” umbrella remains an open question.

Calculation of the Hourly Rate

The Regulations require a third-party client to “provide to the temporary help service firm a listing of the hourly rate of pay and cost per hour of benefits for each employee of the third-party client who the third-party client determines would be a comparator employee” at the time of contract for the services of a temporary laborer. Where the third-party client pays the comparator employee on a salary basis, the hourly rate must be calculated by (1) “dividing the annual salary paid to the comparator employee by 2,080 hours” to determine the hourly rate of pay, and (2) divide the annual benefits cost to the employer by 2,080 hours to determine the cost per hour of benefits.

A temporary help service firm must then use the following method to determine the appropriate minimum hourly rate of pay for the temporary laborer:

1. Take the sum of the hourly rates of pay of the comparator employees identified by the third-party client and divide it by the number of comparator employees to arrive at the average hourly rate of pay of the third-party client’s comparator employees; then
2. Take the sum of the cost per hour of benefits of the comparator employees identified by the third-party client and divide it by the number of comparator employees to arrive at the average cost per hour of benefits of the third-party client’s comparator employees; and then
3. Subtract the cost per hour of benefits provided by the temporary help service firm to the temporary laborer, from the sum of the average hourly rate of pay of the third-party client’s comparator employees and the average cost per hour of benefits of the third-party client’s comparator employees.

The resulting amount is the minimum hourly rate of pay that a temporary help service firm must pay to the temporary laborer.

Determining Substantially Similar Work

The Regulations list twelve non-exclusive principles for determining whether a temporary laborer and an employee of the third-party client are performing “substantially similar work.” Specifically:

1. similar work should be looked at as a composite of skill, effort and responsibility performed under similar working conditions;
2. functions and duties, however, need not be identical;
3. more than occasional, trivial or minor differences in duties that only consume a minimal amount of the employee’s time is needed to classify work as dissimilar;
4. job titles and job descriptions are relevant but not dispositive;
5. rather than focusing on the specific person performing the work, the determination should focus on an analysis of the actual job duties performed;
6. the analysis should be applied to a full work cycle, not a particular time or day;
7. skill is measured by experience, ability, education and training;
8. effort is the physical or mental exertion needed to perform a job;
9. responsibility is the level of accountability and judgment required to perform a job;
10. employee seniority is not relevant to whether a job is substantially similar, even where the third-party client’s employee compensation system is seniority based. The number of years’ experience required is relevant;
11. a merit system for the compensation of third-party client employees is not relevant;
12. working conditions are the physical surroundings and hazards.

Judicial Challenge

In August, the New Jersey Staffing Alliance (“NJSA”) challenged the “equal benefits provision” of the Act, requiring a temporary worker to “not be paid less than the . . . average cost of benefits” of employees performing substantially similar work. NJSA sought a preliminary injunction to prevent defendants “from continuing to enforce the equal benefits provision of the [the Act] arguing that it is preempted by ERISA.” The U.S. District Court for the District of New Jersey denied NJSA’s request for a preliminary injunction, finding that, while NJSA may succeed with its assertion that ERISA preempts the Act’s equal benefits provision, NJSA failed to demonstrate irreparable harm, as required to obtain emergency injunctive relief.

Should the court ultimately find that ERISA fully or partially preempts the Act’s equal benefits provision, the formula for calculating equivalent pay will effectively change. We will continue to monitor developments in the case.