Today we offer some fun facts about New Jersey. Raise your hand if you knew these things, but only if you are working from home because otherwise it would be weird:

• The Lambert Castle Museum in Paterson has a spoon exhibit with over 5,400 spoons from every state and almost every country in the world.
• The Passaic River in Paterson was the site of the first submarine ride in 1878 by its inventor John P. Holland.
• New Jersey’s capital city, Trenton, was once the capital of the United States – but only for about eight weeks in 1784.

A less fun fact about New Jersey is that this past weekend, the NJ Temporary Workers’ Bill of Rights went into effect. It is a well-intentioned law that will have loads of unintended consequences. Rather than helping temp workers, the law’s requirements seem more likely to cause companies to stop using temp workers entirely.

The law’s requirements have been discussed elsewhere, and you can check out the BakerHostetler blog, The Bargaining Table, for a more complete discussion. But I want to focus on one aspect of the law that I think is particularly dumb and poorly drafted.

Section 7(b) requires that temp workers “shall not be paid less than the average rate of pay and average cost of benefits, or the cash equivalent thereof, of employees of the third party client performing 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. Each violation of this subsection for each affected temporary laborer shall constitute a separate violation….”

Take a minute to digest that. It requires that temps are paid at least as much as similarly situated regular employees, but not just in wages. You also have to add in the cost of benefits. The cash value of benefits is often around a third of total compensation.

Suppose you have full time maintenance employees who average $20/hour plus benefits. If the cash value of benefits are one-third of the worker’s compensation package, then the temp worker “shall not be paid less than” $26.67/hour. And that’s before the staffing agency takes its markup of, maybe, 35%. You’d have to pay $36/hour for a temp maintenance worker, and the temp worker’s take home pay will be 33% higher (because of the cash value of benefits) than your comparable maintenance employee.

What if the temp agency provides benefits? Unclear. Poorly drafted. The law sets the temp worker’s minimum wage based on the cash value of the benefits the similarly situated employees receive. Maybe if the temp worker gets benefits, then the temp’s hourly wage floor would be $20, not $26.67, but that’s not clear.

Not only does the law greatly increase the cost of using temp labor, it also requires the company using the staffing agency’s services to disclose to the staffing agency the average wages and cost of benefits it provides to its similarly situated employees. If your company didn’t disclose this information, the staffing agency wouldn’t be able to comply with the pay floor requirement.

A failure to comply results in joint liability. So now you need to make sure the staffing agency pays its temps a particular wage, calculated based on the wages your company pays its employees. In your staffing agency agreement, you’ll need to require the agency to pay a particular wage to ensure compliance.

Here’s where things get tricky. An indemnity provision might not be sufficient to shift liability because the law says both parties are liable. So you need a breach of contract claim to rely on instead.

To build a potential breach of contract claim, the company will want to contractually require the agency to pay the workers a wage that is not less than the average cost of the company’s wages and cost of benefits. But directing and controlling wages is a strong indicator of joint employment under other laws. The act of complying with the NJ law could turn companies into joint employers. The wording in any staffing agreement, therefore, needs to thread the needle.

The text in a staffing agency agreement (or amendment) will need to be carefully drafted so that the company is requiring only that the agency comply with NJ law with respect to wages and benefits and is not directing or controlling the wages and benefits that the agency pays its temps.

Something like this might work: “If required under N.J.S.A. [insert citation], but only to the extent required by such statute, Agency shall pay the temporary workers at a rate not less than the average rate of pay and average cost of benefits, or the cash equivalent thereof, of employees of the company performing 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 company at the time the temporary laborer is assigned to work at the company.”

I don’t like telling the agency what it must pay its workers, but you’ll want a breach of contract claim available to you if the agency fails to comply and your company is jointly liable under the NJ law. An amendment to your staffing agency agreement is appropriate, but it needs to be carefully drafted.

And here’s another possible unintended consequence. How will your maintenance employees like being paid less than the maintenance temps? Maybe we need a union in here to get us a fair wage! I could see things going in that direction. If a temp can take home $26.67/hour, we want $26.67/hour too, not $20!

The NJ law does not apply to all temps. It applies to temps in these “occupational categories as designated by the Bureau of Labor Statistics of the United States Department of Labor:

• 33-90000 Other Protective Service Workers;
• 35-0000 Food Preparation and Serving Related Occupations;
• 37-35 0000 Building and Grounds Cleaning and Maintenance Occupations;
• 39-0000 Personal Care and Service Occupations;
• 47-37 2060 Construction Laborers;
• 47-30000 Helpers, Construction Trades;
• 49-0000 Installation, Maintenance, and Repair Occupations;
• 51-0000 Production Occupations;
• 53-0000 Transportation and Material Moving Occupations; or
• any successor categories as the Bureau of Labor Statistics may designate.”

If all of this makes you want to take a long walk and get away, then fun fact: New Jersey has more than 4,000 miles of trails!

© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.