On March 11, a federal judge in Chicago issued an injunction barring the state of Illinois from forcing staffing agencies to alter their employee benefit plans to instead provide benefits “equivalent” to those benefits offered by their third-party clients.

In August 2023, Gov. JB Pritzker signed into law immediately-effective legislation amending the state’s Day and Temporary Labor Services Act. The act generally covers industrial temporary labor services, excluding clerical and professional services. Although the amendments could have the effect of upending the Illinois temporary staffing industry, the three most troubling amendments included

1. Section 42—requiring temporary staffing agencies to offer certain employees benefits (e.g., retirement plans or health, dental, vision, or life insurance) that are equivalent to those offered by the staffing agency’s client, or otherwise pay the employees the actual cash value of the client’s benefits
2. Section 11—requiring temporary staffing agencies to alert their employees to any labor disputes occurring at a client site prior to dispatch and further providing a guaranteed right to reassignment
3. Section 67—allowing any interested party to initiate duplicative litigation in the case of suspected Day and Temporary Labor Services Act violations

In response to these amendments, five plaintiffs—two trade associations, including ASA and Staffing Services Association of Illinois, and three staffing agencies—sued the Illinois Department of Labor in November 2023 for injunctive relief. The plaintiffs argued Section 42 was pre-empted by the Employee Retirement Income Security Act, which is a comprehensive federal statute establishing a uniform body of employee benefits law throughout the U.S. The plaintiffs also alleged Section 11 was pre-empted by the National Labor Relations Act and that Section 67 violated the due process clause of the U.S. Constitution.

The U.S. District Court for the Northern District of Illinois granted the plaintiffs’ request to enjoin Section 42 as it applies to all staffing agencies operating in Illinois on March 11. However, the court decided to reserve judgment on the plaintiffs’ Section 11 argument until the issues surrounding it have been more fully litigated. Finally, although the court denied plaintiffs’ injunctive relief request as it concerned Section 67, the court nevertheless noted Section 67 concerns standing issues that may be challenged in any lawsuit brought by an interested party.

The court’s ruling prohibits the Illinois Department of Labor and attorney general from requiring temporary staffing agencies to provide benefits equivalent to those offered by their clients while the case continues to proceed through litigation. The Department of Labor’s proposed permanent rules concerning Section 42 are still pending, but no rules may be finalized enforcing Section 42 until or unless the court concludes Erisa does not pre-empt Section 42.