On June 23, a Chicago federal court stayed further litigation in Staffing Services Association of Illinois et al. v. Flanagan, where the American Staffing Association and other staffing industry plaintiffs are arguing Section 42 of the Illinois Day and Temporary Labor Services Act is pre-empted by the federal Employee Retirement Income Security Act.

Section 42, which requires staffing agencies to do many things, including provide certain temporary employees with benefits substantially similar to benefits offered to clients’ equivalent full-time employees or pay the hourly average cash equivalent of the actual cost of the benefits provided to full-time employees, was previously enjoined by the court in March 2024. The Illinois General Assembly then implemented modest changes to Section 42. ASA, an Illinois staffing trade association, and several leading Illinois staffing agencies then filed a second motion to preliminarily enjoin Section 42. The court changed course and rejected this motion last month and ruled that Section 42 was not likely pre-empted by Erisa.

The plaintiffs and the director of the Illinois Department of Labor recently agreed that staying the litigation was necessary in order to give IDOL time to promulgate final rules needed to interpret, implement, and enforce the employee benefits requirements of Section 42. In the meantime, staffing agencies facing litigation related to the employee benefits requirements of Section 42—e.g., whether an “interested” party has standing to sue staffing agencies for purported violations—may draw on the research and arguments developed by the plaintiffs’ preliminary injunction briefing in Flanagan. Firms that have questions about the current effectiveness or obligations imposed by the employee benefits provision should consult counsel.