NJDOL Issues Proposed Regulations Implementing N.J. Temporary Workers Bill of Rights Act

On July 21, 2023 the N.J. Department of Labor and Workforce Development (Department) issued long-awaited guidance regarding the Temporary Workers Bill of Rights Act. Certain provisions of the Act took effect on August 5, 2023. These regulations address Sections 1 through 7, and Section 10 of the Act only and are not technically binding on employers and temporary help service firms (THSFs) now since they are in their proposed form and the Department is accepting public comments through October 20; however, they provide additional guidance for employers and THSFs who are trying to comply with the provisions of the Act.

The proposed regulations generally address: out-of-state work assignments; the method to determine comparators and compensation for purposes of the complying with Act’s pay equity requirements; maximum placement fees; wage statements; and administrative penalties. The remaining sections of the Act, including Section 8, which address the new certification process and bonding requirements for THSFs, are enforced by the N.J. Division of Consumer Affairs (Division), which will be promulgating its own rules to implement those sections of the Act. To date, no Division regulations have been issued and the Division has advised that until it adopts rules relating to the certification process, it will not enforce the certification and accompanying bond requirements of the Act.

Which THSFs are covered by the Act? A THSF is covered by the Act if it is located, or operates, or transacts business in N.J.

Which Jobs Classifications are covered by the Act? The following job classifications as designated by the USDOL’s Bureau of Labor Statistics: Protective Service Workers; Food Preparation and Serving Related Occupations; Building and Grounds Cleaning and Maintenance Occupations; Personal Care and Service Occupations; Construction Laborers; Helpers, Construction Trades; Installation, Maintenance, and Repair Occupations; Production Occupations; Transportation and Material Moving Occupations; or any successor categories as the BLS may designate.

Which Temporary Laborers are covered by the Act? The Act applies to each temporary laborer in a designated job classification listed above who is either (i) assigned to work in N.J.; or (ii) resides primarily in N.J., regardless of where the work is performed.

Pay Equity. To assist employers and THSFs in complying with the pay equity provisions of the Act, the regulations provide guidance as to the calculation of the hourly wage rate and how to determine when temporary workers have third-party client comparator employees. The regulations make clear that this process begins when the third-party client, at the time it contracts for the temporary work, determines which of its employees are comparators to the temporary worker and provides the THSF the hourly rate of pay and cost of benefits for these employees.

The regulations define comparator employee as an employee of the third-party client who is performing the same or substantially similar work to that of the temporary laborer at the time the temporary laborer is assigned to the third-party client, on a job (A) the performance of which requires equal skill, effort, and responsibility to that of the temporary laborer, and (B) performed under similar working conditions. The proposed regulations do not address compliance with the pay equity provisions where the third-party determines there are no comparators.

The regulations provide that when determining whether work is substantially similar, job titles and written job descriptions are relevant, but not dispositive. The focus is on actual job duties performed (not the specific person performing the job), skill is measured by factors such as the experience, ability, education and training required to perform the job, effort is the amount of physical or mental exertion needed to perform the job, responsibility is the degree of accountability and discretion required to perform the job, and similar working conditions relates to physical surroundings and hazards, not job shifts. The regulations also make clear that seniority and seniority systems are not relevant, even where the client’s employee compensation system is seniority based. However, the years of experience required to perform the job is a relevant factor.

Where the third-party client pays a comparator employee on a salary basis, the hourly rate of pay for the comparator employee is calculated by dividing the annual salary paid to the comparator employee by 2,080 hours and the cost per hour of benefits is calculated by dividing by 2,080 hours the annual cost to the employer of providing benefits to the comparators.

The regulations define benefits as “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,” but does not include legally required employee fringe benefits (e.g., earned sick leave under N.J.S.A. 34:11D-1 et seq.).

The regulations lay out the precise steps the THSF must follow to determine the appropriate compensation for the temporary laborer. First, the THSF sums up the hourly rates of pay of all comparator employees identified by the third-party client and divides it by the number of comparator employees to arrive at the average hourly rate of pay of the comparators. Second, the THSF sums up the cost per hour of benefits of all comparator employees identified by the third-party client and divides it by the number of comparators to arrive at the average cost per hour of benefits of the comparators. The THSF takes the results from the first two steps above and subtracts the cost per hour of to the THSF of benefits actually provided to the temporary laborer; the resulting number is the total hourly rate of pay that the THSF must pay the temporary laborer for all work performed during the designated classification placement. This can be paid all in cash, or part in wages and part in benefits.

Placement Fees. If a client chooses to hire a temporary laborer as its employee, the THSF may charge a placement fee to client, but the fee cannot exceed the total daily commission rate that the THSF would have received from the client for that laborer for a 60-day period, less the daily commission rate actually received for that temporary laborer in the prior 12 months. If this number is a negative number, no fee may be charged; if it is a positive number, that is the maximum placement fee that the client can be charged.

Wage Statements. At the time it makes wage payments to the temporary laborer, the THSF must provide to the temporary laborer a wage statement, either on the paycheck stub or on a form prescribed by the Department that includes:

• Name, address and telephone number of each third-party client at which the temporary laborer worked during that pay period;
• Number of hours worked by the temporary laborer at each third-party client on each day during that pay period;
• Rate of pay for each hour worked by the temporary laborer during that pay period, including any premium rate or bonus;
• Total pay period earnings, and the hourly rate, including any premium rate or bonus;
• Total amount of each deduction made from the temporary laborer’s wages including the purpose of the deduction (i.e. temporary laborer’s food, equipment, withheld income tax, withheld Social Security deductions, withheld contributions to the State unemployment compensation trust fund and the State disability benefits trust fund);
• Current maximum amount of a placement fee that may be charged to the third-party client should it wish to directly hire the temporary laborer;
• Total amount charged by the THSF to the client for the services of the temporary laborer during that pay period; and
• Total cost to the THSF of benefits provided to the temporary laborer during that pay period.

Recordkeeping Requirements. The regulations impose separate recordkeeping obligations on THSFs and third-party clients. THSFs must maintain the following records for each assignment of a temporary laborer to work in a designated classification placement for six years:

• Name and address of the temporary laborer;
• Name, address, and telephone number of the third-party client;
• Date on which the THSF contracted with the third-party client for the services of the temporary laborer;
• Name, address and telephone number of each worksite to which the temporary laborer was sent by the THSF, and the date that the temporary laborer was sent to each worksite;
• Nature of the work that was performed by the temporary laborer;
• Number of hours that were worked by the temporary laborer;
• Number of hours billed by the THSF to the third-party client for the temporary laborer’s hours of work;
• Temporary laborer’s hourly rate of pay;
• Name and title of the individual(s) at the third-party client who are responsible for the temporary laborer’s assignment;
• Any specific qualifications or attributes of a temporary laborer that were requested by the third-party client for the assignment;
• Copies of the contract(s) with the third-party client for the assignment;
• Copies of any invoice(s) provided by the THSF to the third-party client for payment in relation to the assignment;
• Copies of the statements, notices, and written confirmations, provided by the THSF to the temporary laborer under N.J.A.C. 12:72 3.1 through 3.4;
• A record of any deductions made from the temporary laborer’s wages, including a description of each deduction and the amount of each deduction; and
• Verification of the actual cost to the THSF or third-party client of any equipment or meal charged to the temporary laborer.

Third-party clients must maintain the following records for each temporary laborer assigned by a THSF to work in a designated classification placement for the third-party client: name, address and telephone number of each worksite to which the temporary laborer was sent by the THSF; date that the temporary laborer was sent to each worksite; nature of the work that was performed by the temporary laborer; number of hours that were worked by the temporary laborer; and temporary laborer’s hourly rate of pay. For each work week in which the temporary laborer performed work with the third-party client, the third-party client must remit these records to the THSF no later than seven business days after the last day of the work week.

Penalties. The Commissioner will consider the following factors when determining administrative penalties: (i) the seriousness of the violation; (ii) past history of violations; (iii) the good faith of the THSF; and (iv) the size of the business.

Our firm will continue to monitor and report on the regulatory developments related to the Act. In the meantime, if you have any questions regarding how to comply with the Act, please contact Patrick W. McGovern, Esq., Partner in the firm’s Labor Law and Employment Law & Litigation practice via email here or call 973.535.7129.