On Feb. 6, New Jersey Gov. Phil Murphy signed into law the controversial bill A-1474 concerning employment and protection of temporary laborers, otherwise known as the “Temp Worker Bill of Rights.” Most of the law’s provisions will take effect on Aug. 5. The bill applies to construction, light industrial and other workers but excludes professional or clerical workers.

The bill requires temporary workers to be paid at least the same average rate of pay and equivalent benefits as a permanent employee of the third-party client performing the same or substantially similar work on jobs requiring equal skill, effort and responsibility and which are performed under similar working conditions.

The European experience. While this law is groundbreaking in the US, the European Union has had similar legislation in place applicable to all agency workers since 2008. Known as the “Agency Work Directive” or “AWD,” the law was intended to protect agency workers and to establish a suitable framework for the use of temporary agency work to contribute to the creation of jobs and development of flexible forms of working.

Negotiations over the directive took nearly a decade due to European member states, including the UK at the time, holding very different attitudes toward temporary agency work. Many European countries already had in place sectoral bans and restrictions on the use of temporary agency workers in general. The UK, by contrast, had removed the requirement for agencies to be licensed in a bonfire of regulation in 1995.

European directives, being framework legislation, permit member states to derogate from the principal rules in their own national legislation in certain ways. Among these were the right to introduce a qualifying period before agency workers could qualify for equal pay and conditions (e.g., the UK has a 12-week qualifying period) and an exclusion from the right to equal pay, provided workers had permanent employment contracts with their agency employer and received pay between assignments (following the Swedish model).

However, the basic right for agency workers to receive the same pay and conditions as they would have received if they had been employed directly by the hirer at the start of their assignment was unassailable. Notwithstanding this, many European countries have modified this right through collective bargaining agreements across whole sectors of industry and the agency work sector itself (including the Netherlands, Sweden, Denmark, Finland, Austria and Germany).

Equal pay. The New Jersey bill appears to rely on there being a permanent employee of the third-party client performing the same or substantially similar work. Equal pay legislation has been around for over 50 years, so the concept of pay audits is nothing new, but it does add to the complexity of using temporary agency workers over other types of flexible work. Identifying comparable workers may not be straightforward.

In the UK, it is not necessary to identify a permanent employee as a comparator. But in practice, if there is no comparable employee because the agency worker is undertaking a role that is not a core part of the hirer’s business, and the hirer has no permanent employees doing the same or similar work, it can be difficult to establish the appropriate “basic working and employment conditions” that the agency worker is entitled to.

Despite 15 years of equal pay rules for agency workers across the EU, agency work remains an important element of the overall workforce mix. The penetration rate — the portion of the workforce that is employed through temporary staffing firms — fluctuates, as it is highly dependent on the economy and national policies on employment, but averaged 1.7% in 2021, the most recent year for which data is available.

Other elements of the New Jersey legislation, such as notice and itemized pay statements, are also well known to European staffing firms, as is the prohibition on restricting a temporary employee from accepting another position with a permanent employer or a third-party client.

It is still the case that certain European countries embrace temporary agency work more than others, but regulation should not be viewed as catastrophic for temporary agency work in New Jersey. Equally, compliance should not be taken lightly, as the difference between the US and some European countries is the prevalence of state enforcement of such rights and the right for temporary workers to bring class action lawsuits, which are not generally permitted on the other side of the pond.