Illinois Federal Court Refuses to Halt Equal Benefits Provisions of Illinois Day and Temporary Labor Services Act

On May 23, 2025, Judge Thomas Durkin of the U.S. District Court for the Northern District of Illinois refused to enjoin enforcement of amendments to the Illinois Day and Temporary Labor Services Act (IDTLSA) that require temporary staffing agencies to provide “equal benefits” to temporary employees who work for third-party clients for more than 720 hours in a rolling 12-month period. Judge Durkin refused to follow an order issued in March 2024 enjoining enforcement of an earlier version of the amendments on a nearly identical issue. This new ruling appears to be a serious setback to opponents of the amendments. 

Amendments Requiring “Equal Benefits” 

In August 2023, Illinois passed several amendments to the IDTLSA, including provisions that required temporary service agencies to provide temporary laborers assigned to work at a third-party client for more than 90 calendar days with compensation that is NOT less than the rate of pay (“equal pay” provision) and equivalent benefits (“equal benefits” provision) as the lowest-paid, directly hired comparator employee of the third-party client. The temporary service agency had the choice of paying such workers the hourly cash equivalent of the actual cost of the benefits or providing the benefits to the temporary employee.  

In November 2023, three temporary service agencies and two agency trade associations filed a lawsuit challenging certain provisions of the IDTLSA amendments, notably the “equal benefits” provision – but not the “equal pay” provision – claiming the provision was preempted by the Employer Retirement Income Security Act of 1974 (ERISA). In March 2024, Judge Durkin entered an order enjoining enforcement of the “equal benefits” provision, and the defendant director of the Illinois Department of Labor appealed. In June 2024, while the appeal was pending, Illinois enacted revisions of the IDTLSA amendments. Although the defendant represented to the appellate court that the changes were not material, the defendant nonetheless voluntarily dismissed the appeal, so the underlying lawsuit continued before Judge Durkin. 

In light of the new revisions, plaintiffs amended their complaint and moved to enjoin enforcement of the revised amendments, including the “equal benefits” provision. Contrary to the court’s previous ruling, Judge Durkin denied the motion to preliminarily enjoin enforcement of the IDTLSA amendments. Unpersuaded by several amici curiae briefs filed in support of plaintiffs’ position, the court found that the plaintiffs failed to show they were likely to succeed on the merits. Specifically, the court found that the “equal benefits” provision did not make reference to ERISA plans, was not connected to ERISA plans, nor did it impose upon plaintiffs the creation of an ERISA plan, and thus did not require preemption by ERISA. 

With regard to the plaintiffs’ arguments that calculating the value of “equal benefits” would be difficult or impossible, the court provided little analysis of this issue, merely stating that “Defendant offers a far more straightforward calculation method of dividing the client’s total benefits expenditure for the relevant job classification by the number of employees in that classification.” 

The plaintiffs now have the opportunity to appeal denial of the injunction to the Seventh Circuit. The Illinois Department of Labor has not to date issued any guidance as to whether it will enforce the “equal benefits” provisions of the IDTLSA immediately or provide a “grace period” to enable employers to prepare for enforcement.

 Practical Considerations 

Unless the appellate court reverses Judge Durkin’s May 23 order, temporary staffing agencies should prepare to comply with the requirements of the revised law by obtaining information and taking steps to determine the costs of benefits being provided by third-party clients to their directly hired employees. 

As noted above, the plaintiffs argued that gathering and obtaining information about benefits being provided by third-party clients and their value was “difficult” or “impossible.” The court discounted these concerns, citing to documents provided by the defendant showing how the U.S. Bureau of Labor Statistics (BLS) obtains data. One of the documents cited by the court describes BLS’s method for calculation of benefit costs as follows: 

The BLS field economist determines eligible employees’ benefit usage. They then calculate the employer cost based on the type of benefit: (i)employer costs for hours-based (wage-related) benefits, such as paid leave, directly relate to wages and salaries; and (ii) for those hours-based benefits, the field economist collects information on the number of hours or days of the benefit used by workers in sampled jobs. The field economist then multiplies this number by the company contribution or compensation rate and divides by total occupational employment to calculate cost.  Where employer contributions are not directly linked to hours and wages, (for example, insurance), for these benefits the field economist collects information for plan participants. 

The government essentially argued, and the court agreed, that staffing agencies and third-party clients can engage in similar analyses to calculate the average benefit cost per employee, and that this will comply with the amended IDTLSA.  

The court explained that the average cost of benefits could be calculated by “dividing the client’s total benefits expenditure for the relevant job classification by the number of employees in that classification.” Of course, this method of calculation of the average cost of benefits would be totally dependent upon being able to obtain the necessary information from third-party clients. While the government suggested that much of the back-end work to calculate “equal benefits” can be split between the staffing agencies and their third-party clients, the court merely opined that the government’s position was more straightforward and reasonable than that of the staffing agencies.  

The IDTLSA amendments require third-party clients to provide agencies with “all necessary” information to determine value, but the law does not specify what information must be provided. Third-party clients could provide a total average value of benefits without specifying the benefits, or simply provide a description of benefits, requiring the agency to inquire further in order to determine the value of each benefit. Further, while the law requires that an agency provide “substantially similar” benefits to certain workers, it does not indicate whether substantial similarity must be based upon the nature, or the value of such benefits. In other words, if an agency provides dental insurance but not vision insurance, and a client provides vision insurance but not dental insurance, and the value is the same for both, is the agency providing substantially similar benefits or must it also provide vision insurance to comply with the law? This and similar questions are not answered by the law or the court’s ruling.   

The court indicated that it now expects the Illinois Department of Labor to provide clarification and guidance of the law’s requirements, but with no current regulations in effect, it remains to be seen how much guidance will be provided to agencies and impacted third-party clients.

Conclusion

Last week’s decision by Judge Durkin presents another procedural twist in the implementation of the amended IDTLSA. With several important questions left unanswered, this new ruling forces companies to wait for guidance from the Illinois Department of Labor. In the meantime, temporary service agencies with employees in Illinois as well as companies that utilize such agencies for temporary staffing needs in Illinois may consider it prudent to consult with legal counsel regarding how they will comply with the Act.