An Update on the Illinois Day and Temporary Labor Services Act and its Equal Benefits Provision

Illinois amended the Illinois Day and Temporary Labor Services Act (the “Act”) in 2023 and 2024 to require staffing agencies to provide equal pay and benefits to certain temporary staffing employees placed with clients relative to the pay and benefits provided by those clients to their regular employees performing the same or comparable work. The Act applies specifically to temporary staffing employees who work for more than 720 hours in Illinois for the same staffing agency client in a rolling 12-month period.

A federal court initially blocked enforcement of the Act’s equal benefits provision, but this ended in late May 2025. While the Act’s Section 42(a) equal pay requirement is relatively straightforward, the Act’s Section 42(b) equal benefits provision is not.

Equal Benefits

The equal benefits provision allows a staffing agency to provide benefits and/or additional compensation of equal dollar value rather than any requirement to actually match a client’s plan design. The Act allows the staffing agency to satisfy the equal benefits provision through any combination of benefits or additional compensation, and a staffing agency can choose to satisfy the entire equal benefits requirement through additional compensation (although this may be less tax efficient than providing coverage).

The Act requires client employers to provide the staffing agency with benefit plan and related information to enable the staffing agency to meet its equal benefits requirement, but the Act does not provide any detail or guidance addressing how to calculate the value of those benefits. The Illinois Department of Labor (IDOL) indicates it will publish guidance addressing this in the future (see FAQ #6), and it is our understanding that the IDOL will not enforce the equal benefits provision until it does. However, Section 95 of the Act allows affected temporary staffing employees to sue for their equal pay and benefits.

Good Faith Efforts

We are aware of existing lawsuits seeking enforcement of the equal pay provision. The end of the injunction for the equal benefits provision in late May technically means affected employees may file lawsuits to enforce it as well. Staffing agency employers may wish to consider whether they should attempt to comply in good-faith prior to the IDOL’s future guidance addressing how to calculate the value of client benefits. Good-faith approaches may include:

• Cost of coverage relative to all employee participants – This involves dividing the client’s total cost of providing the coverage by the total number of employee participants. This is claims experience and other costs for self-insured coverage and the employer share of premiums for fully insured coverage. Employee contributions toward coverage do not count. The result is the average cost of coverage per covered employee. Variations of this may also be reasonable, such as limiting the calculation to those enrolled in employee-only coverage, but it may be challenging to determine the cost for just that population.
• Cost of coverage relative to counterpart participants – Similar to the above, but the calculation is limited to the client’s regular employees performing the same or comparable work. The May 2025 court opinion discussed this as a possibility, but this discussion was not guidance and is not binding. We are not convinced the IDOL and court are aware of how administratively challenging it may be to isolate the plan costs for this specific population.
• Cost of coverage reduced to hourly rate equivalent – This involves taking the total premium or premium-equivalent and dividing it by 2,050 as a proxy for annual hours worked by a full-time employee. This reduces the value of the benefit down to an hourly rate and is the approach used to determine the value of benefits provided to federal contractors under certain federal law. The employer then attempts to provide this value of coverage based upon hours worked and makes up any difference in additional compensation.

Attempting a good-faith solution prior to the IDOL’s guidance is that the guidance may require the employer to change its adopted approach, so we recommend viewing any good-faith approach as temporary. The IDOL did not provide an ETA on its guidance, but we hope it arrives before 2026. We realize that a good-faith solution requires data from the staffing agency clients. At a minimum, we recommend agencies determine the value of the coverage they currently offer in order to at least take credit for those costs for employees that enroll. The agencies can pay any shortfall as additional compensation (or the entire value).

Next Steps

We expect staffing agencies will attempt to comply with the Act by offering a basic benefits package to affected employees and supplement any shortfall with additional compensation. We are aware that many staffing agencies already offer some sort of basic coverage, although the Act may cause a staffing agency to reevaluate its package. We interpret the Act to only give credit to a staffing agency for its actual cost of providing coverage to an affected employee, which means the employee’s own contributions toward coverage do not count. Similarly, we do not believe an agency will receive any credit should an affected employee waive coverage. An agency might choose to make certain coverage mandatory, although this may require the benefit to be 100% paid by the agency.

We recommend staffing agencies discuss these issues with their legal counsel and/or other appropriate advisors. Marsh McLennan Agency intends to provide more formal guidance for the Act in the future, but we are waiting for the IDOL’s equal benefits guidance before we do so. Please contact your Horton Service team if you have any questions.