State high court to hear case against staffing agencies accused of suppressing wages

[November 15, 2023]  By HANNAH MEISEL
& DILPREET RAJU
Capitol News Illinois
[e-mail]

The Illinois Supreme Court on Wednesday will hear arguments from three staffing agencies that say their industry is exempt from state antitrust laws in a case claiming the firms conspired to hold down wages for their workers.

The Chicagoland-based companies have already lost twice in lower court. But they contend those decisions are a new interpretation of Illinois’ decades-old antitrust law.

Wednesday’s oral arguments come after Attorney General Kwame Raoul sued the companies in 2020, alleging they used their mutual client to coordinate no-poach agreements, which created a secondary agreement to pay less than the market rate.

“No-poach agreements allow employers to take advantage of low-wage workers by trapping them in low-paying jobs and limiting their opportunities for advancement,” Raoul said in a news release at the time.

The three companies – Elite Staffing Inc., based in Chicago, Midway Staffing Inc. and Metro Staffing Inc., both headquartered in Chicago suburbs – all had contracted with a construction company also located in the suburbs.

Elgin-based Colony Display LLC designs and builds display models and custom furniture for commercial properties like motels, grocery stores and restaurants. While the company operates in seven states, Colony manufactures, assembles and houses most of their furniture in three Illinois warehouses.

The vast majority of Colony’s workforce is temporary. According to court records, at any given time the company “employs approximately 75 to 100 full-time employees,” compared with “between 200 to 1,000 temporary workers,” the original complaint alleged.

The staffing agencies’ contracts with Colony gave the company sole discretion over hiring, firing and assigning workers. And, the lawsuit alleged, the staffing agencies began to take advantage of that setup as early as 2018, communicating with each other via Colony.

“For example, many Midway employees wanted to switch to Elite because they were ‘not happy working for Midway’; they cited ‘pay issues’ and a lack of communication and support from their employer,” according to court records.

In response, Midway Staffing allegedly asked Colony for assistance in “squashing” the transfer of employees, resulting in Colony informing Elite Staffing that hiring other agencies’ employees was “bad practice” and wasn’t allowed. Elite Staffing then produced its own policy to Colony, which the company then forwarded on to Midway Staffing, thus enforcing the no-poaching policy, according to Raoul’s office.

“As this incident shows, the no-poach conspiracy eliminated competition among (the staffing agencies)...which resulted in a lower quality of employment for the workers,” lawyers for the attorney general’s office wrote in a brief this summer.

The Illinois Supreme Court building is pictured in Springfield. (Capitol News Illinois file photo)

As a result, “the workers could not seek better wages, on-time payment, improved communication from supervisors, or other benefits” by switching to another of the staffing agencies.

The staffing agencies also used Colony as a medium to set wages lower than the market rate, according to Raoul’s office.

“At one point, for instance, the fixed wage was $10 per hour but, according to a survey done by Elite, the ‘fair wage’ was $13 per hour,” according to court records.

For their part, the staffing agencies claim their business models preclude them from the state’s Antitrust Act, basing their legal arguments on a 1980s update to a key definition in the law.

The law prohibits “restraint of trade” that decreases competition between “persons engaged in commerce and trade,” and then further defines commerce and trade as “all economic activity involving or relating to any commodity or service.”

But the staffing agencies point to that 1980s-era update that defines service as anything that isn’t a commodity. The definition also stipulates that “service” doesn’t include “labor which is performed by natural persons as employees of others.”

In an appellate court opinion last year, Judge Thomas Hoffman wrote that “services provided by staffing agencies are generally not excluded from the Act’s coverage.” He also said the agencies are attempting to broaden the law’s exceptions by distinguishing the “labor” of its temp workers from the “service” the agencies provide.

In June, three workers’ rights groups – the National Legal Advocacy Network, the National Employment Law Project, and the Raise the Floor Alliance – filed an amicus brief in support of the Attorney General’s claim, writing that "temporary staffing jobs, including those working in warehouse and manufacturing facilities like those operated by Colony, often do the same work as direct-hire employees, but for less pay, worse benefits, increased health and safety risks, and no job security.”

It went on to argue that temporary workers are “disproportionately people of color” and such conditions “are contributing to the racial wealth gap and economic insecurity for communities of color.”

A second related case was also scheduled for oral arguments Wednesday morning, but an attorney for Colony confirmed the case was recently settled with Raoul’s office and would not be heard. That case was filed directly against Colony and concerned more granular aspects of the state’s antitrust laws.

The attorney indicated the settlement was confidential and declined to comment.

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.