Nevada’s staffing agencies are embroiled in an existential struggle. Could that help the state’s workers?

For four years, Nevada’s staffing agencies were content with the status quo: a court order preventing the state from enforcing a 2021 labor law. On July 2, their dreams were dashed.

That day, District Judge Lynne Jones dealt staffing agencies — which construction firms rely on for temporary workers — a critical blow by allowing the state to begin enforcing a law that could force builders to find their own temporary labor.

Assembly Bill 227, passed in May 2021, says work requiring a contractor license must be performed by a licensed contractor or by an employee of a licensed contractor.

The July 2 decision ended a yearslong temporary restraining order filed by the American Staffing Association. Now, staffing agencies involved in construction will need to pursue contractor licenses or eliminate the human resources aspect of their business to remain commercially viable, according to industry insiders.

“The American Staffing Association and its members doing business in Nevada are disappointed in the decision, and we’re considering potential options,” Ed Lenz, senior counsel for the American Staffing Association, told the Las Vegas Review-Journal in a statement.

A drawn-out legal battle to prevent that loophole closure continues years later, and it could shape the future of Nevada’s construction industry.

Shifting foundations

Since AB227 was introduced, staffing agencies have argued the law would eliminate jobs while labor leaders have argued it would protect construction workers from exploitation.

That’s because a plurality of temporary workers in the U.S. — about 36 percent — work in construction, according to 2023 data from the American Staffing Association, a trade group. Temporary workers are also more likely than non-temporary workers to get injured on the job, UNLV professor Jeff Waddoups said.

In Nevada, the current battle between staffing agencies and organized labor originated from an early-2021 lawsuit involving a Lake Tahoe-area contractor and a staffing agency which, court records indicate, failed to pay some temporary workers.

Staffing agencies connect contractors with temporary workers and typically handle their payroll, benefits and HR. These workers are not employed by the contractor — which AB227 seeks to change.

The law would require staffing agencies to pursue contractor licenses if they want to employ temporary workers directly — something agencies have repeatedly testified is not feasible.

The Nevada State Contractors Board saw a 45.9 percent increase in contractor license applications in the three weeks after AB227 became enforceable, compared with the same three-week period last year, according to public records obtained by the Las Vegas Review-Journal.

However, the records did not indicate whether the increase in license applications was due to staffing agencies seeking licenses, and even AB227’s proponents say it’s still too early to claim victory.

While one round of protracted litigation surrounding the law has come to a close, with the law in effect, another may just be getting started. The American Staffing Association filed a notice of appeal on Thursday.

‘A long time coming’

If the staffing industry’s ongoing litigation does not succeed — and fast — AB227 could lead to thousands of lost jobs across Nevada, Lenz wrote.

Many of the Silver State’s unions and registered contractors disagree. After all, construction projects will occur whether staffing agencies provide temporary labor or not, said Rob Benner, executive secretary-treasurer of the Building and Construction Trades Council of Northern Nevada.

The law aims to address employee misclassification. When employers incorrectly classify an employee as an independent contractor, it can lead to employers circumventing labor and insurance regulations — paying lower wages, worker’s compensation rates and insurance rates.

“It really levels the playing field by making sure that everybody is playing by the rules — by making sure that low-road contractors aren’t able to cheat,” Benner said.

Contractors’ unions, several of which worked with former Assemblymember Maggie Carlton, D-Las Vegas, to advance the bill through the Nevada Legislature, celebrated the July 2 ruling.

“It’s about time. This has been a long time coming,” said Brandon Morris, a business representative for the Western States Council of Carpenters. “It’s sad to look out and see a construction site, and you talk to a company and they’re like, ‘Oh, I’ve only got three employees,’ but you see 40 people running around there. It’s not fair.”

In the 2021 case, a Nevada contractor used temporary labor on a project which the NSCB claimed required a contractor license.

Though the judge ruled for the contractor, he said lawmakers could change the law — and they did, four months later.

‘A misguided piece of legislation’

To comply with AB227 while continuing to directly employ temporary workers, staffing agencies would need to become licensed contractors.

Stakeholders say that could be difficult. Mac Bybee, CEO of Associated Builders and Contractors of Nevada, said the state requires “qualified individuals” with construction experience to pass several examinations before obtaining a license.

“It’s individuals that (staffing agencies) dispatch who have the skills and training to work in the construction profession, but (the staffing agency managers) don’t build anything. They dispatch (workers) to the contractor,” Bybee said. “It was a completely disingenuous way to present the bill.”

Temporary workers may not always have those skills and training. While OSHA requires that employers instruct construction workers in “the recognition and avoidance of unsafe conditions,” many aspects of general labor are not highly regulated.

Still, Bybee described AB227 as “a misguided piece of legislation” because it decreases the choices available both to contractors and to prospective workers.

The law passed along party lines in both chambers of the Legislature three sessions ago.

Democrats, in favor of the change, consistently cited the revenue the state loses by allocating social services to misclassified employees who should have received workers’ compensation.

According to committee records, they sought to ensure labor protections and protect state-funded programs.

Republicans, on the other hand, raised concerns over excessive regulation and potential job losses, arguing that there was no evidence of systemic malfeasance on the part of Nevada staffing agencies.

They were joined by staffing agencies and the builders who rely on them. The opponents argued that by effectively eliminating the option of temporary labor for contractors, the law would force the construction industry to radically change its hiring practices, or even prevent them from filling short-term labor needs.

“This was about eliminating competition for the unions,” Bybee said. “It had nothing to do with safety or construction quality. It was strictly about market share.”

Builders Association of Northern Nevada Executive Officer Dan Morgan told the Review-Journal that the law’s proponents failed to present evidence of wrongdoing by Nevada staffing agencies and reiterated that the law would weaken the job market.

The calm before the storm

David Behar, the NSCB’s executive officer, said the agency hasn’t seen a large effect yet. Because the agency never considered it legal for staffing agencies to behave like contractors, it’s business as usual.

“I can’t say I’ve seen this rush of new complaints coming in regarding this because of the loophole maybe closing,” Behar said. “It’s just been the same practices that we’ve already been enforcing.”

When Jones issued the temporary restraining order in 2021, she said Nevada’s staffing agencies had demonstrated a significant likelihood of proving the ambiguity and vagueness of AB227, and a significant likelihood of “irreparable harm” to their business.

After reviewing the evidence presented since then, and after significant prodding from the trades union in Northern Nevada, she changed her mind and ruled that AB227 was sufficiently specific.

Behar said the NSCB is working to lower the barriers to licensure, which could allow staffing agencies to survive the new regulation. As an example, he said the agency recently established a restricted license, which proscribes licensees from performing certain highly-skilled jobs.

As the fight over AB227 continues, Benner framed the law as a key victory on “an ongoing march for the labor movement.” Because the law targets employee misclassification, Benner said he hopes it will protect temporary workers, as well.

“This will help all workers, not just union workers,” Benner said. “This helps all workers.”

Contact Isaiah Steinberg at isteinberg@reviewjournal.com. Follow @IsaiahStei27 on X.