Colin Munro is a partner focusing on immigration law for McCarter & English out of its Stamford, Conn., office. His e-mail address is cmunro@mccarter.com.

Contractors Face Liability in Undocumented Workers

Contractors may take on liability when subcontractors hire undocumented aliens on their construction projects.

by Colin D. Munro II

Low levels of unemployment in Connecticut and the region, coupled with the continuing boom in residential and commercial construction, are making it increasingly difficult for contractors to find skilled and even unskilled workers to support business growth.

The pool of undocumented immigrants in the U.S. is now approaching 12 million, and it is not surprising that the construction industry is one of the largest employers of workers who are in the country without legal status.

Even though large companies generally have hiring procedures to pre-screen for legal work status to comply with the 1986 Immigration Reform and Control Act, most general contractors subcontract much, if not all, of the actual labor and materials work to subcontractors, who may or may not rigorously screen for undocumented workers.

The issue that inevitably comes up is whether a general contractor may be liable under the federal law for a subcontractor's knowing employment of illegal workers. While the law expressly exempts "independent contractors" from employment verification, it imposes the same verification burden on the "contractor supplying the labor or service."

Anticipating the subterfuge of simply making every worker an independent contractor, the law imposes "employer liability" in circumstances where "any person knowingly uses a contract, subcontract or exchange to obtain the labor or services of an alien, knowing that the alien is an unauthorized alien."

The plain meaning of this provision seems to create culpability even when the contractor has not purposely hired a subcontractor in order to get around the law's provisions. If the contractor's site manager knows or suspects that the subcontractor may be employing unauthorized workers, the government would only have to prove that the contractor's agent on site knew about the unauthorized worker.

There is also risk of further liability through a civil action for treble damages under the federal Racketeer Influenced and Corrupt Organizations Act, known as RICO, for conspiring, in effect, to deprive U.S. workers of higher wages.

In Williams et al. v. Mohawk Indus., the 11th Circuit upheld a lower court decision that a corporation and its suppliers of temporary workers can constitute an "enterprise" for purposes of civil liability under RICO. The U.S. Supreme Court granted certiorari in Williams and recently vacated the 11th Circuit opinion, remanding the case for further review in light of its June decision in Anza vs. Ideal Steel Supply Corp. In Anza, the court found a lack of the required "proximate cause" between the criminal act and the alleged harm to the plaintiff. Due to the differing fact patterns in Williams, however, it is by no means clear that the court will find a similar lack of proximate cause. If Williams is ultimately upheld, businesses relying on temporary workers likely will be more vulnerable to liability under RICO.

How can a general contractor protect itself from such liability? In light of the many risks, contractors should implement a comprehensive IRCA compliance policy that will:

• Designate an officer or senior manager as a compliance officer for the company with the responsibility to implement and enforce a company-wide, comprehensive policy to comply with the Immigration Reform and Control Act

• Publish and disseminate the policy broadly and frequently within the organization, including making it part of new employee orientation

• Specifically educate managers, supervisors, and others who come in contact with subcontractors about the potential risks of civil and criminal liability for "knowingly hiring" undocumented workers and about the risks to the company if they fail to report knowledge of a subcontractor's use of illegal aliens

• Impose an affirmative duty on all employees to report any hiring of undocumented workers by the company or a subcontractor

• Impose affirmative contractual duty on subcontractors to agree to hire only eligible workers, and require them to impose the same policy and duties on other subcontractors

• Require subcontractors to indemnify you and hold you harmless for any liability resulting from that firm hiring unauthorized workers or failing to verify employment eligibility.

Contractors should never rely on "credible deniability" as a defense in today's complicated labor marketplace. A "don't ask-don't tell" policy may not be enough to protect you from liability and significant legal difficulties.