Monthly Archives: April 2012

What You Don’t Know May Hurt You: Things You Should Know About The Hiring of Illegal Immigrants.

By: Angela R. Stephens

The Department of Homeland Security (“DHS”) and the Department of Justice (“DOJ”), responding to a growing number of illegal immigrants and current political debates, have placed an increased focus on the enforcement of the Immigration Reform and Control Act of 1986 (“IRCA”).  As a result, IRCA enforcement actions and investigations of the construction industry have increased substantially.  States are following suit by enacting their own legislation with respect to the hiring of illegal immigrants.

I. Overview of Immigration Reform and Control Act of 1986

The IRCA, codified at 8 U.S.C. §1324a, makes the employment, either directly or indirectly, of unauthorized aliens unlawful.[1]  An employer that obtains the labor of an alien through an indirect means, i.e. a contract or subcontract, knowing that the alien is unauthorized shall be considered to have violated the IRCA.

The IRCA also mandates that employers (1) physically examine identification documents to verify each job applicant is authorized to work in the United States,[2] (2) complete an I-9 Form for each employee hired,[3] (3) retain the Form for each employee for the later of three years after the date of hire or one year after employment is terminated,[4] and (4) update and/or re-verify employment eligibility before the employee’s work authorization expires.[5]   This process is referred to as the employment verification process.

In 1996, Congress created a good faith defense for employers who fail to properly verify the status of new hires in accordance with the IRCA.[6]  Under this exception, a company is considered to have complied with the employment restrictions, notwithstanding a technical or procedural failure to meet the requirements, if there was a “good faith” attempt to comply.[7]  However, this defense is not available to companies that engage in a “pattern or practice” of IRCA violations or if the employer fails to correct the error after receiving notice.[8]

An employer who has not acted in good faith and hires an unauthorized alien or who fails to comply with the employment verification process will be subject to civil and criminal penalties.   An employer who knowingly hires an illegal alien or retains an illegal alien after learning they are unauthorized may be civilly fined between $250 and $2,000 for each illegal alien retained.[9]  Likewise, an employer who fails to comply with the employment verification process may be civilly fined between $100 and $1000 for each violation.[10]  Employers who engage in a “pattern or practice of violations of knowingly hiring illegal aliens can be subject to misdemeanor criminal penalties of up to $3,000 and/or imprisonment of up to six months.[11]

In addition to penalties for violation of the IRCA, an employer who hires illegal immigrants can also be penalized for a violation of the Racketeer Influenced Corrupt Organizations Act (“RICO”).[12]   Private parties, such as competitors, legal employees, undocumented employees, or local government officials, can assert an action against an employer who commits a RICO violation.[13]

II. State Legislation Regulating the Hiring of Illegal Immigrants.

Many states, feeling that the IRCA does not impose sufficient penalties on employers who hire illegal immigrants, have passed legislation to strengthen the penalties against such employers.  For example, on June 15, 2006, Tennessee enacted legislation that prohibited entities from contracting with the State of Tennessee or any State agency for up to one year if that entity “knowingly utilizes the services of illegal immigrants in the performance of a contract to supply goods or services” to the state or state agency.[14]  Also, in 2007, Tennessee HB 729 was signed which provided that the a business’ license would be suspended for up to one year for knowingly hiring an illegal alien.  Notably, Kentucky has not enacted such legislation.

In addition to the increased penalties, States are also requiring that certain employers use the E-verify system. For example, eighteen states have mandated that certain employers use e-verify:  Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Louisiana, Minnesota, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Utah, and Virginia.

III. Suggestions to Reduce the Risk of Liability

With States and the Federal Government placing an increased focus on enforcement, construction participants must ensure that both the requirements of the IRCA and any State immigration laws are followed.  The key to compliance with the IRCA is to (1) physically examine approved identification documents listed on the I-9 Form, (2) complete an I-9 Form for each employee hired, (3) retain the Form for each employee for the later of three years after the date of hire or one year after employment is terminated, and (4) update and/or re-verify employment eligibility before the employee’s work authorization expires.

Also, as discussed above, contractors can face liability if one of their subcontractors hires illegal immigrants.  The contractor can reduce its risk of liability by including certain language in its subcontracts.  The following is an example of potential language which might be used to attempt to reduce such risk (you should consult with your lawyer to determine whether this language is right for your company):

COMPLIANCE WITH IMMIGRATION LAWS

Subcontractor agrees that it shall be obligated to comply with all requirements imposed on employers under IRCA with regard to every Subcontractor employee (“Contract Worker”) who will perform services for Subcontractor, where such service is provided in connection with Subcontractor’s performance of this Agreement.  Subcontractor further agrees that Subcontractor is the “employer” as that term is defined at 8 C.F.R. Section 274a 1(g), and that neither the Owner nor the Contractor is the “employer” as so defined, with regard to such Contract Workers.  Contractor agrees that Subcontractor is not the “employer” of persons who are employed directly by subcontractors and independent contractors of Subcontractor.  In furtherance of its duties as employer under IRCA of Contract Workers directly employed by Subcontractor, Subcontractor agrees to do the following:

Complete USCIS Form I-9 for all Contract Workers.  Subcontractor agrees that it has sole responsibility for completing Form I-9 for all Contract Workers who provide services as an employee of Subcontractor as part of Subcontractor’s performance of this Agreement and that it will do so and will further update such Form to the extent required by law.  Subcontractor further warrants that all Subcontractor’s employees who complete Form I-9 for such Contract Workers will be knowledgeable of all Form I-9 requirements including, but not limited to, knowledge of which documents do and do not satisfy the requirements of Form I-9, and that such employees will otherwise complete Form I-9 in full compliance with IRCA.

Subcontractor’s Warranty of Employment Authorization for all Contract Workers.  Subcontractor hereby warrants that no Contract Worker directly employed by Subcontractor will provide services pursuant to this Agreement until Subcontractor has completed Form I-9 for such Contract Worker in the manner required by IRCA.  Subcontractor further warrants that it has taken all necessary steps to comply with IRCA and that Subcontractor believes all Contract Workers directly employed by Subcontractor are authorized to work in the United States.

Indemnification and Hold Harmless.  Subcontractor agrees that in any event any government agency determines that any Contract Worker directly employed by Subcontractor to perform duties under this Agreement is not authorized for employment in the United States, Subcontractor shall indemnify and hold harmless Owner, Contractor, and any of Contractor’s agents, employees, officers, directors, trustees or other persons acting on Contractor’s behalf, from any liability incurred by Contractor as a result of such determination.  Such indemnification shall include, by way of example but not in any way limited to, any civil or criminal fines or penalties, assessed or alleged, and any costs incurred in responding to or participating in any government investigation, finding, recommendation, hearing, appeal or any other proceeding, including attorney’s fees and costs.

Liability for Subcontractors.  Subcontractor shall require all its subcontractors to comply with these immigration provisions.  The Subcontractor shall indemnify the Owner, Contractor and any of the Contractor’s agents, employees, officers, directors, trustees or other persons acting on the Contractor’s behalf, from any liability incurred by the Contractor as a result of a determination that a subcontractor’s worker hired to perform duties under this Agreement is not authorized for employment in the United States.  Such indemnification shall include, by way of example but not in any way limited to, any civil or criminal fines or penalties, assessed or alleged, and any costs incurred in responding to or participating in any government investigation, finding, recommendation, hearing, appeal or any other proceeding, including attorney’s fees and costs.

This article was written by Angela R. Stephens with the law firm of Stites & Harbison, PLLC.  Special thanks to Nate Simon for his assistance with this article.   If you have further questions about this article you can reach Mrs. Stephens at astephens@stites.com.


[1] 8 U.S.C. §1324a(a)(2012).

[2] 8 U.S.C. §1324a(b)(1).

[3]  8 U.S.C. §1324a(b). It is important to keep up with changes to the I-9 Forms as well.

[4] 8 U.S.C. § 1324a(b)(3).

[5] The form must be available for inspection by the authorized U.S. Government officials (e.g., ICE, Department of Labor).

[6] 8 U.S.C. 1324a(a)(1)(3) creates a rebuttable presumption that the employer has not violated the IRCA if it has complied in good faith with the requirements of 8 U.S.C. §1324a(b).  Likewise, 8 U.S.C. §1324a(b)(6) creates a “good faith” defense if the employer in good faith attempted to comply with the employment verification process.

[7] Id.

[8] 8 U.S.C. 1324a(b)(6)(B).

[9] 8 U.S.C. §1324a(e)(4)(A).  Penalties will increase to a range of $2,000 to $10,000 for repeat offenses.

[10] 8 U.S.C. §1324a(e)(5).

[11] 8 U.S.C. §1324a(f)(1).

[12] 18 U.S.C. §1962.  To establish a RICO action, a plaintiff must prove (1) conduct, (2) of an enterprise, (3) through a pattern, (4) of racketeering activity. Zavala v. Wal-Mart Stores, Inc., 393 F. Supp. 2d 295 (D.  NJ 2005).

[13] Elisabeth J. Sweeny Yu, Symposium on the American Worker: Note: Addressing the Economic Impact of Undocumented Immigration on the American Worker: Private RICO Litigation And Public Policy, 20 ND J. L. Ethics & Pub Pol’y 909 (2006). This Article notes that the Second, Sixth, Ninth, and Eleventh Circuits have approves RICO suits where legal employees sue for wages lost when employers hire unauthorized workers.

[14] H.B. 111 (Tenn. 2006) Section 1, amending Tenn. Code Ann. Title 12, Chapter 4, Part 1 by inserting the legislation as a new section.

IPIN Tip of the Month: Tracking Projects

The internet has changed the way business is conducted in virtually every industry, and the construction industry is no different. Online plan rooms now provide construction firms with more information about projects than ever before and the capability to access that information quickly at any time of the day or night. With all of that information at one’s fingertips, it’s easy to become overwhelmed and lose track of what is most important. One of the tools Builders Exchange provides through the IPIN system is the ability to track the projects that are the most important to your company.

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Construction and Materialman’s Liens on Public Projects in Kentucky

J. Mark Grundy
Jeffrey A. McKenzie
Bingham Greenebaum Doll LLC
3500 National City Tower
101 South Fifth Street
Louisville, Kentucky 40202
Phone: 502/587-3628 and 502/587-3594
mgrundy@bgdlegal.com
jmckenzie@bgdlegal.com
www.bgdlegal.com

Other than contract provisions, statutory lien provisions provide Contractors, Subcontractors and Material Suppliers with their best assurance of an Owner’s compliance with payment terms.  As discussed in our last article on private project liens, Kentucky applies different lien rules depending upon whether the project is private or public.  As with private project liens, the courts of Kentucky strictly construe the public project lien requirements and will disallow a lien if it is not filed in strict compliance with those requirements.  Kentucky has separate lien statutes with respect to lien rights of others, including engineers, architects, landscape artists, real estate brokers, and land surveyors who provide professional services.  This article will describe the rules governing liens filed on public projects.

Generally, the applicable construction lien statute in Kentucky is KRS 376.010 et seq.  Contrary to the effect of the private lien law, the public lien statute, KRS 376.210, provides that a mechanics’ lien on public projects will attach to project funds, not to the real property itself or the improvements thereon.

Because a lien cannot attach to the real property itself in a public project, rather it only attaches to the funds owed by the public authority to the general contractor, there is no advantage for a general contractor to try to attach the funds, since those funds are already owed to the general contractor.  However, a subcontractor in a public lien project must file its lien statement within sixty days after the last day of the month in which the services were performed or material was delivered.  In addition, the Kentucky Fairness In Construction Act allows a subcontractor or materialman to also file a lien statement up to the date of substantial completion as defined in that Act, in the event the substantial completion date falls outside the statutory sixty day period.  The common practice is to file the lien statement in both the county in which the project is located and the county in which the seat of government where the public facility is located.  In addition, the lien claimant must send a copy of the lien statement to the public authority as well as proof of delivery of the lien statement of the general contractor.  Once all requirements are met, the mechanics’ lien is perfected.

If a subcontractor materialman has perfected a mechanics’ lien on a public project, the general contractor must take certain steps.  Once the lien is perfected, the public authority must withhold the amount claimed in the lien statement from any amount then due to the general contractor.  If the amount due to the general contractor is not sufficient to cover the lien, the public authority will withhold the difference from future payments once the general contractor earns those payments.  Significantly, the general contractor must file a protest with the public authority within thirty days from the date it receives the lien statement from the public authority.  Failure of the general contractor to file such a protest will result in the public authority paying the held funds to the lien claimant.  If the general contractor, however, timely files its protest, then the public authority will notify the lien claimant and retain the withheld funds.  It is then incumbent upon the lien claimant to file a suit to enforce the lien to seek disbursement of said funds upon adjudication or court order.

Private projects – the filing deadlines apply to general contractors as well as to subcontractors materialmen.  However, notice requirements are not the same.  Because general contractors have contracted directly with the owner and work directly with the owner, general contractors do not provide notice to the owner of its attempt to file a lien.  General contractors must file a lien statement within six months of the last date it provided labor or delivered materials on the project.  The lien statement must be filed in the county clerk’s office where the building or improvement is located.  The lien claimant must file notice of the lien statement and mail it by regular mail to the owner at his last known address within seven days of filing with the county clerk.  Kentucky generally strictly adheres to the perfection of the requirements of the statute.  The lien claimant must file a lawsuit to enforce the lien within twelve months after the date the lien statement was filed or otherwise the lien will be statutorily dissolved.  See KRS 376.090.

In contrast, subcontractors materialmen who have not directly contracted with the owner must provide notice to the owner of the project.  Pursuant to KRS 376.010(2), such entities may have filed an optional preliminary filing in order to receive certain protections in priority versus other creditors, however, this optional or preliminary filing is not necessary to perfect lien rights.  A mandatory notice of intent to file a cash lien must be sent to the owner of the property or the owner’s authorized agent.  If it is a non-owner occupied project, then notice must be received by the owner within 75 days of the last date labor or services were provided.  If the lien is for less than $1,000 or 120 days if the lien is for more than $1,000.  If the project is owner occupied, the notice must be received by the owner within 75 days of the last date of labor or services provided by the claimant.

The lien claimant then has six months from the last day of labor or services provided to file its lien statement.  Upon filing of the lien statement, the requirements for the perfection of the lien are satisfied.  The lien claimant then has twelve months from the date of the filed lien to initiate a lawsuit in order to avoid dissolution of the lien.