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.

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