Immigration Law Enforcement Developments: Contractor Liability For Undocumented Subcontractor Employees

I. STATISTICS

Estimate: 12 million illegal immigrants in America making up about 5 % of the workforce.

According to the Pew Hispanic Center, illegal immigrants constitute:

14% of construction workers

17% of cleaning crews

12% of food-preparation workers

25% of farm-workers

Some estimates conclude that unauthorized workers comprise an estimated 22% to 36% of the construction industry workforce.

II. RECENT LAW ENFORCEMENT ACTIONS

Early 2006: Immigration and Customs Enforcement (Division of Department of Homeland Security) announced that it was targeting employers of illegal immigrants and that it would use criminal prosecution and forfeiture of assets to do so. DHS Chief Michael Chertoff has vowed to use "every authority" within DHS's power to "shut down businesses that exploit an illegal workforce to turn a profit."

April 11, 2006: In the Northern District of Ohio a federal indictment was unsealed charging two temporary employment agencies and nine individuals with hiring and harboring illegal aliens, mail and wire fraud, and laundering approximately $5.3 million. Suspects were arrested in Pennsylvania, New York and Ohio. The indictment alleges that HAV Connect Inc., and TN Job Services Inc. provided hundreds of illegal alien employees to unwitting companies in Ohio by falsely representing that they were legal.

April 19, 2006: ICE officials arrest 7 current and former managers as well as 1,100 illegal workers employed by IFCO Systems North America Inc., the largest pallet service company in the United States. The arrests followed a two year long investigation which determined that more than half of IFCO's 5,800 employees during 2005 had invalid or mismatched Social Security numbers. The arrests occurred at more than 40 IFCO locations nationwide pursuant to criminal complaints filed in the Federal Court for the Northern District of New York charging them with harboring illegal aliens for financial gain. Two other IFCO employees were arrested for criminal document fraud violations.

May 2006: Fischer Homes, a leading builder of residential homes in Kentucky, Indiana and Ohio: News headlines reported that ICE arrested 4 construction supervisors and 76 foreign nationals at three of their Kentucky jobsites. All Fischer Homes construction supervisors were charged with criminal aiding abetting and harboring illegal immigrants for private financial gain. The investigation tied Fischer Homes directly to the subcontractor who hired and employed the illegal workers. The indictment alleged that the use of subcontractors was a ruse designed to buffer Fischer which, it was alleged, knew of the subcontractors' illegal practices and assisted in coordinating those efforts. Charges against the supervisors were dismissed, without prejudice, in November 2006 due to the disappearance of a key witness, a subcontractor who supplied the illegal labor to the Fischer jobsites.

November 29: ICE arrests 32 workers in a Home Depot parking lot on their way to work for labor brokers utilized by Spectrum Interiors, a drywall subcontractor engaged throughout central and southern states.

December 1: ICE announced that Stucco Design, Inc. and its owner agreed to forfeit $1.8 million representing the proceeds of illegal activity and 18 months imprisonment after which he will be deported. Stucco Design, an Indiana firm, performed stucco related services in at least seven mid-west states. According to the charges, the company was able to undercut bids and win work from general contractors by taking advantage of lower labor costs through the use of illegal labor. It was alleged that the owner paid for hotel rooms and transported the illegal workers throughout seven states, failed to withhold federal or state income tax, social security tax and did not pay the workers overtime. The investigation began after the North Dakota Highway Patrol stopped a truck for a traffic violation in October 2005. All four illegal aliens were employees of Stucco Design and had been working at a construction site for Wal-Mart. They told authorities that they were not required to show any documents to establish their eligibility to work in the U.S. and that their employer knew they were illegal.

December 12, 2006: Swift Foods: ICE agents arrested over 1,200 employees in 6 states. Swift voluntarily participated in Basic Pilot (discussed below). This constituted the largest sweep ever against one firm. According to the Washington Post, Swift's president and chief executive, Sam Rovit, criticized the arrests, saying the company has "played by the rules and relied in good faith" on the Basic Pilot program since 1997.

Smithfield Packing Company: Seemingly as a result of its participation in IMAGE (discussed below), the company discovered that approximately 550 of its workers had mismatched social security numbers. The company advised employees they had 14 days to correct the discrepancies which led to a walkout in November 2006. In January 2007, 21 workers at the plant were arrested after the government scrutinized forms submitted by the Company. According to the Washington Post, over 500 workers in the plant's workforce of 5,000 are facing termination because of data obtained through Basic Pilot. A company spokesperson said that its participation was "a business decision" resulting from an implied threat of raiding by ICE. "We felt that by going this way, there would be less of an effect."

March 2007: ICE arrested illegal aliens working on construction projects in four U.S. Southern States. Many workers had been employed by Tarrasco Steel. Jose Gonzalez, owner, was accused of falsifying and altering information contained on the 1-9 forms.

March 2007: Nine business locations of Jones Industrial Network in the Baltimore, Maryland area were the subject of a criminal investigation. The investigation was commenced when ICE was tipped off that a temporary employment agency was providing illegal aliens to work at critical infrastructure sites.

III. THE IMMIGRATION REFORM AND CONTROL ACT OF 1986, ("IRCA")

This Act gave amnesty to 2.7 million aliens living in the U.S. illegally.

The Act made it illegal, for the first time, to knowingly hire undocumented workers.

A. Definition of Knowing:

Includes not only actual knowledge but also knowledge "which may be fairly inferred through notice of certain facts and circumstances which would lead a person, through the exercise of reasonable care, to know about a certain condition." Such knowledge can be inferred where the employer "(i) fails to complete or improperly completes the I-9; (ii) has information available to it that would indicate that the alien is not authorized to work . . . ; or (iii) acts with reckless and wanton disregard for the legal consequences of permitting another individual to introduce an unauthorized alien into its work force or to act on its behalf." Id. 8 C.F.R. 274a.1(1)(1).1

What constitutes constructive knowledge is a question of facts and circumstances:

Living in dormitories

Use of labor brokers with rewards paid for worker recruitment

Apparent violations of wage, hour and other labor and employment laws

Prior violations of immigration laws

B. The Employment Eligibility Verification Form I-9 ("I-9")

The person or entity must attest, under penalty of perjury and on a form designated or established by the...