New York: By Hiring Illegal Alien, Employer Did Not Give Up Protection Against Third-Party Claims for Contribution and/or Indemnification

In spite of the fact that the Federal Immigration Reform and Control Act of 1986 (IRCA) makes it unlawful to knowingly hire undocumented (illegal) aliens [see 8 U.S.C.S. § 1324a], the dominant, although not unanimous, rule is that such undocumented (illegal) aliens who sustain injuries arising out of and in the course of their employment are covered by the various state workers’ compensation laws [see Larson’s Workers’ Compensation Law § 66.03]. That the employment is itself illegal is deemed insufficient to cause a forfeiture of benefits. One reason is, of course, that if the courts were to hold otherwise, it would penalize those firms who abide by immigration rules and reward those who do not.

If the existence of IRCA does not alter, in any important way, the right of the employee to recover workers’ compensation benefits from the employer, does it nevertheless affect or control other issues that are peripheral to compensable injury? For example, where the undocumented worker sues a third party alleging that it is responsible for the harm, may that third party implead the employer, alleging that the latter’s sole or concurring negligence contributed to or caused the employee’s injury? The dominant rule–at least where the employer and employee haven’t violated the law by creating the illegal employment contract–is that the employer cannot be sued or joined as a joint tortfeasor; the employer is not jointly liable to the employee in tort and cannot, therefore, be a joint tortfeasor. Moreover, unless the third party can show some breach of an independent duty (e.g., an express agreement to indemnify the third party), the dominant rule is that the third party cannot proceed against the employer on any sort of indemnity cause of action. But does the employer lose such defenses by hiring the undocumented worker?

In a recent case from New York, a state appellate court has answered that question in the negative. In New York Hosp. Med. Ctr. v. Microtech Contracting Corp., 2012 N.Y. App. Div. LEXIS 6240 (Sept. 26, 2012), the court held that violations of IRCA, as alleged by the defendant against the employer, did not abrogate the protections provided by N.Y. Workers’ Comp. Law § 11 from third-party claims for contribution and indemnification.

Background

Microtech allegedly employed two undocumented aliens to perform work on the property of a New York City hospital. The employees were injured on the job, and Microtech provided them with compensation for their injuries pursuant to the Workers’ Compensation Law. The employees sued the hospital for damages relating to their injuries predicated upon violations of the Labor Law. The hospital commenced this separate action seeking contribution and indemnification from Microtech. Microtech moved to dismiss the complaint on the ground that the hospital’s claims for contribution and indemnification were barred by Workers’ Compensation Law § 11. The trial court granted summary judgment on that issue and the hospital appealed.

The hospital contended that Microtech failed to verify the immigration status of the employees and that this failure constituted a violation of IRCA. The hospital further contended that this violation should result in the loss of protections provided to employers under the Workers’ Compensation Law and that Microtech’s motion should therefore have been denied, at least to that extent.

IRCA Does Not Preempt State Workers’ Comp Laws

The appellate court observed that IRCA did not contain an explicit statement that Congress intended to preempt state laws such as New York’s Workers’ Compensation Law. On the contrary, the legislative history of IRCA showed that the Act was not intended to undermine or diminish in any way labor protections in existing law. The court continued that while precluding Microtech from receiving the protections provided by Workers’ Comp. Law § 11 for its violations of the IRCA might support the ultimate goals of IRCA by punishing Microtech for failing to verify the workers’ immigration status, affording Microtech the economic protections of Workers’ Compensation Law § 11, even in light of a violation of the IRCA, would not stand “as an obstacle to the accomplishment or execution of the full purposes and objectives of Congress‘” such that Workers’ Compensation Law ß 11 should be considered preempted.

The appellate court added that to accept the hospital’s contention would not only deny Microtech the economic protections it acquired under the Workers’ Compensation Law in return for providing the subject employees with compensation for their injuries, but it would relieve the hospital of its responsibility to ensure a safe construction site for workers under the Labor Law.

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