Keefe, Campbell & Associates, LLC

Editor’s comment: Back in July we wrote an article on Economy Packaging, the recent case where a unanimous Illinois Appellate Court ruled someone who was employed illegally and injured could obtain lifetime total and permanent disability benefits because they couldn’t locate suitable replacement work. Last week we provided an update on that case in regard to a recent Nebraska state law. We had a lot of comments and responses to both articles, and have had some time to reflect on the nature of our immigration system as it relates to workers compensation in general. We take this opportunity to editorialize.

While we continue to believe the court’s ruling in Economy Packaging was something of a travesty, we would like to take a moment and analyze some of the reasoning behind why. Lets face it, in today’s America, just like in our parents’ and our grandparents’ generations, there has been a massive amount of immigration to our great nation. Why? America, leaving aside its partisan political nature, is still the land of opportunity. It is still one of the only places in the world where you can begin anew with only the clothes on your back and make your own way. And there are numerous success stories of immigrant families doing just that.

What is different about today’s America is that the immigration system has become a gigantic federal bureaucracy that moves at a snail’s pace and really cannot process the applications it receives. The system is still paper driven and anecdotal evidence of files misplaced for months at a time if not years are commonplace. Also, evidence indicates it is far easier to move through the system when one is already within the borders of the US than from without. This, among a vast amount of other things, leads to what we colloquially call “illegal immigration.”

We recently saw an article and study on the web about low wage workers. A 2008 study of 4,387 workers in low wage jobs in Chicago, Los Angeles and New York is titled Broken Laws, Unprotected Workers. The academic study revealed widespread violations of basic wage and labor laws. These violations affected all workers, regardless of legal status, race, or gender. The study found numerous violations of minimum wage and overtime laws; workers who log hours without being paid for their time; workers who are denied earned breaks and meal time; charges illegally deducted from worker pay; retaliation by employers for complaints; and denial of workers’ compensation benefits, including encouraging employees to commit fraud.

Stating state workers’ comp systems are not functioning in the low-wage labor market, the report’s executive summary noted of the workers in the sample who experienced a serious injury on the job, only 8 percent filed a workers’ compensation claim. When workers told their employer about the injury, 50 percent experienced an employer reaction including firing the worker, calling immigration authorities or instructing the worker not to file for workers’ compensation. About half of workers injured on the job had to pay their bills out-of-pocket or use their health insurance to cover the expenses. Workers’ compensation insurance paid medical expenses for only 6 percent of the injured workers in their sample.

The report recommends three principles that should drive the development of a new policy agenda to protect the rights of all workers:

• Strengthen government enforcement of employment and labor laws
• Update legal standards for the 21st century labor market
• Establish equal status for immigrants in the workplace

Let us take a step back from that, what does it mean to be illegal or undocumented? Were our forefathers who set foot on this shore illegal? Our states bind together in union, but suppose they did not, would it be illegal for an Illinoisan to travel to Michigan? Essentially it is government sanction that allows legality. But why do we need government sanction? We here at KCA are all for background checking for criminal activity, and for communicable disease screenings, but the driving wedge in politics is jobs. Often you hear cries of illegals stealing American jobs. Here we come to the crux of the issue in relation to workers’ compensation.

We as a society need to redefine how we look at the issue. Illegal aliens or undocumented workers are people. Almost all undocumented workers are “workers”–they are people who want to work. They wouldn’t be working if they didn’t want to, and in fact, many of them wouldn’t come to America if there weren’t jobs available here for them. What does that mean in the bigger picture? It means that in almost all respects, there are employers out there who are looking for help, and there are people willing to work for them. In the vast majority of cases, if there were no legal consequences, and even in some cases with the consequences, employers would not care if the employee was “illegal” or not – if they can do the job and they are a good employee, that is all they are looking for. These people are not stealing jobs, they are doing the jobs that employers cannot get citizens to perform. Is it any wonder when today’s unemployment benefits often pay more than some of these positions do?

From that standpoint, we move into the arena of workers’ compensation. We agree that illegal or undocumented workers should be generally entitled to the protections of the Act, to an extent. If you lose a finger, you lose a finger. And the rapid receipt of certain benefits in exchange for doing away with tort liability is something that everyone can agree is a worthwhile compromise. What the court did in Economy Packaging may have changed the game however. By ordering the employer to pay total and permanent benefits to a person who could easily have obtained work but for their “illegal” status, is not what the system or its originators intended. If these individuals could obtain a job, it would be a moot issue and vocational counseling would have been used as it is in many other every day cases. But until Federal law allows this, the states should not be able to penalize an employer simply because they can’t legally re-employ an injured worker and have to comply with federal law.

The situation gets even more complex when you look at where it is going in the long run. We are creating more and more incentive to eliminate illegal aliens in the workforce. Agree or disagree with the concept, but at present we have jobs out there that are being performed by these hard working folks, and if we continue to crack down on employers, there won’t be anyone to work for them, which means they go out of business, which means fewer and fewer jobs, which means more and more unemployment, and a smaller economy, and so on, ad infinitum. What is the real fix? We need to overhaul the Federal immigration system and make it easier for respectable, hard working individuals to get their visas. Its almost “criminal” to make someone a criminal for wanting to work.

The link for the report we cite is http://nelp.3cdn.net/59719b5a36109ab7d8_5xm6bc9ap.pdf. If you have thoughts and comments, please send a reply or post them later today on the blog at www.keefe-law.com/blog.

Editor’s comment: About four months ago, the Governor of Nebraska signed a sweeping new bill that prohibits illegal immigrants from receiving state and local benefits by requiring state and local governments to verify that any person applying for benefits is in the United States legally and therefore eligible to make the claim for such benefits. The bill becomes effective at the beginning of October 2009.

The basic reasoning behind this bill is to ensure taxpayers’ money is not spent on services or benefits for people who are not in the state legally. The bill outlines a process agencies must use to verify eligibility. Those applying for public benefits must first attest they are either a citizen or an alien able to work in the U.S. As we go to press, we are not sure whether this will require anyone making a workers’ compensation claim to also demonstrate eligibility to work as part of the claim for WC benefits.

Government entities are to verify the immigration status of aliens using the U.S. Department of Homeland Security’s (DHS) Systematic Alien Verification for Entitlements (SAVE) program. The web-based program allows government entities to verify whether an individual is in the U.S. lawfully. In addition, public entities, contractors for public projects, and businesses qualifying for state tax incentive programs will also be required to verify legal status of newly-hired employees using the federal E-Verify system, which is made available to employers by DHS. No fees are charged for accessing the E-Verify database.

As we have advised on numerous occasions in the past, one of the underlying precepts of all workers’ compensation benefits is a legally binding contract between employer-employee. In 2002, the United States Supreme Court ruled in Hoffman Plastics Compounds, Inc. v. National Labor Relations Board that Federal immigration policy, as expressed by Congress in IRCA, foreclosed the Board from awarding back pay to an undocumented alien who has never been legally authorized to work in the United States. The ruling still stands and we feel it clearly outlines it is illegal to hire an undocumented alien in the United States. There is no higher authority on this issue than our Supreme Court.

However, in Illinois, the ruling by the Appellate Court, Workers’ Compensation Division in Economy Packing Co. vs. Illinois Workers’ Compensation Commission found an undocumented Mexican national who slipped and injured herself in May 2002 working on an assembly line was entitled to apply for and receive Illinois workers’ compensation benefits. The arbitrator awarded her temporary total disability benefits of $147 per week for 60 weeks and permanent total disability benefits of $371 per week for life. The arbitrator also ruled Ms. Navarro to be an “odd-lot” worker, meaning she was permanently and totally disabled and her limited skills would prevent her from finding future work. The defense pointed out it was illegal for her to seek future work in the United States.

The Illinois Workers’ Compensation Commission and a trial court agreed and Respondent Economy Packing appealed. The employer argued that “undocumented aliens” are always unemployable because of U.S. immigration law regardless of their physical capabilities. In order to receive permanent and total disability benefits under Illinois’ unusual and court-created “odd-lot” theory, claimant therefore needed to prove she was not employable due to age, training, education or experience, the employer argued.

The Illinois Appellate Court disagreed and found that although immigration law prevented this undocumented alien from legally working in the United States, she would still be able to work “elsewhere” had she not sustained an injury on the job. This created the need for the hapless Illinois employer to locate work outside the United States! The Court further found an Illinois employer has the burden of producing “sufficient evidence that suitable jobs would be regularly and continuously available to the undocumented alien but for her legal inability to obtain employment.”

As we pointed out at the time of the Economy Packing ruling, the Court did not address the basic legal tenet requiring a valid employment contract as a prerequisite for workers’ compensation benefits. We feel the members of the Court simply wanted Illinois employers to understand there is potentially a very heavy penalty when hiring undocumented workers. In the alternative, the Court wanted to reward claimant lawyers who enroll undocumented workers as clients.

Either way, we are certain the members of the Court are not going to change their ruling in Economy Packing any time soon. We further feel legislation such as that recently enacted in Nebraska will be the only way to “overturn” the Economy Packing theory. We would appreciate your thoughts and comments.

Editor’s comment: Immigration is a tough issue to tackle, with a lot of nuance and involving a lot of different facets. Beginning with President Bush, and continued by President Obama, this is one “stream-lining” regulation we can get on board with. Whether you agree with it or not, the law of the land requires employers not employ illegal immigrants. Where previously employers were required to have their employees fill out I-9 information forms to have on hand should DHS or USCIS wish to review them,  this process was time consuming, filled with inaccuracies, and allowed a lot of illegal or undocumented aliens to remain employed when the Feds didn’t check their forms. The internet age is making it that much easier to confirm the status of the potential employees, in a concurrent time frame.

From the U.S. Citizenship and Immigration Services’ website: “E-Verify is an Internet-based system operated by the Department of Homeland Security (DHS), U.S. Citizenship and Immigration Services (USCIS) that allows employers to verify the employment eligibility of their employees, regardless of citizenship.  Based on the information provided by the employee on his or her Form I-9, E-Verify checks this information electronically against records contained in DHS and Social Security Administration (SSA) databases.”

On June 6, 2008, President Bush issued Executive Order 13465 which required any contractor entering into a contract with the federal government to agree to the use of an electronic employment eligibility verification system to verify the employment of all persons hired during the contract term who were to perform work in the US, and all persons hired to perform work on the federal contract in question.  Since enactment, various decisions have pushed back the initial date of effect at September 8, 2009.

The Society for Human Resource Management (SHRM) and the other plaintiffs including the Chamber of Commerce of the United States of America challenged the legality of the executive orders and their implementing regulations arguing it was neither legally justified nor practical for federal contractors to implement. In a ruling last week, a federal district court held in favor of the government and ruled the regulation should go forward.

What does this mean? In eight short days, from September 8, 2009 onward, anyone doing business with the federal government and accepting government contracts will have to E-verify the employment status of their employees. Although this will amount to greater cost expenditures for those businesses entering into contracts with the federal government, it does not appear to be a significant one, and it is difficult to fault the government for attempting to streamline a process that will actually make it easier for businesses to comply with the law. Furthermore, we’d like to point out that it isn’t exactly a secret that federal contracts come with strings attached, taking a government contract was never compulsory, and the new string here is that if you want the lucrative government contract, you have to allow them a little more access to your records.

Where it may become an issue, as in any system that grows too large, errors have already been appearing in the E-verify database. In use in other areas of federal law for many years, as of last year, there were nearly 100,000 employers already using the E-verify database verification system. The new rules going into effect next week are estimated to increase the volume of users by another 100,000-150,000 users. As the users grow, and data grow, it may more prevalent to get false reports or inaccurate results from the E-verify database. That remains to be seen, however, and one can always hope the federal government will become efficient in at least one more area.

USCIS has published information and frequently asked questions on its website regarding application of the rule. This article was drafted by Arik D. Hetue, J.D. who is soon to be an attorney with Keefe, Campbell & Associates. Please reply with your thoughts and comments.

Editor’s comment: We were recently asked by a reader about the unusual ruling in Economy Packaging where a unanimous Illinois Appellate Court ruled someone who was employed illegally and injured could obtain lifetime total and permanent disability benefits because they couldn’t locate suitable replacement work. Prior to Economy Packaging, there was a ruling from an Illinois arbitrator where he would not order vocational rehabilitation because to re-hire such an individual is against U.S. law.

After Economy Packaging, no one knows what to do with an illegal or undocumented alien who is injured and can’t return to the same job in part because of disability and in full because it is illegal to again hire such an individual. We cannot imagine a lot of Illinois arbitrators would allow an illegal alien to sit home with a sore thumb and turn them into a total and permanent disability or wage loss claim because they were laid off following their injury and couldn’t find work due to illegal status.

But one never knows. If the man or woman had a serious injury and the problem finding work was real, most arbitrators aren’t going to reward an employer who hired the illegal alien and then had them get seriously injured. Please also note we had a claim where a worker got seriously hurt in Illinois while making about $15 per hour. He returned to his own country and was making about $10 a week. That isn’t a solid outcome for an Illinois employer either. The Illinois Workers’ Compensation Act doesn’t address such a potential—we assure all of our readers it should but good luck getting something written into the statute that might benefit Illinois employers and also make sense.

The Economy Packaging message is clear to Illinois employers and insurers—if you hire illegal or undocumented aliens you do so at an enormous WC risk. We can foresee employers putting up signs and printing on employment applications their willingness to sue anyone who lied about their eligibility for employment to later find out they were illegal and had to pay monster WC benefits due to the illegal status. We would ask all of you if such an employment application would or could comprise WC fraud.

If we ran an insurance carrier and had any first-dollar exposure for paying such benefits, we would write the policy to confirm we did not provide workers’ compensation coverage for employees of an account if they were illegal or undocumented aliens. The added cost and exposure would and should cause premiums to spiral. We caution we don’t know how the Illinois Department of Insurance would view such a policy.

All the effects of Economy Packaging ruling are insidious and difficult to predict. If you get a similar claim and we can assist, send an email with as much detail as possible and we will provide our opinion(s). We don’t charge for such work.

On another note, the world of human resources and employee benefits is buzzing as the Department of Homeland Security’s Immigration Customs and Enforcement (ICE) agency announced yesterday it was “launching a bold, new audit initiative” aimed at U.S. employers. Beginning July 1, 2009, ICE sent notices to 652 businesses notifying the companies ICE intended to conduct an audit on their hiring records, e.g. Form I-9s and accompanying documentation to ascertain whether they complied with federal immigration laws.

In announcing the move, ICE director John Morton commented “ICE is committed to establishing a meaningful I-9 inspection program to promote compliance with the law. This nationwide effort is a first step in ICE’s long-term strategy to address and deter illegal employment.” To illustrate its new commitment to workplace enforcement measures, ICE noted in its press release in all of 2008, the agency issued 503 similar notices to companies. The U.S. government’s efforts and proclamations continue to make it unambiguously evident the battle against illegal immigration in the U.S. is now being primarily fought against employers and illegal hiring practices. Undoubtedly, ICE enjoys the press garnered by these large-scale enforcement actions. Nevertheless, funding for ICE’s enforcement activities against employers has increased substantially recently and this new I-9 audit is a clear example of ICE’s new strategy of focusing on companies’ hiring practices and penalizing employers for failing to comply fully with immigration laws. Employers who have not done so yet should consider having an audit conducted on their hiring practices to ensure compliance with federal immigration laws.

The notice from ICE is online at http://www.ice.gov/pi/nr/0907/090701washington.htm. Please do not hesitate to send your thoughts and comments.

Editor’s comment: We don’t know your personal political spin on illegal aliens as it relates to workers’ comp benefits but we want all veteran risk managers to understand some very simple thoughts on the topic.

The math on Illegal aliens isn’t hard to follow. Plaintiff trial lawyers make money on fees. If they are retained by clients who are illegal aliens and their illegal aliens don’t get benefits, Plaintiff trial lawyers don’t get fees.

There is a persistent rumor the current Illinois Commission and reviewing courts are friendly to Illinois’ Plaintiff trial lawyers. There is also a rumor the Commission and reviewing courts aren’t quite as friendly to Illinois business.

So no matter how you spin it, illegal aliens will get WC benefits, regardless of how “illegal” that might be under federal law. No one expects the federal courts; particularly the rare air of the U.S. Supreme Court will give a hoot. It is our reasoned legal opinion the U.S. Supreme Court will not consider taking an appeal of a measly state WC claim to confirm their position in Hoffman Plastics that it is illegal for an undocumented alien to get a job and such an employment contract has an illegal purpose and should therefore be voidable without payment of further services or compensation when discovered.

We note the State of North Carolina is considering such a ruling right now. North Carolina is obviously less friendly to trial lawyers than Illinois.

And if the U.S. Supreme Court won’t straighten it out, the states, particularly Illinois, will run around doing whatever they want. So if Illinois business doesn’t want to pay benefits to Illegal aliens, don’t hire illegal aliens. If they get hurt and can’t or won’t find replacement work, the “workers’ compensation penalty” in this state may be huge. Please don’t hesitate to reply with thoughts and comments.