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Tax Laws Protect Illegal Workers

A lawyer friend recently told me about a new personal injury client he’d signed up. The client was employed on a large construction job and had fallen from a scaffold, and was suing his employer.

The client had been working in this country for almost 20 years and had a federal tax transcript going back almost that far showing he'd paid his taxes. Adding machine projections using the 19 years more the client could have expected to work had he not been injured put his future lost wages somewhere in the vicinity of $950,000. But the client never obtained any kind of legal immigration status, and because the 1986 Immigration Reform and Control Act (search) (IRCA) prohibited any U.S. employer from legally employing him, his employment and payment of his wages were illegal.

Yet, as last week’s Wal-Mart raids (search) have shown, the fact that the employment and payment of illegal immigrants is against the law does little to stop U.S. companies from hiring them. And, my friend's client stands an excellent chance of winning his case. 

You may wonder how it is that an illegal immigrant is known to our government for almost 20 years and still not removed from the country. It's because the mission of the Internal Revenue Service (search) is to collect revenue. Anyone earning income in the United States must pay taxes on it, even if their employment or presence in the U.S. is illegal. The Individual Taxpayer Identification Numbers (search) the IRS issues to people who are ineligible for a Social Security number (read: people with no legal immigration status) could be an excellent resource for locating people who are removable, but immigration authorities cannot get this information because IRS regulations prohibit taxpayer information from being disclosed to third parties without the authorization of the taxpayer. The IRS has made a policy decision to shield illegal immigrants from immigration authorities. Even after the terror attacks of Sept. 11, our government places a higher value on collecting revenue than removing illegal immigrants.

People who have no legal immigration status make excellent personal injury clients. This is so mainly because it’s difficult to document their work history and courts almost always permit juries to award future lost wages with the sparsest evidence of what those future lost earnings might be. Copies of the illegal immigrant’s tax returns, with the testimony of an economist, is regularly the basis of future lost wages awards that can run into the millions of dollars. Any attempt by a defense attorney to elicit testimony on the plaintiff’s lack of legal immigration status will be met with an objection that the court will sustain. Even asking an illegal immigrant’s economist how he can be certain that the plaintiff will be allowed to remain in the U.S. for the rest of his projected work life, and not removed, is not permitted by trial judges.

Stories abound of illegal immigrant plaintiffs who have been in the U.S. for a month, land a good paying (albeit illegal) job in the construction industry, and fall from a ladder two days after they begin work. Their medical bills are normally paid through Workers Compensation (search) coverage, as is a percentage of their lost wages. Then every company on the work site who played any role at all in the construction is sued.  In the case of my friend's client, his employment in the U.S. was illegal, payment for his work was illegal and at any moment he might be picked up by the BCIS and removed from the country. Nonetheless, courts, generally, would allow an economist to testify that because of his injury, the defendants owed my friend’s new client nearly $1 million for his future lost wages alone.  

American consumers foot the bill through increased insurance premiums. 

Last spring, the U.S. Supreme Court decided the case of Hoffman Plastics Compounds, Inc. v. NLRB (search). The court relied on the prohibitions of the 1986 Immigration Reform and Control Act in deciding that an illegal immigrant is barred from an award of back pay after his unlawful firing. Many read the case to mean that any award of lost wages to an illegal immigrant is prohibited by the IRCA. Since the decision in Hoffman, several federal appellate courts and some state courts have found that the IRCA prohibits any award of lost wages to an illegal immigrant, be they for past or future lost wages.   

In New York, several appellate court decisions (made after IRCA, surprisingly) held that at least in New York, IRCA was more or less meaningless and state courts could award lost wages to people whose employment in the U.S. violated immigration laws. But since the Supreme Court’s Hoffman decision, one New York trial judge recently showed the courage to do what the IRCA requires. The judge decided that if a plaintiff cannot demonstrate that he has a legal right to work in the U.S., he cannot ask a jury to award him lost wages because federal law prohibits it. The judge’s decision in the case, Majlinger v. Casino Contracting Corp. (search), has already been appealed. 
 
Reed Podell, a defense lawyer at Smith & LaCuercia in Manhattan, represented one of the defendants in the case and successfully moved the court to strike the plaintiff’s lost wage claim. Some defense lawyers have become accustomed to courts allowing the lost wage claims of people who cannot demonstrate a legal right to work, says Podell, and frequently do not demand proof of a plaintiff’s legal right to work during the discovery process. Failing to do this can put defense lawyers in a bad position when the time comes to move the court to strike an undocumented alien’s wage claim.

But my friend’s client’s $950,000 lost wage claim continues to look good. To date, the lawyers representing the defendants in that case still have not demanded any proof of my friend’s client’s right to legally work in the U.S. If you own a business, you can expect your insurance premiums to rise a little bit more. If immigration authorities do not have the resources to stop the employment of illegal immigrants, perhaps America’s employers, when sued, will at least use the opportunity to make it less profitable. 

Matt Hayes began practicing immigration law shortly after graduating from Pace University School of Law in 1994, representing new immigrants in civil and criminal matters. He is the author of The New Immigration Law and Practice, to be published in October.

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