¿Dónde Están Mis Beneficios? Workers’ Comp Claims by Undocumented Employees

By Gary Wickert | February 2, 2017

Following an election cycle in which illegal immigration became a touchstone issue, it seems only appropriate that claims handlers and subrogation professionals have a clear understanding of the many nuances involving workers’ compensation claims made by undocumented employees. Indeed, with more than 11 million such immigrants living and working in the country according to the U.S. Department of Homeland Security, such an understanding is probably indispensable. When an injured employee initiates a workers’ compensation claim with the words, “No tengo documentos“, claims professionals are exposed to a Pandora’s Box of legal issues and concerns.

No discussion of the issue of illegal immigration would be complete without the tension of selecting which term will be used to describe illegal immigrants. Many commentators are uncomfortable with the use of the term “illegal alien” and prefer other terms such as “unauthorized worker”, “foreign national”, or “undocumented immigrant.” A California appeals court has stated the following:

As compared with the term undocumented immigrant … [w]e consider the term “illegal alien” less ambiguous. Thus, under federal law, an “alien” is any person not a citizen or national of the United States. A “national of the United States” means a United States citizen or a noncitizen who owes permanent allegiance to the United States. Under federal law, “immigrant” means every alien except those classified by federal law as nonimmigrant aliens. “Nonimmigrant aliens” are, in general, temporary visitors to the United States, such as diplomats and students who have no intention of abandoning their residence in a foreign country. Martinez v. Regents of University of California, 83 Cal. Rptr.3d 518 (Cal. App. 2008), rev’d, 198 P.3d 1 (Cal. 2008).

In order to offend everybody equally, I will use a variety of terms with reference to illegal immigrants.

For more than a century, federal law allowed employers to hire undocumented immigrants. The Immigration and Nationality Act of 1965 (INA), also known as the Hart-Celler Act, is a comprehensive body of federal law (including both federal statutes and federal regulations) governing the immigration, naturalization, and exclusion of aliens. 8 U.S.C.A. § 1101, et seq. However, it did not bar the hiring of undocumented immigrants. The Immigration Reform and Control Act of 1986 (IRCA), was passed and signed into law by Ronald Reagan in order to amend, revise, and reform the status of unauthorized immigrants under the INA. This bill gave unauthorized aliens the opportunity to apply and gain legal status if they met mandated requirements. The fate or status of all those who applied fell into the hands of “Designated Entities” and finally the U.S. Attorney General. Applicants had to prove that they lived and maintained a continuous physical presence in the U.S. since January 1st, 1982, possess a clean criminal record, and provide proof of registration within the Selective Service. Moreover, applicants had to meet minimal knowledge requirements in U.S. history, government, and the English language or be pursuing a course of study approved by the Attorney General.

Employment of Illegal Immigrants

Section 274A of the INA, as amended by the IRCA, makes it a federal felony for any person or business to assist an “illegal alien” by transporting, sheltering, or assisting him or her to obtain employment. 8 U.S.C.A. § 1324a(a)(1). An “alien” is defined as a person not lawfully admitted for personal residence nor authorized to be so employed by the Attorney General. It might also be surprising to learn that, despite the existence of 31 sanctuary cities in America – municipalities which have adopted a policy of protecting undocumented immigrants by not prosecuting them solely for violating federal immigration laws – such knowing assistance of illegal aliens due to personal convictions is also a federal felony punishable by a fine of not more than $3,000 and imprisonment of not more than six months.

Many argue that undocumented employees should receive no benefits because they are working in this country illegally. In many border-crossing locations, there is a government sign which reads, “Warning! If you are entering the United States without presenting yourself to an Immigration Officer you may be arrested and prosecuted for violating U.S. Immigration and Customs Law.” Many argue that because of the employee’s undocumented immigrant status, there can be no valid, enforceable employment contract between the employee and employer. Some argue that deportation and exclusion from the U.S. is paramount to incarceration, and many states provide for suspension of benefits during periods of incarceration. On the other hand, some argue that where the employer knows that the employee is an illegal immigrant, there is no valid reason to withhold benefits. They point out that workers’ compensation laws were enacted to make sure the expense of injuries created by the industry was placed on the industry, rather than on society or employees. They claim that anyone knowingly employing illegal immigrants should not be able to reap the benefits of doing so, but avoid the responsibilities. By denying benefits, the employer shifts the cost of the situation it has knowingly created on the taxpaying public, giving it a superior financial position to those employers who operate within the bounds of the law. No matter which side of the debate you are on, decisions regarding a workers’ compensation claim presented by an illegal immigrant must be made. With immigration issues grabbing the headlines around the country, understanding workers’ compensation claims involving illegals is vital to claims handling.

Entitlement To Workers’ Compensation Benefits

Obviously, if an illegal immigrant is injured while “on the job”, questions arise regarding workers’ compensation benefits. These issues are still in their infancy, but lawmakers are scrambling to plug the legal holes. Legislatures in 45 states and the District of Columbia enacted 437 immigration-related laws and resolutions during 2013 alone, and even more are on the way. However, workers’ compensation laws are governed by the states, while immigration law is exclusively federal. No two states have approached the issue of paying workers’ compensation benefits to illegal immigrants in the same way.

The issue of illegal immigrants’ workers’ compensation claims is an issue that is further complicated by the existence of 51 different and diverse bodies of law governing it. Most states have determined, either by statute or by case decision, that illegal aliens are entitled to workers’ compensation benefits under state law. With a few exceptions, the federal government permits the states to administer their own workers’ compensation laws. Nat’l Labor Relations Bd. v. A.P.R.A. Fuel Oil Buyers Group, Inc., 134 F.3d 50 (2nd Cir. 1997) (holding that the IRCA does not “reduce the legal protections and remedies for undocumented workers under other laws”). States are preempted by U.S.C. § 1324(a)(h)(2) only from imposing civil sanctions on an employer just for employing an undocumented alien, but that states are not preempted in other respects. Dowling v. Slotnik, 712 A.2d 396 (Conn. 1998).

Each state deals with the issue differently. In Maryland, for example, courts have held that an undocumented alien who is injured in the course and scope of employment is a “covered employee” for workers’ compensation purposes and that the IRCA did not preempt the state’s workers’ compensation laws. Design Kitchen and Baths v. Lagos, 882 A.2d 817 (Md. App. 2005). In Michigan, the courts have held that illegal immigrants are entitled to medical benefits, but not disability benefits, because of the commission of a crime under the IRCA. Sanchez v. Eagle Alloy, 254 Mich. App. 651 (Mich. App. 2003). New Jersey courts conclude that since illegals can file civil court actions, they should likewise be able to avail themselves of the statutorily-mandated substitute of workers’ compensation. Mendoza v. Monmouth Recycling Corporation, 672 A.2d 221 (N.J. Super. 1996).

A handful of states have denied benefits, but the number is dwindling. Wyoming’s Supreme Court had concluded that Wyoming’s workers’ compensation statute expressly includes only “legally employed” aliens and that an alien who is not authorized to work in the U.S. is not an “employee” for workers’ compensation purposes. Felix v. State of Wyoming, 986 P.2d 161 (Wyo. 1999). However, in 2015, the bar was lowered when the Supreme Court held that for an alien not authorized to work in the U.S. to be an “employee” under the Workers’ Compensation Act, an employer need only reasonably believe, based upon documentation in its possession at the date of hire and at the date of injury, that the employee is authorized to work in the U.S. In re Arellano, 344 P.3d 249 (Wyo. 2015). Nebraska denies vocational rehabilitation benefits to illegal aliens because they are unable to return to some form of employment in the U.S., contrary to the purpose of such services. Ortiz v. Cement Prod., Inc., 708 N.W.2d 610 (Neb. 2005). Georgia has ruled that disability benefits are not payable if the illegal immigrant is unable to work due to his illegal status and not the injury. Martines v. Worley & Sons Construction, 628 S.E.2d 113 (Ga. App. 2006).

At least eleven (11) states are still undecided on the issue of workers’ compensation benefits for illegal immigrants. As an example, Wisconsin has held that illegal aliens have a right to sue for negligence in Wisconsin courts. Arteaga v. Literski, 265 N.W.2d 148 (Wis. 1978). The court’s rationale was that, if the policy is to discourage illegal immigration, that policy is not furthered by refusing aliens access to the courts. Although it hasn’t had a definitive ruling yet, employers have attempted to use the IRCA to deny payment to injured workers by stating they would rehire the employee were it legal to do. However, the Wisconsin Workers’ Compensation Act does not provide for terminating disability compensation where an employee is terminated, so long as the employee is still temporarily disabled. Arista-Reav Kenosha Beef, 1999 WL 370027 (Wis. L.I.R.C. 1999). In Arista-Reav, despite the fact that undocumented aliens have no legal right to employment in the U.S., the Wisconsin Labor and Industry Review Commission (LIRC) ordered benefits be paid to them. In Arista, this was the case despite the applicant’s inability to return at his job at respondent’s place of business or anywhere else (which they said was due to the claimant’s legal disability, not his worker’s compensation injury disability), the fact that the applicant remained an undocumented alien and was not legally qualified to work in the U.S., and his continued residence in the U.S. also being in doubt, they awarded him benefits. The Wisconsin LIRC ruled in 2014 that an undocumented worker does in fact have a Loss of Earning Capacity and that one factor in determining that loss would be his illegal status. Antonio Zaldivar v. Hallmark Drywall, 2014 WL 1647891 (Wis. L.I.R.C. 2014).

The cost of illegal immigration in our country is astronomical. It costs taxpayers $113 billion every year in federal, state, and local healthcare, education, and incarceration costs. This includes $84 billion at the state and local level and $29 billion at the federal level. Whether or not illegal immigrants injured while working can recover workers’ compensation benefits is a developing issue and has not been uniformly decided or handled by the states. However, as the pendulum swings toward allowing benefits, the cost of illegal immigration swings with it. The trend clearly appears to be toward increasing the high cost of illegal immigration by providing them with a right to workers’ compensation benefits.

Right To File Third-Party Negligence Lawsuit

The issue of the qualification of illegal immigrants for medical and or indemnity workers’ compensation benefits is not just a claims issue. It is also a subrogation issue. The law of every state provides for the filing of a third-party negligence lawsuit in cases where a third-party tortfeasor is responsible for causing an employee’s injury. Every state also provides for the right of a workers’ compensation carrier to be reimbursed out of the proceeds of such a negligence bodily injury suit. When the employee does not file suit, virtually every state provides that the workers’ compensation carrier is subrogated to the rights of the injured employee – illegal or otherwise – and gives it the same right to file such a suit on its own. Therefore, if an illegal immigrant can’t or won’t file suit, the workers’ compensation carrier must do so. However, if the workers’ compensation carrier is subrogated only to the rights of the employee to whom it has paid benefits, and the employee is not authorized to file suit in a particular state, one can imagine the defense the carrier will encounter arguing that the carrier is also not able to file under those circumstances.

The right of undocumented aliens to sue in state and federal courts has not received uniform recognition in every state. Massachusetts, for example, has unequivocally stated that an undocumented alien has as much of a right to sue as any other resident of the state. In Wisconsin, on the other hand, the alien’s access to the courts depends solely on comity, which means that access to the courts is not guaranteed by the Constitution, but depends instead on the discretion and grace of the court in which the alien attempts to sue. Some other states say the case law is rather ambiguous. In New York, although an alien is illegally present within the state, he is nevertheless a resident and as such has the right to file a suit. New Jersey provides them with a right of access to the courts to bring suits to enforce contracts and seek redress for civil wrongs. Montoya v. Gateway Ins. Co., 168 N.J. Super. 100 (N.J. App. Div. 1979), cert. denied, 81 N.J. 402 (1979).

Some states limit the nature of damages an illegal alien can recover in state court. For example, in Texas, the law is unsettled as to whether an illegal alien can recover damages for the loss of future earning capacity based on U.S. wages. Hernandez v. M/V. Rejaan, 841 F.2d 582, 585 (5th Cir. 1988). Clearly, if an employee has no right to future employment in the U.S., given his or her citizen status, there should be no right to recover damages at U.S. levels.

The tension between the public demand for a crackdown on illegal immigration and the public policy of many states in affording all individuals protections from discrimination and unfair treatment in the workplace will continue in the courts and in public debate. While the ultimate outcome is far from certain – especially in light of the results of the November election – employers of illegal aliens and insurance companies who provide them with workers’ compensation insurance should understand the extent of the legal rights afforded to such workers and the subrogation rights they are left with once a claim is made.

A chart summarizing the law in this area in all 50 states can be viewed here.

image of Gary Wickert

About Gary Wickert

Gary Wickert is an insurance trial lawyer and a partner with Matthiesen, Wickert & Lehrer, S.C., and is regarded as one of the world’s leading experts on insurance subrogation. He is the author of several subrogation books and legal treatises and is a national and international speaker and lecturer on subrogation and motivational topics. He can be reached at gwickert@mwl-law.com. More from Gary Wickert

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