Barclay Damon
Barclay Damon

Legal Alert

N.Y. Court of Appeals: Employers Are Entitled To Workers' Compensation Law Protection For Undocumented Alien Employees

In Balbuena v. IDR Realty, LLC, 6 NY3d 338, 363 (2006), the Court of Appeals held that an injured employee’s status as an undocumented alien does not preclude recovery of lost wages in a Labor Law action against a landowner. A few weeks ago, in New York Hosp. Med. Ctr. of Queens v. Microtech Contr. Corp., 2014 N.Y. Slip Op. 897 (2014) (“Microtech”), the Court addressed a closely-related question: may an employer invoke the Workers’ Compensation Law’s shield against third-party claims for common-law contribution and indemnification, even if the subject employees were undocumented aliens? The Court held yes; an employee’s immigration status does not affect his/her employer’s rights under Workers’ Compensation Law § 11.

In Microtech, a hospital engaged a contractor, Microtech, to undertake a demolition project. Microtech hired two undocumented aliens, Luis and Gerardo Lema, to perform the work. It was undisputed that the Lemas were not legally employable in the United States. The Lemas were injured when, during the course of the project, a metal chimney toppled and struck them. The Lemas subsequently claimed and received workers’ compensation benefits and obtained a judgment against the hospital for violations of the Labor Law (permitted under Balbuena).

In the meantime, the hospital commenced an action against Microtech for common-law and contractual contribution and indemnification, to recover any damages it incurred in the Labor Law litigation. The hospital alleged, among other things, that Microtech violated the Immigration Reform and Control Act (IRCA) when it hired the Lemas; and that Workers’ Compensation Law § 11 did not preclude its action against Microtech. Under § 11, third-party lawsuits for contribution and indemnification against an injured employee’s employer are barred unless the employee suffered a “grave injury,” which is limited to death and a few defined disabilities, or the employer agreed to contribution and indemnification in a written contract entered into with the third party prior to the accident.

The Supreme Court granted Microtech’s motion to dismiss, concluding that § 11 barred the hospital’s action. The hospital appealed, asserting that Microtech should not “profit” from its violation of IRCA. It also argued conflict preemption – i.e., that permitting an employer who knowingly hires undocumented workers to enjoy the immunity conferred by § 11 conflicts with IRCA’s goal to discourage illegal immigration by decreasing employment opportunities for undocumented workers. The Second Department rejected these arguments and unanimously affirmed, citing repeatedly to Balbuena.

Notably, in the Court of Appeals, the hospital abandoned its contention that the IRCA preempts § 11’s shield against third-party claims for common-law contribution and indemnification. Thus, the sole issue before the Court was whether the employment contracts between Microtech and the Lemas were illegal and unenforceable, precluding Microtech from asserting immunity under § 11.

In affirming, the Court of Appeals noted that § 11 does not require an underlying employment contract. The Court concluded that because the Lemas did not suffer grave injuries, and there was no preexisting agreement for contractual contribution or indemnification, Microtech was entitled to the protections of § 11.

It is unclear why the hospital did not raise the issue of preemption in the Court of Appeals. Presumably, unless and until the Court addresses this point, conflict preemption remains an avenue for third parties to seek contribution or indemnification from an undocumented alien employer. However, the Second Department rejected this contention.

In the meantime, Microtech marks a second instance, after Balbuena, where the Court of Appeals has refused to treat parties any differently under the state’s laws where an undocumented and illegally employed plaintiff is involved. Defendants and their attorneys must investigate beyond such status to determine whether the subject alien, in gaining employment, tendered false documentation in violation of IRCA or whether the subject employer satisfied its duty to verify the employee’s eligibility to work. In Balbuena and Microtech, the Court made clear that such factors may change its analysis.

If you require further information regarding the content presented in this Legal Alert and its impact on your organization, please contact Thomas B. Cronmiller, Chair of the Torts & Products Liability Defense Practice Area at (585) 295-4424 or tcronmiller@hblaw.com.