Status Woe

Contractors' illegal workers could put you in a legal pickle.
Magazine Contributor
2 min read

This story appears in the April 2004 issue of Entrepreneur. Subscribe »

It was big news when federal agents swept through 60 Wal-Mart stores last October to arrest about 250 illegal immigrants contracted to work on Wal-Mart's cleaning crews. Wal-Mart-which relies on at least 100 vendors to supply cleaning crews for more than 700 stores across the country-says it can't be responsible for ensuring the workers it contracts from third parties are in the United States legally; the government, meanwhile, is investigating and could press criminal charges.

Wal-Mart's case hinges on whether it knew about these workers' status and hired them anyway, says Elizabeth Espin Stern, a partner with Shaw Pittman LLP in Washington, DC. "The law is that direct employers, not users of subcontractors, bear the burden of documenting the employment eligibility and identity of their workers," she says. "How the [case] is interpreted in terms of future policy is going to be critical."

Think about the practices you have for hiring contractors; firms of all sizes can face lawsuits and fines of up to $10,000 per illegal alien for each day he or she works on-site. Review contracts with vendors that supply contract workers. Is there a provision stating the vendor will comply with federal and state immigration laws and will recertify the status of its workers? Ask your accountant to audit vendors that supply contract workers to see if they're completing I-9s, the federal immigration form for foreign workers. Also check with your local Better Business Bureau to see if the vendor has faced immigration disputes. These steps will show you acted in good faith if U.S. Citizenship and Immigration Services lands on your doorstep.

It remains to be seen how Wal-Mart's case will change the legal landscape, but the consequences of doing nothing could cost your company. In this environment, companies "are not immune because there's an independent contractor relationship," says Neil Martin, partner, labor and employment, with Gardere Wynne Sewell LLP in Houston. "This can be a 'gotcha.'"

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