The Professional Landcare Network (PLANET) offers this Q&A for firms concerned about HR compliance issues in the wake of Congress' failure to pass the H-2B returning-worker exemption. Michael L. Thompson, a shareholder with the law firm of Lehr, Middlebrooks, & Vreeland, prepared the answers.
Q: What about using other companies to service my contracts through sub-contracts?
A: Moving towards a subcontracting relationship can be an effective method to address a labor shortage. However, moving to a true subcontractor relationship means relinquishing control over the method of how the work is performed in many instances. There are several questions to consider in this analysis. First, does your servicing contract restrict assignment to a subcontractor? If not, you are likely free to subcontract. However, even with this freedom, certain concerns arise. How will I hold the subcontractor accountable for the same quality services that my customers expect to preserve my reputation? What recourse will I have if the subcontractor fails to do a good job? First, obviously you would want to be as selective as possible in choosing a subcontractor. Second, you need a solid written agreement with the subcontractor that clearly outlines the respective expectations for the relationship including provisions regarding indemnity, insurance, quality control, etc.
Q: What about using temp agency labor, under my supervision, to service my contracts?
A: Using labor from a temp agency can solve labor shortage issues on a short-term basis. However, temp agency labor is often significantly more expensive than direct labor and can be cost prohibitive. You will have no input into the recruitment of the temp workers (this can be a positive) so it is important to go with a provider that is reputable and will provide quality workers. Similar to the subcontracting scenario, a written agreement with the agency is key to establishing each parties’ expectations. It is much more desirable to use a form agreement that is prepared for you, the primary employer, rather than using the form agreement that the temporary agency will provide. Key provisions in any such agreement will include:
-Indemnification and duty to defend clauses;
-The right to reject unsatisfactory workers without paying the temporary agency for their services within a limited time of the assignment (a few hours is typical);
-The agreement should clearly state that the contingent workers are not your employees but are employees of the temporary agency;
-Assurance that the temp agency will adhere to all applicable employment laws including employment eligibility requirements (more on this below);
-Insurance provisions and a requirement that the temp agency provide certificates of insurance and notice when any policy is to be cancelled or coverage reduced;
-Reasonable provisions to convert productive workers to your employees.
Obtaining assurances (and indemnification) from both temporary agencies and subcontractors related to employment authorization is essential. Just because the employees are not your direct workers does not exculpate you from potential liability if the workers are unauthorized (i.e., illegal aliens). The applicable regulation provides that an employer is liable if it has “constructive knowledge” that a person is not authorized to work and defines constructive knowledge as “…knowledge which may be inferred through notice of certain facts and circumstances which would lead a person, through the exercise of reasonable care, to know about a certain condition.” The regulation further provides that one way a primary employer can be found to have constructive knowledge is if the employer: “Acts with reckless and wanton disregard for the legal consequences of permitting another individual to introduce an unauthorized alien into its work force or to act on its behalf.” That is, there can be no “wink and a nod” agreement between the primary contractor and the temp provider regarding the workers’ status because you can bet the temp provider will not be in your corner when it is faced with civil and criminal sanctions and ICE is looking to cut a deal for a “bigger fish”.
Q: What about just using my core workforce more?
A: Extra hours are always an option so long as daylight permits. You and your supervisors know your workforce better than anyone but you must pay attention to burnout as well as any safety issues created by the longer hours. Of course, you will also incur overtime expenses and must strictly comply with overtime laws, both state and federal. However, the additional expense will most often be less, sometimes significantly less, than the comparative expense of subcontracting or temporary labor, each of which will significantly eat into profit margins.
Q: What if my H-2B worker reports to work even though I know that he did not make an authorized entry and I know that he does not have valid status?
A: Unfortunately, you are on notice that the worker is not authorized and employing him is a direct violation of the immigration laws. Even if he was your best worker last season, without authorization, he is not eligible to work for you and will expose you to liability, discussed below.
Q: What about I-9 completion, how close an inspection must I make of the documents provided by the employee?
A: The regulations do not require that you become a document expert and, indeed, doing too much digging regarding a provided document can expose you to liability for putting employees of a certain minority under undue scrutiny. Accurate completion of the I-9, consistent with the I-9’s instruction, is key. The regulations require that the documents appear genuine and relate to the employee providing it to you. That’s it. This means that if the documents appear genuine, i.e. no reason to doubt them on their face, and if they appear to relate to the prospective employee, you can accept them. It is important to maintain your I-9s in a well-organized fashion, periodically discarding those that you are no longer required to keep. Additionally, a periodic I-9 self-audit can also help identify deficiencies in the process. One common deficiency is an incomplete or unverified I-9. Many employers mistakenly believe that they are not required to verify the I-9 if they retain copies of the supporting documents. While an employer can elect to retain copies of supporting materials, doing so does not eliminate the requirement that the employer’s representative verify that s/he inspected the original supporting documents.
Q: I just received a call from someone at ICE who wants to visit with me, what is that and what do I do now?
A: ICE, Immigration and Customs Enforcement, is the enforcement arm of the Department of Homeland Security. It is not a social call. That they called is a good indication that they received a tip that some of your workers may be illegal. As the employer, you may not be the target but it is likely that you are about to lose some employees. We like to think that the first action is to call your legal counsel, preferably someone who is versed in the requirements of IRCA as well as current trends in worksite enforcement. The initial counsel will be to be certain that your I-9’s are in order through a quick self-audit (see above). If they are not, you should immediately bring them into compliance to qualify for a good faith defense that might be available. Next, there is a direct correlation between the level of employer cooperation and the severity of sanctions that are handed down. To the extent feasible, we encourage cooperation within the requirements of the law. This is not a mandate to capitulate to every demand, just an effort to put yourself in the best possible light with the enforcement folks.
Q: I worked 20 years to build my business. To keep it going, I have no choice but to risk employing illegal workers. What happens if I get caught?
A: We counsel you against employing illegal workers. That said, the penalties/fines/assessments depend on who catches you and how egregious a violation has occurred. If it is a first offense and there is no evidence that it is your business practice to knowingly recruit, retain and potentially harbor illegal aliens, a fine of between $275 and $2200/per illegal alien will likely be imposed. A more egregious violator – e.g., the employer who facilitates the illegal entry, provides false documents and exploits the labor advantage to the profit of his business – risks more substantial fines and possible incarceration through ICE enforcement. An employer actively using illegal labor can also be subject to claims from its employees and applicants as well as its competitors that the employer utilized illegal labor to suppress wages or gain an advantage bidding contracts. Such a claim can be asserted under RICO and brings with it potential monetary damages, including enhanced damages and attorneys’ fees to the prevailing party, as well as potential criminal sanctions.
Q: How can two companies combine workforces to share work load?
A: Combining workforces is certainly a potential solution to the labor shortage, particularly if there is a potential partner who complements your company’s strengths. Any such arrangement must not be entered without significant consideration – friends oftentimes do not make the best business partners and many friendships are lost through a failed attempt to expand the friendship to a business relationship. The combined workforce approach should only be taken through a written agreement that is tailored to the individual scenario. Such an agreement should clearly allocate responsibilities including insurance obligations as well as allocate who is entitled to what revenue. A further consideration might be to determine whether a true combination of workforces is the best approach or if a full merger of operations resulting in a single company will be more effective to limit duplication of administrative, marketing and other expensive overhead.
Q: Can I use high school students to supplement my workforce?
A: Maybe: Three questions must be addressed: (1) minimum age in general for the particular state; (2) minimum age for certain dangerous tasks for the particular state; and (3) what hours – both scheduled and weekly cumulative – are to be worked. Also note that some states restrict the employment of high school age workers even if the potential employee has “dropped out” of school.
Q: I can no longer take the headache, maybe I just need to sell my business.
A: Hopefully, this is a last resort although it may be that the labor shortage is the final “straw” in a decision that has been brewing for some time. If it does come to it, you will need competent transactional, financial and tax advisers to put you in the best position relative to any sale or dissolution of business. Of course, if you have been in the business for some time, you are well aware that the labor circumstances can quickly change although it seems that the search for willing and effective laborers is a never-ending process.
Q: What options do I have if cannot fulfill my contracts?
A: The contract should provide the penalty for non-performance so the first step is to read the contract. Approach customers to work it out. Some will understand. Attempt to mitigate the damages caused by any breach by lining up someone else to perform the job. Again, like the above, a last resort because you have worked hard to obtain the customer and should proceed very cautiously in introducing them to another provider. If it comes to reducing your customer list, you should selectively reduce your workload to your manpower limitations by jettisoning the least profitable (e.g., the outlying locations) and/or least enjoyable customers first.