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Reprint version JWC_fall06_Harris-Tentindo

  1. 1. 1 JOHN P. HARRIS AND VINCENT M. TENTINDO IMPLICATIONS OF IMMIGRATION REFORM ON THE WORKERS COMPENSATION SYSTEM T heoutcomeofthegrowingdebateoverthemillionsofundocumented workers in the United States will surely have a significant impact on the administration of workers compensation systems across the country.1 In Massachusetts, employers have already gotten a sense of what this impact will be, as the state Department of Industrial Accidents (DIA) has already resolved that injured workers who are in the country illegally are entitled to workers compensation benefits. UsingMassachusettsasanexample,thisarticlewillfocusonthefinancial and administrative implications of ongoing efforts to extend workers com- pensation coverage to undocumented workers. The article will also discuss some initiatives of the DIA, the legislature, and public interest groups to The Journal of Workers Compensation A quarterly review of risk management and cost containment strategies VOL. 16 NO. 1 FALL 2006
  2. 2. 2 The Journal of Workers Compensation bring all Massachusetts employers and workers into full compliance with the public policy of the Commonwealth to ensure safety in the workplace for all of its workers. Finally, it will suggest several steps that all employers should take to ensure they are complying with the law. CURRENT STATE OF LAW In late 2003, the reviewing board of the DIA squarely addressed the question of whether injured workers who were in the country illegally were entitled to state workers compensation benefits. In Medellin v. Cashman KPA, the insurer argued that Guillermo Medellin, a native of Mexico who was injured while working for Cashman KPA on the “Big Dig” (a Mas- sachusetts public works project), should be barred from weekly indemnity paymentsbecauseofhisstatusasanundocumentedimmigrantworker.2 The insurer contended that Hoffman Plastic Compounds, Inc. v. National Labor Relations Board, a U.S. Supreme Court decision that had just been decided at the time of the case, preempted existing Massachusetts case law on this topic.3 In Hoffman Plastic Compounds, the Supreme Court concluded that the National Labor Relations Board’s “award of back pay to undocumented immigrant workers for [their employers’] violations of the federal labor law it administers would unduly trench upon explicit statutory prohibitions critical to federal immigration, as expressed in IRCA [the Immigration Reform and Control Act of 1986].”4 ThereviewingboarddisagreedwiththeinsurerandruledthatMedellin’s contract of hire was not rendered a nullity as an illegal contract under the law of the Commonwealth: “As expansively and eloquently discussed by the amici, undocumented workers perform essential employer labor, and the route to dissuading these work relationships is not to eliminate the responsibility for injuries to such workers.”5 Consequently, Medellin retained his entitlement to benefits. The decision was appealed to the Mas- sachusetts Appeals Court, but it was recently withdrawn without prejudice by the parties.6 On the surface, the financial and administrative scenario in Medellin was simple and straightforward: Cashman KPA purchased a workers compensa- tion insurance policy and presumably paid a premium based, in part, on the wages of Medellin and his coworkers, without consideration of their immigration status or nationality. Once Medellin was injured, he filed a claim, which moved through the DIA process in a routine fashion after a dispute arose concerning the extent of Medellin’s disability. Medellin was awarded appropriate compensation by an administrative judge at the DIA, along with payment of medical benefits, which included multiple surgical
  3. 3. 3 Implications of Immigration Reform on the Workers Compensation System procedures to his right arm and shoulder, right major hand, and right knee. At the hearing before the administrative judge, the testimony revealed for the first time that Medellin had come to the United States on a 10-year visitor’s visa and was working under a false Social Security number. At this point, the insurer did not challenge Medellin’s entitlement to benefits on the basis of his unauthorized working status; it was only afterward thatHoff- man Plastic Compounds was decided by the U.S. Supreme Court, prompting the insurer’s appeal to the reviewing board. WhenthereviewingboardupheldtheawardtoMedellinnotwithstanding theU.S.SupremeCourt’sdecisioninHoffmanPlasticCompounds,itbecame settled law in Massachusetts that immigration status cannot be considered in determining whether an injured worker is entitled to workers compensa- tion benefits. (The decision also means that even if Medellin had been a day laborer whose wages had not been included in his employer’s premium calculation, Medellin would still have been covered by his employer’s workers compensation policy.) Other states are similarly addressing this same issue. The Court of Ap- peals in Maryland has upheld the right of illegal immigrants to receive benefits for a work-related injury.7 That court stated that denying benefits would run contrary to the goals and principles of the workers compensa- tion law and leave injured illegal workers with only two options: receive no relief for work-related injuries or death (unless they qualify for welfare benefits) or sue the employer in tort for negligence, with a potential for unlimited damages, including for pain and suffering. The second course would allow an end run around the exclusive remedy doctrine in most workers compensation laws. TheSupremeCourtofNewJerseyhasruledthatillegalimmigrantsinjured by uninsured drivers can have their medical expenses covered by a fund supported by fees assessed on auto insurers doing business in New Jersey.8 The court held that the term “resident” was flexible enough to include “il- legal immigrants” working in New Jersey, even though they may be there only transiently. While not explicitly addressing a workers compensation claim, the language used by the court gives a fair indication that a similar outcome would be reached for a work-related injury. Virginia recently debated a legislative proposal to eliminate or limit benefits available to undocumented workers under the workers compen- sation statute for purposes of enforcing immigration laws.9 That measure, however, was defeated when it was realized that such an approach might actuallyprovidesomeemployerswithanadditionalincentivetohireillegal workers, further aggravating the problem they were trying to fix.
  4. 4. 4 The Journal of Workers Compensation A RISE IN UNINSURED EMPLOYERS AND DAY LABORERS But what of the thousands of other workers in Massachusetts who do not have traditional, steady employment with large employers? What about the so-called “day laborers” who gather in the parking lots of urban home improvementoutletsorsupermarketswaitingtobepickedupandtransported for a day of labor by employers without workers compensation insurance or without adequate coverage for the number of employees they will use that day? In May 2006, the Boston Herald ran several feature stories about this growing phenomenon in New England. For years, Southern California and other states in the Southwest have witnessed a similar growing market for day laborers. Day laborers may be either illegal or legal workers, but the majority tend tobeillegalworkersduetothelimitedoptionsofthisgroup.Asdaylaborers, these workers are generally part of the underground economy — workers being paid in cash and thus generating no paper trail. One might assume that work-related injuries to undocumented workers would remain unreported and completely left out of the mandatory workers compensation scheme because of these workers’ fear of repercussions due to their immigration status. This was once the case, but it is now beginning to change. As we have witnessed since the May 1, 2006, rallies across the nation, advocates for undocumented workers are becoming much more organized and public. Massive demonstrations have attempted to show the economic impact that this previously invisible workforce has on our national economy. Undocumented workers themselves are now taking their complaints and their aspirations to the streets and public airways on an increasingly frequent basis. In Massachusetts, these workers are also being assisted by the Coalition for Occupational Safety and Health, which created the “Immigrant Safe Work Initiative” to press for closing the gaps in government protections for immigrant and low-wage workers. The DIA also sponsors television and radio ads, with Bob Vila as official spokesman, to educate both employ- ers and employees that workers compensation insurance is mandatory in Massachusetts. HOW “UNINSURED” CLAIMS ARE HANDLED In Massachusetts, an undocumented worker injured while working for an employer without workers compensation insurance can file a claim for benefits with the state Workers’ Compensation Trust Fund. The trust fund has a duty to defend the claim or to pay the appropriate benefits under the law. It also has authority to join the allegedly uninsured employer to the
  5. 5. 5 Implications of Immigration Reform on the Workers Compensation System proceedings.Thetrustfundcanalsosuetheemployerforanybenefitsitpays to the worker. Funding for the trust fund comes from annual assessments levied by the DIA on all employers insured for workers compensation in the Commonwealth. In fiscal year 2005, the amount paid out for uninsured injuries was $6,052,205 on 201 such claims. Procedurally, the injured worker’s burden vis-à-vis the trust fund is the same as it would be vis-à-vis the employer: The claimant must prove an employer-employee relationship, an injury that arose out of and in the course of employment, average weekly wage, and extent of disability. This burden is typically hard to overcome. Because of the clandestine nature of the employers in question — their typical aversion to maintaining written records of their activities, their cash payment of wages with no withholding of taxes — it is difficult for the injured worker to meet the burden of proof on each and every element of the claim.10 Recently, however, the burden of one of these elements was lightened. Specifically, the state legislature changed the independent contractor law in 2004 so that there is now a “presumption of employment relationship” for any individual performing any service for another except as specifically excluded under the law.11 As explained in an advisory opinion by the Mas- sachusetts Attorney General’s Office in January 2005: The Independent Contractor Law creates a presumption that a work arrangement is an employer-employee relationship un- less the party receiving the services can overcome the legal presumption of employment by establishing that three factors are present. First, the worker must be free from the presumed employer’s control and direction in performing the service, both under a contract and in fact. Second, the service provided by the worker must be outside the employer’s usual course of business. And, third, the worker must be customarily engaged in an independent trade, occupation, profession, or business of the same type.12 Significantly, the change in the independent contractor law shifted not only the presumption (that the worker was not an employee), but also who carriedtheburdenofproof.Nowitistheputativeemployerthatmustprove that no employment relationship existed. This change in who carries the burden of proof means that it will now be the trust fund that has to prove that no employment relationship existed (in cases when it believes this to be the case). This will require that the
  6. 6. 6 The Journal of Workers Compensation trust fund assign a staff attorney to defend the claim and that the DIA as- sign investigators to contact the alleged employer and obtain any business records that exist. All of this will be a significant cost to the trust fund and the DIA, with funding for these tasks coming from assessments on the legitimate employers who have purchased the required insurance. In fiscal year 2005, 198 stop work orders arising from work-related ac- cidents were issued as a result of 19,086 investigations by the DIA; 98 percent of these orders were issued against small companies with less than 10 employees. Only $284,460 in fines were collected from those uninsured employers — less than 5 percent of the benefits actually paid out because of uninsured injuries. Mostclaimswillnotbepaidvoluntarilybythetrustfund,andthedispute will need to go to a conference and a full hearing before an administrative judge. (Approximately 95 percent of the reported injuries in Massachusetts arevoluntarilypaidbyinsurersandonlythemorequestionableclaimsenter the dispute resolution process.) When claims need to be fully litigated, this slows down the “simple and summary” process of the DIA in resolv- ing disputed claims. An increase in the number of judges, investigators, attorneys, and trust fund staff to handle this potential influx of disputed cases will probably be needed. HOW MASSACHUSETTS IS ADDRESSING THE PROBLEM In the last few years, there has been a dramatic surge in deaths due to workplace illnesses and injuries in Massachusetts. The number of such deaths in 2003 reached 81, up from 49 in 2002, and represented the highest number of fatalities since 1999, according to a report by the Massachusetts AFL-CIO and the Massachusetts Coalition for Occupational Health and Safety. One particular industry that stood out was the hardwood floor refinishing industry, an occupation that is overwhelmingly dominated by Vietnamese immigrants. There are about 500 floor refinishing contractors in Massachusetts, with 3,000 to 5,000 workers involved.13 While 85 percent of the hardwood floor refinishers in Greater Boston are of Vietnamese descent, in other cities across the Commonwealth, the predominantly Vietnamese business- owners of floor refinishing companies regularly hire day laborers of other nationalities, based on the ethnic makeup of the communities in which the businessowners are located. In the areas around Framingham and Natick, for example, Brazilian immigrants represent the largest group, one that has a higher percentage of illegal immigrants than the Vietnamese. However, regardless of their national origin or immigration status, most
  7. 7. 7 Implications of Immigration Reform on the Workers Compensation System floor refinishers in Massachusetts work “under the table” for employers who pay in cash and provide no insurance, no benefits, and no withholding of payroll taxes. Those employers are not registered with the Commonwealth and consequently are not assessed to fund the uninsured-employer claims against the trust fund. In order to describe the process by which undocumented workers actu- ally enter the U.S. economy and the corrective measures that need to be undertaken to fully legitimize those sectors of the economy, we will use this one small industry as a case study. By looking carefully into this occupation, we can begin to see how complex the problems are and how many differ- ent corrective actions will be needed to fully integrate all workers into the framework of how Massachusetts expects its workers to be treated. Despite low wages and lack of benefits, many Vietnamese workers accept floor refinishing jobs as a necessary first rung on the U.S. economic ladder. All that is required to get started in this occupation is a pickup truck or van, a few sanding machines, and inexpensive brushes and rollers for ap- plying the finishes. Among the relatively few consumable supplies used in this process is a highly flammable lacquer sealer, which is applied to newly sanded hardwood floors. A number of fires and explosions have taken place inresidentialdwellingswherefloorrefinishersweredoingtheirwork,result- ing in at least several worker deaths and the destruction of homes. After a highly publicized fire in September 2004 destroyed a three-fam- ily house and killed two workers in Somerville, Massachusetts, the Floor Finishing Safety Task Force was created by all stakeholders in the floor refinishing industry to promote safety. This organization includes repre- sentatives of organized labor, floor refinishing suppliers, public health and environmental organizations, and workplace safety groups. The results of a survey conducted by the task force found that 127 out of 144 floor refinish- ing contractors identified in Boston had Vietnamese surnames. It was also learned that there are basically only three floor refinishing suppliers in the Greater Boston area that serve this industry and that more than 25 fires in Massachusetts have been attributed to hardwood floor refinishing since 1995. The task force has been working with several state representatives to propose licensing and other measures to promote the safety and health of workers. Those measures would include training and certification for the workers and provision of a floor refinishing safety fact sheet to consumers informing them about the hazards associated with this process. According to a May 17, 2006, article in the Boston Globe, “Nearly 85% of local floor sanders are Vietnamese, who are attracted to well-paying jobs that require little formal training. Michael Le, manager and co-owner of
  8. 8. 8 The Journal of Workers Compensation Capital Wood Floor Supply, Inc., based in Roxbury, which removed its lacquer sealers months ago, said sanders don’t need a license to work and can make $100 a day, about twice what they would earn in minimum-wage jobs.” We spoke to Le recently about this industry and he informed us that members of this particular immigrant community, having left their country in the aftermath of a long war, reeducation camps, and widespread poverty, were eager to take advantage of the opportunities they found in the United States.Unfortunately,theseworkersaregenerallyunawareofthehealthrisks in this occupation and have an understandable reluctance to register with governmentagencies.TheimmigrantworkersalsoexpressedconcernstoLe that workers compensation insurance and other mandatory benefits would drive their costs up and cause them to lose the only business they know. Le, a Vietnamese immigrant who is now a U.S. citizen and businessman, became an active member of the task force after hearing about several of his customers being killed: “I suddenly realized that my customers — and their customers — were being exposed to safety hazards. I understand their language and the need to earn a living, so I decided to help.” Leexplainedthatusingthesafer,water-basedsealerscandoublethelabor costs for each job because of the longer drying time between coats and the greaternumberofsurfaceimperfectionsthatneedtobecorrectedbeforethe job is completed: “That is why it is so important that workers and contrac- tors be educated about the health hazards and safety risks associated with lacquer thinners so that the resulting higher costs are uniformly factored into job quotes by every contractor. I don’t want to see them continue to gamble their lives in trying not [to] be underbid by rival contractors.” As a step in this direction, Le and his two competitors have voluntarily agreed to stop selling lacquer sealer while the legislature studies other appropriate safety measures. In the meantime, workers in this industry are still exposed to airborne dust and fumes from polyurethane, usually without protection from respirators. Floor refinishing workers continue in a risky occupation that, by and large, fails to provide wage replacement and appropriate medical treat- ment should they become injured on the job. What does happen, how- ever, is that they and their families are forced to become public charges when they do become disabled. They must then rely on state-supported health insurance for the financially needy (MassHealth), which is funded by taxpayers in general, rather than on insurance financed directly by employers and indirectly by the customers for whom the floor refinishing services are performed.
  9. 9. 9 Implications of Immigration Reform on the Workers Compensation System WHAT ALL EMPLOYERS SHOULD DO RIGHT NOW No one can predict exactly what new laws will emerge from the present national debate on immigration reform. However, there are several state and federal laws that all employers should already be complying with. Al- though, to some extent, these laws are not rigorously enforced now, this may soon change given the political climate. The last time Congress attempted to address immigration reform, it produced the Immigration Reform and Control Act (IRCA) of 1986. That law requires all employees to complete and sign a U.S. Citizen and Immigration Services Form I-9 (Employment Eligibility Verification) on their first day on the job. That form notifies workers that they are obligated to submit documentation to their employer to establish that they are au- thorized to work in the United States. No later than the close of business on the third day, the employer is required to review the documentation provided by a given employee, record it on that same form, and sign the form. All employers are required to keep the completed forms and the attached documentation for three years after the date of hire or one year after the date of dismissal, whichever is later. IRCA makes it a violation for employers to knowingly employ an illegal worker and establishes criminal penalties for doing so, albeit ones that have not been rigorously enforced. The lack of enforcement will no doubt change soon. Every employer should immediately begin a systematic review of its personnel records to ensure that this required document has been com- pleted by all of its current workers. (In a union environment, special efforts should be made to work with union officials if it is discovered that any documentation is missing and if workers need to be contacted to comply with the requirements of the IRCA so that “grievances” do not arise that would complicate the effort. Legal counsel should be consulted early in the planning process.) A similar review process should be performed regarding U.S. Internal Revenue Form W-2 (Wage and Tax Statement) or Form 1099 (Miscella- neous Income) for tax withholding (or lack thereof), as well as for proof of insurance coverage in those states where workers compensation insurance is mandatory. This review should not be limited to just those individuals who are formally identified as employees of the company. If a company contracts with temporary-help agencies, employee-leasing companies, or subcontractors to perform essential portions of a company’s business, the prudent executive has a duty to ensure that those entities are in compliance with applicable laws to the same extent that the company must comply.
  10. 10. 10 The Journal of Workers Compensation Simply obtaining essential manpower from other entities to avoid treating those workers as employees is no longer a viable business option. Again citing Massachusetts as an example, the legislature is also con- sidering a revision to the Workers’ Compensation Act that would grant employees for whom no workers compensation coverage exists the right to sue the putative employer for the value of the insurance premium cost avoided. Ten or more such employees can be certified to file a class-action suit on behalf of all the workers of an employer. Savvy business leaders need to keep in mind that the American public is also taking a hard look at the “corporate culture of greed” and other questionable corporate governance practices at the same time they are watching the immigration question. CONCLUSION Fully integrating immigrant workers into our economic system would involve providing them a reasonable expectation that income-tax with- holding, Social Security taxes, insurance benefits mandated by law, and the minimum wages established by the legislature are paid. This full integra- tion hasn’t happened yet. Until then, immigrant workers will continue to struggle to receive the basic benefits that most states require be provided to all its workers. If our elected leaders fail to address this many-faceted problem or undertake only half-hearted and incomplete corrective actions similar to what occurred in 1986 (most of the currently proposed remedies are identical to those enacted in 1986 except the size and scope of the problem has greatly increased), such a course will continue to drive up costs paid by the legitimate employers across the country. It will also drive immigrants — both legal and illegal — further apart from the rest of us within our economic and political system, breeding resentment and unrest, as is currently unfolding in several European countries. Regardless of the reader’s private view on how the federal government should resolve this important issue of immigration control, it must be ad- dressed in some fashion. Out-of-control workers compensation costs in the late 1980s were one of the major factors that drove many reputable employers away from the Commonwealth of Massachusetts and thereby set the stage for the Commonwealth’s Workers’ Compensation Reform Act of 1991. Today’s challenge involves more than just workers compensation and is significantly more far-reaching. Every aspect of our social structure and our economy is affected by this growing problem. Members of the workers compensation insurance profession understand how all of the components of our complex employment process interact in our national economy. We understand the public policy that has evolved
  11. 11. 11 Implications of Immigration Reform on the Workers Compensation System over the last century to provide a safer workplace for everyone. We work everydaytoensurethaton-the-jobinjuriesareproperlytreatedasanintegral cost of doing business to be borne by employers, not by general taxation. We also understand how all of the separate strands of the United States’ social safety net must be coordinated and seamlessly meshed together for the common good of our society. Those of us who earn our own wages within the workers compensation industry have an obligation to provide knowledgeable input to this important national debate. We must ensure that a well-reasoned, thoughtful, and thorough reform is accomplished by sharing our unique expertise with lawmakers. We owe it to our children and ourselves. And we also we owe it to the memory of our own immigrant ancestors who came before and struggled to create the system that has worked so well for us. ENDNOTES 1. In this article, “undocumented” means without the necessary documents to live and work in the United States. In this context, it is interchangeable with “illegal.” 2. Medellin v. Cashman KPA, 17 Mass. Workers’ Comp. Rep. 592 (2003). 3. Hoffman Plastic Compounds, Inc. v. National Labor Relations Board, 535 U.S. 137 (2002). 4. Id. at 151. 5. To indicate the high degree of public interest in this case, 13 separate amicus curie briefs were filed by various parties, in addition to the briefs of the employee and the insurer. The 11 briefs on behalf of the employee came from the Massachusetts Attorney General; National Employment Law Project; Greater Boston Legal Services; Harvard Legal Aid Bureau; Karl Klare, Esq.; Western Massachusetts Legal Services; Brazilian Immigrant Center; Massachusetts Law Reform Institute; the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO); the Massachusetts AFL- CIO; and the New England Painting & Glazing Industries District Council 35 Joint Trade Board. The two briefs on behalf of the insurer were received from the Workers’ Compensation Trust Fund and Zurich North America Insurance. It is very unusual for amicus curie briefs to be filed on matters pending before the reviewing board; this is the largest number of amici that anyone can remember. 6. A source close to the case suggested that the case was being settled by lump-sum agree- ment, meaning that the immigration-status issue will not be subject to appellate review and the reviewing board’s decision will remain a legal precedent in Massachusetts. 7. 882 A.2d 817 (Md. 2005). 8. 897 A.2d 1026 (N.J. 2006). 9. See Jenkins, C.L., Washington Post (March 29, 2006), at B5. 10. Even if a claimant is unable to prove what his or her average weekly wage was, this would preclude only indemnity payments (and sometimes an estimated low average
  12. 12. 12 The Journal of Workers Compensation weekly wage will likely be awarded by an administrative judge anyway). However, this would have no effect on the claimant’s right to medical coverage (assuming all other burdens of the claim are met). This category of worker is highly unlikely to have any other health insurance or resource to pay for necessary medical care. This medical benefit may be even more important than the wage-replacement component of the Workers’ Compensation Act. 11. See Mass. Gen. Laws ch. 149, § 148B (2004). 12. An Advisory from the Attorney General, Chapter 193 of the Acts of 2004, Amend- ments to Massachusetts Independent Contractor Law, Mass. Gen. Laws ch. 149, § 148 2004/2 (January 2005). 13. The majority of these Vietnamese workers have been here legally since the 1980s with the necessary documentation to work or with full citizenship. However, about 5 percent to 10 percent came to the United States on a student or a visitor’s visa and subsequently dropped out of school or overstayed their visa, thus now qualifying them as illegal immigrants. John P. Harris is the second injury fund manager atTentindo, Kendall, Canniff & Keefe, LLP, in Boston. Prior to joining the firm, he served as an administrative judge at the Massachusetts Department of Industrial Accidents for 10 years.Vincent M.Tentindo is managing partner atTentindo, Kendall, Canniff & Keefe, LLP, and an adjunct professor at New England School of Law, where he teaches a course in workers compensation. BothHarrisandTentindofrequentlyconductseminarsonworkerscompensationtopics for the Council on Education in Management. They can be contacted at jph@tkcklaw. com and vmt@tkcklaw.com. Reprinted with permission from The Journal of Workers Compensation, Volume 16, Number 1; Fall 2006. Copyright 2006, Standard Publishing Corp., Boston, MA. All rights reserved. www.spcpub.com

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