Key Takeaways:
- Employers and general contractors may face liability if they knowingly obtain labor from contractors or subcontractors that employ unauthorized workers.
- IRCA generally places employment-verification obligations on the direct employer, but it does not permit businesses to avoid liability by using third-party labor providers.
- Actual knowledge and constructive knowledge can both create risk under federal immigration law.
The Immigration Reform and Control Act (“IRCA”) generally requires an employer who directly hires a worker to verify the individual’s identity and employment authorization. However, businesses cannot necessarily avoid liability by outsourcing labor through contractors, subcontractors or staffing agencies.
When an employer or general contractor knows that a contractor’s workers are unauthorized to work in the United States, federal law may treat the company as having unlawfully hired those workers itself. 8 U.S.C. § 1324a(a)(4).
Accordingly, businesses that utilize staffing agencies, labor brokers, subcontractors, or other third-party labor providers should conduct appropriate diligence and avoid arrangements that could create actual or constructive knowledge of unauthorized employment.
Overview of Employer Sanctions Under IRCA
Section 274A of the Immigration and Nationality Act, codified at 8 U.S.C. § 1324a, prohibits employers from:
- Knowingly hiring an unauthorized worker, 8 U.S.C. § 1324a(a)(1)(A);
- Hiring any employee without completing the required Form I-9 verification process, 8 U.S.C. § 1324a(a)(1)(B);
- Continuing to employ an individual after obtaining knowledge that the individual lacks work authorization, 8 U.S.C. § 1324a(a)(2).
Employers that comply in good faith with the Form I-9 requirements may have an affirmative defense to certain hiring violations under 8 U.S.C. § 1324a(a)(3).
Liability for Contractors and Subcontractors
The key provision for companies that obtain labor from third parties is 8 U.S.C. § 1324a(a)(4), entitled “Use of labor through contract.”
That subsection states a person or entity that uses a contract, subcontract, or exchange to obtain the labor of an alien in the United States, knowing that the worker is unauthorized for employment, “shall be considered to have hired the alien” in violation of § 1324a(a)(1)(A). 8 U.S.C. § 1324a(a)(4).
In practical terms, this means that a general contractor, project owner, manufacturer, staffing customer, or other business may face liability if it knowingly obtains labor from a contractor whose workers are unauthorized to work in the United States. The statute expressly prevents businesses from insulating themselves from liability merely by placing an intermediary between themselves and the workers.
What Does “Knowing” Mean?
Liability under § 1324a generally requires knowledge. The statute prohibits knowingly hiring an unauthorized worker under§ 1324a(a)(1)(A) and knowingly continuing to employ such a worker under§ 1324a(a)(2).
Federal regulations implementing IRCA have long interpreted knowledge broadly to include not only actual knowledge but also circumstances that may give rise to constructive knowledge. See 8 C.F.R. Part 274a.
While the mere use of a subcontractor does not establish liability, red flags that are ignored may increase risk, including:
- Direct admissions that workers lack employment authorization;
- Receipt of credible information indicating unauthorized employment;
- Discovery of obviously fraudulent work authorization documents;
- Contractor pricing or labor practices suggesting unlawful employment practices; or
- Continuing to use a contractor after learning that unauthorized workers are being supplied.
Whether sufficient knowledge exists is a highly fact-specific inquiry.
Is There Automatic Liability for General Contractors?
No. Nothing in 8 U.S.C. § 1324a creates automatic liability merely because a subcontractor employs unauthorized workers. Rather, liability generally depends on the employer’s knowledge and involvement. Section 1324a(a)(4) specifically focuses on situations where a company obtains labor through a contract or subcontract knowing that the workers are unauthorized.
Accordingly, a general contractor is ordinarily not liable solely because a lower-tier subcontractor later turns out to have employed unauthorized workers. Liability typically requires evidence that the general contractor knew, or deliberately ignored facts indicating, that unauthorized workers were being supplied.
Compliance Considerations
Companies that rely on contractors, subcontractors, staffing agencies, or labor suppliers should consider:
- Including contractual representations requiring compliance with federal immigration laws;
- Requiring contractors to maintain completed Form I-9 records and comply with employment verification requirements;
- Reserving audit and inspection rights;
- Promptly investigating credible reports that workers may lack authorization;
- Training managers to elevate immigration-related compliance concerns; and
- Avoiding actions that could be construed as knowingly benefiting from unauthorized labor.
These measures cannot eliminate all risk, but they may help demonstrate good-faith compliance and reduce exposure under IRCA.
Bottom Line
Under 8 U.S.C. § 1324a(a)(4), an employer, owner, or general contractor may be held liable when it obtains labor through a contract or subcontract knowing that the workers are unauthorized to work in the United States. Although IRCA does not impose strict liability for the acts of independent contractors, businesses cannot evade the prohibition on unauthorized employment by outsourcing labor through third parties. Careful contractor due diligence and prompt response to compliance concerns remain critical risk-management tools.
If you have questions about how these requirements may affect your organization, please contact Dinsmore attorney Alla Taher.