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The Construction Industry and Immigration Reform
by Daniel Brennan
Immigration reform has been one of the many hotly debated issues in our nation’s capital for years. Like so many contentious issues in national politics, the advocates on all sides are passionate and polarized. Those who oppose immigration reform claim to be a bulwark against infiltration of foreigners who will necessarily increase threats to national security. Supporters of immigration reform, pointing to the inevitable flow of humanity across the borders into the U.S., promote a balance between national security, individual rights and economic opportunity. There is perhaps no industry that better captures the cross-currents of the immigration debate than the construction industry. Construction trades employ significant numbers of undocumented foreign-born workers often, but not always, to perform the lesser-skilled tasks that are required on construction projects. Whether employment of undocumented workers is knowing or inadvertent there is no dispute that employment of such workers carries risks for both the employers and the employees. Immigration reform holds some promise to alleviate or mitigate those risks and to address the unfair treatment often directed at such workers.
Economics
The importance of the immigrant work force to the U.S. economy in general and the construction industry in particular is significant. Many studies have concluded that the impact of the immigrant work force is positive for overall U.S. economic growth including providing workers critical for certain industry segments such as construction, and leveraging other portions of the U.S. economy. For example, in contrast to the middle of the 20th century when many native-born workers lacked even a high school diploma, most native-born U.S. workers entering the workforce have a high school diploma or a college degree. These workers do not historically pursue occupations in the construction trades. Nonetheless, the construction industry needs workers for these trades – laborers, plumbers, pipefitters, sheet metal workers, drywallers, electricians, ironworkers and more.
The fact is that in the construction industry undocumented workers are filling these positions – rightly or wrongly depending upon your political perspective. The Workers Defense Project, an organization based in Texas that serves the undocumented worker community, estimates that over 1 million construction workers, 14% of the total construction workforce in the U.S., lack legal status. These facts and figures demonstrate that the construction industry needs trade workers. Individuals willing to work in these trades often come from the ranks of illegal immigrants and these two realities create friction and risks for both contractors and the undocumented workers.
Problems with Current Immigration Laws and Enforcement
The current federal immigration laws are fraught with traps for the unwary. This situation is further complicated by some states’ immigration laws that are at odds with, or extend beyond, federal legislation leaving contractors left to determine which laws apply, when and how.
The current prohibition against hiring illegal aliens emanates from the Immigration Reform and Control Act of 1986 (“IRCA”). IRCA prohibits employers from knowingly hiring illegal workers. To set a framework for what constitutes “knowingly hiring” illegal workers, IRCA requires employers to complete a documentation exercise for each employee commonly referred to as the I-9 process. The I-9 process requires employers to gather and examine certain documentation to verify the legal status of workers. The employer must ensure that an employee completes the I-9 accurately. If an employer is audited for immigration compliance, the employer could be held responsible for errors, even inadvertent ones, in completing the I-9. The employer must also obtain and review certain types of documentation to verify legal status (the types of acceptable documents are specified in IRCA). As part of this process, the employer must also assess whether the tendered documentation appears to be genuine and authentic. The employer must maintain these records for a designated period of time.
One additional step that is optional for most employers (but required for certain employers doing federal contract work) is the use of E-Verify. E-Verify uses an internet system to allow employers to compare information that an employee provides on a Form I-9 with records of the Department of Homeland Security and the Social Security Administration. Any discrepancies allow the employer to trigger a process to further investigate the discrepancies.
Employers are exposed to potentially stiff penalties on a per form basis for errors in completing I-9’s. The I-9 process does impose some discipline into the verification of the legal status of employees but there is clearly a significant administrative burden associated with I-9 process.
As if dealing with the I-9 process were not enough of a challenge, certain states have passed legislation that imposes more or different requirements to deal with employment of potentially illegal workers. Illinois, for example, passed legislation in 2007 which prohibited employers from using E-Verify until it met certain accuracy criteria. That legislation was invalidated by a federal district court in 2009 and Illinois then passed alternative legislation that largely tracks E-Verify requirements but actually imposes fines for an employer’s violations of E-Verify requirements.
Other states have passed immigration legislation that imposes or could impose significant hardship on contractors especially those that perform public construction work. For example, Colorado requires contractors who perform state or local government contracts to use E-Verify. More importantly, the Colorado legislation prohibits a contractor from knowingly contracting with a subcontractor who knowingly employs illegal aliens. If the contractor obtains actual knowledge that a subcontractor knowingly employs illegal aliens, the contractor must provide a three day notice to the subcontractor to prove otherwise; if such proof is not available then the contractor must terminate the relationship with the subcontractor. See Colo. Rev. Stat. § § 8-17.5-101 & 102. Imagine the dilemma that a Colorado contractor faces when mid-way through a government project it discovers that a key subcontractor employs “illegal aliens.” What is worse for the contractor – risking a performance default under its contract with the public body by firing the subcontractor or facing fines and other penalties due to violations of Colorado’s immigration laws? Facing this proverbial Scylla and Charybdis is, unfortunately, not uncommon for contractors toiling under the patchwork of state immigration laws.
Federal immigration law includes a program for the issuance of a temporary work visa known as the H2B visa. The H2B visa nonimmigrant program allows employers to hire foreign workers to come temporarily to the United States and perform temporary, nonagricultural services or labor on a seasonal or intermittent basis. These visas are commonly used in construction. To obtain such a visa, an employer must petition the federal government to issue the visas for particular workers. That means that foreign workers that are in the country legally under the H2B visa program are beholden to the employer. If a foreign worker under an H2B visa is being underpaid or exposed to dangerous work conditions (an all too common problem as discussed later in this article), any complaint could prompt the employer to fire the worker at which point the H2B visa will expire and the worker must leave the U.S. or be considered an illegal alien.
Risks for Immigrant Workers and the Unlevel Playing Field for Contractors
The prevalence of undocumented workers in the construction industry carries substantial risks to those workers. Undocumented workers are more often exposed to unsafe work conditions because employers know that undocumented workers are less likely to blow the whistle for fear of retaliation from the employer. OSHA regulations require a certain minimum number of hours of safety training for construction workers. Studies have shown that undocumented workers are far less likely to have received this training. The reasons for this could be that unscrupulous employers hire undocumented workers knowing that they will never be reported for failing to provide the training, or undocumented workers are simply unaware of their legal rights. Whatever the reason, the lack of safety training is likely part of the reason why undocumented workers are also more likely to suffer on-the-job injuries.
Undocumented workers have also historically been underpaid compared to U.S. born workers. This reality presents a competitive disadvantage to both U.S. born workers and to law abiding contractors. U.S. born workers are more expensive to employ generally for the same type of work. An employer that pays lower wages to undocumented workers will reduce its labor costs and forego hiring U.S. born workers. This also skews the playing field when it comes time to bid on construction work. Labor costs are a huge component of most construction projects. A contractor with lower labor costs due to underpayment of undocumented workers will have a competitive advantage over the law-abiding contractor who pays the appropriate wages to all workers.
Current Status of Federal Reform Legislation
Immigration reform bills are winding their way through Congress. The latest bill that saw any legislative action was Senate Bill 744, known as the Border Security, Economic Opportunity, and Immigration Modernization Act which passed the Senate on June 27, 2013. The key features of Senate Bill 744 are: (1) financing for border fencing, surveillance and personnel; (2) preemption of state or local laws (including criminal penalties); (3) prohibition against the knowing employment of unauthorized individuals; (4) application of the “knowing” standard to use of contractors or subcontractors for hiring undocumented workers; (5) potential debarment of employers from obtaining government contracts; (6) creation of a new status – Registered Provisional Immigrant – for undocumented workers who satisfy certain criteria which would allow them to work legally in the U.S.; and (7) a cap of 15,000 H2B visas annually for construction employment. See The Associated General Contractors of America, Immigration Reform ( http://www.agc.org/cs/advocacy/legislative_activity/immigration_reform).
Advocates for both the immigrant community and construction contractors have found shortcomings with the latest Senate bill. For example, the Associated General Contractors of America (“AGC”) has taken particular aim at what its dubs an “arbitrary” cap on the H2B visas made available to the construction industry. The AGC, along with other groups, issued a letter in support of an amendment to lift the cap. In this letter, AGC cited predictions from the Bureau of Labor Statistics that the construction industry will need 1.8 million more workers by 2020. With an aging workforce certain to leave before 2020, the AGC advocated that lifting the cap will make labor available to fill this need. See http://www.agc.org/galleries/advy/Cornyn9lettercornyn.pdf. The AGC has also expressed concerns about the scope of debarment penalties for immigration violations, potential vicarious liability of general contractors for violations by their subcontractors and the proportionality of penalties to the violations.
Views of Organized Labor
Unions traditionally looked at any attempt to ease immigration barriers as a threat to keeping union workers employed in the construction trades. In general, the unions expressed concern that an influx of foreign-born workers represented a competitive threat to its membership. These workers were also less inclined, or so the thinking went, to join a union.
Now unions recognize that legalization of some portion of undocumented workers could be a boon for union membership and union prowess. It is no secret that union membership in general has declined throughout the U.S. Undocumented workers represent a huge cohort. While the devil is the details, many large union organizations in general favor immigration reform. For example, the AFL-CIO advocates a framework for reform that reflects “shared values: dignity, fairness, opportunity, voice and justice.” AFL_CIO, The Time is Now for Immigration Reform (http://www.aflcio.org/About/Exec-Council/EC-Statements/The-Time-Is-Now-for-Immigration-Reform). Perhaps more to the point for unions and their members, the AFL-CIO supports an approach that includes “keeping families together, creating a road map to citizenship and halting the race to the bottom in wages and worker standards by employers who are taking advantage of our failures in immigration policy. The framework proposes a data-driven approach to immigration that would determine future visas based on labor market needs, as well as the improvement–not expansion–of guest worker visa programs that too often deny basic civil rights to immigrant workers. The framework also recognizes that a new immigration system must include rational operational control of our borders supplemented by effective work authorization mechanisms that hold employers accountable.” While organized labor is not in complete accord with contractor groups or immigrant rights groups, the recognition of the need for reform is a common ground among all.
Conclusion
The construction industry relies heavily upon workers who often come from the ranks of the undocumented. The current regime of immigration laws, including the visa program, poses compliance and management challenges especially in states that impose different obligations than the federal government. Abuses under the current laws by unscrupulous employers undermine the integrity of the bidding process and also threaten the safety and rights of undocumented workers. All segments of the industry appear to recognize the urgent need for reform. Even if there are differences in priorities among these segments, the universal recognition of the need for reform is encouraging. On the other hand, the recent track record of uncompromising partisanship in Washington, D.C. does not bode well for progress on immigration reform.