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How You Might Accidentally Hire an Undocumented Employee

Many of us consider ourselves law-abiding citizens. We pay our income taxes, comply with numerous regulations, purchase mandatory insurance policies, and refrain from stealing, killing, and cheating. We register our cars and our guns, and we only use legal substances when we want to experience intoxication. Admittedly, we occasionally drive faster than the speed limit or jaywalk, but we generally stay on the “right side of the law”, which is why it comes as such a shock when someone we know finds him- or herself defending a claim. Unfortunately, it’s easier than you think to find yourself in their shoes. Below are some of the ways I have seen people unintentionally hire an undocumented worker and open themselves to overtime claims, workers’ compensation (“WC”) claims, penalties for not withholding income taxes, and penalties for not securing WC or disability insurance. You could face the same financial ruin if:

  1.  You call the housekeeper who slipped a business card under your apartment door, and you failed to check for a licensed or registered business entity, insurance, and other evidence of a legitimate enterprise. It is very common for undocumented workers to work in private homes for cash “off the books”, as this allows them to avoid detection, earn the wages they need for basic living expenses, and avoid paying income taxes. You might think it’s a good deal, too, because they are “independent contractors” that you don’t need to provide the benefits of employment. All is well, until you decide you want to terminate the employment and they fear they will not be able to easily replace the lost income. Depending on the situation, this housekeeper could file claims against you that result in a variety of damages payable. They could also cause a series of audits that result in penalties.
  2. You used an app to hire an individual, who you pay in his or her personal name, rather than the name of a business. You use them for a set number of hours on a regular basis, such as weekly or monthly, and they run errands, do administrative work, maintain your books, or help with work overflows in your business. In other words, you are using their services in the same way you would use those of an employee. Unfortunately, if that worker looks like an employee and functions like an employee, you have probably misclassified him or her and could be responsible for injury claims, overtime claims, income tax withholdings, penalties, and more.
  3. You got referrals from friends, after your elderly parents doctors said they required full-time companionship to continue living outside of a nursing home. You had heard as many horror stories about companions assigned by agencies as you heard about nursing homes, so you chose to hire directly. The people you hired said they had lived nearby for many years, and you assumed this meant they were citizens. You didn’t check. You didn’t know you needed to. Nor did you know your parents needed workers compensation and disability insurance, withhold taxes, and pay overtime. It all happened so quickly. But ignorance of the law is no excuse, and it won’t matter that your parents are in their 90s.
  4. You paid an “agency” that claims the workers it assigns are their “independent contractors”. Think that one through. You are paying an agency for services of workers they deny are their employees. The agency is trying to insulate itself from, if not entirely avoid, all liability for its operations. Who do you think they will try to tag with that liability, if something goes wrong? This common business structure stinks for you and the so-called independent contractor (who should then be considered an independent business owner). I recommend against using such agencies, unless your services agreement includes indemnity and hold harmless provisions that would protect you from their mistakes.

In short, hiring workers can be very confusing. Errors are made every day. Costly errors. And the law, at least in New York State, can be very unforgiving. Please consult attorneys with experience in Employment and Workers’ Compensation Laws before hiring workers, especially those you think will be “legitimate” independent contractors. With authorization to work in the United States.

NOTE: This post is a general overview of the ways some people might hire undocumented employees and find themselves on the “wrong side of the law”. It is not legal advice, and there is certainly no guarantee that any of the actions detailed above will generate a similar or specific result. Past success is never a guarantee of a future outcome. If you require information or advice applied to your unique situation, please make an appointment to discuss it with an attorney. Don’t rely solely on what you read on the Internet.

Nance L. Schick, Esq. is an arbitrator, mediator, and conflict resolution coach based in New York City. A former human resources supervisor and minor league hockey coach, she focuses on resolving employment and business-related disputes. She loves these areas because nearly everyone has a job or knows someone who does, and we all patronize businesses at some times. She's out to prove that there are always win-win options, if not win-win-win-win+, when we're willing to look for them.