United States: The Interplay Between Illegal Alien Status And Fraud Under The Workers' Compensation Act

Last Updated: October 5 2017
Article by Taylor S. Poncz

Illegal alien status and its role in the workers' compensation arena has always been a hot topic, but it is hotter than ever right now, at least in large part due to our current political climate. Employers and insurers, rightfully so, are frustrated by the fact that many injured workers are not in the country legally. Defense attorneys are often asked whether the employer/insurer have any recourse in this scenario.

A series of cases decided all in a row more than a decade ago form the framework for the fundamental holding that one's status as an illegal alien, meaning someone who has entered the United States illegally or is an alien who has entered legally but has lost his legal status and is deportable, does not bar his right to benefits.

The seminal cases that established an illegal alien's eligibility for benefits were decided in 2004. In Continental PET Tech, Inc. v. Palacias, the claimant was in the United States illegally, and produced fraudulent documents to her employer in order to obtain a job as a janitor. After an on-the-job injury, she filed a claim for benefits and the employer denied, claiming that illegal aliens were not employees under the Act because there was a federal law, the Immigration Reform and Control Act, which prohibited the knowing hiring of illegal aliens and the use of fraudulent documents to obtain employment. The employer argued that because of the worker's illegal status, there was no valid employer/employee relationship.  The Court of Appeals disagreed and affirmed the finding of benefits, holding that the definition of employee under the Georgia Workers' Compensation Act, every person in the service of another under any contract of hire or apprenticeship, included illegal aliens. As a result, the Court of Appeals concluded that the federal law did not pre-empt state law for employment purposes in this regard. The Court explained that although the goal of the federal law was to reduce the incentives for employers to hire illegal aliens, it conversely was not meant to allow employers to avoid workers' compensation liability for work-related injuries to those employees since such would provide employers with a financial incentive to hire illegal aliens.

In another case that same year, Earth First Grading v. Gutierrez, the employer argued that the injured worker would not be able to accept a job under O.C.G.A. § 34-9-240(a), reasoning that an undocumented worker was analogous to an incarcerated person in that neither could meaningfully accept a job even if it were offered. The Court of Appeals rejected this argument, noting that the employer had already employed the worker while he was illegal and that the employer did not even learn of his residence status until long after the period for which he sought benefits. As a result, the Court found that the worker's status as an illegal alien did not render him unable to meaningfully accept employment during the period of time at issue, and benefits were affirmed.

A conspicuous common thread in these cases is the submission of fraudulent documents or misrepresentations in applications to secure employment, which the employer in Dynasty Sample Co. v. Beltran, argued was sufficient to void the employment contract based on fraud. The Court of Appeals ultimately disagreed. It applied the Rycroft test and found that it failed to meet all three prongs of the test because there was no causal connection between the misrepresentation made about the worker's illegal status and the injury the worker suffered. Consequently, benefits were awarded to the employee.

While these cases all upheld the worker's right to benefits despite being in the country illegally and submitting fraudulent documents to obtain employment, the pendulum did swing back in favor of the employer/insurer in the later case of Martines v Worley & Sons Construction, in which the injured worker received benefits, but was then offered a suitable light duty job with the employer which was conditioned on his production of a valid driver's license and documentation that he was in the country legally. When the injured worker was unable to do so, and therefore, could not accept the job, his benefits were suspended. The Court of Appeals agreed with the employer's suspension of benefits, finding that the job was suitable for the employee's restrictions. The Court explained that the employee's reason for not performing the job was because his illegal alien status prevented him from being able to produce a valid license and documentation, and not because of a physical inability to do the work.

While the Martines case certainly provides an effective takeaway tool for employers/insurers, the bottom line remains that an injured worker's status as an illegal alien will not bar him or her from benefits. A question that often arises during discovery, especially after a claimant's deposition has been taken and he or she pleads the 5th Amendment when asked for a social security number, is what a defense attorney can do with the information that an injured worker is suspected to be in the country illegally.  The Modern Rules of Professional Conduct prevent an attorney from reporting an illegal alien status to Immigration Customs Enforcement (ICE). The Georgia Rule of Professional Conduct also prohibits attorneys from threatening to present criminal charges solely to obtain an advantage in a civil matter.  In practice then, while a lawyer may serve discovery requests that ask the party to reveal her citizenship status, the lawyer cannot report that status to ICE.

An attorney can, however, report apparent fraud to the Fraud Unit of the State Board of Worker's Compensation, and the legislature has enacted the Safe Harbor provision as added protection for doing so. Under O.C.G.A. § 34-9-24(d), any person or entity who furnishes information relevant and material to suspected fraud under or noncompliance with the workers' compensation act is protected against liability for damages in a civil action or criminal prosecution for the furnishing of such information. The only condition on the reporting is that it must be furnished without fraud or malice. The Safe Harbor provision therefore allows an attorney to report a claimant's illegal status to the Fraud Unit and let the Fraud Unit investigate. From a practical standpoint, refusing to admit one's status by pleading the 5th Amendment when asked about a Social Security number may not be enough information for the Fraud Unit to act on, but a proven illegal status coupled with other admissions of fraud could be sufficient, and could result in avoided liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Taylor S. Poncz
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