Potential Effects of Immigration Enforcement

By William Coats

Our columnist writes that contractors should start thinking about the various contractual provisions that can help safeguard them against possible delays or increased costs on projects due to the nature of the construction industry's workforce.

It is estimated that the number of illegal immigrants in the United States is close to 12 million, with approximately 7.2 million currently employed. Within the construction industry, the Pew Hispanic Center, based in Washington, D. C., has estimated that illegal immigrants comprise up to 36 percent of insulation workers, 29 percent of roofers, 28 percent of drywall workers, 27 percent of construction helpers, 25 percent of construction laborers, 25 percent of brick masons, 22 percent of painters, 21 percent of cement masons and 20 percent of flooring installers. These percentages are no doubt higher in Texas. Recently, the federal government has stepped up its efforts to enforce the immigration laws in the work place. U.S. Immigration and Customs Enforcement agents have inspected construction sites, resulting in not only arrests of illegal immigrants, but significant fines and penalties for those who employed illegal immigrants. There are recent instances of construction project delays because employees were arrested, deported or did not show up to work for fear of being deported.

William Coats is director and a member of the executive committee and the head of the construction/surety section of Houston-based Coats/Rose.

The escalation of immigration enforcement is creating the potential for an immediate work shortage on construction projects, which could conceivably result in significant delays to a project's schedule.
Being caught in the middle of an immigration violation may also subject the contractor or owner to hefty federal fines and penalties. To help prevent such delays and/or damages, contractors should consider the effects of illegal immigration on a project and whether there are any contractual provisions that may help curb these effects.

One contract provision that may remedy an immediate work shortage is the force majeure clause. These clauses generally excuse delay caused by events beyond the contractor's control, such as fires, floods, unforeseeable strikes and labor problems, abnormal weather or sovereign acts of government. However, often force majeure clauses only provide relief for those events that are specifically enumerated in the clause. It would be beneficial to specifically state in the contract what events will be considered excusable delays. By including a force majeure clause that excuses delays caused by immigration enforcement, the contractor will not be solely responsible for such delays. If you are not in a position to bargain for such a clause, at least try for a force majeure clause that includes in the enumerated examples of force majeure events something broad, such as "causes beyond the reasonable control of the Contractor."

There are other possible avenues of relief such as the theory of impracticability. Nonperformance of a contract may be excused if it is impracticable to perform because of facts that were unknown to a party, or if supervening, unanticipated circumstances make performance impracticable. However, a party claiming this defense must also show that it used reasonable efforts to perform despite the impracticability.

Contractors should become acquainted with the current immigration laws. Specifically, the Immigration Reform and Control Act of 1986 that requires employers to verify that every employee they hire is legally entitled to work in the United States. IRCA makes it illegal for any employer to hire, recruit or refer for a fee an alien known to be unauthorized to work; continue to employ an alien known to be unauthorized; and hire, recruit or refer for a fee any person without following IRCA's record keeping requirements.

A contractor that knowingly hires illegal immigrants or permits illegal immigrants to work after discovering they are not legal will likely face stiff penalties that can range anywhere from $250 to $11,000 for each illegal immigrant employed, and it may even include a prison sentence of up to six months.

General contractors may want to consider adding provisions to their subcontracts, such as adding an indemnification provision requiring the subcontractor to indemnify the contractor from all liability the contractor may incur as a result of the subcontractor's failure to comply with IRCA. A contractor might include a provision to the subcontract that would require the subcontractor to warrant that it is in compliance with the applicable provisions of IRCA. Consider requiring the subcontractor to verify employment qualifications for all employees who will work on the project.