Wal-Mart Pays Record Immigration Fine

Robert Banta
May 4, 2005 — 2,591 views  
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Wal-Mart's recent $11 million civil fine for alleged immigration violations is the largest ever paid by Corporate America.  Immigration and Customs Enforcement officials also announced that subcontractors providing the floor cleaning crews in question to Wal-Mart plead guilty to criminal immigration charges and will pay a total of $4 million in fines.

This case should be a wake-up call for employers using contract labor.  In addition to prohibiting the "knowing" employment of undocumented workers, federal law prohibits employers from "knowingly" obtaining the services of undocumented workers through contracts.  "Knowing" is defined to include both actual knowledge as well as "constructive" knowledge; that is, circumstances that would alert a reasonable person of an individual's undocumented status.

The Wal-Mart case was based upon the government's allegations that Wal-Mart was "knowingly" obtaining the services of undocumented workers through independent contractors providing floor cleaning crews.  The underlying investigation was massive in scope, covering 61 Wal-Marts across 21 states.

An $11 million fine for a company like Wal-Mart is, strictly from a financial perspective, almost negligible.  However, the adverse publicity that has resulted from this case, combined with the amount of lost productivity and professional fees that Wal-Mart has expended, represents, no doubt, a significant "cost" to the company..

What lessons should employers draw from the Wal-Mart case?  First, employers using independent contractors should have a  written agreement with the  contractor.  That agreement should confirm the contractor's obligation to provide only authorized workers to perform the described services and require the contractor immediately to remove from the job anyone  whose work authorization expires or who is found to be undocumented.

Employers may also want to include in their contracts with independent contractors an indemnification for any loss or damages suffered because the contractor did not properly verify and/or maintain work authorization for contracted workers.  Realistically, employers should understand that such indemnifications are only helpful if the contractor has the financial capacity to pay when the need arises.

The Wal-Mart case does not resolve the dilemma that employers using independent contractors regularly face; that is, what type of circumstances or events are enough to constitute  "knowledge" of the undocumented status of individuals providing services under a contract?  The law provides little guidance.  Clearly, an employer cannot stick its head in the sand and avoid liability.  But what about other scenarios? Is the fact that contract workers speak only broken English or no English at all sufficient?  Employers struggling with this question must keep in mind that federal immigration and antidiscrimination laws also impose penalties on employers that are overly zealous in their efforts to confirm the work authorization of employees, candidates for employment or contracted workers.

Ominously for employers, an ICE official announced that the government plans to use the Wal-Mart investigation and settlement as a model for future work site enforcement actions.  Employers are well advised to take this message to heart and seriously embrace immigration compliance.

Robert Banta

Banta Immigration Law