New York's highest court, the New York Court of Appeals, has ruled that an employer that allegedly hired undocumented aliens in violation of federal law did not lose the benefit of a provision of the state's Workers' Compensation Law limiting the ability of a third party to assert contribution and indemnity claims against the employer.

The Case

New York Hospital Medical Center alleged that it engaged Microtech Contracting to undertake demolition in a basement room housing an incinerator at the hospital's location in Flushing, Queens; that Microtech hired brothers Luis and Gerardo Lema, undocumented aliens not legally employable in the United States, to perform the work; and that the Lemas were injured and received workers' compensation benefits that Microtech's insurance carrier paid.

Additionally, the Lemas sued the hospital for violations of the New York Labor Law. Thereafter, the hospital sued Microtech for common law and contractual contribution and indemnification to recover any damages it would have to pay in the Labor Law litigation with the Lemas.

Microtech moved to dismiss the hospital's complaint, arguing that New York Workers' Compensation Law Section 11 barred the hospital's action and that its alleged non-compliance with the federal Immigration Reform and Control Act (“IRCA”) did not deprive it of the protection of Section 11 because the law applied to all workers within the state's borders regardless of their immigration status.

The hospital insisted, however, that Microtech should not be allowed to “hid[e] behind the language of Workers' Compensation Law § 11 after violating a federal statute” because “New York courts have long held that they will not award a plaintiff the benefit of an illegal bargain.”

The trial court granted Microtech's motion to dismiss, an intermediate appellate court affirmed, and the case reached the New York Court of Appeals.

New York Workers' Compensation Law Section 11

Section 11 states that:

“[t]he liability of an employer [to pay workers' compensation benefits] shall be exclusive and in place of any other liability whatsoever, to such employee, his or her personal representatives, spouse, parents, dependents, distributees, or any person otherwise entitled to recover damages, contribution or indemnity, at common law or otherwise, on account of such injury or death or liability arising therefrom….

“For purposes of this section the terms 'indemnity' and 'contribution' shall not include a claim or cause of action for contribution or indemnification based upon a provision in a written contract entered into prior to the accident or occurrence by which the employer had expressly agreed to contribution to or indemnification of the claimant or person asserting the cause of action for the type of loss suffered.

“An employer shall not be liable for contribution or indemnity to any third person based upon liability for injuries sustained by an employee acting within the scope of his or her employment for such employer unless such third person proves through competent medical evidence that such employee has sustained a 'grave injury' which shall mean only one or more of the following: death, permanent and total loss of use or amputation of an arm, leg, hand or foot, loss of multiple fingers, loss of multiple toes, paraplegia or quadriplegia, total and permanent blindness, total and permanent deafness, loss of nose, loss of ear, permanent and sever facial disfigurement, loss of an index finger or an acquired injury to the brain caused by an external physical force resulting in permanent total disability.”

The Decision of the New York Court of Appeals

The court affirmed.

In its decision, the court explained that, in Balbuena v. IDR Realty, LLC, 6 N.Y.3d 338 (2006), it held that an injured employee's status as an undocumented alien did not preclude recovery of lost wages in a personal injury action against a landowner under the state's Labor Law. The hospital's action, the court said, was “the other side of the coin.” It observed that if the illegality of an employment contract did not defeat an employee's rights under an otherwise applicable state statute, as was the case in Balbuena, it was “not clear why it would nonetheless annul the employer's statutory rights.”

Therefore, the court held, an employer's statutory rights under the Workers' Compensation Law were not extinguished merely because its injured employee was an undocumented alien; specifically, it ruled, the employer still may invoke Section 11's shield against third party claims for common law contribution and indemnification.

In other words, the court concluded, an employee's immigration status did not affect an employer's rights under Section 11.

The case is New York Hospital Medical Center of Queens v. Microtech Contracting Corp. (N.Y. Feb. 13, 2014). Attorneys involved include: Timothy J. O'Shaughnessy, for appellant; Dennis M. Wade, for respondent.

Originally published on FC&S Legal: The Insurance Coverage Law Information Center. FC&S Legal is the industry's ONLY single-source, comprehensive portal developed specifically for insurance coverage law professionals. To find out more, visit www.fcandslegal.com. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Special Reports /

The Case, the Policy and the Decision: Immigration Status and Workers' Comp Law

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