WCM Partners Dennis Wade, Cheryl Fuchs and Mike Bono obtained a unanimous affirmance of the dismissal of a Labor Law indemnification action from New York’s Court of Appeals, NY’s highest court. In the case of New York Hospital Medical Center of Queens v. Microtech Contracting Corp., the Court of Appeals was asked to consider a corollary to its decision in Balbuena v. IDR Realty, LLC, which held that an undocumented worker was not precluded from recovering lost wages in a personal injury action against a landowner under the state’s Labor Law.
In New York Hospital, the Hospital hired Microtech to perform demolition work. Two of Microtech’s employees, who were undocumented, were injured during the course of the work. The employees collected workers compensation benefits under Microtech’s policy, and thus were precluded from suing Microtech for personal injuries pursuant to New York State’s Workers’ Compensation Law. Instead, the employees sued the Hospital and were successful on their Labor Law 240 and 241(6) causes of action. The Hospital, then sued Microtech for common law indemnification claiming that though there was no “grave injury” or indemnification contract, Microtech should be stripped of its Workers Compensation Law Section 11 defense since it violated federal immigration statutes (the IRCA) by hiring undocumented workers.
WCM immediately moved to dismiss, which was granted. The Appellate Division affirmed, but granted leave to the Hospital to appeal to the Court of Appeals. On appeal, the Court of Appeals was asked to decide whether an employer is stripped of its Section 11 defenses if it hires an undocumented worker in violation of the IRCA. The Hospital argued that since the “employment contract” between Microtech and the undocumented workers was illegal, the Court could not enforce it, and thus Microtech could not benefit from the Workers Compensation Bar. In opposition, Microtech argued that the existence of an employment contract was irrelevant, since Microtech was not asking the Court to enforce any contract, nor was Microtech raising it as a defense to the common law indemnification action. Instead, Microtech was asking the Court to apply the statute to the facts of the case (i.e. the Bar applied since there was no “grave injury” or indemnification contract with the Hospital). The Court of Appeals agreed agreed with us and affirmed the Appellate Division order, holding that if the illegality of an employment contract did not defeat the employees’ rights under an otherwise applicable state statue, as was the case in Balbuena, it would not annul the employer’s statutory rights in our case.
This decision is obviously welcome news for contractors and their insurers. As it stands, the realities of the New York construction industry are that many contractors do in fact hire undocumented workers. If the Court had changed the law by creating an exception where an employer hires undocumented workers, it would open up exposure to many of our contractor clients and their insurers despite the bar raised by Section 11 of the New York workers compensation law. It also happens to be WCM’s second victory in New York’s highest court in the past two months!