Immigration Update

By Joseph Dirik

Contractors should review their current "no-match" and general immigration compliance procedures..

Joseph Dirik, Esq., a graduate civil engineer and attorney. He is a member of the litigation and construction law practice groups at the Dallas office of Fulbright & Jaworski LLP. Contact him at jdirik@fulbright.com.

In March I wrote about the U.S. Immigration and Customs Enforcement's pending rules regarding specific procedures employers should follow after receiving "no match" letters from the Social Security Administration or the Department of Homeland Security. National immigration policy is in a state of flux.

On August 10 of this year, ICE issued its final rule on the "no-match" letters issue. Based on the rule, if discrepancies with a Social Security number, immigration status document or employment authorization document presented by an employee for I-9 purposes cannot be resolved within 93 days of the "no-match" letter by following prescribed procedures, employers must terminate the affected employee. The final regulations were scheduled to take effect on September 14, 2007.

On August 31, however, a federal district court judge granted a nationwide temporary restraining order placing a hold on the "no-match" regulations at the request of a coalition of labor unions and immigrant rights groups, including the AFL-CIO, the American Civil Liberties Union, and the National Immigration Law Center. The court's order also put a hold on the federal government's plan to start sending out No-Match Letters. The order is presently scheduled to remain in effect until October 1, when another judge will consider whether to grant an injunction preventing implementation of the rule until trial.

Business lobbyists predict that the ICE rule could result in hundreds of thousands of workers losing their jobs, leading to severe labor shortages. Homeland Security Secretary Michael Chertoff recently said that "the person who does their best, in good faith, has nothing to fear from this." At some point, Congress and the courts will likely establish comprehensive immigration reform. But in the meantime, contractors must address the real problems at issue today. With all of this uncertainty, contractors should contact an attorney to review their current "no-match" and general immigration compliance procedures.

Commercial General Liability Insurance The Texas Supreme Court issued an important ruling in September dealing with commercial general liability policies and allegedly defective work performed by subcontractors. Based on the court's ruling in the underlying case, Lamar Homes Inc. v. Mid-Continent Casualty Company, a general contractor might be able to look to its CGL insurer to defend it against claims for damage allegedly caused by work performed by the general contractor's subcontractors.

In Lamar Homes, a homeowner sued its builder and a subcontractor for construction defects that allegedly caused damage to the home. The homebuilder's policy at issue included a standard "your work" exclusion of coverage for damage caused by the insured's own work. It also included a standard "subcontractor provision" that said the exclusion of coverage did not apply "if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor." The builder's insurer refused to defend the builder, arguing that the damage was not an "occurrence" under the policy. The insurer argued, among other things, that the claim was a financial loss resulting from an uninsured business loss and not covered by the policy. The Supreme Court concluded that allegations in the lawsuit of "unintended construction defects may constitute an 'accident' or 'occurrence' under a CGL policy and that allegations of damage to, or loss of use of, the home itself may also constitute 'property damage' sufficient to trigger the duty to defend under a CGL policy." Importantly, the court's ruling deals with the duty to defend only and leaves for another day whether an insurer must cover losses for subcontractor's defective work. Attorneys are already making plans to litigate this unanswered issue concerning insurers' ultimate liability for losses.

Note that the entity responsible for creating the various ISO endorsements to policies, the Insurance Services Office, has already issued an endorsement to eliminate the subcontractor exception to the "your-work" exclusion. Be on the look out for this exclusion in future policies. Consult an attorney if you believe a claim involving a subcontractor's work might be covered by an existing policy.

Mechanic's Liens The Texas Supreme Court also decided a case that expanded the universe of persons who can lien a private construction project in Texas. The case involved a mechanic's lien filed by a temporary employment agency that had furnished workers to a subcontractor. The case tells us that even if a subcontractor gets paid, an unpaid labor agency can successfully file a lien claim if it is not paid, even if the agency's workers are paid by the agency. This development is important to contractors who should treat a temporary employment agency in the same fashion as a lower tier subcontractor.

The trial court denied the agency's lien claim, concluding that it had not furnished labor within the meaning of the Texas mechanic's lien statute.  The general contractor and the subcontractor had been paid for the work performed by the subcontractor. The trial court judge concluded that the agency did not furnish labor, but had simply extended credit to the subcontractor for its payroll.

Be sure to secure lien waivers when practical. Most importantly, add temporary employment agencies to your list of potential lien claimants.

Editor’s note: The information in this article is not intended as legal advice but to provide a general understanding of the law.