Immigrant Workers and Wage Theft Exposure

Why this matters

The cheapest crew in town is cheap for a reason, and often the reason is that somebody in the chain is not paying overtime to workers who are afraid to complain. When that comes out, through a wage claim, a state investigation or a worker injured on your job, the investigator does not stop at the subcontractor who wrote the checks. Federal law and a growing list of state laws can reach the shop that hired the sub, directed the work and benefited from the labor. Knowing how that exposure works lets you price, contract and supervise subs so the bill does not land on you two years later.

Why this group gets underpaid

Wage theft happens to every kind of worker. It concentrates where workers are least likely to push back, and recent immigrants, especially those without work authorization or with limited English, are the textbook case. The mechanisms are mundane:

• Fear of the government. A worker who believes a complaint leads to immigration enforcement does not complain. Some employers say so outright.
• No paper trail. Cash pay, no paystub, no record of hours. The worker cannot prove what he was owed, and he knows it.
• Language. He cannot read the contract, the paystub or the poster telling him his rights, and does not know overtime exists as a legal right rather than a favor.
• Debt to a broker. A labor broker who arranged transport, housing or the job itself takes a cut and controls the work.
• Short horizons. A worker moving job to job may not stay long enough to see a claim through.

The forms the underpayment takes are predictable too: a flat day rate for 10 or 11 hours with no overtime, piece rates with no overtime, "1099" status for workers who are employees in every practical sense (see related: Independent Contractor vs Employee), deductions for tools, transport or housing that push pay below minimum wage, unpaid travel and shop time, and a final check that never comes.

The federal layer: who the law calls an employer

The FLSA protects these workers for work they have already performed, regardless of immigration status. The Department of Labor's Wage and Hour Division enforces minimum wage and overtime without asking about status, and courts have generally allowed undocumented workers to recover unpaid wages for hours actually worked. (The Supreme Court's 2002 Hoffman Plastic decision limited back pay for work NOT performed under labor-relations law; it did not license unpaid wages for work done.)

"Employ" is defined broadly. Under 29 USC 203(g), to employ includes "to suffer or permit to work". A worker can have more than one employer at once, which is called joint employment. Courts decide it with an economic-reality test: who controls the work, sets the schedule, supervises day to day, can hire and fire, provides the tools, and whether the work is part of the shop's own business. The federal standard has shifted through rulemaking and court decisions several times since 2020, and circuits apply it differently, so treat the factors as the shape of the question and check current Wage and Hour Division guidance for the rule in force.

The facts that push a shop toward joint-employer status are the ones that feel like ordinary supervision: your lead tells the sub's workers what to do each morning, sets their start time, checks their work, sends one home, and the work is your core trade on your customer's job.

Damages compound. An FLSA violation owes the unpaid wages plus an equal amount in liquidated damages (29 USC 216(b)), with a two-year look-back, three for a willful violation (29 USC 255). Retaliating against a worker who complains is separately unlawful (29 USC 215(a)(3)), and courts have treated threats to report a complaining worker to immigration authorities as retaliation.

Immigration law cuts the other way, and narrowly. Under 8 USC 1324a(a)(4), using a contract to obtain the labor of a worker you KNOW is unauthorized is treated the same as hiring him directly. The trigger is knowledge. The wrong response is to start demanding immigration papers from your sub's crew, which can itself be national origin or citizenship discrimination; see related: National Origin and Citizenship Discrimination in Hiring. If you suspect a sub's workforce, that is a question for an employment or immigration attorney before you act.

The state layer: some states make you liable by statute

In some states you do not need to lose a joint-employment argument to be on the hook. The legislature put you there.

• California has two rules. Labor Code 2810.3 makes a "client employer" share liability for wages and workers' compensation with a labor contractor that supplies workers to perform labor within the client's usual course of business; it applies to client employers with 25 or more workers including the supplied ones, where at least 6 workers are supplied. Labor Code 218.7 makes the direct contractor on a private construction contract jointly liable for a subcontractor's unpaid wages.
• New York made contractors on construction contracts jointly liable for their subcontractors' unpaid wages, effective 2022 (Labor Law 198-e).
• Minnesota imposes similar contractor liability for subcontractor wage violations on construction projects.

Most other states have no statute like these and leave the question to the federal or state joint-employment test. Whether residential repair and service work counts as a "construction contract" under these statutes is a fact question for your attorney; do not assume your work is outside them because it is small.

Workers' compensation is the other trap. In many states, if your sub carries no workers' comp and his worker is hurt on your job, your carrier can end up responsible, and your premium audit will charge you for the uninsured sub's payroll. Check how your state handles it with your agent.

Worked example: a roofing sub on a day rate

A roofing shop subcontracts tear-offs to a crew leader who supplies 4 workers. The shop pays the crew leader a per-square price. The crew leader pays each worker a flat day rate, call it one day's pay, for whatever hours the job takes. On a six-week stretch of jobs the crew works 11-hour days, 5 days a week.

What the law requires on a day rate. A day rate is lawful under the FLSA, but overtime still applies. Under 29 CFR 778.112, the regular rate is the week's total day-rate pay divided by total hours, and every hour over 40 is owed an extra half of that rate.

Per worker, per week:

• Hours: 11 hours times 5 days is 55 hours.
• Pay: 5 day-rates.
• Regular rate: 5 day-rates divided by 55 hours is one-eleventh of a day-rate per hour.
• Overtime hours: 55 minus 40 is 15.
• Overtime premium owed: 15 hours times one half times one-eleventh of a day-rate is 7.5 elevenths, about 0.68 of a day-rate.

So each worker is short about two-thirds of a day's pay every week.

Across the job: 0.68 of a day-rate times 6 weeks times 4 workers is about 16.4 day-rates of unpaid overtime. Add the equal amount in liquidated damages and the FLSA exposure is about 32.7 day-rates, before attorney's fees, which the FLSA also shifts to an employer who loses.

Where the shop stands. On these facts, the shop's lead met the crew each morning, set the start time and checked each roof before the crew left, and tear-off is the shop's own core work. That is the fact pattern where a court applying the economic-reality test could find the shop a joint employer, and if the crew leader cannot pay, the workers' lawyer will look to the company that can.

The pricing tell the shop could have caught. The shop knew its own crews take about 1.5 labor hours per square on a tear-off of this type. The sub's per-square price, set against what the shop pays its own crew per square, came in around 70 percent of the shop's own labor cost, with the sub's margin and truck still to come out of it. Labor priced that far under a compliant crew's cost, by a sub with no faster method, is a sign the difference is coming out of somebody's overtime.

What changes the answer, layer by layer. In California, 2810.3 can make the shop liable as a client employer without any joint-employment finding, if the shop has 25 or more workers including the supplied crew and at least 6 are supplied; with this crew of 4 supplied workers, 2810.3 would not reach the shop, but 218.7 may if the reroof is a private construction contract, so the escape is not as clean as the headcount makes it look. In New York, 198-e can reach the shop as the contractor on a construction contract regardless of who supervised. In a state with no contractor-liability statute, the exposure turns on the federal joint-employment test, and a shop that genuinely does not direct the sub's crew (the sub schedules, supervises and inspects his own work) is in a stronger position, though not a safe one if the work is the shop's core trade. This is not legal advice; walk into an employment attorney's office with the sub agreement, your lead's daily notes or texts with the crew, and the pricing history.

What protects the shop

Contract terms, with clear eyes about their limits. Require the sub to warrant compliance with wage and hour law, maintain workers' comp and general liability, and indemnify you. An indemnity is only as good as the sub's ability to pay; a crew leader with a truck and no assets indemnifies you with nothing. See related: The Difference Between a Sub and a Labor Broker.

Insurance certificates, current. Collect a certificate showing workers' comp and liability before the first job and on renewal, with you as certificate holder.

Price sanity. Compare a sub's labor price to your own crews' hours on the same work. If it is well under what a compliant crew costs, ask how.

Supervise the work product, not the workers. Inspect the finished job against the spec; let the sub direct his own crew. The more your lead acts as the crew's foreman, the more the crew looks like yours.

A poster and a phone number in the right language. Federal and state wage posters are available in Spanish and other languages. Posting them where sub crews see them costs nothing and tells everyone on your site where the line is.

References

• Fair Labor Standards Act, 29 USC 203(g), 215(a)(3), 216(b) and 255; 29 CFR 778.112 (day rates and job rates).
• 8 USC 1324a(a)(4) (use of contract labor).
• California Labor Code 2810.3 and 218.7; New York Labor Law 198-e.
• See related: The Difference Between a Sub and a Labor Broker; Independent Contractor vs Employee Classification (Deep); National Origin and Citizenship Discrimination in Hiring.