Determining the Lost Earning Capacity of Undocumented Workers

/ / Economic Damages in Personal Injury Litigation, Publications

By Chad L. Staller, J.D., M.B.A., M.A.C.

Currently, undocumented aliens injured on the job in the United States may recover damages for lost earning capacity, but this area of law is in flux. Things could change as courts continue to interpret the extent of recovery available to undocumented workers and as state legislatures debate statutes limiting recovery. As the landscape shifts, a significant number of claims are being made due to the large number of undocumented workers in the workforce and the nature of the work typically performed by undocumented workers.

Here, we offer a brief survey of the current state of case law in this area and review a methodology for calculating lost earning-capacity damages to undocumented workers.

Background

Though the number of undocumented workers has declined in the U.S. since 9/11, due to increased scrutiny by federal and state law-enforcement agencies and, more recently, due to the general economic decline, these workers still constitute an estimated 5% of the U.S. workforce, according to a recent report by the Pew Foundation. (Portrait of Unauthorized Immigrants in the United States, Pew Research Center Publications, 2009). Many of these workers are employed in dangerous occupations in the agricultural, industrial and construction sectors. Employers in these industries have, at least until recently, been willing to overlook questionable documentation.

California

In California, where undocumented workers have traditionally been a mainstay of the agricultural economy, courts have long given workers the right to recover damages for lost earning capacity, within certain limits. The California Court of Appeal in Rodriguez v. Kline, 186 Cal. App. 3d 1145 (CA, 1986), allowed undocumented workers to recover in tort actions if they could show that they had applied for a visa and had worked to correct their illegal status. Recovery for lost earning capacity under Rodriguez is based on what the undocumented worker could have earned in the U.S. absent the tort. If the plaintiff cannot show that he or she has worked toward becoming a legal worker, earning-capacity damages are based on earning capacity in the plaintiff’s home country.

Texas and New York

In Texas, undocumented workers were allowed to recover lost earning-capacity damages, but the jury was instructed to consider the plaintiff’s undocumented status. ABC Rendering v. Covarrubias, 1972 Tex. App. Lexis 2794 (TX, 1972). Undocumented workers in New York were allowed to recover lost earning capacity based on U.S. wages in Public Administrator of Bronx County v. Equitable Life Assurance Society of the United States et al., 192 A.D.2d 325 (1993), 595 N.Y.S.2d 478.

Other Rulings

IHoffman Plastic Compounds Inc. v. National Labor Relations Board, 535 US 137 (2002), the U.S. Supreme Court held that because the Immigration Reform and Control Act of 1986 (IRCA) makes it illegal to hire undocumented workers, back-pay remedies are unavailable to undocumented workers bringing claims of unjust dismissal.

Defendants, citing Hoffman, have since sought to bar any recovery for lost wages in tort claims brought by undocumented workers, with limited success. Generally, courts have held that the unjust-dismissal claim in Hoffman is distinguished from personal-injury claims and, for public-policy reasons, injured undocumented workers should be able to recover lost earning capacity where the employer is at fault, following the Supreme Court of New Hampshire’s reasoning:

To refuse to allow recovery against a person responsible for an illegal alien’s employment who knew or should have known of the illegal alien’s status would provide an incentive for such persons to target illegal aliens for employment in the most dangerous jobs or to provide illegal aliens with substandard working conditions.

Rosa v. Partners in Progress, Inc., 868 A.2d 994, 1000, 152 N.H. 6, 13 (2005).

The Rosa court held that the defendant may introduce evidence of the plaintiff’s undocumented status to rebut a claim for lost U.S. wages — even though the plaintiff’s illegal status is not relevant to liability, it is relevant to the issue of lost earnings. Similarly, the Second U.S. Circuit Court of Appeals, interpreting New York law, held that evidence of a plaintiff’s “removability” (susceptibility to deportation under IRCA) is permissible, and also that an award of “some measure” of damages based on lost US earnings is also permissible. Madeira v. Affordable Housing Foundation, Inc., 469 F.3d 219, 251 (2nd Cir. 2006).

A Crucial Factor

Where a jury is allowed to consider some measure of damages based on lost U.S. wages, the issue of how long the plaintiff would have remained employed in the U.S. absent the tort is a crucial factor in quantifying lost earning capacity. Factors affecting an undocumented worker’s tenure in the U.S. include the worker’s probability of deportation, ties to the community in the U.S., English-language skills, family situation, the nature of the worker’s U.S. employment, and other variables. The above-referenced study, Portrait of Unauthorized Immigrants in the United States, includes some statistics on length of employment of undocumented workers, as do many other research papers showing employment data specific to various nationalities. In addition to statistical data, depositions and other evidence specific to the plaintiff might reveal how long the injured worker had planned to stay in the U.S. absent the tort. Many undocumented workers maintain strong ties with their countries of origin and are working in the U.S. only until they can earn enough money to return and start businesses or buy homes.

Aside from determining probable U.S. employment tenure, assessing lost earning capacity of undocumented workers presents other difficulties. Where earning capacity is to be based on earnings in the plaintiff’s country of origin, data may not be so easy to come by. Wages in developed nations are fairly well documented, but this is not normally the case in countries such as Costa Rica, Ecuador, Uruguay and other economies where not only may data be scarce, but occupations similar to the job the undocumented worker was performing in the United States might not even exist.

One solution, offered by economist Tyler J. Bowles in Illegal Aliens: Damage Claims for Lost Wages, J. Forensic Economics 17(3), 281 (2004), would be to base the award on a “purchasing power parity” (PPP) exchange rate.

The PPP Exchange Rate

Unlike exchange rates based on gross domestic product (GDP) data on internationally traded goods, or currency-exchange rates based on spot prices in the market, a PPP exchange rate is based on the relative cost of a basket of traded and non-traded goods and services representing the relative costs of living in various countries. An exchange rate based on GDP measured only by goods traded between countries — goods that, for example, Japan might sell to France, such as Toyotas and cameras — does not include some goods and services required in daily life, such as energy, health care and haircuts.

By taking into consideration these non-traded yet essential goods and services, the PPP exchange rate might offer the most equitable basis for compensating an injured undocumented worker for lost earning capacity based on wages in the worker’s country of origin. Another advantage to basing recovery on a PPP exchange rate is that per-capita income data expressed in PPP rates are widely available — both the International Monetary Fund and the World Bank, as well as other agencies, regularly publish GDP/PPP per-capita income tables for a wide range of nations.

Conclusion

Case law in this area promises to evolve rapidly, and both state and federal law may change the rules of tort recovery by undocumented workers as well. For the time being, it would be a mistake not to take into consideration these issues — length of probable employment in the U.S. and an equitable basis for calculating lost earning capacity — when assessing lost-earning capacity to these workers.

This article originally appeared in Products Liability Law & Strategy, May 2011. Reprinted with permission of ALM Properties Inc.

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