Contractors Need to Modify Their Subcontract Forms to Qualify for the “Safe Harbor” Protection Under Pennsylvania’s New Construction Industry Employee Verification Act (“Act 75”), Effective October 20, 2020
By Jeff Venzie and Julie Pfaff
On October 7, 2020, the Construction Industry Employee Verification Act (also known as “Act 75”) goes into effect. Act 75 prohibits a construction industry employer from knowingly employing an unauthorized employee. Unauthorized employees are defined as those who do not have the legal right or authorization under Federal law to work in the United States. This article provides an overview of Act 75 and explains what contractors must do to qualify for the Act 75 “safe harbor” that insulates them from liability for Act 75 violations by their subcontractors.
Parameters of the Act
- Act 75 applies to “Construction industry employers” in Pennsylvania. The Act defines “Construction industry” as follows:
The industry which engages in erection, reconstruction, demolition, alteration, modification, custom fabrication, building, assembling, site preparation and repair work or maintenance work on real property or premises under a contract, including work for a public body or work paid for form public funds.
- Act 75 defines “Construction industry employer” as an individual, entity or organization in the construction industry, which: (1) transacts business in Pennsylvania; and (2) employs at least one person in Pennsylvania. The term includes a staffing agency that supplies workers to a construction industry employer.
- Act 75 covers all employees hired on or after October 7, 2020.
Construction Industry Employer Responsibilities
- In order to verify that an employee is authorized to work in the United States, Act 75 requires employers to utilize the E-Verify system. The E-Verify system, which works in tandem with the I-9 form, is a federal web-based service that allows employers to verify the work eligibility of new employees.
- Employers must keep a record of the verification for the duration of their employee’s employment or three years, whichever is longer.
- Complaints that an employer is violating the Act may be submitted to the Pennsylvania Department of Labor and Industry (“L&I”). Without a complaint, the L&I has no authorization to investigate an employer.
- If an L&I investigation determines that the employer hired an employee who is unauthorized to work, then the DOL will issue a written warning.
- After receipt of a written warning, the employer has 10 business days to verify that the unauthorized employee was terminated.
- Failure to verify that the employee was terminated will constitute a second violation of the Act.
- L&I must refer second and subsequent violations by an employer to the Attorney General for an enforcement action with increasingly severe legal penalties.
- Proof that the employer verified the employment authorization of an employee through the E-Verify stem creates a rebuttable presumption that the employer did not knowingly employ an unauthorized employee.
Penalties / Probation / Suspension of License
- If an employer is found to be in violation of Act 75 in an action brought by the Attorney General, the court shall order the employer to:
- Terminate the unauthorized employee(s);
- Verify in writing to L&I, within five business days, that it has terminated the employment of each unauthorized employee.
- Be placed on probation for a 3-year period for each business location where the unauthorized employee worked
Subcontractor “Safe Harbor”
- A contractor will not be considered in violation of Act 75 when a subcontractor has knowingly employed an unauthorized employee, IF the contractor has done the following:
- Required compliance with Act 75 in the subcontract, including a clause that terminates the subcontract if a court orders sanctions against the subcontractor for an Act 75 violation; and
- Obtains written verification from the subcontractor that the subcontractor is aware of the provisions of Act 75 and is responsible for compliance.
Tip: Contractors (and subcontractors) should modify their current subcontract forms to include the termination and verification provisions described above in order to qualify for the “safe harbor”, which provides protection against liability for an Act 75 violation by their subcontractors.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.