Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 6 minutes
Key Takeaways
- Workers’ compensation systems generally cover undocumented workers, often regardless of immigration status.
- Medical costs for undocumented workers injured on the job are typically covered, but wage benefits can vary by state.
- Some states may deny long-term wage replacement or vocational programs for undocumented workers based on specific regulations.
- Businesses face risks like federal penalties and audits when hiring undocumented workers, despite insurance coverage for injuries.
- To protect their companies, employers should verify work eligibility, document hiring practices, and review their workers’ comp policies.
In many states, yes. Workers’ compensation systems are designed to cover employees injured in the course and scope of work, and immigration status is often not a bar to eligibility. For example, New York states that workers’ comp benefits are available to eligible workers regardless of their immigration status.
Why is this the case? This is because workers’ compensation is a no-fault insurance that is made to protect employees who are injured while they are doing their jobs. It also protects businesses from lawsuits. Many courts have ruled that denying coverage based on immigration status would undermine the entire point of this kind of insurance coverage.
Things That Are Covered Under Workers’ Compensation Policies When Undocumented Workers Are Hurt on the Job
If you have undocumented workers who are part of your daily operations, and someone gets hurt on the job while doing work they were hired to do, your workers’ compensation policy may pay for the following:
· Medical care to address the injury or illness
· Compensation for hospitalization, surgery, prescription, or physical therapy
· Temporary disability payments and partial wage replacement
These benefits may apply so long as the worker was hurt in the course and scope of doing their job.
As an example, imagine a roofer who doesn’t have legal papers who falls off the roof and breaks their arm. Your workers’ compensation insurance may take care of their medical care and pay partial wages while they are unable to come back to work.
What is Not Covered by Workers’ Compensation When a Worker Without Documents is Hurt on the Job
This is where things get more complicated. While the medical costs of an injured worker may be at least partially covered, long-term or wage-based benefits can vary. Each state has its own guidelines that impact workers’ comp coverage.
These are the things that may or may not be covered by your workers’ compensation policy:
· Some states choose to limit or just deny long-term wage replacement for undocumented workers. An example of this is Florida and Georgia generally treat undocumented workers as covered employees, but benefits could be disputed when false identity documents or other statutory defenses are at issue.
· Vocational programs help injured workers to retrain and seek new jobs if they are not going to be able to go back to their former profession due to the severity of their injuries. Some states have denied vocational rehabilitation to undocumented workers on the theory that the benefit’s purpose is return-to-work in the U.S., while other states/cases handle it differently. It must be presented as state-specific and fact-dependent.
· Hiring an unauthorized worker does not automatically eliminate standard workers’ comp defenses. The employer may face separate immigration and licensing exposure, but the comp compensability defenses generally remain governed by state workers’ comp law.
What Are the Laws in Some Key States?
This comparison chart gives you some information about how different states handle workers’ compensation coverage for undocumented workers.
| State | Medical Coverage | Wage/Disability Benefits | Notes |
| California | Yes | Yes | Undocumented workers actually get full workers’ comp rights. |
| Texas | Yes | Partial | Medical is covered. Some wage benefits are limited. |
| Florida | Yes | Often limited | FIdentity/document issues may create a fraud defense in some jurisdictions and can materially affect benefits |
| New York | Yes | Yes | Courts can affirm coverage regardless of immigration status. |
| Georgia | Yes | Partial | Permanent wage loss benefits are often disputed. |
| Illinois | Yes | Yes | Full coverage that matches authorized employees. |
Most states provide some level of coverage; rules may vary significantly, and a small number of states have restrictive rulings or evolving disputes.
There are Still Risks That You Should Consider
While your workers’ comp coverage will likely take care of medical costs associated with an injury at your business, there are still reasons that you might not want to hire undocumented workers.
· Businesses can face federal penalties. You can be fined for hiring undocumented workers, and this is a risk, whether the workers are injured on the job or not.
· Some states do have licensing sanctions. Arizona is a well-known example (state law also requires E‑Verify).
· Many undocumented workers are hired using fake IDs or fake SSNs, which is a major problem in the US. Fraud related to the actions of your workers who are not correctly documented can get you in trouble with the government and local officials.
· The audit costs related to claims made for undocumented workers can be expensive and may increase your future premium renewal costs.
How Can Business Owners Protect Their Companies?
Here are the right steps to take to avoid penalties, fines, and issues with your workers’ compensation coverage:
1. Verify work eligibility for all the workers that you hire. Submit all hires to the same process to avoid discrimination and refuse to hire those without proper documents. Use Form I-9 per federal law.
2. Make sure that everyone is covered. When you hire new staff or even temporary workers, let your workers’ comp carrier and your payroll staff know.
3. Document everything and make sure to keep records of payroll, hiring documentation, and anything else that might be relevant if there is a question about the work status of any of your employees in the future.
4. Review the language of your workers’ comp policy to be sure that you are aware of the limitations of your coverage or any requirements related to specific industries.
5. Train your supervisors to hire help with the right processes and protocol, and explain to them how legal hiring works.
Key Takeaways:
· Workers’ compensation policies may cover undocumented workers’ medical costs, but you, as the employer, can still face fines, back premiums, audits, and penalties as a result of hiring them.
· Your insurance coverage may protect the worker, but your lack of compliance with federal and state law can lead to penalties.
· If you operate in an industry that uses day labor, you still need to hire documented workers rather than taking the risk of all of these fines and legal consequences due to simply picking up people off the street corner to handle simple tasks.
A Word of Advice
At USA Business Insurance, we see these kinds of claims and cases all the time. Many people lose their businesses to the costs associated with making the mistake of hiring undocumented workers. We can help your business to stay compliant while also making sure that you have the insurance coverage that you need to protect your business. Be sure that you follow the advice in this guide and reach out to us to get help securing the business insurance policies that you need most.
