Illegal Aliens Can Prove AWW By Filing Taxes with the IRS

Friday, February 12, 2010 | 0

By Michael Rabinowitz

The 1st District Court of Appeals brings us a pair of opinions that further support the notion that the court sees little to no difference between illegal aliens and naturalized citizens. While in Fast Track Framing v. Caraballo, they opened a door to the possibility of shutting down illegal aliens claims by holding that a claimant who does not report his income to the Internal Revenue Service has an average weekly wage of $0.00, the court now clarifies its position and offer illegal aliens a solution.

Rene Stone Work Corp. v. Gonzalez and J.B.D. Brother’s v. Miranda both involve illegal aliens who had not reported their pre-injury wages to the IRS, for obvious reasons.  Therefore, according to Caraballo, their AWW should be $0.00.  According to section 440.02(28), the AWW will only be measured by wages “reported for federal income tax purposes.”

However, both claimants’ attorneys got creative and hired certified public accountants to prepare tax forms that confirmed their past wages. The CPA’s each testified at the final hearings of each claimant and the judge of compensation claims for each claim accepted their testimony.  In both instances the employer/carriers objected that despite the testimony from the CPA’s, claimant still did not file the correct forms with the IRS.

Both JCC’s rejected this argument as declining to read 440.02(28) so strictly.  There is nothing in the section that mandates what forms must be filed with the IRS, just that the income be reported.  The 1st DCA agreed in both instances with lower courts’ rulings. And, this is a sound decision.

What this means for employer/carriers is they need to take a pause before asserting the AWW is $0.00. All a claimant needs now is a CPA to overcome that obstacle.  And, when claimant wins this argument, we–the employer/carriers–will have to pay the CPA in taxable costs to the claimant attorney.  While it remains a smart defense to declare the AWW $0.00, it is equally wise to drop the defense when claimant lists a CPA on his witness list or presents copies of 1040 EZ forms to you.

But, employers, beware!  As I wrote in a previous post concerning Caraballo, if you assert this defense you are exposing yourselves to federal tax liability (paying employees under the table), immigration liability (hiring illegals, and most importantly, workers’ compensation fraud liability.

the W/C statute contains a lengthy fraud provision that does not just cover actions by claimants. Section 440.105(4)(b)6 states that it is unlawful for any person (ie. employer):

. . . to knowingly misrepresent or conceal payroll. . . which would be material to the computation and application of an experience rating modification factor for the purpose of avoiding or diminishing the amount of payment of any workers’ compensation premiums.

In other words, paying employees under the table can be used to show an employer is skirting workers' compensation premiums, a form of insurance fraud. This would put the employer in direct conflict with its carrier.

An employer has to look long and hard at itself in the mirror to insure that its hands are clean, otherwise it can come back to bite them.

In the end, is it worth denying workers' compensation benefits if it brings a host of major legal problems?

Michael Rabinowitz is a defense attorney for the Banker Lopez Gassler law firm in Tampa. This column was reprinted with his permission from his blog, Workers' Comp Corner, which can be found here: http://workerscompblog.wordpress.com