Employers concerned about incurring fines or criminal liability for hiring undocumented workers now face a new challenge: large healthcare payouts and contract litigation when stop loss carriers refuse to honor claims arising from an undocumented employee’s policy. In a recent case before a U.S. District California Court, a small business sued its stop-loss carrier to compel payment of medical expenses resulting from the care of an undocumented worker’s U.S. citizen children. Although the Court held against the stop-loss carrier in this instance, companies operating in states without laws that explicitly protect undocumented workers may face a very different outcome if their employees turn out to be undocumented despite presenting a reasonably valid work authorization document during the Form I-9 process.

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