Inside this Issue

A1 - Impact of Undocumented Immigrants in the United States
A2 - Defendant’s Negligence must be Substantial Factor in Causing Injury before Liability Can be found (No Proximate Cause)
A3 - Time was not of the essence so no time related costs could be awarded
A4 - Indemnification Article Violated the State anti-indemnification Statute

Article 1

Impact of Undocumented Immigrants in the United States

See similar articles: Undocumented workers

Most large construction projects in which I am involved have a large percentage of Hispanic workers. The deportation efforts of the current administration are going to impact the amount of time it takes to complete construction projects as well as the cost to complete. I have been advising contractors that they need to include a contract clause in their contracts stating that if their schedule and/or costs are impacted due to deportation and/or tariffs, a change order will be issued to extend the schedule and/or pay them more.

As I write this newsletter, the government is shut down because the democrats want to assure that those receiving health insurance under the Affordable Care Act (otherwise known as Obama Care) don’t have their premiums significantly raised. Republicans insist this issue can be debated after a “clean resolution” to fund the government temporarily. In talking with people about the argument it is apparent that Republicans believe that undocumented workers are getting free services and that regular Americans are having to subsidize these workers with all types of government services.

I did a ChatGPT search and asked this question:

How much federal income tax do undocumented workers pay each year in the United States, and how much Social Security tax do they pay in the United States?

ChatGPT answered as follows:

“Here’s what the research and data suggest — with caveats and uncertainties — about how much undocumented workers pay in federal income taxes and Social Security (payroll) taxes in the U.S.

Key Data & Estimates

A good reference is a 2024 report by the Institute on Taxation and Economic Policy (ITEP):

In 2022, undocumented immigrants paid an estimated $96.7 billion in total taxes (federal, state, and local).

Of that, $59.4 billion was paid to the federal government (which includes income taxes, payroll taxes, and other federal levies)

For Social Security / payroll / “social insurance” taxes, they estimate $25.7 billion (for Social Security) and $6.4 billion for Medicare, plus other related contributions (both employer + employee shares)

So from that estimate:

Federal-level taxes (all kinds): ~$59.4 billion

Social Security portion: ~$25.7 billion (note: this is part of the payroll / “social insurance” tax bundle)

Another corroborating figure: a Bipartisan Policy Center discussion notes that unauthorized immigrants in 2022 “contributed $25.7 billion in Social Security taxes” (employee + employer shares) but are ineligible for benefits.

Important Context, Disclaimers & Interpretive Notes

- - - These are estimates, not direct tallies. The undocumented population is difficult to measure, and matching their actual incomes, tax filings, and withheld wages involves assumptions.
    - The $59.4 billion in federal taxes includes all federal taxes (income tax, payroll taxes, etc.), not just income tax. So it overstates how much is strictly “federal income tax.” The share that is income tax is smaller.
    - The $25.7 billion figure for Social Security is the total contributions (employer + employee) associated with undocumented workers’ wages, in jobs covered by Social Security. But not all of their earnings are in jobs that pay into Social Security (some work in sectors or under conditions that aren’t covered).
    - Also, many undocumented workers use fraudulent or borrowed Social Security Numbers or use Individual Taxpayer Identification Numbers (ITINs) to file tax returns, allowing the IRS to withhold or collect taxes even if the true identity is not clear.
    - Because these contributions are “anonymous” or unmatched, the Social Security Administration often puts those payments into an “Earnings Suspense File” since they can’t verify a matching SSN record. Over time, many of these contributions will never be claimed by the individual who paid them.
    - Finally, eligibility for Social Security benefits requires legal presence, a valid SSN, and accumulating enough work credits under law. Most undocumented workers are ineligible under current law to receive benefits.

About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk Report, Vol. 27, No. 6 (October 2025).

Article 2

Defendant’s Negligence must be Substantial Factor in Causing Injury before Liability Can be found (No Proximate Cause)

See similar articles: Proximate Cause

A pickup truck was traveling too fast on an icy, divided interstate highway and suddenly lost control, hurtled across a 42-foot-wide median, and collided with an 18-wheeler before the defendant had time to react. The collision killed one of the pickup’s occupants and severely injured three others. A lower court found that the car driver was not solely responsible for the injuries, but that the driver of the18 wheeler was also liable because even though he was driving less than the speed limit the accident would not have happened if he had been going slower and could have stopped his vehicle before crashing with the car that crossed into its lane.

This was reversed by the Supreme Court of Texas in a decision holding that the 18 wheeler was not the proximate cause of the accident and therefore could have no liability, explaining:

“Proximate cause is not established merely by proof that the injury would not have happened if not for thedefendant’s negligence. Instead, proximate cause requires, among other things, proof that the defendant’snegligence was a substantial factor in causing the injury. The substantial-factor requirement incorporates “the idea of responsibility” into the question of causation. Thus, even if the defendant’s negligence is part ofthe causal chain of events that led to the injury, the defendant is not liable if his involvement was a mere “happenstance of place and time.” Instead, the substantial-factor requirement means that liability falls only on a party whose substantial role in bringing about the injury is such that he is “actually responsible for the ultimate harm.” Liability does not fall on other participants in the causal chain whose actions merely “created the condition which made the injury possible.” Werner Enterprises, Inc. and Shiraz A. Ali v. Jennifer Blake, Texas Supreme Court, (No. 23-0493, 2025.

The court stated the plaintiffs proved at trial that the accident likely would not have occurred or the injuries would have been less severe, if not for the 18-wheeler’s speed, which was below the speed limit but still unsafe for the icy conditions. The court concluded, however

“that this proof is insufficient to establish that the defendant’s negligence was a substantial factor in bringing about the plaintiffs’ injuries. The defendant’s presence on the highway, combined with his speed, furnished the condition that made the injuries possible, but it did not proximately cause the injuries.Rather, the sole proximate cause of this accident and these injuries—the sole substantial factor to whichthe law permits assignment of liability—was the sudden, unexpected hurtling of the victims’ vehicle into oncoming highway traffic, for which the defendants bore no responsibility.”

The court concluded that this proof is insufficient to establish that the defendant’s negligence was a substantial factor in bringing about the plaintiffs’ injuries. The defendant’s presence on the highway, combined with his speed, furnished the condition that made the injuries possible, but it did not proximately cause the injuries. Rather, the sole proximate cause of this accident and these injuries—the sole substantial factor to which the law permits assignment of liability—was the sudden, unexpected hurtling of the victims’ vehicle into oncoming highway traffic, for which the defendants bore no responsibility.”

***

Cause in fact has two components: (1) “but-for” causation, and (2) “substantial-factor” causation. Id. The defendant’s negligence is the “but-for” cause of an injury if, “without the act or omission, the harm would not have occurred.” Id. (quoting Gunn v. McCoy, 554 S.W.3d 645, 658 (Tex. 2018)). But-for causation is essential to liability, but proving but-for causation alone does not establish that the defendant’s negligence was a cause in fact of the plaintiff’s injuries. “[I]t is not enough that the harm would not have occurred had the actor not been negligent.” Lear Siegler, 819 S.W.2d at 472 (quoting RESTATEMENT (SECOND) OF TORTS § 431 cmt. a). The plaintiff must also prove that “the [negligent] act or omission was a substantial factor in bringing about the injury.”

… If [ ]the defendant’s conduct “merely creates the condition that makes the harm possible, it is not a substantial factor in causing the harm as a matter of law.” *** In other words, “cause in fact is not established where the defendant’s negligence does no more than furnish a condition which makes the injuries possible.”

The court concluded that in this case, "no reasonable juror could assign responsibility for these injuries to anyone other than the driver who lost control of his vehicle and hurtled across a 42-foot median into oncoming highway traffic, thereby causing this accident and these injuries in every legally relevant sense of the word."

Comment:

This decision reaches a well-reasoned conclusion. I believe there are many cases in which a party is injured due to their own negligence that was the proximate cause of his or her injuries, but then they successfully sue someone else arguing that such party was also at fault and should pay damages.

Article 3

Time was not of the essence so no time related costs could be awarded

See similar articles: Time of the Essence

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Where contractor filed suit against subcontractor for breach of contract, the trial court granted the subcontractor’s motion for summary judgment on the issue of time related damages. Other issues in dispute will go to trail. The subcontractor was responsible for installing cast concrete wall panels for student dormitories. The subcontractor began work under subcontract with the prime an entire year before the prime executed a contract with the University/client. Numerous issues caused delay to the project. The subcontractor argued successfully at trial that the Prime failed to manage other subcontractors whose work preceded the Sub’s work, and that this delayed the sub’s ability to complete its work on schedule. It also argued that the Prime failed to facilitate timely approval of the Sub’s submittals and this delayed production of the panels.

The Prime contract had no completion date specified for on of the buildings on the project. The Sub, therefore, argued that time could not be of the essence for that building. The Prime argued that various parts of the subcontract language made time of the essence. It also argued that “one party may unilaterally make time of the essence by giving clear and unequivocal notice that the contract must be performed within a reasonable time". In this case, the court stated that “the mere designation of a particular date upon which a thing is to be done does not result in making that date the essence of the contract.” The Prime’s argument that the construction schedule included a “desired completion date”, standing alone is insufficient to create a material issue of fact. PikeCompany, Inc. v. Tri-Krete Limited, 772 F.Supp.3d 353 (New York, 2025)

The Prime also argued that even if the Subcontract did not include a time of the essence clause, it could have unilaterally made time of the essence “by giving clear and unequivocal notice that the contract must be performed within a certain reasonable time.” But the record before the Court does not support that Pike gave “clear and unequivocal notice”—rather, as referenced above, "the record before the Court demonstrates that Pike changed the dates for the completion of the wall panel installation.” The court stated that under the language in the Master Services Agreement (MSA) the Prime was required to grant the Sub and time extension to complete the building. The MSA stated:

“Should the Subcontractor be delayed by an act or omission of the Contractor or by any other contractor or subcontractor on the Project or by any cause beyond the Subcontractor’s control and not due to any fault, act or omission on its part, then the time for completion of the work shall be extended for a period equivalent to the time lost by reason of any of the aforesaid causes, but only to the extent an extension of time is actually allowed to the Contractor by the Owner under the terms of the Prime Contract.”

In this case, the court found that the Subcontractor was “actually allowed” an extension to complete the building. The court stated that the Prime’s arguments fail to acknowledge the obvious—that since it had no obligation to deliver Building D by August 31, 2017, there was no delay in the completion of that building, and therefore no associated damages. The court, therefore, found that the Sub was entitled to summary judgment on this issue.

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Article 4

Indemnification Article Violated the State anti-indemnification Statute

See similar articles: Anti-indemnification Statute | Indemnification clause

A contractor was hired via a Master Services Contract to provide various services and equipment to supply electrical power to an onshore oil and gas lease wellsite. The MSC contained a broad indemnity provision requiring the contractor to indemnify the Owner from all claims even if caused by the Owner. While a laborer of the contractor was performing work on damaged equipment to restore power, an arc flash occurred, causing him burns and physical injuries. That laborer filed suit against the Owner alleging negligence of both the contractor and the owner. The Owner tendered the claim to the Contractor and demanded it defend and indemnity the Owner. When the Contractor refused to do so, the Owner sued from breach of contract – that being the failure to defend and indemnify pursuant to the terms of the indemnity article. Based on the state anti-indemnification statute, the court granted summary judgment to the contractor because the clause was deemed void and unenforceable because the statute prohibits indemnity of claims caused by the negligence of the indemnitee/owner. The court rejected the Owner’s assertion that the contract was not for construction and the indemnity clause should not apply. BKV BARNETT, LLC v. ELECTRIC DRILLING TECHNOLOGIES, LLC, Defendant, 2024 WL 4308184, United States District Court, D. Colorado (2024).

Colorado's Anti-Indemnification Statute provides that

“any provision in a construction agreement that requires a person to indemnify, insure, or defend in litigation another person against liability for damage arising out of death or bodily injury to persons or damage to property caused by the negligence or fault of the indemnitee or any third party under the control or supervision of the indemnitee is void as against public policy and unenforceable.”

The indemnification clause in this contract stated:

“4. INDEMNITY

4.1 CONTRACTOR AGREES TO INDEMNIFY, DEFEND, RELEASE, PROTECT AND SAVE HARMLESS COMPANY GROUP FROM AND AGAINST ANY AND ALL LOSSES, CAUSES OF ACTION, CLAIMS, DEMANDS, ALLEGATIONS, JUDGMENTS, DEFENSE COSTS, OR SUITS INCLUDING, BUT NOT LIMITED TO, CLAIMS, DEMANDS, JUDGMENTS OR SUITS FOR PROPERTY DAMAGE, BODILY INJURY, ILLNESS, DISEASE, DEATH, LOSS OF SERVICES OR WAGES, OR FOR LOSS OF CONSORTIUM OR SOCIETY (ALL OF THE FOREGOING, COLLECTIVELY, “CLAIMS”) MADE OR ASSERTED BY, OR ARISING IN FAVOR OF, ANY MEMBER OF CONTRACTOR GROUP (OR THEIR SPOUSES, RELATIVES, DEPENDENTS, OR ANY LEGAL

REPRESENTATIVES), OR BASED ON OR ARISING OUT OF SUCH CLAIMS, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISING OUT OF OR RELATED TO THE PERFORMANCE OF THIS CONTRACT OR THE USE BY ANY MEMBER OF COMPANY GROUP OR CONTRACTOR GROUP OF, OR THEIR PRESENCE ON, ANY

PREMISES OR FACILITIES OWNED, OPERATED, CHARTERED, OR CONTROLLED BY COMPANY GROUP OR CONTRACTOR GROUP OR USED FOR TRANSPORTATION (INCLUDING, BUT NOT LIMITED TO, ANY STRUCTURE, PLATFORM, AIRCRAFT, VESSEL, OR OTHER PREMISES) OR FOR INGRESS AND EGRESS BY COMPANY GROUP OR CONTRACTOR GROUP, EXPRESSLY INCLUDING ANY CLAIMS ACTUALLY OR ALLEGEDLY CAUSED BY THE UNSEAWORTHINESS OR UNAIRWORTHINESS OF VESSELS OR CRAFT, OR THE SOLE, CONCURRENT, OR PARTIAL NEGLIGENCE (OF WHATEVER NATURE OR CHARACTER), FAULT, OR STRICT LIABILITY OF ANY MEMBER OF COMPANY GROUP, AND WHETHER OR NOT SUCH NEGLIGENCE, FAULT, STRICT LIABILITY, UNSEAWORTHINESS, OR UNAIRWORTHINESS PREDATES THE DATE OF EXECUTION OF THIS CONTRACT; PROVIDED, HOWEVER, THAT THE FOREGOING OBLIGATIONS OF CONTRACTOR TO INDEMNIFY, DEFEND, AND SAVE COMPANY GROUP HARMLESS SHALL NOT APPLY TO THE EXTENT THAT ANY SUCH CLAIMS ARE CAUSED BY, RESULT FROM, OR ARISE OUT OF OR FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY MEMBER OF COMPANY GROUP.”

The Colorado anti-indemnification statute defines “construction agreement” as:

“A contract, subcontract, or agreement for materials or labor for the construction, alteration, renovation, repair, maintenance, design, planning, supervision, inspection, testing, or observation of any building, building site, structure, highway, street, roadway bridge, viaduct, water or sewer system, gas or other distribution system, or other work dealing with construction or for any moving, demolition, or excavation connected with such construction.”

In this case, the Owner/indemnitee argued that the MSC was not a construction contract and that the parties merely contracted for the Contractor to provide electrical power to the site. With no citation to the record, BKV contends that "[a]ny work, including installing or repairing damaged electrical equipment, was incidental to EDT's contractual obligations to provide electrical power to the site and its drilling operations. As such, the sole purpose of BKV and EDT's contract was for EDT to provide electrical power to BKV's site and its drilling operations.”

In reviewing the facts of this case, the court noted:

the following work was performed in March 2022: (a) “install[ed]” a “Utility Pole,” “overhead wires,” “[a]bove ground cable,” and “drive- overs;” (b) “set 2 pad mounted switches;” and (c) “repair[ed] overhead cable.” Docket No. 40-5. EDT also provided a “Crane to Load and Unload standard load items.”

“ … it is undisputed that the March 2022 Invoice shows that EDT performed to Load and Unloadstandard load items.” Id.”

The Court finds that the parties’ agreement for EDT to perform work in March 2022 is a “construction agreement” under the Anti-Indemnification Statute because the agreement involved “materials or labor for the construction, alteration, renovation, [or] repair ... of any ... structure.” …. EDT installed a “Utility Pole” at the Site. Docket No. 40-5. A utility pole constitutes “materials” and when installed constitutes a “structure.” EDT also repaired “overhead cable,” see id., which constitutes the “repair” of a “structure.” Because EDT's work involved the construction and repair of a structure, the Court finds that the parties’ agreement is a “construction agreement” under Colo. Rev. Stat. § 13-21-111.5(6)(e)(I). See Higby Crane Servs., 703 F. App'x at 693 (finding, at the summary judgment stage, that a work order issued pursuant to a master services contract constituted a “construction agreement” under Colo. Rev. Stat. § 13-21-111.5(6)(e)(I) because it was undisputed that the work order showed that appellant “[p]ulled off end caps to plug tubes on heat exchangers” at “a gas processing plant”); Cont'l Ins. Co. v. Cintas Corp. No. 2, No. 18-cv-00254RBJ, 2019 WL 4643711, at *5-6 (D. Colo. July 12, 2019) (holding that a contract was a “construction agreement” under section 13-21-111.5(6)(e)(I) because the defendant repaired a “dry pipe system” in a building, and thus, the indemnification provision in the contract was void).

As a result of finding the work to constitute “construction”, the court held that the indemnity clause was void and unenforceable.

Comment: Indemnity clauses are the source of much contract negotiation. When reviewing design professional contracts, my office seeks to revise the clause so that the design professional does not agree to defend the indemnitee against any professional liability claims because there is no insurance coverage for that obligation. We also revise the clause to state that the design professional will only indemnify against damages arising from third party claims and demands to the extent caused by the negligent acts, error or omissions of the designer. Going broader than that will create uninsurable exposure due to the “contractual liability exclusion” contained in the liability policies.

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