ILLEGAL IMMIGRATION David A. Bego President and CEO Executive Management Services, Inc.

THE IMMIGRATION ISSUE Before we enter this program, let us remember that no matter our position on this extremely sensitive issue, the United States is a nation of laws for the people and by the people.

FEDERAL AND STATE CAUSE 1.Supply – Mexico has an abundance of workers that have no jobs, nor easy access to social services, health care or schools. 2.Demand – U.S. has available jobs and easy access to social services, healthcare and schools. 3.Enforcement – Lack of enforcement of current laws results in mass immigration.

FEDERAL AND STATE ISSUES/IMPACTS Social responsibility for fellow man million illegal immigrants present in the U.S. (approximately 5% of the population) Illegal Immigrants:  constitute approximately 6% of the U.S. workforce  are an integral part of the service and agricultural industries  are a drain on social services, health care and schools  in many cases do no pay income taxes, unemployment taxes, FICA  may have criminal backgrounds According to polls, a majority of American citizens do not want to provide amnesty to illegal immigrants U.S. cannot financially afford to deport million people U.S. cannot build enough walls to stop the flow of illegal immigrants; no wall in history has kept people in or out Businesses take advantage of the inexpensive labor

IMPACT ON BUSINESS Provides source of low-wage workers Depresses wages and benefits for legal American workers Places businesses who utilize illegal immigrants in a position of breaking Federal and State laws and being subject to penalties and fines Encourages “misclassification of workers” Encourages “unionization of workers” Artificially deflates true costs/pricing

BUILDING SERVICES SCENARIOS LEGAL EMPLOYEES Protect Contractor and Company from fines and penalties Provide jobs for legal Americans Provide for healthy wage and benefit growth Provide increased revenues to State and Federal coffers Provide for true costs/pricing Provide an even playing field

BUILDING SERVICE SCENARIOS ILLEGAL IMMIGRANTS AS EMPLOYEES OF CONTRACTORS/VENDORS I-9 system is insufficient –forgeries and lack of detailed information make it extremely unreliable Suppress wage rates Provide for artificially low costs/prices Place Contractor, and Companies who purchase its service, in violation of Federal and State laws and subject to intervention Subject Contractor and Company to fines and penalties Place potentially dangerous individuals in building service positions Rob revenues from State and Federal coffers

BUILDING SERVICE SCENARIOS MISCLASSIFICATION OF WORKERS “INDEPENDENT CONTRACTING” 1.What is it? Contractor hires people who are paid by the job or piece work. 2.Violates Federal “independent contractor” laws because:  people are supervised  supplies and chemicals are provided  uniforms are provided  quality is supervised  people are not susceptible to profit or loss  days and hours of work are dictated 3.May violate minimum wage and overtime laws

BUILDING SERVICES SCENARIOS MISCLASSIFICATION OF WORKERS (cont.) “INDEPENDENT CONTRACTING” 4.Provides unfair advantage to ethical Contractors and artificially skews costs/pricing due to: a.Not withholding FICA, SUTA, FUTA b. Not paying liability insurance or workers compensation (payroll based) c.Not paying overtime 5.No background checks required – they’re not employees 6.Large percentage are illegal immigrants – same issues as noted earlier

BUILDING SERVICES SCENARIOS ILLEGAL SUBCONTRACTING What is it? Contractor wins master contract and then subcontracts with a subcontractor who uses illegal immigrants, independent contractors, or both. Same scenarios are now in place as reviewed previously.

BUILDING SERVICES SCENARIOS IMPACT ON PRICING AND DELIVERY OF SERVICES Employee Availability  Contractors who utilize legal employees have difficult time finding them  Contractors who utilize independent contractors and/or illegal immigrants have ready supply of people available Wages  Wage scales are depressed by utilization of illegal immigrants/independent contractors oIllegal immigrants will accept lower wages to find employment oIndependent contractors will accept less because taxes and FICA are not deducted from checks or they are paid in cash Often these people are required to clean at high production rates

COST ANALYSIS – CLASS A OFFICE SPACE 250,000 SQ FT

COST/PLUS WORKSHEET – CLASS A OFFICE SPACE 250,000 SQ FT

BUILDING SERVICE SCENARIOS LEGAL IMPLICATIONS Places Contractor and Company in violation of Federal and State Laws I-9 system is unreliable due to forgeries and lack of detailed information Increased enforcement by Federal and State government Federal and State governments are putting emphasis on employers to make sure employees are legal Contractors and Companies are subject to fines and penalties Misclassification of workers – “Independent contracting is illegal!” Minimum wage and overtime laws may be violated

BUILDING SERVICE SCENARIOS KEYS TO ASSET MANAGEMENT 1.Insist on Contractors who utilize their own employees and do not independent contract as defined by U.S. law. 2.Insist Contractors provide legal employees through extensive social security background checks. 3.Utilize Contractors who perform extensive national background checks. 4.Don’t depend on contract language; it will not protect you if illegal immigrants or independent contractors are discovered by the government.

BUILDING SERVICES SCENARIOS PRICING Artificially reduced prices Use of independent contractors result in non-payment of:  SUTA  FUTA  FICA  Income taxes  Liability insurance  Workers comp insurance Company utilizing independent contractors has 20-25% advantage in pricing Illegals will work for $1-1.50/hour less Combine illegals with independent contracting and the advantage becomes % Result – Pricing can be 30-50% below true market

POTENTIAL SOLUTIONS FEDERAL/STATE GOVERNMENT 1.Pass a fair immigration reform bill requiring all immigrants to have work visas and legitimate social security numbers. 2.Enforce current Federal and State laws with respect to illegal immigrants, independent contractors and availability of social services. 3.Provide a finite amount of time for illegal immigrants to become American citizens. 4.Penalize businesses who utilize illegal immigrants or misclassify workers as independent contractors.

POTENTIAL SOLUTIONS BUSINESSES: CONTRACTOR/BUILDING MANAGER Contractors  Utilize only legal Americans and do not independent contract  Educate customers on costs of being ethical and legal Building Managers  Educate your customers on, “Why it costs more to be legal.”  Only do business with Contractors who use their own employees as defined by U.S. law  Only use Contractors who do extensive SSA and background checks  Don’t depend on contract language – request copies of SSA and background checks for each Contractor employee  Be wary of Contractors who subcontract

CONCLUSIONS IS IT WORTH IT? To suppress wages and benefits for legal Americans To encourage unionism To violate State and Federal laws To defraud government of income To allow potential criminals in your buildings To provide the demand for more illegal immigrants to enter To overtax social programs To increase taxes to fund social programs To under-fund social security system To increase liability and workers comp rates because many do not pay fair share To encourage terrorism TO PUT YOUR COMPANY AND YOUR JOB AT RISK!

Businesses need to self-police themselves and abide by Federal and State laws After all, we are a “Nation of Laws”