Legal Risks of Providing Employee Housing in Texas

Providing housing to employees in Texas may seem like a helpful benefit, but it carries serious legal risks that every employer should understand. From potential federal harboring charges to violations of Texas labor laws, offering employee housing can expose businesses to significant penalties. This article explains what Texas employers need to know about providing housing to employees and how to protect their businesses.

Providing housing to employees in Texas: What risks may affect you

Author: Jacob M. Monty

Providing housing to employees may seem like a practical solution, but it carries significant legal risks, especially for employers hiring undocumented workers. A recent case in South Texas demonstrates how offering housing to employees can result in federal harboring charges under 8 U.S. Code § 1324, even without the intent to conceal workers from immigration authorities. Additionally, employers acting as landlords face potential violations of Texas labor laws, which can lead to financial penalties and civil litigation.

Housing or harboring?
A federal judge ruled that the owners of a South Texas bakery could be charged with harboring after a worksite enforcement action led to the apprehension of eight undocumented employees on February 12, 2025. According to federal agents, the business owners knew their employees were undocumented and provided them with housing adjacent to the business. Defense attorneys argued that providing shelter doesn’t necessarily mean the workers were concealed from detection, but the judge ruled there was probable cause to charge the bakery owners under 8 U.S. Code § 1324.

The case highlights one of the many potential problems created when employers overextend the general employer-employee relationship. In general, it isn’t a good idea for employers to provide their employees with housing because it adds complexity to a relationship that should otherwise be simple. Not only are employers supposed to maintain a professional relationship within the workplace, but they now also tack on the role of landlord.

These complexities will be explored more in the article, but first we must learn about what constitutes harboring.

What is harboring?
Harboring, as defined by 8 U.S. Code § 1324, includes the following key elements:
• Knowledge of an individual’s undocumented status—the person must know or recklessly disregard the fact that the individual is unlawfully present in the United States;
• Assisting in transportation or movement—moving or attempting to move the individual within the United States;
• Concealing or shielding the individual from detection—providing housing or other means of hiding an undocumented person; and
• Encouraging unlawful residence—taking actions that induce or help the individual remain in the United States illegally.

Court interpretations of harboring in employment and housing
Federal courts have addressed what constitutes harboring in employer-employee and landlord-tenant relationships. The U.S. 7th Circuit Court of Appeals held that employers that provide their undocumented employees with housing may be charged under the harboring statute if their actions help shield their employees from immigration (by omitting their names from wage records and providing housing).

The 11th Circuit held that if an employer gains a financial advantage from the housing arrangement (for example, the undocumented workers are paid less and work longer hours because of the housing, benefiting the employer), it can be charged under the harboring statute.

Despite these rulings, there may be a way for employers that seek to provide their employees with housing without the risk of criminal penalties to continue to do so.

Additional legal risks of employer-provided housing
It’s generally not advisable for employers to act as landlords to their employees because of the potential legal and financial risks involved. When housing and employment are intertwined, disputes over rent can easily become labor law violations.

For example, if an employer provides an employee with a small loan to cover overdue rent and later deducts unpaid amounts from the employee’s wages, it may violate the Texas Payday Law, which prohibits unauthorized deductions from wages. This could subject the employer to penalties from the Texas Workforce Commission and potential civil litigation from the employee.

Employers that are adamant about providing housing should be clear on the possible risks when doing so.

Good practices and leases may limit employer risk of federal penalties
Compliance with federal law is the rule, especially now with increased enforcement. You should remember that the Immigration Reform and Control Act (IRCA) mandates that you have an I-9 for every employee, and you can’t knowingly hire undocumented workers.

Of course, problems may arise when employees provide false documentation and the employer offers housing. Though it may be an honest mistake, federal law imposes a fine of up to $250,000 for an individual and up to $500,000 for an organization that’s found to harbor an undocumented person in addition to a maximum of 5 years’ imprisonment. These penalties are much stricter compared with the penalties for hiring undocumented workers.

Because the penalties for harboring are so harsh, employers may add a lease agreement when providing housing to employees to reduce their risk of federal penalties. A formal lease agreement may provide protection against harboring charges because it suggests a business transaction rather than an effort to encourage or induce someone to remain in the United States unlawfully.

The 4th Circuit has ruled that simply renting to undocumented individuals isn’t harboring unless additional steps are taken to shield them from detection.

What should a lease include to reduce risk?
In addition to a robust status verification system, employers may include the following in a lease to mitigate the risk of harboring charges:
• A monthly rent amount and payment terms;
• A clearly defined lease term (a month-to-month or fixed-term contract); and
• A written record of all transactions related to the lease.

Conclusion
Providing housing to employees, even within a formal landlord-tenant arrangement, is generally not advisable because of the significant legal and financial risks involved. The recent South Texas case highlights how such arrangements can lead to harboring charges, even if you don’t intend to shield employees from detection. Additionally, employers that act as landlords may risk violating state labor laws if disputes over rent or deductions arise. If you choose to provide housing despite these risks, you must be mindful of potential federal and state penalties. At a minimum, you should ensure compliance with federal hiring laws and use formal lease agreements to clarify the nature of the arrangement. As enforcement efforts increase, seeking legal counsel and adopting best practices are essential to minimize liability.

This article was originally written by Jacob M. Monty for the Texas Employment Law Letter. Jacob Monty is the Managing Partner of  Monty & Ramirez, LLP, in Houston and Dallas.

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