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Employers in Denial: Still Clueless or Avoiding I-9 Obligations?

It’s been 27 years since Congress passed the 1986 Immigration Reform and Control Act (IRCA) requiring employers to document the work permission status of ALL new hires, including US citizens, on Form I-9. After all those years, employers still contact our office wanting to hire, or continue employing undocumented workers, or they simply want to “help” an employee who they don’t realize lacks permission to work. Many employers sound clueless about IRCA requirements, even when there is so much information out there. In addition, mergers and acquisitions are picking up again in a number of industries. Determining actual or potential I-9 liability and other immigration related workplace compliance problems should be part of every due diligence effort.

Of course, there are many employers who know about their IRCA obligations but ignore them, betting they will not be the subject of enforcement action and penalties, and contributing to employment as the magnet for illegal immigration. By contrast, many employers don’t know if their employees are work authorized or not if they are using fraudulent documents or signing I-9 forms falsely. It’s not just those who entered the country illegally without inspection that employers want to hire or sponsor for visas and green cards. A substantial portion of the undocumented population are those immigrants who came to the US lawfully and overstayed visas, committed misrepresentation in getting their visas, or violated status by working without authorization when the terms and conditions of those visas prohibit employment (such as tourists, foreign students without authorized practical training, and H-4 spouses, to name a few examples). Hiring workers without authorization puts employers at risk as well as the unauthorized workers. Employers can be audited and fined at any time; the worker can be deported or at the least make the ability to get legal documents more complicated. Nonetheless, the fact that a worker does not presently have work authorization, doesn’t mean that they are ineligible to become work authorized later. Separate legal advice is recommended to determine a prospective employee’s status and strategy. Because of potential conflicts of interest between the employer’s liability and the employee’s right to work (or not), each may need separate legal advice depending upon state bar rules.

Without doubt, the direction of Congress has been and will continue to be increased enforcement penalties against employers. According to ICE, in 2012 the agency made:

-520 criminal arrests tied to worksite enforcement investigations, of which 240 were owners, managers, supervisors or human resources employees. They face charges such as harboring or knowingly hiring illegal aliens. The remaining workers who were criminally arrested face charges such as aggravated identity theft and Social Security fraud.
-Homeland Security Investigations served 3,004 Notices of Inspection and 495 Final Orders, totaling $12,475,575.00 in administrative fines.
-ICE debarred 376 business and individuals for administrative and criminal violations.

While these enforcement figures are fairly low, jobs in the US are still the magnet that attracts both legal and illegal immigration. As we have seen, when the economy is doing well, more immigrants come to the US. When employment slows, so does legal and illegal immigration.

Potential Penalties
Civil fines for employers who violate I-9 rules include $110-$1100 per paperwork violation or $375-$15,000 per knowing hire/continuing to hire violation per employee. Recent legislative proposals include increased fines for employers by factors of three to ten times what they are now. Employers can be penalized for technical “paperwork” violations (failing to complete I-9s, failing to properly complete I-9s, failing to keep I-9s, etc.) as well as for “knowingly hiring or continuing to hire unauthorized workers.” “Knowing” includes “constructive knowledge.” In addition, there are criminal penalties for a “pattern or practice” of knowingly hiring or continuing to hire undocumented workers. Penalties can include asset forfeitures if used in a crime, as well as debarment from various federal programs, business forfeitures, liability for back wages, damages, and legal fees and costs. In other words, it can be very, very expensive to hire undocumented workers just to save on payroll expenses or to “help someone out as a favor.” There are also the burdens and costs of public relations nightmares, fiduciary duties owed to shareholders, and loss of management and executive time, if not service to the company, if the CEO, owner, officer or manager is found liable. In egregious cases, employers may be dealing with USCIS, ICE, the IRS, Social Security, US Department of Labor, state labor offices, prosecutors, and potentially the SEC (relating to public filings and disclosures about company liabilities).

ICE publishes its penalty schedule. ICE considers five factors in determining penalties: the size of the business, good faith effort to comply, seriousness of violation, whether the violation involved unauthorized workers, and history of previous violations. Every employer should review ICE’s description of the I-9 audit process including the “enhancement matrix” based on the above listed five factors.

Employers should plan how the company or organization will respond in case of a Notice of Inspection (NOI). Employers have only three days to respond. Calling the company lawyer, who may not practice immigration or employment law, or contacting an immigration lawyer for the first time upon receiving a NOI, with only three days to respond, can make it very difficult to review personnel records and I-9s and/or to formulate an effective response in a short time frame under stressful conditions. Rather, companies should review their employment and compliance practices before ICE comes knocking on the door. Conducting an internal audit with counsel and training appropriate personnel to handle I-9s should be done well in advance.

Who gets audited anyway?

ICE uses a combination of resources to decide who to inspect: at risk industries such as hospitality, construction, restaurants, landscaping, and agriculture; tips from disgruntled employees and spurned lovers; fraud or other criminal investigations stemming from other violations (e.g., immigration case violations, human smuggling, harboring, trafficking, money laundering, identity theft, RICO criminal violations and more). Finally, there can be random audits, plus leads from the Social Security Administration, that sends out “mismatch” letters to employers and employees, as well as leads involving worker abuse practices and investigations. SSA mismatches are a frequent trigger for audits.

Although for a period of time the government focused on raids to find undocumented workers and to deport them, in recent years, emphasis is on prosecution of employers for civil fines and criminal offenses by turning employees into witnesses against employers. With employers willing to hire the undocumented, it makes sense for Congress and the Administration to want to target the lure that contributes to illegal immigration.

A quick review

Since November 6, 1986, all employers must document the work permission status of new hires since that date on Form I-9. This includes government, nonprofit and private sector employers. New hires include anyone hired, including US citizens, and anyone referred or recruited for a fee. Although independent contractors need not be verified, employers cannot use the independent contractor status to avoid classification of employee status. Independent contractor status is regulated by the USCIS, the IRS, the US Department of Labor and the states’ labor agencies. The leading case on independent contractor violations concerned Wal-Mart. Wal-Mart was found liable for the hiring violations of its contractors and subcontractors.
Nor can employers hide behind the veil of “volunteer” status where someone is remunerated for service/labor with something of value, payment in cash, or where payments are made to a foreign bank account (common when tourists, foreign students and others without work authorization work “under the table”).

E-Verify

E-Verify is the government’s automated employment verification database that employers may use or must use in some cases in addition to their primary obligation to complete I-9s. Employers who have been sanctioned before are usually required to use it. Employers with certain federal contracts must use E-Verify. And, many states and localities have enacted mandatory E-Verify laws, which can make it difficult for employers with business in multiple states to manage. E-Verify is also required of those employers who want to avail themselves of hiring students with US STEM degrees in order to get extended periods of employment authorization called Optional Practical Training.

E-Verify is free. In addition, employees may see if the system has their information correctly through Self-Check, which is also free. Otherwise, for all other employers, E-Verify is largely voluntary at this point. Even if an employer uses E-Verify, it must be used with the IRCA I-9 form, and only as part of the hiring process, not the screening process.

Although the E-Verify database is not always accurate, Congress is heading in the direction of mandatory electronic verification. Some immigration reform proposals advocate that the government be responsible for verification and take the responsibility away from employers. In addition, E-Verify is not well-suited for helping employers determine when a new hire is using false documents due to identity theft. In addition, E-Verify has been known to spit out poor “tentative non-confirmations” about US citizens due to name changes or marital status, and glitches in data when immigrants change status or become naturalized. Finally, immigrant advocacy groups argue that before E-Verify becomes mandatory for all employers, there should be comprehensive immigration reform with a legalization program first, so that millions of people can come out of the shadows and get their status information into E-Verify to make it more robust and easier for everyone to use.

At a February 2013 House Judiciary Committee meeting, a USCIS representative, Soraya Correa, testified that E-Verify is now used by over 400,000 employers with over 21 million queries made in 2012. Meanwhile, the US Chamber of Commerce now supports the idea of mandatory E-Verify if several conditions are first met, including having legislation that makes federal law on the subject preempt state law; making sure that employers do not have to verify existing work forces (v. new hires); giving employers a “safe harbor” for using E-Verify, and making sure they are shielded from liability for subcontractors, private causes of action, or other liability if E-Verify is used in good faith. Further, employers want the Form I-9 either eliminated from the process or integrated into the E-Verify system, so it is no longer two separate processes. Employers also want mandatory E-Verify to be phased in over time. Also, agricultural companies need a workable agricultural work visa before they should be required to use E-Verify.

Meanwhile, at the same hearing, Emily Tulli, of the National Immigration Law Center, testified that E-Verify should not be mandatory until there is a “fully legalized workforce.” She expressed concerns about the high rate of workers (42%) who are never told by employers that E-Verify checks resulted in “tentative non-confirmations” and that they have the right to follow up with Social Security or USCIS to clarify their status. There are no penalties to employers who don’t tell workers about their rights under E-Verify. Other workers are retaliated against for complaining about worker conditions or E-Verify is improperly used as a screening tool rather than post hire, as required under IRCA.

Anti-Discrimination

IRCA also requires that employers not discriminate on the basis of national origin or citizenship status. This means that employers cannot demand I-9s, for example, just of Hispanic looking new hires, but not of other new hires. Nor can an employer engage in document abuse by demanding more verification documents from Asian hires than it requires of others. Nor can employers engage in retaliation measures against employees who report abuses. The I-9 form and instructions state specifically the allowable documents new hires can present to an employer where employees may choose from the options on the list.

There is much for employers to know about their IRCA obligations. There are numerous government resources cited above on the USCIS, ICE and US Department of Justice websites. Every employer should have the Form I-9 readily available (using the most recent version), the I-9 Instructions and the M-274 Handbook for Employers, which teaches employers about the various types of immigration and citizenship documents. As previously discussed, employers should become familiar with the ICE penalty scheme and audit process as well as ICE’s worksite enforcement efforts. A quick review of ICE’s press releases can give employers a taste of their enforcement targets, settlements, and penalties imposed. Preferably, employers should designate specific employees or officers to handle I-9s, what to do in case of receiving a Notice of Inspection, and employers should consult with counsel for training and private internal audits of their I-9 forms and systems.