IRCA requires employers to collect information related to an employee’s identity and employment eligibility and document it on Form I-9

Immigration policies and undocumented workers remain a hot-button issue in national politics, particularly in a presidential election year.

Increasingly, the federal government is leaning on employers to weed out who’s eligible to work in this country and who’s not. The tool of choice: the Employment Eligibility Verification form, more commonly known as Form I-9.

“It’s usually part of the paperwork flurry of the first day. Everyone’s done it, even if you don’t remember,” says attorney Matt Hoyt, a partner at Baker Hostetler.

The Immigration Reform and Control Act (IRCA) of 1986 prohibits employers from knowingly hiring illegal workers. IRCA requires employers to collect information related to an employee’s identity and employment eligibility and document it on Form I-9. The form is not filed with the federal government. Instead, employers keep it (along with copies of documents that verify a person’s work eligibility) on file for three years after the employee’s hire date or one year after termination, whichever is later.

Compliance can be trickier than it seems. “At first glance it appears easy to complete, but there are lots of ways to do it incorrectly, both on the part of the employer and the employee,” says attorney Sarah Flannery, a partner in Thompson Hine’s Cleveland office.

Most missteps are unintentional. “We’re not seeing employers looking to evade the law. The law itself is complicated. From a common-sense standpoint, an employer will do something they think is innocuous, but turns out to be a violation,” says attorney Patrick Peters, an associate in the Cleveland office of Benesch, Friedlander, Coplan & Aronoff.

While the statute itself hasn’t been modified, the extent to which it’s being policed has. Immigration and Customs Enforcement (ICE), an investigative arm of the U.S. Department of Homeland Security (DHS), is charged with conducting Form I-9 compliance audits.

“Congress has not gone back and revisited the 1986 IRCA statute. The fundamental I-9 obligations have not changed. To the degree there’s been evolution, it’s been around enforcement,” says attorney Gregory Adams, partner and chair of the immigration practice group in Dinsmore & Shohl’s Cincinnati office.

Most labor and employment attorneys say it’s easier than you might think to get tripped up by the technicalities of IRCA. To ensure your company doesn’t unwittingly employ unauthorized workers and that your paperwork can withstand the scrutiny of ICE, here’s some insight into the ins and outs of the law and Form I-9.

Form I-9 Audits

Employers are increasingly at risk of having their Forms I-9 audited.

“The previous administration engaged in high-profile site raids where ICE agents surrounded the building. The Obama administration is taking an electronic enforcement approach through audits,” Adams says. “Instead of hundreds of officers descending on one company, now one ICE officer can go after hundreds of companies through the audit process. They’re called silent raids.”

“We’re seeing a systemic increase in audits. For the last 18 months, the current administration has been performing nationwide audits in three- to four-month waves. Each wave has about 1,000 notices of inspection for the I-9 process,” says attorney Ian Macdonald, shareholder and co-chair of Littler Mendelson’s Immigration & Global Practices Group in Atlanta.

The stepped-up enforcement is intended to battle the perception that it’s relatively easy for American employers to hire undocumented workers. “The I-9 audits allow the administration to implement enforcement actions that make a real impact in the business community,” Macdonald says.

Some businesses are more at risk than others. “The construction, manufacturing and hospitality industries are in the crosshairs. Foreign nationals, new immigrants or undocumented workers often make up a significant proportion of their employee populations,” Adams says.

“A new trend I see is that ICE is taking a representative sample of large companies’ I-9s to more effectively use its resources. They’re looking at I-9s and the methodology, so the company’s recordkeeping matters. It can mean the difference between a clean bill of health and fines,” Macdonald says.

The audit process begins when an employer receives an inspection notice compelling it to produce its Forms I-9 within three business days. ICE frequently requests supporting documentation, too. Once an audit is completed, the employer receives one or more written notices.

A notice of inspection results, or compliance letter, indicates the business is compliant.

If a notice of suspect documents is sent, ICE found an employee who is unauthorized to work. The employer and employee may present additional documentation if they believe the finding is in error.

A notice of discrepancies means ICE cannot determine an employee’s work eligibility. The employer should provide that employee with a copy of the notice, so he or she can present ICE with additional documentation. “If they’re truly not authorized to work, the worker usually doesn’t show up again,” Flannery says.

A notice of technical or procedural failures gives the employer 10 business days to correct the affected I-9 forms. Uncorrected, they become substantive violations.

A warning notice is issued when substantive verification violations are identified, but circumstances don’t warrant a monetary penalty and ICE expects future compliance by the employer.

The most severe penalty—a notice of intent to fine—may be issued for substantive or uncorrected technical violations as well as for knowingly hiring and continuing to employ an ineligible worker. An employer can either negotiate a settlement with ICE or request a hearing within 30 days.

Penalties and Fines

ICE commonly dings employers for missing, incorrect, out-of-date or incomplete I-9 paperwork. “Usually the employer who gets fined hasn’t engaged in deliberate wrongdoing, but there’s a hole in their process,” Hoyt says.

Employers may be subject to civil fines and/or criminal penalties when there’s a pattern or practice of violations. They may also be banned from future government contracts.

Penalties for substantive infractions range from $110 to $1,100 per I-9 violation. Fines for knowingly hiring and continuing to employ unauthorized workers range from $375 to $16,000 per violation. When levying fines, ICE considers the size of the business, whether it made a good faith effort to comply and the seriousness of the violation. The feds also look at whether the violation involved unauthorized workers and any history of previous violations.

“I find ICE agents to be very reasonable. Most of its auditors come from a tax background and follow the black letter of the law,” Macdonald says.

As if ICE audits weren’t scary enough, the U.S. Department of Justice’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC, for short) is getting employers’ attention. Created as part of IRCA, OSC enforces the anti-discrimination provision of the Immigration and Nationality Act and has jurisdiction over discrimination claims emanating from Form I-9.

“ICE has a formulaic approach to fines, but OSC has complete discretion. The amounts are arbitrary,” Macdonald says.

E-Verify

Critics charge the major flaw of Form I-9 is that employers can’t verify the validity of the employee’s information or the genuineness of the supporting documents that he or she presents.

E-Verify was introduced in 2007 to strengthen the process and help employers find bogus driver’s licenses, Social Security cards, visas and the like. The Internet-based system compares an employee’s Form I-9 information with 455 million Social Security Administration records and 80 million DHS records on employment-based visas, immigration and naturalization status and U.S. passport issuance. Employers operate the free program themselves after completing online training modules.

As of March, more than 345,000 employers were enrolled in E-Verify, according to U.S. Citizenship and Immigration Services. In 2011, those businesses used E-Verify to check the work eligibility status of 17 million people. “E-Verify participation is voluntary for the most part, but it’s mandated for businesses with certain federal contracts,” Flannery says.

Federal legislation mandating use of E-Verify nationwide passed the House Judiciary Committee in 2011, but hasn’t been brought to a floor vote. Nineteen states have passed laws requiring participation in E-Verify in some way. In Ohio, despite a 2009 legislative effort to mandate participation, E-Verify remains voluntary for employers that don’t work on federal contracts.

The myriad of state laws is challenging for businesses. “Companies with locations in states with mandatory E-Verify laws are calling to ask how to best comply with the differences in the laws,” Flannery says.

Employers using E-Verify learn quickly if an employee is legally authorized to work in the United States. Through March, U.S. Citizenship and Immigration Services reported that 98.3 percent of inquiries were authorized instantly or within 24 hours. Another 0.3 percent of initial mismatches are eventually confirmed. Only 1.7 percent of workers are found ineligible to work.

“Initially, E-Verify was vilified for its significant error rate. The government has improved it a lot, given that the Social Security database was never designed to verify worker eligibility,” Adams says.

When there is a data mismatch, E-Verify alerts the employer of a temporary non-confirmation (TNC). The employee can stay on the job while he or she resolves the problem. Many mismatches occur for innocuous reasons, including mistyped information. “The databases are finicky. Names changed after marriage, hyphenated names, odd spellings. There are a lot ways to get a TNC,” Adams says.

If the government ultimately delivers a final non-confirmation, the outstanding work eligibility issues couldn’t be resolved. “Employers have the option to ignore the final non-confirmation and keep the worker in question. We tell clients they’re on shaky ground with ICE if they do that. In the government’s eyes, that employee is not authorized to work,” Adams says.

E-Verify gives employers peace of mind and a safe harbor. “If the employee fooled you and the federal government, the business isn’t held responsible because it relied on government information,” Hoyt says.

‘Far from Perfect’

When ICE audits an employer’s I-9s, participation in E-Verify is on the checklist. “It’s a big gold star. Even if you’ve had historical deficiencies, by participating in E-Verify, ICE recognizes it’s probable you’ll be more compliant going forward,” Macdonald says.

“ICE recognizes that a company didn’t have as many tools before it joined E-Verify. My experience is that ICE sees if the company tried in good faith to comply with the I-9 rules and what compliance is likely to be going forward by using E-Verify,” Flannery says.

Donatos Pizza is among nearly 4,100 Ohio employers enrolled in E-Verify. “Even though it’s not required, the reality is that it’s still the best means available to determine the employment eligibility of new hires,” says spokesman Tom Santor.

IMI Material Handling Logistics of Columbus is another E-Verify participant. Managing partner Nicole Smith says the company employs about 7,000 people annually as direct hires and temporaries through its local office and locations in Melville, N.Y., and Reno, Nev.

“It’s the nature of a staffing company. We have a diverse workforce and E-Verify helps us make sure everyone is legally authorized to work. Overall, we see E-Verify as a positive thing,” says Smith, who’s also the president-elect of the Human Resources Association of Central Ohio.

Still, some companies are reluctant to sign on.

Once an employer chooses to participate, it signs a memorandum of understanding with the federal government that delineates responsibilities. The company agrees to use E-Verify for all new hires from that time forward. “You can’t pick and choose,” Hoyt says.

An employer also waives the right to receive advance notice from the government to audit its I-9s. “If you’re not an E-Verify participant, you get three days’ advance notice. That time allows the company to look through their files and clean up errors before the government arrives. Most employers do their I-9s correctly, but mistakes happen,” Hoyt says.

Large businesses are more inclined to participate in E-Verify because of the volume of employees and associated paperwork. “They have more administrative support. Small to medium-size companies with limited resources think harder about it, because of the time and staffing commitment,” Flannery says.

“More of our clients are opting not to participate as long as it’s voluntary, because of the increased governmental burden, cost, the training and time involved learning the system. Most employers want a legal workforce, but E-Verify is far from perfect,” Peters says.

Best Practices

With audit activity on the rise, companies should proactively manage the accuracy of their Forms I-9.

“Employers are definitely in tune with this issue. Our clients are asking what they can do to address any I-9 issues before the government gets involved,” Peters says.

Correct mistakes when they’re discovered. “You cannot destroy an I-9 or obscure the original information. You can draw a line through the error, write in the correct information and initial and date the change,” Hoyt says. “When corrections are made before the government arrives, it shows the employer is serious about the process. That helps minimize any penalties.”

“Double-check that you’re using the current I-9 form that’s dated 2009,” Peters says.

“Conduct annual training and centralize the I-9 responsibility as much as possible. If it’s spread out over different locations, determine the oversight process,” Adams says.

Develop an annual Form I-9 self-audit program. “Use it. You’d be surprised at how many companies don’t follow through. Then conduct an external audit every one to two years,” Adams says.

Implement an internal recordkeeping system that mirrors the ICE audit process to quickly gather relevant data. “For example, maintain an alphabetical listing of I-9 records by employee name and run it against the payroll records. That identifies who you have an active I-9 for and who you don’t,” Macdonald says.

Taking such steps may not minimize a company’s audit risk, attorneys advise, but they should leave it better prepared if ICE does come calling.

Lisa Hooker is a freelance writer.

Reprinted from the June 2012 issue of Columbus C.E.O. Copyright © Columbus C.E.O.