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Given the increased focus on employers’ immigration-related compliance efforts, many companies are conducting Form I-9 audits.  While all companies are well-advised to conduct a Form I-9 audit annually (or immediately if one has not been conducted within the last year), conducting one without the relevant expertise can do more harm than good.  My favorite and therefore often repeated phrase regarding immigration compliance is, “Form I-9s are complex.”  That bears repeating in bold – Form I-9s are complex.       

Form I-9s are one of the most misunderstood federal government forms.  The form is not a simple linear document with blanks that need to be filled.  Rather, the Form I-9 is an interactive process with numerous rules (most of which do not appear on the face of the form) that must be followed.  To ICE and the DOJ, the procedure and manner by which the Form I-9 is completed is just as important as the information provided on the form.  And, it is the procedure and manner by which a Form I-9 is completed that most often gets employers into trouble (e.g., Abercrombie & Fitch settlement). 

As a result, employers can get themselves into a heap of trouble by trying to correct mistakes on the Form I-9 in an inappropriate manner.  For example, I’ve heard many times, “Why can’t we just populate the missing information from our HR system into Section 1 of the Form?” (only the employee can complete Section 1) or another one of my favorites, “The employee only completed List B and List C, but did not complete List A.  We need to call her in and have her complete List A” (employers should not accept more than the required documentation).  These procedural missteps could cost the employer significant penalties including, but not limited to fines, debarment and negative publicity.

Corrections to the Form I-9, like those described above, can make matters far worse for the employer than the original error.  As another example, some employers will correct a missing employee signature in Section 1 by creating a new Form I-9, often stating that the old Form I-9 is “out of date” and needs to be “redone.”  The employer then destroys the original Form I-9 leaving it no method to prove that it complied with the timing requirements of the Form I-9.  Further, the employer has just made it clear to ICE that not only was the employer not fully compliant with the Form I-9 procedure when that employee was hired (which may have been as early as 1986), the employer is even worse at it now – not a good position to be in. 

Unfortunately, these mistakes occur because most HR personnel responsible for the Form I-9 process have little to no formal training.  While lack of Form I-9 training is extremely risky in today’s enforcement environment, even more risky is allowing HR personnel to conduct an audit of their own work.  The use of independent, experienced auditors is key.

All employers should absolutely be conducting Form I-9 audits.  However, employers should tread carefully and ensure that they involve experienced immigration counsel in their auditing.  With the assistance of competent counsel, audits can play double duty and not only get existing Form I-9s in order, but also serve as an excellent training exercise for the employer’s HR personnel.

Next up in our review of states requiring private employers to participate in E-Verify – North Carolina and South Carolina. 

North Carolina

In June 2011, North Carolina enacted a law (North Carolina HB 36) requiring all state agencies, counties and municipalities to use E-Verify by October 1, 2011.  All other North Carolina employers must implement E-Verify by the following deadlines:

• Employers with more than 500 employees: October 1, 2012
• Employers with 100-499 employees: January 1, 2013
• Employers with 25-99 employees: July 1, 2013

The North Carolina law exempts seasonal temporary employees who are employed for 90 or fewer days during a 12-month period.  However, employers need to be careful with these state mandated exemptions.  In order to participate in E-Verify, employers have to sign a Memorandum of Understanding with the Department of Homeland Security which requires the employer to use E-Verify for all new employees and prohibits the employer from verifying selectively. 

The North Carolina law imposes civil monetary penalties for violations.

South Carolina

In June 2011, South Carolina enacted a law (South Carolina Act 69) requiring all employers to participate in E-Verify by January 1, 2012.  The new law removed the option of only hiring employees who possess or qualify for a South Carolina driver’s license (or other state license with similarly strict requirements) in lieu of using E-Verify.  The South Carolina law includes a grace period of one year for employers, during which penalties are probationary.  After the one year grace period, employers can face suspension of their business license.

The South Carolina law also requires private employers to maintain contact information for all of its subcontractors and sub-subcontractors performing services for the private employer and to provide such information pursuant to an audit or investigation within seventy-two hours of the request.

Like many other states, certain provisions of the South Carolina immigration law have been blocked from taking effect by a challenge in federal court (see United States v. South Carolina, No. 2:11-cv-2958 (D.S.C. December 22, 2011)), including a provision that requires law enforcement officers to check the immigration status of people they pull over for traffic violations.  However, the provisions regarding participation in E-Verify remain in effect.

As predicted in my May 2011 blog on the U.S. Supreme Court’s decision upholding Arizona’s E-Verify mandate, several states have followed suit and mandated E-Verify participation.  At the start of this year, E-Verify requirements became effective in Georgia, Louisiana, South Carolina and Tennessee, and all employers in Alabama must implement E-Verify by April 1, 2012.

The number of immigration-related bills introduced across the country in 2011 is astounding.  In 2011 alone, state lawmakers in all fifty states and Puerto Rico introduced over 1,600 immigration-related bills.  Of those bills, as of December 7, 2011, 42 states and Puerto Rico had enacted over 300 new immigration-related laws or resolutions.   

Of most importance to employers and businesses are the states that enacted laws in 2011 regarding E-Verify participation.  According to the National Conference of State Legislatures, 17 states now require E-Verify for public or private employers.   

While this list will not remain current for long, employers operating in at least the following states should pay attention to state E-Verify requirements:

• Alabama (passed in 2011) (effective April 2012)
• Arizona
• Colorado
• Florida (2011)
• Georgia (2011)
• Idaho
• Indiana (2011)
• Louisiana (2011)
• Mississippi
• Missouri
• Nebraska
• North Carolina (2011)
• Oklahoma
• South Carolina (2011)
• Tennessee (2011)
• Utah (2011)
• Virginia (2011)

While many states this year enacted laws requiring E-Verify use, a few states moved in the opposite direction.  In January 2011, Rhode Island repealed a 2008 executive order requiring use of E-Verify.  And, Minnesota’s 2008 executive order requiring some state agencies and contractors to use E-Verify expired in April 2011. 

E-Verify: Georgia

This blog is the first in a series to focus on individual states’ E-Verify requirements.  First up – Georgia. 

Effective January 1, 2012, E-Verify is mandatory for all employers with 500 or more employees in Georgia. (Georgia H.B. 87).  The Georgia law will eventually require all employers with more than 10 employees to use E-Verify.  The law kicks in for employers with 100-499 employees on July 1, 2012, and for those with 11-99 employees on July 1, 2013. 

Similar to those in the Arizona law (Arizona S.B. 1070), the penalties in Georgia include restrictions on the ability to get new or renew business licenses or other required business documents. 

1. EVERY employer has immigration-related compliance obligations.
2. Enforcement against employers has dramatically increased in recent years.
3. Enforcement has increased for violations associated with the H-1B visa program.
4. A Form I-9 Notice of Inspection (“NOI”) is not a “friendly audit” or “client review” – ICE considers the NOI an important tool in its enforcement strategy and employers should handle an NOI with the appropriate caution.
5. The following industries are high on ICE’s priority list for inspection: (a) critical infrastructure, (b) heavy manufacturing, (c) chemical plants, (d) defense contracting, (e) transportation, (f) janitorial, (g) food, (h) construction, (i) agriculture, (j) hospitality, (k)companies with large numbers of low skilled workers, and (l) companies that are potential targets for terrorist activity.
6. Penalties for immigration-related violations can be painful and can include: (a) financial sanctions (Abercrombie & Fitch - $1Million; Pilgrim's Pride - $4.5 Million settlement; IFCO Systems - $20.7 Million settlement); (b) debarment; (c) prison time; and (d) forfeiture of assets.
7. Any one Form I-9 can carry almost an infinite number of errors.
8. Employers can be penalized for Form I-9 paperwork violations regardless of whether or not they actually employed an unauthorized worker.
9. Participation in E-Verify alone is insufficient to satisfy an employer’s immigration compliance obligations – participation in E-Verify also triggers additional compliance requirements.
10. Employers should conduct a Form I-9 audit and training annually.

Most employers know it is against the law to hire or continue to employ an unauthorized worker in the United States.  However, company owners, executives and managers continue to be charged with a myriad of immigration-related offenses, including “bringing in and harboring certain aliens.”  Although harboring carries the most severe criminal penalties, it is also one of the most misunderstood immigration-related offenses.  So, just what does harboring include?

• transporting, moving, concealing, harboring or shielding from detection an alien with knowing or reckless disregard of the fact that the alien has come to or remains in the United States in violation of law.  8 U.S.C. § 1324.
• hiring illegal aliens, securing apartments for them, paying for rent and utilities, providing transportation to and from jobs, and maintaining counterfeit immigration documents.  U.S. v. Tipton, 518 F.3d 591 (8th Cir. 2008).
• providing shelter, obtaining employment, providing transportation to and from work, and arranging sham marriages for illegal aliens.  U.S. v. Lopez, 521 F.2d 437 (2d Cir. 1975). 
• failing to maintain Form I-9s for illegal aliens, advising illegal aliens where they can purchase fake documents and not including illegal aliens on payroll records.  U.S. v. Ye, 588 F.3d 411 (7th Cir. 2009). 
• falsifying information on the Form I-9 for illegal aliens, knowingly hiring illegal aliens who presented counterfeit documents and arranging for illegal aliens to fraudulently obtain security badges by falsely certifying information.  O’Hare Airport Staffing Agency
• providing housing, utilities and meals for illegal aliens.  Hi-Tech Trucking
• in response to the receipt of a Social Security No-Match letter (see May 16, 2011 Blog), advising illegal aliens to change their social security numbers in order to continue working at the company. Agriprocessors

What does harboring not include?

• merely giving an illegal alien advice on how to avoid attracting the attention of immigration authorities.  U.S. v. Ozcelik, 527 F.3d 88 (3d Cir. 2008).

The Circuits are split as to whether the conduct must “substantially facilitate an alien’s remaining in the United States” in order to be considered harboring.  According to the Third Circuit, harboring includes conduct that tends “to substantially facilitate an alien’s remaining in the United States illegally” and to prevent the authorities from detecting his or her unlawful presence.  United States v. Ozcelik, 527 F.3d 88 (3d Cir. 2008).  According to the Seventh Circuit, the Second, Fifth and Eighth Circuits have “explicitly” or “implicitly” taken the same position as the Third.  However, the Seventh Circuit has held that the relevant federal law does not require a specific quantum or degree of assistance to an illegal alien in order to constitute concealing, harboring or shielding.  U.S. v. Ye, 588 F.3d 411 (7th Cir. 2009).  “Congress could not have been clearer: it said that concealing, harboring, or shielding from detection an alien is unlawful conduct, regardless of how effective a defendant’s efforts to help the alien might tend to be.”  Id. 

Employers must focus on implementing, reviewing and auditing their immigration compliance programs, including their Form I-9 process.  Employers should also ensure that additional services such as housing, transportation, meals, and utilities are not provided to employees who are not authorized to work in the United States.

I’d like to thank Ashley B. Matthews, Summer Associate, for her contribution to this blog entry.

Last week, ICE announced an additional 1,000 I-9 Notices of Inspection (NOIs) of U.S. employers to review compliance with immigration-related laws. This round of inspections brings the number of I-9 inspections for fiscal year 2011 to more than 2,300 — more than the total number of audits conducted in the entire fiscal year 2010.

NOIs typically include ICE scrutiny of employee I-9 Forms, payroll records, immigration filings, and Social Security No-Match Letters. The latest round of NOIs targets businesses with a role in protecting national security and public safety. Affected sectors include:

• agriculture and food
• financial services
• commercial nuclear reactors
• drinking water and water treatment
• postal and shipping
• health care
• transportation

By law, employers have three days to produce the requested documents; however, ICE is generally amenable to reasonable extensions.

Employers who hire or continue to employ unauthorized employees can end up paying hefty fines and serving lengthy criminal sentences. If you receive an NOI, you should immediately contact counsel. The window for response is short and it is critical that employers carefully review documents prior to production.

For those of you new to this blog, it is important to understand what an NOI is and what it means for your business. ICE considers the NOI an important tool in its enforcement strategy and employers should treat the NOI accordingly. For more information about NOIs, see previous posts here, here, and here.  If you have not yet received an NOI, you should use this time to conduct an internal audit.

Thursday, the United States Supreme Court upheld (pdf) in a 5-3 vote an Arizona law that mandates employers in that state use E-Verify and revokes business licenses for employers that knowingly hire unauthorized workers. both the Wall Street Journal and USA Today had good coverage of the Court's decision.  Opponents of the Arizona law, including the Obama administration (interestingly, current DHS Secretary Napolitano is the former Arizona governor who, in 2007, signed the Arizona law), argue that state laws imposing sanctions on immigration-related activity trespass on an area of traditional federal oversight.  
 
E-Verify is an Internet-based employment verification system administered by DHS. Under federal law, use of the system is voluntary except for certain federal contractors. The Court , however, held that “[t]he fact that the Federal Government may require the use of E-Verify in only limited circumstances says nothing about what the States may do.”   According to the Court, only DHS is precluded from mandating the use of E-Verify.
 
Further, the Court noted that the “consequences of not using E-Verify under the Arizona law are the same as the consequences of not using the system under federal law. In both instances, the only result is that the employer forfeits the otherwise available rebuttable presumption that it complied with the law.”   The Court specifically noted that the Arizona law had since been amended to include other consequences of failing to use E-Verify, but because the suit was brought prior to that amendment, those consequences were not before the Court.  Therefore, the Court’s reasoning leaves open the possibility that if other consequences were imposed by state law, the Court might think differently.  

Because the penalties imposed by the Arizona law involve business licenses, the Court held that the Arizona law meets the licensing exception to federal immigration provisions specifically preempting any state or local law that imposes civil or criminal sanctions on those who employ illegal immigrants.  8 U.S.C. § 1324a(h)(2).  Specifically, the Legal Arizona Workers Act suspends or revokes the business licenses of state employers that knowingly or intentionally employ unauthorized aliens. 

For employers, there is one main difference – penalties imposed at the federal level may include fines, debarment and possible prison time; whereas, the state penalties include revocation of an employer’s business license.  The effects of the state law may be more immediate and severe to an employer.  It may be a death sentence – completely shutting down the business throughout the state.
The Court’s ruling is the first high court challenge to a myriad of state laws recently imposed to crack down on illegal immigration and a victory for those pursuing immigration reform at the state level.  It is likely that many states that have been letting Arizona lead the way, will join in with their own versions of the Arizona law tied to business licenses.

With the Supreme Court’s endorsement, the Arizona law will become the blueprint for other states that wish to mandate the use of E-Verify and also to impose their own set of penalties on employers who knowingly hire unauthorized workers.  Several states have already passed such legislation, but many more are now expected to follow suit.

Another Arizona law that requires police officers to investigate the immigration status of those they suspect are in the county illegally is still pending in lower courts. The effect of yesterday's decision on this law is unclear as the decision was based on a state licensing exception created by relevant federal law. No such exception exists for the exercise of other state powers.

Last month the SSA began sending “no-match” letters to employers after a four year suspension as a result of DHS’s attempt to implement safe-harbor procedures for employers who receive a no-match letter.  Unfortunately for employers, although the no-match letters are being distributed again, there remains no consensus among the various government agencies regarding what employers are supposed to do with the no-match letters.

Here’s the breakdown:

• SSA
  • “A no-match between an employee’s name and SSN in the employer and SSA’s records DOES NOT mean that the employee lacks work authorization, nor does it make any statement regarding a worker’s immigration status.”  
  • The no-match letter itself also states that it does not imply that the employee intentionally provided incorrect information and that it is not a basis, in and of itself, to take adverse action against the employee
• DHS
  • “Receipt of a No-Match letter, when considered with other probative evidence, is a factor that may be considered in the totality of the circumstances and may in certain situations support a finding of ‘constructive knowledge.’ A reasonable employer would be prudent, upon receipt of a No-Match letter, to check their own records for errors, inform the employee of the no-match letter, and ask the employee to review the information.  Employers would be prudent also to allow employees a reasonable period of time to resolve the no-match with SSA.”
  • ICE routinely requests that employers provide copies of no-match letters as part of a Form I-9 audit.
• DOJ Civil Rights Division
  • Employers should not “[u]se the receipt of a no-match notice alone as a basis to terminate, suspend or take other adverse action against an employee.  Instead, employers should “[g]ive the employee a reasonable period of time to address a reported no-match with the local SSA office.”
• Anyone else care to chime in?

Where does this guidance (or lack thereof) leave employers? Employers cannot ignore no-match letters especially considering that no-match letters have formed the basis for multiple criminal investigations by ICE and prosecutions for harboring or knowingly hiring unauthorized workers.  However, employers cannot terminate employees based on the receipt of a no-match letter alone. Well, that clarifies it.

To make matters worse, approximately 1.6 million letters mailed by the SSA to employees included an incorrect Spanish translation that read, “Your employer may take action against you based on this letter,” rather than “Your employer may not take action against you based on this letter.” The SSA is still considering whether it will re-mail corrected letters to those individuals who received the incorrect Spanish translation.

Last week, Howard Industries, Inc., a manufacturer of electrical transmission and distribution equipment, pled guilty to conspiracy to violate immigration laws and agreed to pay a record $2.5 million fine.     

The plea comes approximately 2 1/2 years after an immigration raid on the company’s transformer manufacturing plant in Laurel, Mississippi, when nearly 600 people were arrested.  In addition, in December 2009, the company’s former HR Manager pled guilty to conspiring to violate immigration laws and admitted that he routinely hired people whom he knew were not authorized to work in the United States.  The HR Manager will be sentenced on Thursday, March 3, 2011 and faces a maximum of five years in prison on each count and a fine of $250,000.

According to the criminal complaint against Howard Industries, the company knowingly hired people unauthorized to work in the United States and, in the process, knowingly accepted false identity documents.  Specifically, the charge states that, as part of the conspiracy, the HR Manager:

• hired unauthorized workers presenting false identity documents and completed the I-9 Form with false information;
• submitted SSNs to the SSA to verify employees’ numbers and then disregarded the results if they came back as invalid;
• instructed employees to obtain alternative identity documents which he knew were false;
• falsely attested, under penalty of perjury, on the I-9 Form that he had examined the documents presented and determined them to be genuine; and
• assured Spanish-speaking workers that he would warn them of any possible immigration raids.

Clearly there was some wrong-doing on the part of the company, and this was not simply a case of an HR Manager gone rogue.  And of course, as the criminal complaint states, the company “is legally responsible for the actions of [the HR Manager] as his employer.”

So, what lessons can employers learn from Howard Industries?  How could Howard Industries have avoided this criminal fine, guilty plea, negative publicity and considerable litigation expense (including the additional recent lawsuits stemming from these actions)

A few suggestions for employers to ponder:

• Never allow one HR manager to be responsible for all employment actions and I-9 Form compliance.
• Conduct routine internal audits of I-9 Form compliance, including cross checks by more than one employee.
• Conduct routine internal reviews of the hiring process.
• Ensure the company is following the appropriate re-verification process for I-9 Forms.
• Conduct appropriate follow up in response to Social Security No-Match letters and IRS discrepancy notices.
• Ask experienced immigration counsel to conduct regular comprehensive I-9 Form audits.
• Know your workforce and do not turn a blind eye to when something seems amiss.

Although lately, much of the focus of immigration enforcement—and of this blog—has been on the hiring or continued employment of unauthorized workers, an employer’s exposure to immigration enforcement activity does not end there. 

On December 7, 2010, the U.S. Department of Labor (“DOL”) announced that Peri Software Solutions Inc. (“Peri”) and its owner have been debarred from the H-1B visa program for one year and ordered to pay $638,449 in back wages and interest and $126,778 in civil money penalties.  Pursuant to its consent order with the DOL, Peri must pay back wages for failing to compensate H-1B workers as required under DOL regulations, and civil fines for failing to provide notice of its intent to employ H-1B workers and for suing former H-1B workers “for early cessation of employment."

In August 2010, the DOL announced a nearly $1 million settlement with Smartsoft International Inc. (“Smartsoft”), a computer consulting firm based in Georgia, for back wages owed to H-1B workers.  According to the Wage and Hour Division’s determinations, some employees were not paid at the beginning of employment, were paid only part time despite full-time employment agreements, and were paid less than the prevailing wage applicable to the geographic area where the work was performed.  The DOL settled with the company after it contested these conclusions and requested a formal hearing.           

The Peri and Smartsoft cases illustrate a current trend of increased penalties and enforcement activity for violations associated with the H-1B visa program. Under the H-1B visa program, employers can temporarily hire foreign workers, such as computer programmers, engineers and financial analysts, in professional occupations.  However, the program carries very specific obligations, including pay rates and notice requirements.  For example, employers must continue to pay an H-1B worker even after employment terminates until U.S. Citizen and Immigration Services (“USCIS”) has revoked the H-1B petition.  In addition, the employer must notify USCIS when an H-1B worker’s employment ends.  An H-1B employer must also post notices at the place of employment regarding its intention to hire H-1B workers.  The Peri and Smartsoft cases serve as excellent reminders to employers that regulations governing the H-1B visa program are very detailed and failure to follow the rigorous obligations can result in significant penalties.

In fact, USCIS has stepped up its review of H-1B employers in the form of unannounced site visits at companies that file H or L petitions, focusing especially on those employers filing H-1B petitions.  In addition, the DOL has been conducting its own inspections, as the Peri and Smartsoft cases demonstrate. 

From an enforcement perspective, these complicated regulations and increased administrative audits make for a hot topic where companies should focus their compliance energy.  Now, more than ever, employing H-1B workers without a comprehensive immigration compliance program is risky business.