On May 3, 2011, the Federal Trade Commission ("FTC") announced that it had approved a settlement with Lookout Services, Inc., a Form I-9 software solutions company ("Lookout"), arising out of FTC charges that the company failed to take reasonable measures to protect consumer information, including Social Security numbers, in the Form I-9 software that the company designed, developed, and licensed to businesses. Lookout claimed that its product maintained the security of sensitive personal information contained in the completed Forms I-9. According to the FTC, Lookout had easily compromised security features and, as a result, experienced serious security breaches that exposed the sensitive data of approximately 37,000 individuals to an employee. The settlement bars Lookout from making false claims about the security of personal information in its Form I-9 software when marketing the product.

The FTC's settlement with Lookout serves as a warning to those employers considering electronic solutions to their Form I-9 and possibly E-Verify obligations. There are numerous vendors selling products that purport to address and handle these responsibilities. We can expect additional products to be offered as states pass new legislation mandating the use of E-Verify. Employers need to ensure that the products they consider will satisfy all Department of Homeland Security and state requirements and are compatible with not only their own HR software systems but also the processes and procedures that employers must use to comply with their hiring and orientation patterns. The Lookout settlement instructs that employers also need to assess the security features of these products to make sure that they protect all the workforce information they contain.