Since 1986, federal law has required employers in the United States to verify the identity of new employees and their eligibility to work in this country by examining certain identity and work-authorization documents and completing an I-9 Form relating to that examination. A new Georgia statute, the Georgia Security and Immigration Compliance Act, expands on that duty by requiring certain employers to verify the work eligibility of new hires through participation in a federal on-line employee-information program jointly administered by the Social Security Administration and the Department of Homeland Security. This Georgia statute will have nationwide repercussions and will affect some employers that do not have any offices or facilities in Georgia.
The Employee-Verification Requirements of the Georgia Security and Immigration Compliance Act
The Georgia Security and Immigration Compliance Act (the “Act”) requires public employers (defined as every department, agency, instrumentality, and political subdivision of the State of Georgia) to verify work-authorization information about all new employees hired on or after July 1, 2007 through the Employment Eligibility Verification (EEV)/Basic Pilot Program (the “Pilot Program”), the on-line program referred to above. Upon completing an I-9 form for a new hire, the public employer must submit certain information about the individual to the Pilot Program’s electronic database, which produces a report either confirming the identity and work eligibility of the new hire or finding an initial failure to confirm identity or work eligibility.
Private employers become subject to the Act when they enter into a contract with a Georgia public employer (or a subcontract under such a contract) for the physical performance of services within the State of Georgia. The Act applies to such contracts and subcontracts entered into on or after July 1, 2007 if the public employer, contractor, or subcontractor has 500 or more employees. The Act applies to such contracts and subcontracts entered into on or after July 1, 2008 if the public employer, contractor, or subcontractor has 100 to 499 employees and to all such contracts and subcontracts entered into on or after July 1, 2009. For purposes of applying these effective dates, employees based outside Georgia as well as those based in the state should be counted. The Act does not appear to apply to contracts and subcontracts already in place as of the foregoing effective dates.
Contractors and subcontractors covered by the Act must register with the Pilot Program and verify the identity and work-eligibility of all new employees through that program. Nothing in the Act or the Georgia Department of Labor regulations interpreting it suggests that the verification procedures must be followed only with respect to employees working under the contract or subcontract or to employees working in Georgia. Thus, a contractor or subcontractor with nationwide operations would have to perform the Pilot Program verification process for all new hires throughout the country. The services of the Pilot Program currently are free, but to make use of them, a contractor or subcontractor must sign a memorandum of understanding that imposes certain obligations on the employer, including a duty to train one or more employees in the use of the Pilot Program, a duty to post a notice concerning the Pilot Program, and a duty to allow representatives of the Department of Homeland Security and the Social Security Administration to examine employment records and to interview employees about their experiences with the Pilot Program. If the contractor or subcontractor receives a report of initial failure to confirm an employee’s work eligibility, the memorandum of understanding requires it to notify the affected employee. If the employee contests the tentative nonconfirmation, the contractor or subcontractor must give the employee a referral letter instructing him or her to contact a Social Security Administration office within eight business days.
Regulations issued by the Georgia Department of Labor under the Act require state contractors and subcontractors to sign an affidavit acknowledging compliance with the Act, and contractors are responsible for obtaining these affidavits from their subcontractors. The regulations also authorize the Georgia Department of Labor to conduct random audits of public employers, contractors, and subcontractors to ensure compliance with the Act, and covered contractors and subcontractors must make their records relating to compliance with the Act available for inspection in the State of Georgia.
Additional Employment-Related Provisions of the Act
In addition to requiring public employers and state contractors and subcontractors to verify new-hire information through the Pilot Program, the Act contains several provisions applicable to all employers paying taxes in Georgia. The Act generally prohibits an employer from claiming as a deductible business expense any wages or remuneration of $600 or more paid to an individual performing services in Georgia who is not authorized to work in the United States. Moreover, when an individual whose compensation is reported on a 1099 form fails to provide a correct taxpayer identification number or provides a taxpayer identification number issued by the IRS for nonresident aliens, the Act requires employers to withhold state income tax at the rate of six percent of the amount of compensation paid to the individual.
As a result of the Act, employers entering into contracts with state and local governmental entities in Georgia may be taking on significant new-hire-verification obligations throughout the country. Despite the sweeping scope of its requirements, however, the Act leaves many questions unanswered. For example, the Act does not address what consequences may befall a contractor or subcontractor that fails to verify information about new hires through the Pilot Program. Because the Act specifies that the duty to verify information through the Pilot Program must be set forth in all covered contracts and subcontracts, a contractor or subcontractor that fails to fulfill that duty could, at a minimum, be found to be in breach of contract. Debarment from future state contracts is not mentioned in the Act or its interpreting regulations as a consequence for noncompliance, but it remains a possibility.
The Act and its regulations also do not clearly define which contracts and subcontracts will be subject to the Pilot Program verification process. The Act states that the Pilot Program provisions apply to contracts for “the physical performance of services” in Georgia and subcontracts “in connection with the physical performance of services” in Georgia, but these terms are not defined. The statutory language could be broadly interpreted to apply to virtually any contract or subcontract with a state or local governmental entity in Georgia as long as some aspect of the performance of the contract requires worker activity in Georgia. Until the courts offer guidance on the meaning of these terms, employers doing business with public entities in Georgia may be faced with some uncertainty as to their obligations under the Act