A new climate of enforcement has exposed US employers to audits, investigations, and enforcement-related litigation which often catch the employer off-guard and unprepared.  These enforcement efforts frequently result in significant civil fines and criminal penalties and the Immigration Customs and Enforcement Agency (ICE) has engaged in a record breaking number of I-9 audits and inspections.  Audits have resulted in more than $50 million in total sanctions with average penalties for each company of $110,000.  Not to be outdone, the United States Citizenship and Immigration Service (USCIS), the Department of Labor (DOL), and the Fraud Detection and National Security Unit (FDNS) are also conducting investigations and worksite enforcement activities.  At the same time, the Department of Justice’s Office of Special Counsel for Unfair Immigration-Related Employment Practices (OSC) has launched a record number of claims alleging discrimination in the I-9 and E-Verify process.

Many such enforcement actions have resulted in the indictments of company executives, owners, and managers on felony charges for harboring illegal aliens, money laundering, and/or knowingly hiring illegal aliens.  Department of Homeland Security (DHS) Secretary Janet Napolitano and ICE Director John Morton revealed that in fiscal year 2010, US ICE enforcement numbers climbed to historically high numbers.  This surge included a 500% increase in penalties from worksite enforcement actions, a nearly two-fold increase in I-9 audits, a record-breaking 180 criminal prosecutions of employers, and the debarring of more than 97 businesses from participating in government contracts, government regulated programs, and sponsorship of immigration petitions.

The results of ICE’s dramatically-enhanced worksite enforcement efforts are very telling.  It is a system that has proven to be both effective and lucrative for the government, which means it will surely continue to grow in its implementation.  The government is typically focused on the following areas:

I-9 Compliance

The Immigration Reform and Control Act of 1986 requires employers to comply with the Employment Eligibility Verification Form I-9.  Compliance is imperative but can be complicated.  We advise and assist employers on all aspects of I-9 compliance.

What is the purpose of an I-9 audit conducted by ICE?

The purpose of an I-9 audit that is conducted by ICE is to detect the known employment of unauthorized workers by a US employer.  I-9 audits also serve to detect if employers are discriminating against certain groups of workers based on their national origin or citizenship status during hiring, firing, recruiting, or referring (for a fee).  The most common result from an ICE audit of an employer’s I-9 forms is the discovery of errors on the I-9 forms that can lead to various monetary fines, civil penalties, and criminal prosecution.

Who should be concerned about an I-9 audit from ICE?

The law requires all US employers to complete an I-9 form for every employee hired after November 6, 1986 who will be working in the United States.  Independent contractors are not required to complete an I-9 Form.

An employer will receive a Notice of Inspection (also known as a NOI) from ICE.  This is usually delivered in person to the employer.  The NOI will contain instructions for which I-9 Forms an employer is to provide to ICE.  The NOI may also request additional paperwork (such as payroll records, letters from the Social Security Administration, a list of current employees, etc.) that may allow ICE Auditors to fully review the I-9 Forms.  The employer is allowed three days to provide the documentation requested in the NOI.  Once produced, ICE has a team of forensic auditors who will evaluate all the documentation for errors.  ICE will then issue a Notice of Technical Deficiencies, indicating which I-9 Forms must be corrected within 10 days if the employer is to avoid a fine.  After the 10 days has elapsed, the employer will be assessed fines for errors that have not or cannot be corrected.  ICE will declare fines in the form of a Notice of Intent to Fine (NOIF).

What penalties does an employer face for I-9 violations?

Employers can face stiff penalties for IRCA violations.  Penalties can be imposed for hiring unauthorized workers as well as simply for committing paperwork violations even if all workers are authorized to work.  Fines for hiring unauthorized workers will amount to anywhere from $250 to $5,500 per worker depending on the prior history of violation.  Employers can also be barred from competing for government contracts for a year if they knowingly hire or continue to employ unauthorized aliens.  Paperwork violations can also result in significant fines.  Each mistake or missing item on a form can result in a $100 penalty up to $1000 for each form.  A missing form would automatically be assessed at $1000.  An employer, for example, that had 100 employees and did not complete I-9 Forms might face a $100,000 fine.  IRCA investigators have considerable discretion in assessing fines and will look at factors like the size of the company, the seriousness of the violations, whether the employer was trying to comply in good faith and the pattern of past violations.  Employers should also be cautioned that knowingly accepting fraudulent documents from employees is a different kind of violation that can be criminally prosecuted under other immigration laws.

An example of how these ICE audits work was seen in the Abercrombie & Fitch ordeal where ICE instituted a fine against the retailer for $1.05 million for violations of its obligation to verify the employment eligibility of its workers.  The settlement was the result of an audit of the I-9 records for Abercrombie & Fitch’s retail stores in Michigan.  The audit uncovered numerous deficiencies in the company’s process for completing and retaining its I-9 records.  The ICE audit indicated that these fines were levied despite the fact that the government discovered no evidence that the company employed unauthorized workers.  This fine was issued to serve as a warning to companies that the employment verification process must be taken seriously.

Fraud Detection Unit: H-1B Labor Condition Application Compliance

The USCIS Fraud Detection Unit first started making random site visits in late 2009.  A visit usually involves an unannounced drop-in by a USCIS agent or contractor who reviews the employment conditions of nonimmigrant workers, usually H-1B employees.  The agent will request to speak to the employee, review the workplace, and review payroll and related records.  As part of the H-1B process, employers are required to maintain public access files, which include the Labor Condition Applications (LCA) and documentation supporting attestations to the DOL regarding working conditions, wages, and employment terms.  Employers are now facing increased LCA audits, which can result in significant fines, debarment, and in some cases criminal prosecution.

In H-1B audits, the DOL will not only request to see an employer’s public examination files relating to a specific period of time, but they will also request other company records to determine whether an H-1B worker was paid the required wage at all relevant times.  The DOL has issued regulations preventing the “benching” of H-1B workers—that is, underpaying or not paying an employee who is not engaged on a matter that will produce revenue for the employer.  These regulations impose a requirement that employees in nonproductive status or otherwise temporarily laid off “due to the decision of the employer” continue to receive their normal wages.  This requirement ceases only once there is a “bona fide” termination of employment.

United States Citizenship and Immigration regulations require that the employer notify USCIS when an H-1B worker is terminated prior to completion of the period of authorized stay.  USCIS regulations also require the employer to reimburse the terminated H-1B employee for one-way travel back to his or her last residence abroad if the employer terminates the employee before the completion of the period of authorized stay.  These issues frequently arise in H-1B audits and employers have been found to owe back-pay if they have not appropriately notified USCIS or fulfilled the return transportation requirement.

In light of the renewed focus on H-1B audits and investigations, H-1B employers should be attentive to their wage and hour obligations, ensuring that terminations are effective for purposes of avoiding back-pay claims, and comply with all wage, benefit, notice, and non-benching requirements.  Because failures in these areas can result in significant back-pay awards, civil fines, and debarment, employers are also well-advised to consult with knowledgeable counsel to ensure that they are complying with all H-1B requirements.  Detailed audits of H-1B public examination files should be conducted to avoid potential liability in this era of increased enforcement.

National Origin and Citizenship Discrimination Claims 

The Office of Special Counsel (OSC) for Immigration-Related Unfair Employment Practices is responsible for enforcing the anti-discrimination provision of the Immigration and Naturalization Act (INA), which protects work-authorized individuals from employment discrimination on the basis of citizenship status or national origin discrimination, including discrimination in hiring and the employment eligibility verification (Form I-9) process.

Another example of one of the major blunders made by employers in 2011 was to require specific work authorization documents (permanent resident cards or employment authorization card) of non-US citizen employees rather than permitting them to choose from the list of acceptable documents on the I-9 form, as US citizens are permitted to do.  Earlier this year, the OSC announced that it reached a settlement with BAE Systems Ship Repair Inc., a leading provider of ship repair services, to settle allegations that its subsidiary, BAE Systems Southeast Shipyards Alabama LLC, engaged in a pattern or practice of discrimination by imposing unnecessary and additional document requirements on newly hired permanent residents (Green Card holders) when establishing their eligibility to work in the United States by requiring them to present Permanent Resident Cards (Green Cards), as a condition of employment.  The investigation was initiated after BAE Southeast Alabama suspended a lawful permanent resident even though he had presented valid documents sufficient under the Immigration and Nationality Act (INA) to establish his work authorization on three separate occasions.

BAE agreed to pay a fine of $53,900, and the  lawful permanent resident who was suspended was reinstated and fully compensated by BAE.  BAE agreed to ensure that the employment eligibility verification policies and procedures of all its subsidiaries comply with the law; to train its human resources personnel about employers’ responsibilities to avoid discrimination in the employment eligibility verification process; and to produce Forms I-9 for inspection by OSC for three years.  The on-going monitoring and training will be costly to BAE in both time and money.

It is essential that employers with subsidiary companies and multiple job site locations establish written, uniform policies and procedures concerning employment eligibility compliance matters.  We also recommend that an I-9 compliance manager be appointed to oversee adherence to compliance standard operating procedures for all subsidiary companies at all locations.

What Employers Can Do in the Area of Risk Management

These government crackdowns on employers represent a key part of DHS’s immigration enforcement policy, emphasizing employer audits rather than the high-profile workplace raids of the past.  It appears employers, as opposed to employees, will continue to be targeted.  If you receive a NOI, immediately contact your counsel.  The window for response is short.  It is critical that employers review thoroughly the documents gathered in response to the Notice and that the documents be well-organized and presented in the best light possible.  Employers who have not yet come under the scrutiny of DHS should be aware of the potential for investigation and take the opportunity to review and audit their records internally.

Conclusion

This information may seem technical and many employers may balk at investing significant time and resources on reviewing regulations and guidance in the completion of a simple one-page form such as the I-9.  However, given the government's on-going focus on worksite enforcement, it is critical that employers recognize that failure to comply with immigration laws will be time-consuming, financially draining, and a potential public relations disaster.

Not only should employers make certain that they do not hire or continue to employ workers they know to be ineligible for employment, but they must also ensure that they are in full compliance with all USCIS requirements pertaining to employment eligibility verification and DOL laws.  Establishing internal "best practices" to avoid liability is critical.  Training human resources personnel on all aspects of immigration compliance, offering regular training sessions, and updating compliance policies for personnel to follow can significantly mitigate damages, reduce exposure and minimize costs for the employer.