Immigration Reform

In recent years, ICE has shifted its focus from imposing civil penalties to criminal prosecution of employers who knowingly employ undocumented workers. Specifically, ICE investigators target abusive or exploitative employers, such as those involved in alien smuggling, alien harboring, document fraud, money laundering or worker threats and exploitation. An example of one such criminal prosecution arose in June 2013, when an investigation by ICE and other law enforcement agencies resulted in the indictment of the owners and managers of numerous New York 7-11 franchise stores for an illegal alien employment scheme. Eight men and one woman allegedly hired dozens of illegal aliens, provided them with stolen identities, housed them and stole substantial portions of their wages. If convicted, the defendants face more than 20 years in prison and forfeiture of all property used to harbor the illegal aliens.

While several courts have ruled that unauthorized employment alone is not sufficient to convict an employer for harboring an alien, additional actions such as willfully misrepresenting facts on the I-9 form, assisting with obtaining false documents, providing housing or warning noncitizens about impending inspections, can support a harboring conviction against the employer and can result in a prison term up to 10 years. Additionally, employers who pay noncitizens low wages and fail to withhold taxes can be subject to a higher prison term. Moreover, if during any 12-month period, a person knowingly hires at least 10 individuals with actual knowledge that they are unauthorized foreign nationals, that employer is subject to fines, imprisonment up to five years, or both.

Clearly, with criminal prosecution at stake, business owners need to understand and comply with federal immigration requirements. In determining whether the employer knowingly employed undocumented workers, ICE will consider the totality of the circumstances. “Knowledge” includes actual knowledge of the unauthorized status or constructive knowledge that the employer should have known of the unauthorized status due to notice of certain facts and circumstances that would lead a person to conclude the worker was unauthorized. Failing to properly complete I-9s, ignoring government notices on mismatching identities, and authorizing workers to work under different names without any explanation for the name change have been used by ICE to develop a case for the knowing employment of undocumented workers.

Trends in I-9'Administrative Cases

Certain cases arising under the Immigration and Nationality Act (INA), including knowingly hiring or continuing employment of unauthorized aliens and failure to comply with employment verification requirements, fall under the jurisdiction of the Department of Justice's Office of the Chief Administrative Hearing Officer (OCAHO). OCAHO administrative law judges (ALJs) conduct proceedings and render decisions on these cases, which can result in the imposition of sanctions and penalties, cease and desist orders and awards of attorney's fees. The majority of OCAHO cases have focused on the imposition of civil fines for substantive errors on the I-9 form. In 2012, more than 2,000 employers were audited by ICE.

The recent trend in such cases has been good news for small employers, such as franchisees, because the ALJs have been lowering fines based on the employer's size and ability to pay. In addition, the ALJs have considered “good faith compliance,” one of the factors in assessing fines, in a manner that is beneficial to small employers. For example, in February 2013, an ALJ found that an employer's habitual failure to sign Section 2 of the I-9 form was not bad faith. The employer was a laundry equipment servicing company with 30 employees and no human resources director. The ALJ fined the employer $700 per violation for failure to prepare and present I-9s and $500 per violation for improper completion of Section 2 of the I-9s. In another case, a California restaurant with seven lawful employees had failed to complete any I-9s because its management team was ignorant of the requirement. The ALJ found that the poor rate of I-9 compliance was insufficient alone to show a lack of good faith. Because the restaurant was in financial difficulty, the ALJ reduced the average fine from $935 to $400. Similarly, in May 2013, a Subway franchisee completed I-9 forms after receiving a Notice of Inspection. The ALJ found that the untimely I-9 completion did not constitute bad faith, and reduced the average fine from $1,000 to $200 because of the franchisee's inability to pay, the lack of undocumented workers and the lack of prior history of violations.

Reducing Immigration Liability Through Compliance

A key component in reducing employer liability for immigration violations is for employers to understand employment authorization obligations. Employers should start with the understanding that they are prohibited from hiring workers who are not authorized to work in the United States. This gives rise to the obligation to verify the identity and employment eligibility of workers. At the same time, however, employers need to realize that they are prohibited from discriminating against applicants and employees on the basis of national origin or citizenship. Balancing these two goals of authorization without discrimination means that employers walk a tightrope between being thorough but not overzealous. Below are the requirements on which franchisors and franchisees should base their immigration-related practices:

Form I-9 Compliance: New'Forms In 2013

The IRCA requires employers to complete a form I-9 for all newly hired employees, regardless of their immigration status. The form was updated earlier this year, and the new form became mandatory beginning on May 8, 2013. (The new form I-9 can be found at www.uscis.gov/files/form/i-9.pdf.)

Completion of the I-9 form is not difficult, but must be done according to certain deadlines and with due attention to detail. The employee must complete Section 1 of the form I-9 on or before the first day of work, attesting that he or she is a citizen, lawful permanent resident or foreign national authorized to work in the U.S. temporarily. The employer then must complete Section 2 of the form within the first three days of the worker's employment. To do so, the employer must examine original documents provided by the worker from a specified list of acceptable documents that verify the employee's identity and eligibility to work in the U.S. Employers may not dictate which of the allowable documents be provided, as long as the employee provides appropriate documents from the list that appear to be reasonably genuine. Employers need not submit the forms to any agency, but they must retain the forms for three years from the date of hire or one year after the last day of work, whichever occurs later. Under IRCA, employers are not required to make and keep copies of the documents they reviewed in order to verify the employee's identity and eligibility.

Additional Risk-Reducing Steps

Employers can help reduce their risk of immigration-related liabilities by being proactive in their compliance efforts. First, employers of all sizes should regularly conduct an internal audit of their I-9s. Check that they are using the new 2013 forms and are completing Sections 1 and 2 of the I-9s in full, including proper signatures, for every new hire and within the proper timeframe. Ensure that I-9s are being retained for the longer of three years after date of hire or one year after termination of employment. (Many employers keep two binders of I-9s, one for active employees and one for terminated employees, which helps facilitate proper retention.) Review the list of documents that are acceptable to show identity and eligibility.

Second, train supervisors, managers, interviewers and human resource personnel on employer obligations under federal and state immigration laws. Anyone involved in the hiring and onboarding process at the business should be informed on the necessary steps and potential liability for noncompliance.

Third, develop policies and practices to address immigration-related liabilities, just as the company does for discrimination and harassment. This means creating policies to avoid discrimination based on national origin or citizenship, and it will entail reviewing job applications and interview questions to avoid potentially unlawful inquiries, as well as investigating any complaints of discrimination without retaliation.

Finally, investigate if using E-Verify is compatible with the company's other business practices. If so, it can be an easy, free check of employment authorization, which may help reduce the chance of inadvertently hiring an undocumented worker. Even though E-Verify may still be circumvented through identity theft, it is an additional, voluntary step that can prevent undocumented workers from entering a workforce. Remember, though, E-Verify does not replace an employer's obligation to complete the I-9 form for all new hires.

Immigration Reform Looms

In late June, the U.S. Senate passed a comprehensive immigration bill with bipartisan support. The Border Security, Economic Opportunity and Immigration Modernization Act of 2013 faces tough obstacles to passage in the House of Representatives, but if a bill is passed that follows the Senate's lead, it would create significant changes for employers on a variety of fronts. (See, http://thomas.loc.gov/cgi-bin/query/z?c113:S.744: for the latest on the bill.) Employers in virtually every sector and industry would likely face changes to their hiring policies, onboarding procedures and, perhaps, even competitive wage rates as an estimated 11 million undocumented immigrants come out of the shadows and pursue a path to citizenship. The International Franchise Association (IFA) (www.franchise.org) announced that it supported passage of the Senate bill, though it is pushing for some adjustments electronic verification requirements in a final bill.

Mandatory E-Verify

The immigration reform bill passed by the Senate would make use of the E-Verify electronic employment verification system mandatory for all employers. This requirement would be phased in over a number of years, depending on the size of the employer; employers with fewer than 500 employees would have four years until use of E-Verify is mandatory. The proposed law would not require any employer to check current employees retroactively via the E-Verify system. Unfortunately, despite the E-Verify requirement, the immigration reform bill retains the Form I-9 requirement that employers check identity and employment authorization documents and attest to doing so, as well as having the employee attest to employment eligibility on the form. In addition, the E-Verify system would add digital photographs so that employers may compare a picture provided on the documentation from an employee with the photograph in the system. Additional notice and confirmation requirements would direct employers in how to handle non-confirmations. Moreover, the bill would strengthen non-discrimination provisions on the basis of national origin and citizenship, making it an unfair immigration-related employment practice to discriminate on those bases in hiring, verification of the individual's eligibility to work in the U.S., and discharge.

Effect of Legal Immigration and Path to Citizenship

Under the Senate bill, individuals living in the U.S. without legal status would have an opportunity to stay and register for “provisional immigrant status” six months after the bill is enacted if they meet certain conditions. Once they receive this status, they could live and work freely in the United States for up to six years, but would not be eligible for any federal benefits, including health care and welfare. They could renew their provisional status for an additional six years and fee. After 10 years, they could seek green card and lawful permanent status if they meet certain requirements and pay an additional fee.

The effect on the U.S. economy of adding millions of workers who have the ability to legally work and live in the country would be immense. Having additional workers paying taxes is expected to reduce the deficit and increase gross domestic product. For employers, it would mean a new source of legal workers who would be now mobile and marketable in society. A big question is whether this would drive up wages, as previously undocumented workers pursue better opportunities and reject low-paying, “no questions asked” employment. We will have to wait to see how the legalization of current illegal workers would drive workplace market forces.

Roger Tsai is an attorney at the Denver-based law firm of Holland & Hart, specializing in the area of employment-based immigration law. He can be contacted in the Salt Lake City office at [email protected].

Business owners wear many hats, often including that of human resource manager. Although savvy about sales, marketing and running their operations, entre-preneurs often struggle with employment eligibility requirements, non-discriminatory hiring practices and immigration issues. Examining potential immigration-related liabilities will help franchisees reduce their risk of non-compliance and develop sound employment practices and effective hiring policies. Moreover, with immigration reform on the horizon, franchisors need to help their franchisees understand their current obligations while preparing for change in the future.

Recent Developments in Immigration Enforcement

U.S. Immigration and Customs Enforcement (ICE) (www.ice.gov), a division of the Department of Homeland Security, is charged with enforcing the Immigration Reform and Control Act of 1986 (IRCA). One of ICE's goals is to investigate and enforce the nation's immigration laws to reduce the demand for illegal employment and protect employment opportunities for lawful workers. Employer compliance under IRCA has focused primarily on civil fines and a maximum penalty of six months' imprisonment and a $3,000 fine for pattern and practice of unlawful hiring. I-9 employment eligibility verification form violations typically result in a civil fine ranging from $100 to $1,100 per employee, with fines for knowingly hiring undocumented workers reaching up to $16,000 per worker.

In recent years, ICE has shifted its focus from imposing civil penalties to criminal prosecution of employers who knowingly employ undocumented workers. Specifically, ICE investigators target abusive or exploitative employers, such as those involved in alien smuggling, alien harboring, document fraud, money laundering or worker threats and exploitation. An example of one such criminal prosecution arose in June 2013, when an investigation by ICE and other law enforcement agencies resulted in the indictment of the owners and managers of numerous New York 7-11 franchise stores for an illegal alien employment scheme. Eight men and one woman allegedly hired dozens of illegal aliens, provided them with stolen identities, housed them and stole substantial portions of their wages. If convicted, the defendants face more than 20 years in prison and forfeiture of all property used to harbor the illegal aliens.

While several courts have ruled that unauthorized employment alone is not sufficient to convict an employer for harboring an alien, additional actions such as willfully misrepresenting facts on the I-9 form, assisting with obtaining false documents, providing housing or warning noncitizens about impending inspections, can support a harboring conviction against the employer and can result in a prison term up to 10 years. Additionally, employers who pay noncitizens low wages and fail to withhold taxes can be subject to a higher prison term. Moreover, if during any 12-month period, a person knowingly hires at least 10 individuals with actual knowledge that they are unauthorized foreign nationals, that employer is subject to fines, imprisonment up to five years, or both.

Clearly, with criminal prosecution at stake, business owners need to understand and comply with federal immigration requirements. In determining whether the employer knowingly employed undocumented workers, ICE will consider the totality of the circumstances. “Knowledge” includes actual knowledge of the unauthorized status or constructive knowledge that the employer should have known of the unauthorized status due to notice of certain facts and circumstances that would lead a person to conclude the worker was unauthorized. Failing to properly complete I-9s, ignoring government notices on mismatching identities, and authorizing workers to work under different names without any explanation for the name change have been used by ICE to develop a case for the knowing employment of undocumented workers.

Trends in I-9'Administrative Cases

Certain cases arising under the Immigration and Nationality Act (INA), including knowingly hiring or continuing employment of unauthorized aliens and failure to comply with employment verification requirements, fall under the jurisdiction of the Department of Justice's Office of the Chief Administrative Hearing Officer (OCAHO). OCAHO administrative law judges (ALJs) conduct proceedings and render decisions on these cases, which can result in the imposition of sanctions and penalties, cease and desist orders and awards of attorney's fees. The majority of OCAHO cases have focused on the imposition of civil fines for substantive errors on the I-9 form. In 2012, more than 2,000 employers were audited by ICE.

The recent trend in such cases has been good news for small employers, such as franchisees, because the ALJs have been lowering fines based on the employer's size and ability to pay. In addition, the ALJs have considered “good faith compliance,” one of the factors in assessing fines, in a manner that is beneficial to small employers. For example, in February 2013, an ALJ found that an employer's habitual failure to sign Section 2 of the I-9 form was not bad faith. The employer was a laundry equipment servicing company with 30 employees and no human resources director. The ALJ fined the employer $700 per violation for failure to prepare and present I-9s and $500 per violation for improper completion of Section 2 of the I-9s. In another case, a California restaurant with seven lawful employees had failed to complete any I-9s because its management team was ignorant of the requirement. The ALJ found that the poor rate of I-9 compliance was insufficient alone to show a lack of good faith. Because the restaurant was in financial difficulty, the ALJ reduced the average fine from $935 to $400. Similarly, in May 2013, a Subway franchisee completed I-9 forms after receiving a Notice of Inspection. The ALJ found that the untimely I-9 completion did not constitute bad faith, and reduced the average fine from $1,000 to $200 because of the franchisee's inability to pay, the lack of undocumented workers and the lack of prior history of violations.

Reducing Immigration Liability Through Compliance

A key component in reducing employer liability for immigration violations is for employers to understand employment authorization obligations. Employers should start with the understanding that they are prohibited from hiring workers who are not authorized to work in the United States. This gives rise to the obligation to verify the identity and employment eligibility of workers. At the same time, however, employers need to realize that they are prohibited from discriminating against applicants and employees on the basis of national origin or citizenship. Balancing these two goals of authorization without discrimination means that employers walk a tightrope between being thorough but not overzealous. Below are the requirements on which franchisors and franchisees should base their immigration-related practices:

Form I-9 Compliance: New'Forms In 2013

The IRCA requires employers to complete a form I-9 for all newly hired employees, regardless of their immigration status. The form was updated earlier this year, and the new form became mandatory beginning on May 8, 2013. (The new form I-9 can be found at www.uscis.gov/files/form/i-9.pdf.)

Completion of the I-9 form is not difficult, but must be done according to certain deadlines and with due attention to detail. The employee must complete Section 1 of the form I-9 on or before the first day of work, attesting that he or she is a citizen, lawful permanent resident or foreign national authorized to work in the U.S. temporarily. The employer then must complete Section 2 of the form within the first three days of the worker's employment. To do so, the employer must examine original documents provided by the worker from a specified list of acceptable documents that verify the employee's identity and eligibility to work in the U.S. Employers may not dictate which of the allowable documents be provided, as long as the employee provides appropriate documents from the list that appear to be reasonably genuine. Employers need not submit the forms to any agency, but they must retain the forms for three years from the date of hire or one year after the last day of work, whichever occurs later. Under IRCA, employers are not required to make and keep copies of the documents they reviewed in order to verify the employee's identity and eligibility.

Additional Risk-Reducing Steps

Employers can help reduce their risk of immigration-related liabilities by being proactive in their compliance efforts. First, employers of all sizes should regularly conduct an internal audit of their I-9s. Check that they are using the new 2013 forms and are completing Sections 1 and 2 of the I-9s in full, including proper signatures, for every new hire and within the proper timeframe. Ensure that I-9s are being retained for the longer of three years after date of hire or one year after termination of employment. (Many employers keep two binders of I-9s, one for active employees and one for terminated employees, which helps facilitate proper retention.) Review the list of documents that are acceptable to show identity and eligibility.

Second, train supervisors, managers, interviewers and human resource personnel on employer obligations under federal and state immigration laws. Anyone involved in the hiring and onboarding process at the business should be informed on the necessary steps and potential liability for noncompliance.

Third, develop policies and practices to address immigration-related liabilities, just as the company does for discrimination and harassment. This means creating policies to avoid discrimination based on national origin or citizenship, and it will entail reviewing job applications and interview questions to avoid potentially unlawful inquiries, as well as investigating any complaints of discrimination without retaliation.

Finally, investigate if using E-Verify is compatible with the company's other business practices. If so, it can be an easy, free check of employment authorization, which may help reduce the chance of inadvertently hiring an undocumented worker. Even though E-Verify may still be circumvented through identity theft, it is an additional, voluntary step that can prevent undocumented workers from entering a workforce. Remember, though, E-Verify does not replace an employer's obligation to complete the I-9 form for all new hires.

Immigration Reform Looms

In late June, the U.S. Senate passed a comprehensive immigration bill with bipartisan support. The Border Security, Economic Opportunity and Immigration Modernization Act of 2013 faces tough obstacles to passage in the House of Representatives, but if a bill is passed that follows the Senate's lead, it would create significant changes for employers on a variety of fronts. (See, http://thomas.loc.gov/cgi-bin/query/z?c113:S.744: for the latest on the bill.) Employers in virtually every sector and industry would likely face changes to their hiring policies, onboarding procedures and, perhaps, even competitive wage rates as an estimated 11 million undocumented immigrants come out of the shadows and pursue a path to citizenship. The International Franchise Association (IFA) (www.franchise.org) announced that it supported passage of the Senate bill, though it is pushing for some adjustments electronic verification requirements in a final bill.

Mandatory E-Verify

The immigration reform bill passed by the Senate would make use of the E-Verify electronic employment verification system mandatory for all employers. This requirement would be phased in over a number of years, depending on the size of the employer; employers with fewer than 500 employees would have four years until use of E-Verify is mandatory. The proposed law would not require any employer to check current employees retroactively via the E-Verify system. Unfortunately, despite the E-Verify requirement, the immigration reform bill retains the Form I-9 requirement that employers check identity and employment authorization documents and attest to doing so, as well as having the employee attest to employment eligibility on the form. In addition, the E-Verify system would add digital photographs so that employers may compare a picture provided on the documentation from an employee with the photograph in the system. Additional notice and confirmation requirements would direct employers in how to handle non-confirmations. Moreover, the bill would strengthen non-discrimination provisions on the basis of national origin and citizenship, making it an unfair immigration-related employment practice to discriminate on those bases in hiring, verification of the individual's eligibility to work in the U.S., and discharge.

Effect of Legal Immigration and Path to Citizenship

Under the Senate bill, individuals living in the U.S. without legal status would have an opportunity to stay and register for “provisional immigrant status” six months after the bill is enacted if they meet certain conditions. Once they receive this status, they could live and work freely in the United States for up to six years, but would not be eligible for any federal benefits, including health care and welfare. They could renew their provisional status for an additional six years and fee. After 10 years, they could seek green card and lawful permanent status if they meet certain requirements and pay an additional fee.

The effect on the U.S. economy of adding millions of workers who have the ability to legally work and live in the country would be immense. Having additional workers paying taxes is expected to reduce the deficit and increase gross domestic product. For employers, it would mean a new source of legal workers who would be now mobile and marketable in society. A big question is whether this would drive up wages, as previously undocumented workers pursue better opportunities and reject low-paying, “no questions asked” employment. We will have to wait to see how the legalization of current illegal workers would drive workplace market forces.

Roger Tsai is an attorney at the Denver-based law firm of Holland & Hart, specializing in the area of employment-based immigration law. He can be contacted in the Salt Lake City office at [email protected].