On Jul 30 2010

Pa., N.J. Move Forward With E-Verify; Feds Step Up Enforcement

Frustrated with the failure of the federal government to pass meaningful immigration reform, states have moved in to fill the void.

While Arizona has recently received much of the press regarding this issue, Pennsylvania and New Jersey have also moved forward to introduce E-Verify legislation designed to combat the employment of unauthorized workers.

At the same time, President Obama’s administration has stepped up worksite enforcement initiatives and has called on Congress to enact comprehensive immigration legislation that would contain a federal E-Verify requirement.  The message is clear: Employers must achieve compliance.

E-Verify is an Internet-based Employment Eligibility Verification System run by United States Citizenship and Immigration Services, or USCIS, that allows employers to electronically verify the employment eligibility of newly hired employees.  E-Verify allows an employer to electronically compare employee-provided information from Form I-9, Employment Eligibility Verification, against records in the Social Security Administration and Department of Homeland Security databases.

E-Verify does not exempt employers from I-9 completion.  Under the Immigration Reform and Control Act, or IRCA, all employers are required to verify that individuals hired after Nov. 6, 1986, are authorized to work in the United States by completing Form I-9.  On the federal level, E-Verify is voluntary except for certain federal contractors, who are now required to use E-Verify if they have a qualifying contract.  As explained below, many states now require E-Verify and Pennsylvania and New Jersey are following this trend.

Pennsylvania Legislation

On June 10, the Pennsylvania House of Representatives overwhelmingly passed two pieces of legislation, HB 1502 and HB 1503, that would require certain Pennsylvania employers to use E-Verify.  Both bills are now in the Pennsylvania Senate.

HB 1502 requires all state contractors and subcontractors to verify the status of new employees through E-Verify.  The bill also requires contractors and subcontractors to verify the Social Security number of all existing employees for wage reporting purposes through the Social Security Number Verification Service (NVS) “in accordance with federal law regarding NVS.”  Contractors must submit “verification statements” to the contracting state agency verifying compliance not only from their own company but also by each subcontractor.  To ensure compliance, the state will conduct complaint-based and random audits of contractors and subcontractors.  Sanctions for failure to comply include contract termination and debarment from state contracts for up to three years.

HB 1503, dubbed the “Construction Industry Employment Verification Act,” requires all construction industry employers to confirm employment eligibility of new employees through E-Verify and to verify the Social Security number of all existing employees for wage reporting purposes through the NVS.  The bill applies to all construction employers, regardless of whether there is any state contract or public funds.  Construction is broadly defined to include “erection, reconstruction, demolition, alteration, modification, custom fabrication, building, assembling, site preparation and repair work or maintenance work done on any real property or premises.”  Like its sister bill, HB 1503 also requires the regular submission of verification statements and it provides for complaint based and random audits.  Sanctions include the forfeiture of all licenses and certifications that allow the construction employer to conduct business in Pennsylvania for a period of up to three years.

Both Pennsylvania bills also provide that an employer who relies in good faith on the E-Verify and NVS procedures shall be immune from sanctions under the proposed legislation.  The bills also prohibit retaliation against any employee who makes a complaint or participates in an investigation and provide for reinstatement of any such employee as well as restitution equal to three times the amount of the employee’s wages and benefits from the date of violation as well as attorney fees and costs.

State Rep. John Galloway, D-Bucks, has urged the Senate to pass the legislation stating: “These bills target contractors who cheat, who use and abuse a cheap illegal work force for profit and push hard-working Pennsylvania workers off the payrolls and on to the unemployment rolls.”  U.S. Rep. Patrick Murphy, D-Pa., called for Gov. Edward G. Rendell to support the legislation stating: “We need every tool we have, including E-Verify.”

New Jersey Legislation

New Jersey is also pushing for such legislation.  In May 2010, identical bills were introduced in the New Jersey Senate and Assembly requiring employers to use E-Verify.  They are now proceeding in committee.  Bills S1842 and A2600 prohibit the employment of unauthorized workers and require all employers who employ 100 or more employees to verify the employment eligibility of all new employees through E-Verify by Dec. 31.  The effective date for smaller employers is Dec. 31, 2011.

Like the Pennsylvania bills, the New Jersey bills provide for statewide random auditing as well as complaint driven investigations.  The bills provide that the employer must terminate any unauthorized workers and the attorney general or county prosecutor shall notify U.S. Immigration and Customs Enforcement as well as local law enforcement of any unauthorized alien.  Sanctions include civil monetary penalties ranging from $100 to $1,000 for each violation as well as the loss of business licenses.  Depending upon the severity of the offense, the loss of business licenses may be anywhere from a matter of days to permanent revocation for an employer who violates the act a second time.

Currently, there are many other states that require employers to participate in E-Verify. These laws can be broken down into three basic categories: (1) laws that require all employers in the state to participate in E-Verify, (2) laws that require public or state employers to participate and (3) laws that require those contracting with the state or political subdivisions within the state to participate in E-Verify.

At this point, Colorado, Georgia, Minnesota, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, Rhode Island, South Carolina and Utah require E-Verify for employers who have public contracts with state agencies or political subdivisions.  Many of these states also require public employers to use E-Verify and some states like North Carolina and Virginia (effective December 2012) require public employers to use E-Verify but do not require contractors to use E-Verify.  The Arizona, Mississippi and Utah statutes are the most far-reaching of current legislation as they require all employers within the state to use E-Verify.  South Carolina requires employers to either register and participate in the E-Verify or employ only workers who have a valid South Carolina driver’s license or identification card or possess a valid driver’s license from another state where the license requirements are at least as strict as South Carolina’s.

The Obama Administration Calls on Congress to Act

In the wake of this growing patchwork of state legislation, in a speech on July 1 of this year, Obama has called for Congress to act and pass federal immigration reform.  In arguing that the time is now for immigration reform, Obama stated: “The system is broken.  And everybody knows it. Unfortunately, reform has been held hostage to political posturing and special-interest wrangling. … But I believe that we can put politics aside and finally have an immigration systems that’s accountable.”  Virtually every proposal or outline for immigration reform from Congress that has been circulated in recent months includes a requirement for all employers to use E-Verify.  Indeed, even apart from any comprehensive immigration reform, many in Congress have pushed for E-Verify to become mandatory for all employers.

Increased Worksite Enforcement

In his speech, Obama also emphasized that even though Congress has not yet successfully moved forward with legislation, his administration is not only working to actively enforce the borders but it is actively pursuing worksite enforcement actions.  Indeed, in April 2009, the Department of Homeland Security and Immigration and Customs Enforcement, the enforcement branch of DHS, issued a new Worksite Enforcement Overview and Worksite Enforcement Strategy Fact Sheet.

These documents announce: “ICE will focus its resources in the worksite enforcement program on the criminal prosecution of employers who knowingly hire illegal workers in order to target the root cause of illegal immigration.”  Not only will ICE use traditional criminal enforcement methods, but a related ICE memorandum released in October 2009 emphasizes that administrative tools will be used “to advance criminal cases, and in the absence of criminal charges, to support the imposition of civil fines and other available penalties.”

Indeed, the memorandum makes clear that the “most important administrative tool is the Notice of Inspection (NOI) and the resulting Form I-9 audit” as it will not only support the imposition of civil fines and other available penalties, but it “will often serve as an important first step in the criminal investigation and prosecution of employers.”

Consistent with this use of I-9 audits as the key administrative tool, ICE announced a nationwide initiative to audit employers’ Form I-9 employment eligibility verification records.  As part of this initiative, in the first week of July 2009 alone, ICE issued Notices of Inspection to 652 employers across the country.  In comparison, only 503 Notices of Inspection were issued in all of fiscal year 2008.  The pace has only increased — over the past year, ICE has conducted I-9 Inspections at more than 2,900 companies and the agency has levied over $3 million in civil fines this year.  In addition to civil fines, ICE has also regularly pursued debarment from federal contracts.

This widespread enforcement initiative is much different than any in the past.  In the past, initiatives often focused on the most likely offenders — employers in industries such as meat-packing, construction, landscaping and manufacturing — commonly believed to regularly hire unauthorized workers.  Although certain of these businesses were included within the thousands of I-9 audits, the reach has been much broader to include a wide variety of businesses throughout the entire country.  The message is clear: No employer is safe from an I-9 audit and investigation.

E-Verify Does Not Preclude Enforcement Actions

It is important to note that although the government has increasingly touted E-Verify as a way for an employer to increase compliance, E-Verify does not insulate an employer from I-9 enforcement actions.  In order to use E-Verify, an employer must register online with DHS and accept the electronic memorandum of understanding, an agreement between the employer, the SSA and DHS that details the responsibilities of each with regard to E-Verify.

Although an employer who verifies work authorization under E-Verify is presumed to not have knowingly hired an unauthorized alien queried through the system, the E-Verify memorandum of understanding itself clearly provides participation does not provide a safe harbor from worksite enforcement.  Indeed, E-Verify participating employers have been subject to enforcement actions.

In signing the E-Verify MOU, the employer also agrees to allow the federal government and designees to conduct site visits, have full access to employment records, and to interview employees.  By entering into such an MOU, the employer is waiving its Fourth Amendment rights and allowing the government free access to employment records, including I-9s completed prior to participation in E-Verify even though those records are not subject to any presumptions or protections under E-Verify.

In addition, recent information released regarding data mining of E-Verify suggests that, far from providing protection, the use of E-Verify could result in investigations, enforcement actions and even discrimination charges and complaints.  In December 2008, USCIS and ICE negotiated a memorandum of agreement, or MOA.  Pursuant to this MOA, the USCIS Verification Division is charged with (1) the identification and pursuit of suspected employer and employee misuse, abuse, and fraudulent use of E-Verify and (2) the referral of suspected employer and employee misuse, abuse, and fraudulent use of E-Verify to ICE for investigative consideration.  In March 2010, USCIS negotiated a similar MOA with the Department of Justice and its Office of Special Counsel for Unfair Immigration-Related Employment Practices to share E-Verify information.

Specifically, under the agreement, the USCIS will share data obtained from queries run through E-Verify with OSC, which will allow OSC to identify potential violations of the anti-discrimination provisions of the Immigration and Nationality Act.  USCIS will also provide employer information to OSC, as necessary, when employers have engaged in potential misuse or abuse of E-Verify.

Comprehensive Compliance Programs are Essential

In order to avoid potential liability, employers are well advised to develop and implement detailed I-9 policies and practices.  ICE recommends that employers, at a minimum, establish an internal training program, with annual updates, on how to manage completion of Form I-9 and how to detect fraudulent use of documents in the I-9 process; permit the I-9 and any E-Verify process to be conducted only by individuals who have received training; and include a review of the completed I-9 and documents by a second person as part of each employee’s verification to minimize the potential for a single individual to subvert the process.  Most effective I-9 compliance policies will track these recommendations.

Internal audits — conducted before ICE comes knocking on the door — are essential to limit liability and assess compliance.  Indeed, once a NOI is issued, the employer has only three days to respond and produce all I-9 records.

Accordingly, should a NOI be issued, businesses are well advised to contact their immigration counsel as quickly as possible.  It is also advisable, to the extent possible given the limited time frame, that the company conduct an audit of all I-9s and make any allowable corrections.

Employers, however, must be careful to follow proper procedures at all times in any such audits, or face possible additional scrutiny.  Employers, for example, should initial and date any correction clearly showing that the I-9 was corrected pursuant to audit.  Company representatives responding to the NOIs should always retain copies of any documentation submitted to ICE.  Employers who can demonstrate good-faith efforts to comply with immigration laws are more likely to avoid criminal penalties and be assessed lower level civil fines if violations are uncovered.

Should employers enroll in E-Verify they must similarly develop comprehensive training and compliance programs.  As the E-Verify MOU subjects an employer’s I-9 records to scrutiny, internal I-9 audits are essential.  Employers must also develop policies and training programs as E-Verify records are subject to the MOAs that provide for information sharing with ICE and the OSC.  Employers must take all steps to ensure that employees responsible for I-9 completion, and for E-Verify queries, are aware not only of general E-Verify rules and requirements but also the anti-discrimination provisions of the Immigration and Nationality Act.

Published in The Legal Intelligencer, July 30, 2010