Best Compliance Practices and Immigration

Robert S. Groban, Jr.

New York Law Journal

July 2, 2008

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In recent years, U.S. employers have been caught between several competing government enforcement priorities. Restrictions in the number and type of foreign nationals allowed into this country have placed demands on human resources representatives to assess immigration credentials to avoid costly, disruptive and unexpected employment problems. At the same time, these assessments have raised the risks for discrimination claims as both domestic and foreign employees better understand their rights under federal and state law. Simultaneously, law enforcement agencies at all levels of government have strengthened their efforts to monitor worksite compliance and punish those who hire undocumented workers or who otherwise fail to properly administer the Form I-9 process.

In response to these developments, employers have been even more vigilant in evaluating immigration compliance policies and practices in order to avoid discrimination claims, administrative fines, criminal prosecution, civil forfeitures and even imprisonment for immigration offenses. In this article, we shall review developments in this area and make recommendations as to "best" compliance practices.

Recruitment

The limitations imposed by law on the number and types of foreign nationals who can enter the United States to work has created a minefield for most employers to navigate. The H-1B program, for example, is limited to 65,000 professional workers, although it also permits 20,000 additional professional workers who have obtained at least a master's degree from an American university. For the past two years, the quota for these workers has been reached almost as soon as the visa numbers became available, leaving large numbers of eligible applicants unable to secure the H-1B visa they need to remain and work.

Nowhere has this problem been more critical than in the recruitment of foreign students. Recent estimates suggest that the vast majority of those students in American universities seeking Science, Technology, Engineering or Mathematics (STEM) degrees are from foreign countries.1 William Gates, the Microsoft chairman, testified before Congress recently that there are severe shortages of STEM degree employees in the Information Technology (IT) and scientific communities. All of these STEM degree students are eligible for the H-1B classification. Due to the stringent H-1B quota, however, only a limited number of these STEM degree candidates will be eligible to remain and work here.

Unfortunately, the current H-1B process does not allow an employer to identify which STEM degree holders will ultimately be included in the H-1B quota for any particular year. To make matters worse, applications cannot be filed until early April after most employers have had to extend offers to qualified candidates. As a result, many employers hire F-1 students in Optional Practical Training (OPT) only to find out months later that they cannot extend their employment authorization and thus must be discharged.2 Employers increasingly are asking how they can develop legally the information required to assess the immigration status of employees before offers are extended and problems develop with sponsorship and retention. Many fail to inquire, however, due to fears of discrimination claims. In our view, these fears are exaggerated.

We do not suggest that employers should not be vigilant to avoid possible discrimination. What we do counsel is that an assessment of possible immigration status issues is not, by itself, discriminatory. The immigration laws discriminate by nationality, and the Supreme Court has always upheld Congress' plenary power to legislate in this area.3 For this reason, application of these distinctions cannot rise to the level of actionable discrimination. For example, would an employer discriminate by hiring an Australian national eligible for E-3 classification over an equally qualified Indian national whose ability to secure an H-1B is in doubt under the quota? In our view, the answer clearly is no as long as this is the true reason for the decision and there are no other factors, such as age, race, gender or national origin involved.4

A necessary corollary to this conclusion is the recognition that employers must have the ability to inquire into the candidate's background and develop the information required to assess possible immigration-related issues that bear on ultimate employability. It is not discriminatory to ask an applicant if he will require the employer to sponsor him to obtain or extend the employment authorization necessary to accept employment or remain with the employer. For the same reason, it also is not discriminatory to inquire further as to the candidate's status and what action the employer would be required to take to sponsor the candidate.

Before undertaking these inquiries, however, the employer needs a sound immigration policy that articulates the employer's position. Absent a legally binding commitment, it is not discriminatory for an employer not to sponsor candidates for H-1B status in view of the time, expense, effort and unpredictability of that process. It might be discriminatory, however, for that same employer to refuse to hire only a certain nationality on that basis while sponsoring others similarly situated. As in any other area, the development and consistent application of a well thought out company policy that addresses this situation will insulate the employer from successful discrimination claims.

Worksite Enforcement

Another significant concern for employers involves the real specter of worksite enforcement actions by the U.S. Immigration and Customs Enforcement agency (ICE). Under U.S. immigration laws, employers are required to verify on Form I-9 the identity and employment authorization of all employees, regardless of nationality, who start work on or after Nov. 6, 1986. Employers who violate these employment eligibility requirements are subject to increased civil monetary penalties and possible criminal prosecution. They also may be fined for knowingly employing unauthorized aliens or other Form I-9 violations, including failure to complete the Form I-9 properly, wrongful discrimination against job applicants on the basis of nationality or citizenship, and immigration-related document fraud.

In the past, the prospect of monetary penalties did not appear to have much deterrent effect on employers, who often came to view these fines as simply the "cost of doing business." In recent years, however, ICE has intensified its efforts to enforce worksite violations. The Department of Homeland Security (DHS) recently increased the fine structure for offending employers significantly. In addition, the ICE budget for investigations has increased substantially, and this has led to several highly publicized large-scale worksite raids and investigations at well-known corporations, such as Wal-Mart, Swift and Tyson Foods. Through these and other worksite enforcement actions, the government is making it clear that the continued employment of undocumented workers is a major problem that is best addressed through application of the federal criminal and asset forfeiture laws.

As a result of these actions, the government no longer is issuing small fines to employers who commit serious Form I-9 violations. ICE now is conducting lengthy criminal investigations that result in indictments of company owners, executives, managers and other company personnel involved in these illegal activities. Criminal charges include harboring illegal aliens, money laundering and/or knowingly hiring illegal aliens. These offenses can carry a potential 10-20 year prison sentence, plus forfeiture of all company assets and revenues utilized in this illegal activity.5

During the first three quarters of fiscal year 2007, ICE's Worksite Enforcement investigations resulted in over $30 million in forfeitures and civil or criminal fines, restitution orders, and civil judgments levied against employers. This is a significant increase in the amount paid by employers for immigration violations in prior years, which totaled $1,095,734 in FY 2001, $72,585 in FY 2002, $37,514 in FY 2003, $45,480 in FY 2004, and $6,500 in FY 2005.

Form I-9 Verification and E-Verify. A key component of immigration compliance is creating a uniform policy for Form I-9 verification and then making sure that the employer follows the policy. The immigration laws require the employer to make sure that all new employees hired since Nov. 6, 1986, complete a Form I-9 on or before their first day of work. Then, the employer's representative must review the original document(s) submitted by the employee to demonstrate identity and work authorization within three days. Proper completion of the Form I-9 by both the employer and new employee satisfies the employer's obligation to hire, employ, recruit or refer for a fee only foreign nationals who are authorized to work.

To enhance its immigration compliance, employers may elect to use the DHS E-Verify program. This is an on-line program that allows employers to verify that the name and social security number provided by an employee are valid.6 Employers considering E-Verify must carefully weigh the pros and cons of the system. Its advantages include the fact that E-Verify: (1) permits the employer to verify the name and social security number of new employees in most cases; (2) should eliminate Social Security "No Match" letters; (3) should improve wage and tax reporting accuracy; (4) will facilitate operating in certain states or seeking federal or state government contracts; and (5) will enable employers to secure 17-month OPT extensions for F-1 students with STEM degrees.

There also are several disadvantages to E-Verify. Employers may experience delays or even errors in employment verification; they must satisfy a number of additional requirements beyond the basic Form I-9 process; they must designate and train representatives to manage the E-Verify process; and they must allow the SSA and USCIS to perform periodic audits. In addition, employers participating in E-Verify do not obtain "Safe Harbor" protection from worksite enforcement. At most, they receive a presumption that the employer did not knowingly hire an unauthorized foreign national.

The USCIS encourages employers to enroll in E-Verify. The decision depends on the particular circumstances of each employer. In May 2008, the Government Accounting Office issued a report indicating that it will cost over $1 billion to update, maintain and administer the E-Verify program in the next several years. It remains to be seen whether Congress will fund the political rhetoric in this area.

Form I-9 Compliance and IMAGE. To further prevent the employment of undocumented workers, DHS rolled out the ICE Mutual Agreement between Government and Employers (IMAGE) program in 2006. Employers who enroll in IMAGE must execute a Memorandum of Understanding with DHS in which the employer agrees to allow ICE and USCIS to provide education and training on proper Form I-9 and other hiring procedures, fraudulent document detection, use of the E-Verify Program and relevant anti-discrimination procedures. These employers also must agree to submit to an audit by ICE of the employer's Form I-9s and related policies and procedures to ensure the accuracy of their documents and verify the Social Security numbers of the existing labor forces. Finally, employers participating in IMAGE must agree to adhere to a series of "best" compliance practices.7

While many of these "best practices" might not fit the operations of most employers, there are several that make sense and are relatively easy to implement. These include adopting, implementing and following standard corporate practices relating to Form I-9 completion and storage, using the E-Verify system, periodic internal and external audits of Form I-9s, training of all corporate personnel involved in completing Form I-9s, adopting uniform procedures for handling "No-Match" letters (NMLs) received from the Social Security Administration (SSA), developing policies and procedures for ensuring that contractors and vendors to the company do not employ undocumented workers, and providing a means for employees and others to complain if they suspect that the company employs an undocumented worker.

While the IMAGE program may contain other requirements that make it unsuitable for most employers, its "Best Practices" deserve serious attention by organizations that seek to comply with the laws governing worksite enforcement.

Compliance with all the IMAGE requirements allows the employer to become "IMAGE Certified," a mark of agency approval that ICE hopes will become an industry standard. ICE represents that employers who voluntarily sign up for IMAGE will receive appropriate consideration in the event of an investigation that might result in a civil fine or criminal prosecution. Until the government offers immunity from ICE investigations, civil fines or criminal prosecution for organizations seeking IMAGE certification, we seriously question whether employers will enroll in this program given the attendant risks.

Social Security No Match Rule. One of the IMAGE "best practices" requires employers to establish a protocol for responding to NMLs received from the SSA. The NML is a correspondence from the SSA that advises an employer that the name and social security number provided by the employer do not match what appears in the SSA database. There can be many reasons for this discrepancy including human error and a recent change of name following a marriage. For this reason, the SSA advises all NML recipients that these letters, by themselves, provide no basis for taking any employment action against the employee.

DHS and ICE have long noticed a correlation between the volume of NMLs received by an employer and the corresponding number of undocumented workers at the worksite. To these agencies, this correlation amounted to constructive knowledge by the employer that the employee affected by the NML might not be authorized to work. At the same time, these agencies were aware of the caution issued by SSA against overreacting to these letters. Anxious to address concerns about the prevalence of these NMLs in worksite enforcement actions, DHS and ICE issued a final rule in August 2007 that outlined "safe harbor" procedures that insulated employers from criminal prosecution for Form I-9 violations provided the employer followed the safe harbor procedures.

Under this new rule, an employer who received an NML had 30 days to determine whether the Social Security mismatches resulted from errors on their part. If not, the rule gave the subject employees 60 days to resolve the discrepancy with the SSA. If the discrepancy cannot be resolved within this 90-day period, the employer then must re-verify the Form I-9 of the employee subject to certain limitations.

The new rule was extremely controversial. On Sept. 14, 2007, implementation of the new rule was enjoined by the U.S. District Court for the Northern District of California based on a lawsuit filed by the AFL-CIO and the American Civil Liberties Union arguing that only Congress, not DHS, has the legal authority to implement this rule. The injunction remains in effect, and the government has appealed to the U.S. Court of Appeals for the Ninth Circuit. In the meantime, the government published another proposed safe harbor rule on March 21, 2008. In this new rule, DHS hopes that it has addressed all the issues raised by federal district court that blocked the original safe harbor rule and enjoined the SSA from sending no-match letters to employers.

States' Role in Enforcement

ICE's immigration investigations are not dependent solely on that agency. The year 2007 saw an unprecedented level of collaboration with U.S. attorney's offices around the country as well as other federal, state and local law enforcement agencies. At the same time, the states became much more active in addressing what they see as the problem of illegal immigration.

Fueled by frustration over the federal government's inability to pass comprehensive immigration reform, 20 states have successfully enacted employment-related immigration laws - Arkansas, Arizona, Colorado, Georgia, Hawaii, Kansas, Kentucky, Maine, Minnesota, Mississippi, Montana, New Mexico, Nevada, Oklahoma, Oregon, Tennessee, Texas, Utah, Virginia, and West Virginia. Most of this legislation, in some form, requires employers to use the USCIS E-Verify system to verify a new hire's identity and employment eligibility. Many of these laws, such as the one in Colorado, mandate that organizations use E-Verify if they want to do business with the state.8

The Colorado law was the first and has served as a prototype for later state legislation. Colorado's HB 1343, prohibits state agencies from contracting with companies that knowingly employ illegal immigrants, requires a prospective state contractor to use E-Verify to check the legal work status of all employees, and mandates that state contractors advise the relevant state agency within three days if they discover that an illegal alien has been employed. Colorado also passed HB 1017 which requires Colorado employers to examine the work status of each new employee within 20 days of hire and to retain proof that employees have legal work status. This law supplements the employer's Form I-9 obligations under federal law.

Conclusion

This increasingly complex immigration environment places a premium on organizational compliance. Employers should develop a comprehensive and consistent approach to the recruitment, employment and termination of foreign nationals including the specific immigration-related questions that the employer should ask all applicants and a due diligence checklist that will identify those areas of organizational concern as far as immigration compliance goes. These steps are critical if employers hope to manage their work force in a manner that allows them to recruit the right staff in a nondiscriminatory manner and still avoid criminal prosecution and civil penalties for immigration violations.

Robert S. Groban, Jr. is a partner in Epstein Becker & Green, resident in the New York office, and chair of the firm's national immigration law group. Catherine Silie and Parisa Salimi are associates of the firm in the New York office and assisted substantially in the preparation of this article.

Endnotes:

1. See CRS Report for Congress, Foreign Students in the United States: Policies and Legislation, Updated Oct. 11, 2006.

2. Recently, the Department of Homeland Security (DHS) published new interim regulations that will enable most STEM degree holders who are not selected for the H-1B quota to remain here for an additional 17 months of OPT if their employers register in the E-Verify program. This new regulation, however, does not address the problems encountered by those employers who do not wish to register in E-Verify or who do not want to assume the additional administrative burden associated with employing these foreign nationals.

3. See e.g., Fiallo v. Bell, 430 U.S. 787 (1977) and Kleindienst v Mandel, 408 U.S. 753 (1972).

4. An impermissible discrimination based on national origin in this context means a decision not to hire Indians based on their nationality, not an assessment that they cannot be hired for quota reasons.

5. Immigration and Nationality Act §274(b)(1).

6. E-Verify will not assist an employer to identify instances of identity theft where the new employee presents a name and social security number that match but have been stolen.

7. The list of IMAGE best practices can be found at: http://www.ice.gov/partners/opaimage/.

8. See Colorado HB 1343 which imposes an employment verification requirement upon persons who have a public contract for services with state or political subdivisions.