Immigration Worksite Enforcement Alert

Date: Dec 16, 2009

Lessons Learned from a Recent I-9 Audit: I-9 Outsourcing Contracts Should Be Carefully Negotiated to Ensure Proper Service and Indemnification In recent years some employers have opted to outsource the I-9 function, believing that the investment would substantially limit or eliminate exposure to fines for knowing hire, continuing to employ and paperwork violations under the Immigration Reform and Control Act of 1986 (IRCA). As a result of the recent round of ICE audits, some major employers have discovered that their I-9 outsourcing contracts provided less than optimal protection when they needed it the most. For example, one employer with a regular workforce of more than 2,000 employees at a single worksite, received a Notice of Inspection (NOI) from U.S. Immigration and Customs Enforcement (ICE) on Wednesday, November 18, 2009, calling for inspection of the employer's I-9s on the third business day after the NOI service date. The NOI was accompanied by a request for the employer's current employee roster indicating dates of hire and social security account numbers, as well as a roster of terminated employees whose I-9s were subject to the retention rule, indicating social security numbers, hire and termination dates. When it received the NOI, the employer promptly contacted its I-9 contractor – which coincidentally also provided payroll services to the company – and requested immediate delivery of all electronic I-9s that the contractor had prepared and/or retained for the employer since the start date of the contract so that the employer's immigration enforcement defense counsel could review all documents prior to production to ICE. The contractor responded that it needed at least three (3) business days to produce the forms to the employer – which would have provided little or no time for review by counsel prior to production to government agents. Fortunately, the employer's counsel succeeded in obtaining a two-day extension for the production -- notwithstanding current ICE policy which discourages such grants. Counsel's inspection revealed that the contractor had improperly completed Section 2 of the I-9s relating to the employer's foreign temporary workers. Had the I-9s been produced to ICE as received from the vendor, the employer faced substantial civil money penalties due to these errors. Although the violations would have been classified as technical in nature had the vendor retained copies of the employee documentation – the vendor advised the client not to retain any documents. Fortunately, the employer's counsel was able to retrieve the missing information from secondary sources and properly and conspicuously correct the I-9s prior to production – thus eliminating this exposure. The employer otherwise assumed that its I-9 inventory prior to the outsourcing date was error-free based on the results of the internal audit conducted by the vendor at the time of transition. Unfortunately, the contractor had failed to verify that every active employee hired on and after the IRCA effective date – November 6, 1986 had an I-9 on file – a fact discovered by the employer's counsel when she compared the I-9 inventory against the control lists of active and terminated employees requested by ICE. ICE classifies the failure to present a required Form I-9 on the date of inspection as the most serious verification infraction of all and would have been fined the employer $1100 for each missing I-9. Fortunately, under the supervision of counsel, the damage was mitigated by preparation of I-9s for all current employees whose I-9s were missing. Carefully Review Vendor Contracts Any employer contemplating outsourcing its I-9 functions or renewing an existing outsourcing contract should insist that the following performance and indemnity terms be included for the protection of the employer: 1. The contract should require the contractor to produce the employer's I-9 documents to the employer or the employer's designated counsel, in original or electronic form, within 24 hours of notice by the employer of an impending ICE inspection, together with a alphabetical listing of all active and terminated employees covered by the employer's retention requirement, including social security numbers and dates of hire and termination. Further, the contractor should agree to comply with the same production schedule and requirements upon notice by the employer of the service of a complaint and request for statement of position and information made by the DOJ Office of Special Counsel for Immigration-Related Discrimination (OSC), the Equal Employment Opportunity Commissions (EEOC), or any state of local fair employment practice agency with jurisdiction over claims of discrimination based on race, national origin, ancestry, or citizenship status requiring review of the employer's I-9 forms and attached documents. 2. The contractor should guarantee that there is a properly completed I-9 for all employees hired by the employer during the contract term, and should indemnify and holds harmless the employer with respect to any civil money penalties or criminal fines levied against the employer as a result of the contractor's errors and omissions in completing, retaining and producing (within the time specified) I-9 forms for ICE inspection, including the employer's attorney's fees and costs. 3. The contractor should guarantee that any audit services performed by the contractor will include a report of missing I-9s relating to any current employee of the employer as of the date of the audit, as well as any terminated employees of the employer within the applicable retention period, and should indemnify and hold harmless the employer for any civil money penalties assessed as the result of the contractor's errors and omissions in the audit report. 4. The contract should specify that the decision to retain or not retain I-9 supporting documents for all or part of the workforce shall be made by the employer exclusively, which decision may be changed by the employer in its discretion at any time during the course of the contract upon 72 hours' notice. 5. The contractor should agree to notify the employer within 24 hours in the event of notice from the Social Security Administration or other federal, state or local agency that the social security account number provided by any employee of the employer for I-9 and/or payroll purposes (a) does not match information on file with the agency relating to the employee's name and date of birth; or (b) relates to a third party who has filed a claim of identity theft. Additionally, the contractor agrees to notify the employer within 24 hours in the event the contractor discovers that a social security account number is or has been claimed by multiple employees of the employer with respect to whom the contractor has prepared a Form I-9 and/or has provided payroll services. 6. The contractor should agree to notify the employer immediately in the event it rejects any identity or work eligibility document presented by an employee for I-9 purposes, and the employee otherwise is unable to satisfy the I-9 document verification requirements in the opinion of the contractor. In the event of an error or omission on the part of the contractor in rejecting a qualifying document presented by an employee for I-9 purposes, which results that results in a claim of wrongful termination or discrimination by the employee, the contractor should agree to indemnify and hold the employer harmless from any and all liability for back pay, damages, attorney's fees and costs that might be awarded to the employe, as well as the employer's attorney's fees and costs in connection with the defense of the action. Questions regarding ICE I-9 audits and fines should be directed to Manesh Rath, rath@khlaw.com.