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Ethics Corner 

Tough Penalties for Failing to Comply With Immigration Rules 

2,013 

By Dorn McGrath, Martha Schoonover and Nataliya Binshteyn 



Since 2009, the E-Verify Federal Contractor Rule requires most U.S. government contractors and subcontractors to verify the employment eligibility of employees assigned to federal contracts, and all newly hired employees.

An earlier Ethics Corner (Nov. 2009) explained how the new Federal Acquisition Regulation E-Verify Rule would work. Since then, government contractors have used the Internet-based system, operated by the U.S. Citizenship and Immigration Services in cooperation with the Social Security Administration, to verify employee work authorization by electronically submitting the information contained on the Form I-9, Employment Eligibility Verification.

Experience has shown that there are several areas related to E-Verify that should be emphasized as part of every ethics and compliance program. All contractors must first decide whether to implement E-Verify for current employees assigned to government contracts only, or, alternatively, all existing company employees. At the same time, all newly hired federal contractor employees are subject to E-Verify.

Contractors often are subject to civil penalties for I-9 violations discovered during Immigration and Customs Enforcement (ICE) audits, and those that knowingly hire or continue to employ undocumented workers run the added risks of criminal sanctions and referral to a suspension or debarment official. In a statement underscoring its policy on debarments, ICE announced that “[b]y using debarment in appropriate circumstances, the federal government can avoid working with businesses that employ an illegal workforce and unscrupulously undercut their competitors to gain an unfair market advantage because of reduced labor costs.”

Contractors may also be suspended or debarred for violating the Immigration and Nationality Act. ICE suspension and debarment efforts primarily focus on employment violations related to the act, but contractors also may be debarred for fraud, antitrust violations, false statements and tax evasion.

An ethics and compliance program that effectively addresses immigration within an overall culture of compliance can go a long way in demonstrating to ICE that debarment is neither necessary nor appropriate. In such instances ICE may take no action, or it may enter an administrative agreement to specify corrective actions that allow a contractor to continue as a responsible government source of supplies or services. These agreements may require admission of misconduct, restitution, extensive management changes, compliance programs, training, audit and/or access to records.

Many states are following the federal government’s lead; nine states now mandate E-Verify for all employers, including those without federal contracts. Ten other states mandate E-Verify for state contractors. Information on the patchwork of state-based E-Verify laws can be found at www4.gtlaw.com/marketing/NAT/15020/map1.html.

All contractors should have well-established I-9 procedures. Contractors must ensure that new employees complete Section 1 and present a valid combination of original documents so that the contractor may fill out Section 2 as the employer. The E-Verify process then must be completed within three business days of the employee’s date of hire. Employers should keep a copy of the completed E-Verify query reports with the I-9, records and retain the I-9 for all active and terminated employees according to record retention rules.

Although I-9 supporting documents typically need not include an employee’s photo, all List B documents presented to a government contractor participating in E-Verify must include a photograph. An E-Verify query requires a Social Security number, even though including such information on the I-9 is voluntary. Finally, government contractors required to use E-Verify must obtain copies as part of the E-Verify process if an employee presents a U.S. Passport or Passport Card, a Permanent Resident Card (Form I-551), or an Employment Authorization Document (Form I-766).

I-9 compliance should be a focus in all due diligence reviews that accompany mergers or acquisitions. Some buyers elect to accept the seller’s I-9 forms, and assume responsibility for existing violations. Others opt to treat all seller employees as new hires and complete a new set of I-9 forms. A pre-close immigration compliance audit is critically important prior to accepting previously completed I-9 forms. The audit should at a minimum assess pre-existing I-9 compliance procedures, the history of immigration violations and audits, and a review of I-9 forms and payroll records.

The first step in an ICE enforcement proceeding is a Notice of Inspection giving a contractor three days notice in which to produce I-9 forms and associated documents such as payroll records. After completing its investigation and depending on the number, scope and type of violations confirmed, ICE will inform the employer of necessary I-9 corrections and evaluate the revised I-9 forms. Mitigating factors and remediation efforts may cause ICE to close the case with a warning notice reserving the right to re-inspect the employer’s I-9 forms within six months. Certain serious violations or a pattern of non-compliance may prompt ICE to issue a Notice of Intent to Fine.

Implementing a comprehensive ethics and compliance program is key, not only to avoid an ICE enforcement action, but also to resolve previously undetected issues. For the latest information on E-Verify and immigration compliance issues, see www.immigrationcomplianceblog.com.

Dorn McGrath (mcgrathd@gtlaw.com) is a Government Contracts shareholder; Martha Schoonover (schoonoverm@gtlaw.com) is a Business Immigration and Compliance shareholder and Nataliya Binshteyn (binshteynn@gtlaw.com) is an associate in the Business Immigration and Compliance practice group, with Greenberg Traurig, LLP. The views expressed are solely theirs.

Photo Credit: istockphoto

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