LABOR & EMPLOYMENT NEWSLETTER - The Heightened Risk of Employing Undocumented Workers

In response to Congress’ failure to implement comprehensive national immigration reform, the Department of Homeland Security (“DHS”), Department of Justice (“DoJ”), and numerous state legislatures have turned up the heat on employers who hire undocumented, unauthorized workers. Effective March 27, 2008, the DoJ and DHS established new rules that increase the civil fines for hiring undocumented workers.¹ Similarly, individual state legislatures have begun passing more stringent reforms with more extreme penalties. As the number of state laws and administrative rules increases, so do the complexity of an employer’s obligation to verify an employee is legally authorized to work in the U.S. and the consequences for failing to do so. In attempting to comply, however, employers are forced to use verification tools and procedures set forth under the current regulatory scheme, which have proven unreliable and unpredictable.

Verification of Eligibility for Employment in the U.S.

The Immigration Reform and Control Act of 1986 (“IRCA”) prohibits employers from knowingly hiring or continuing to employ unauthorized aliens. The IRCA requires employers to verify the employment eligibility status of each newly-hired employee by completing and retaining DHS Form I-9.² New employees commonly present the employer with a Social Security card for purposes of completing the I-9, although other forms of documentation are acceptable.³ Once hired, employees and employers also submit the employees’ Social Security numbers to the government through IRS Forms W-4 and W-2, respectively, which are reported to the Social Security Administration (“SSA”). This reporting serves two primary purposes: (1) it enables the SSA to determine the employee’s entitlement to Social Security benefits upon retirement or other qualifying events and (2) it enables the SSA to determine whether the employee is, in fact, who he claims to be.

The “no-match” letter

Upon receipt of an employee’s information, the SSA attempts to “match” it with identifying information contained in federal databases. Those databases are not perfect and errors can arise due to mis-documented marriages, improper recording of hyphenated surnames, and other typographical errors. Notwithstanding, the SSA generally issues a “no match” letter to the employer when an employee’s name and social security number come back without a match to its system. Such “no match” letters arguably put the employer on notice that it may have hired an undocumented or unauthorized worker.

The scope of the employer’s responsibility in this situation has been a major point of contention over the past year. Recent revisions to section 274A of the Immigration and Nationality Act (the “Act”) require employers who receive “no match” letters to take reasonable action to determine whether or not the employee is authorized to work in the U.S.⁴ The implementing regulations provide a series of steps, sometimes referred to as “safe harbor” rules, that an employer should follow within a specified period of time after receiving a “no match” letter. If an employer does not comply with these rules, the employer is assumed to be “knowingly” violating the law and is subject to criminal and civil penalties. This means that employers must take a proactive approach to these “no match” letters and that they cannot leave it up to the involved employee to resolve any apparent discrepancy with the SSA.

The employer’s dilemma

Unfortunately, because the initial step in verifying a person’s employment eligibility through the SSA database has proven unreliable, employers may be forced to comply with the safe harbor rules with respect to individuals who are legally authorized to work. The employer must do so, however, to avoid imposition of criminal and/or civil penalties. Further, individuals who are authorized to work may be terminated from employment based solely on errors in the SSA database that the individual has little, if any, ability to correct within the time allowed to retain their job. As recently as October 2007, a U.S. district court recognized these concerns and entered a preliminary injunction to enjoin DHS from taking any action to implement a then new rule that would add the receipt of a “no match” letter as an event that may support a finding that an employer had constructive knowledge of an employee’s status as an unauthorized alien and requiring compliance with safe harbor rules upon receipt of a “no match” letter to avoid such a finding.⁵ This ruling highlights the unreliability of the process that employers must follow and the uncertainty they face in determining an appropriate course of action for responding to “no match” letters.

Increased penalties

An employer who violates section 274A of the Act is subject to criminal and civil penalties. Section 274a.10(a) of the Act provides that any person or entity who violates section 274A of the Act (1) shall be fined not more than $3,000 for each unauthorized alien, (2) imprisoned for not more than six months for the entire pattern or practice, or (3) possibly both.⁶ While the criminal penalties remain unchanged by the DoJ’s and DHS’s new rules, the civil penalties in section 274a.10(b) now have higher minimum and maximum fines for all violations occurring after March 27, 2008, as follows:

First-time offenders minimum $375 fine / maximum $3,200 fine
Two-time offenders minimum $3,200 fine / maximum $6,500 fine
More than two offenses minimum $4,300 fine / maximum $16,000 fine

Although the increased range of civil penalties for a section 274A violation may not seem particularly more burdensome than before, employers should note that the fines apply for each undocumented worker, regardless of whether the violation was intentional. Perhaps even more importantly, DHS and the DoJ are making the pursuit of violators a higher priority than they have in the past and jail time is a real possibility for repeat offenders. Employers must also recognize state legislation as a potential source of additional, burdensome penalties. For example, Arizona, Tennessee and West Virginia have enacted reforms to penalize violators with even higher fines than those set forth above, more jail time, and the potential revocation of business licenses.⁷

Conclusion

Penalties for employing undocumented workers are increasing on both federal and state levels, while employers continue to operate in a gray area due to unreliable verification tools and procedures. Federal lawmakers must work to increase reliability and accuracy in the issuance of “no match” letters and establish an unassailable set of safe harbor rules before employers can, in turn, establish reliable procedures to comply with current immigration laws. In the meantime, employers should be cognizant of the ever-increasing risks of hiring undocumented workers, whether intentionally or unwittingly.

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Randy Moshier, a summer associate in Strasburger's Houston office, contributed to this article.

¹ 8 C.F.R. §274a.10.

² See 8 U.S.C. 1324a(b).

³ See id.

⁴ 8 C.F.R. §274a.1(l)(1)(iii).

⁵ “As demonstrated by plaintiffs, the government’s proposal to disseminate no-match letters affecting more than eight million workers will, under the mandated time line, result in the termination of employment to lawfully employed workers. This is so because, as the government recognizes, the no-match letters are based on SSA records that include numerous errors. Moreover, the threat of criminal prosecution (under the guise of a safe-harbor provision), reinforced by a directive that the employer who receives a no-match letter must follow the safe harbor procedures or expose themselves to criminal and civil liability, reflects a major change in DHS policy.” See AFL v. Chertoff, No. C 07-04472 CRB, -- F.Supp.2d --, 2007 WL 2972952, *4 (N.D. Cal. Oct.10, 2007).

⁶ 8 C.F.R. §274a.10

⁷ See Ariz. Rev. Stat. §23-212 (2008); Tenn. Code Ann. §50-1-103 (2008); 2007 W.Va. Acts 144.