Over the past year, South Florida businesses reported an increase in Immigration
and Custom Enforcement (ICE) worksite enforcement activities, such as
Form I-9 inspections. Noncompliant employers risk civil and criminal penalties
of thousands of dollars per occurrence, depending on the nature of the
offense. This year, ICE levied its largest penalty in history for noncompliance
with the hiring requirements--$95 million.
During the hiring process, employers are required to complete Form I-9
for each person they seek to employ to ensure that the applicant is eligible
to accept employment in the U.S. The prospective employee and the employer
must complete and sign designated sections of the Form I-9, and the employee
must provide proof of identity and eligibility to accept employment. The
employer is required to retain the I-9 for a designated period. Despite
complying with these requirements, the employer can face substantial financial
costs related to an ICE inspection.
During an inspection, federal agents require the employer to produce not
only original Form I-9s, but payroll records, tax records, and other employee
records within three (3) days. As the documents requested can span more
than a year and include records of former employees, the document production
can be voluminous for a company with many employees that are paid weekly,
especially for companies in industries which experience high turnover
rates, such as construction, agriculture, lawn service, food service and
hospitality industries. Generally, the Form I-9 information must be provided
electronically in alphabetical order. In addition to gathering the documents,
a corporate employee must review and organize the documents as directed
by the ICE agents. All of this compliance work takes away from time administrative
or managerial staff could otherwise spend on productive business activities.
Costs Associated with Employee Replacement and Workforce Shortages
It is during this document gathering and review process that the employer
usually discovers that some of the I-9s are incomplete, expired or incorrect.
Special Agents from ICE will work with a forensic auditor to review the
Form I-9s for technical and substantive deficiencies. Technical deficiencies
can include incomplete or improperly completed documents. The employer
is given a deadline to correct the technical defects in the Form I-9s.
In most cases, the technical violations are corrected without much imposition
on the employer. Conversely, substantive violations present a significantly
greater cost for the employer. Substantive deficiencies often relate to
the eligibility of the employee to work for the company. Many times, the
government informs the employer that the employment or identification
documents are invalid. At that time, the employer must either reverify
the employee’s eligibility to work or fire the employee immediately.
Thus, despite following the legal requirements for hiring the employee,
the employer must bear the expenses of abruptly terminating the employee
and filling the position.
For an employer who has complied with the law but is found to be employing
ineligible workers, immediately terminating multiple staff members can
be devas tingly expensive. Studies report that each time an employer replaces
a salaried employee, it costs, on average, six to nine months of the employee’s
salary in recruitment and training costs. On the least expensive end of the spectrum, a low-wage, low-skill employee
can cost a company 16% of the employee’s annual salary to replace
him or her. The cost to the company increases as the skill and salary
of the employee to be replaced increases. On the high end, it can cost
more than twice the employee’s salary for a top-level employee making
more than $100,000 annually.
Beyond the expense of recruiting and training a new employee, the business
can suffer other negative financial effects of abruptly terminating one
or more employees. Workforce shortages can hamper the company’s
ability to meet service or production demands, limit its ability to accept
new business, cost the company accounts due to inadequate performance,
and more. The stigma that the company has hiring compliance violations
might cause other potential employees to shy away from open positions.
Moreover, in South Florida, the potential employee pool becomes significantly
smaller for several months each year, making new employees scarce.
Civil and Criminal Fines and Penalties
Employers are required to terminate ineligible employees immediately. Failure
to do so exposes the employer to civil and criminal penalties. Fines for
noncompliance are levied in accordance with a schedule and enhancement
matrix that weighs factors such as number of ineligible employees and
number of violations. Fines can be as little as $375 for a single occurrence
to tens of millions of dollars. Further, the government can pursue criminal
charges in appropriate cases. Thus, an employer faces serious penalties
if it retains the unauthorized worker, even temporarily.
In light of the costs and risks, employers should take steps to protect
their companies. Annual audits of Form I-9s can help an employer identify
and correct technical errors. An immigration attorney can help employers
identify documents that are potentially invalid. Employers should be mindful
of expiration dates of identification and employment authorization documents,
and require employees to renew these documents timely. Employers who are
comfortable with a direct government interface into their hiring practices
might consider using the Electronic Verification system (E-Verify). Regardless
of how an employer chooses to ensure compliance, the employer should take
steps to avoid the devastating corporate costs of losing employees due