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Immigration Due Diligence: Costly To Ignore, But Not To Implement

by Robert A. McGraw

In early May Overhill Farms, a large frozen food company in the suburbs of Los Angeles, found itself on the bleeding edge of immigration law enforcement. It was notified by the Internal Revenue Service that an audit had uncovered that one-fourth of its 1,000 employees had discrepancies in their Social Security records that turned out to be unresolvable, exposing their status as illegal immigrants. The company had little choice but to let the workers go in one fell swoop. Overhill quickly found replacement workers, but the episode was traumatic for management and workers alike, as it came with little warning.

Such "desktop raids," as one observer has called them, are one key aspect of a new approach to immigration law enforcement in the workplace taking hold nationwide. This new strategy, which has been articulated forcefully by senior Obama administration officials, is centered on holding the employer responsible, and potentially criminally liable, for maintaining a legal work force. In addition, a complicated patchwork of state and local laws and regulations is emerging that in some place surpasses federal efforts. Companies with operations in more than one jurisdiction may be subject to different requirements in each location.

What can employers expect from the new administration in terms of workplace enforcement? What are the trends in state and local regulation? This article surveys some of the more important recent developments in regulation of the hiring process to prevent illegal employment and suggests steps employers can take to balance due diligence with respect for the rights of their workers.

One of the top priorities for the Obama administration's immigration team was to implement a new workplace enforcement strategy. Critical of prior efforts that resulted in large numbers of worker arrests, the new leadership is aiming at employers. "We are going to focus more attention on investigating and prosecuting employers, rather than starting out with simply focusing on the workers themselves," said new ICE assistant secretary John Morton in a recently published interview. "We have too many people knowingly hiring individuals who are not in this country lawfully." Morton is also reviewing current statutes and penalties to see if they can be revised to facilitate prosecutions of employers for knowingly hiring illegal workers.

In May, top ICE managers issued new guidelines for enforcement operations. They state that in general, ICE agents may no longer arrest illegal aliens at the worksite without first developing a case against the worker's employer. They encourage ICE field offices to work with the U.S. Attorney to prosecute this employer. In addition, ICE will be offering work permits to illegal aliens who agree to help build the case against their boss.

ICE field offices have already adapted, with the focus of investigations shifting seemingly overnight. In February of this year, a Bellingham, Washington engine manufacturing company was raided when agents became aware that criminal gang members had been on the payroll. Twenty-eight of 100 workers were initially arrested, and early reports indicated that the employers were cooperating with ICE. Within weeks the case took a turn, as temporary visas were issued to the illegal workers in exchange for their cooperation in the investigation that is now focused on the employer. A similar prosecution is reportedly shaping up in Hawaii, where the U.S. Attorney is bringing a case against a stunned employer, drawing up charges based on an earlier enforcement operation in which several workers were arrested.

Even as the hammer may be dropping on some employers caught off guard, the Obama administration has also indicated its strong support for E-Verify, the electronic verification program that helps employers avoid hiring illegal workers to begin with. DHS Secretary Janet Napolitano has asked Congress for $112 million in funding for E-Verify next year, and has pledged to continue improving its accuracy, efficiency, and scope. This will include expansion of the photo tool enhancement, which enables HR staff to detect imposters using stolen or purchased bonafide documents.

Most of the state regulatory efforts are centered on expanding enrollment in E-Verify. Mandating verification for all or some employers is one of the few tools available to state and local governments to establish a legal work environment in their jurisdiction. Recent court decisions upholding the urgency and constitutionality of these laws in Arizona, Missouri, and Rhode Island have emboldened other jurisdictions to follow.

"We are seeing an unprecedented level of activity at the state and local level to prod companies into compliance with immigration laws and to crack down on identity theft and document fraud," says Jessica Vaughan, director of policy studies at the Center for Immigration Studies, a respected research institute in Washington, DC. "Employers are going to have to be on their toes and take steps to clean up their hiring process if they hope to avoid staffing problems, sanctions, debarment, or in the worst case, prosecution. Not only federal immigration authorities, but also state governments are focusing their attention on the employers, and only secondarily on the workers."

Vaughan recently testified at a hearing in the Pennsylvania state capitol on two bills being pushed by the state's construction and building trade unions. They would require all companies in that sector and all beneficiaries of public works contracts to use E-Verify and the Social Security Number Verification Service, a Social Security-administered program to verify wage records, or potentially lose their ability to do business in the state. In addition, the bills direct the state labor department to conduct both random and complaint-driven audits of companies' hiring records - the kind of audit that, if employers have not done their due diligence, could have results like the Overhill Farms audit.

The Pennsylvania bills are just the latest attempts to crack down on illegal hiring. Fourteen other states have passed laws imposing requirements on employers to check their workers. Other jurisdictions, like Massachusetts and Rowen County, North Carolina are requiring employers to file attestations that they are using E-Verify or that they have not hired illegal workers, leaving them subject to contract termination, fines or even possible perjury charges if illegal workers are later discovered.

Some governments are addressing the problem by aggressively targeting identity theft and document fraud. For example, a group of county sheriffs in the Florida panhandle teamed up to conduct inspections of the personnel records at businesses they suspected of illegal hiring, based on tips from the community. Surprise inspections at the first two dozen companies resulted in 27 employee arrests for identity theft. The outcome has been similar in Beaufort County, South Carolina. Last year, the county hired outside auditors to inspect business records on a random basis. Over the period August to December, 2008 an astonishing two-thirds of the I-9s they inspected were non-compliant with federal law. Some of the deficiencies were minor, but others resulted in employee terminations, and prosecutions are in progress.

According to former SHRM executive Dr. Ronald Mortensen, a researcher who has studied identity theft nationwide, "Few illegal alien workers are undocumented. Nearly all use Social Security numbers that do not belong to them, fake green cards, or phony birth certificates and then falsify their I-9 forms. Most human resources personnel are not equipped to detect this fraud, and their failure to make use of the various tools that are available to help screen workers results in millions of Americans becoming victims of job related identity theft."

What steps should employers take to minimize their exposure to this problem? First, human resources personnel must be aware of the federal paperwork requirements, including the I-9 form and acceptable forms of documentation for work eligibility. To avoid being fooled by false documents, a growing number of employers have also enrolled in the two federal verification programs. More than 120,000 companies nationwide have enrolled in E-Verify, with another 1,000 joining every month. According to USCIS, the agency that runs the program, today about 14 percent of new hires are confirmed through E-Verify. The system is amazingly accurate - 99.6 percent of eligible workers are cleared without a problem - and users give it high marks for efficiency.

E-verify is an excellent tool for screening new hires, but what about workers who are already on the payroll? This is a tougher problem. One option is to conduct periodic checks on the information in wage reports using SSNVS. This automated system matches the SSNs of your employees with the information on file at the Social Security agency. Not only will it catch any instances of bogus numbers, whether by illegal workers or others trying to mask their identity, it will also uncover data entry errors. A recent audit of North Carolina public employers found that half the mis-matches in the system were due to data entry errors made by the payroll office. Catching these errors early protects your workers from potential problems down the line and helps ensure the integrity of the entire Social Security system. However, to avoid violating workers' rights and accusations of discriminatory practices, employers must be careful to take proper steps, including giving employees a chance to correct any problems before taking adverse action.

As helpful as they are, automated systems are no substitute for human attention. Human resources personnel today need to be aware of all the possible vulnerabilities in their hiring process and how to minimize them. They also need to make sure that any problems are resolved fairly and appropriately.

To navigate this tightrope, a growing number of employers are turning to experienced consultants who specialize in immigration-related employment issues. Eight years after 9/11, many in the business community still have only minimal baseline knowledge of immigration law. Understandably, many employers automatically turn to immigration law firms, most of which have vast experience in helping immigrants. Few are aware that there also exists a handful of firms comprised of veteran immigration agents who understand both the immigration law and ICE, the agency that enforces that law. These consultants still have professional contacts with the current ICE managers, and thus understand better than most how to satisfy the enforcement objectives of ICE for this politically charged mission. Their services are usually offered at rates that are highly competitive with law firms.

These consultants fully understand how to balance employers' regulatory obligations with the rights of their workers. They will conduct a top-to-bottom review of company procedures, including relationships with contractors. They will identify weak spots and train HR staff in how to use verification systems, how to spot fraud, and how to address discrepancies. In addition, they can audit personnel records to identify any problems so that they can be dealt with before they come to the attention of government agencies.

Maintaining a legal workforce is important for some obvious reasons - to protect your company from enforcement action and to avoid the negative publicity and business disruption that accompanies it. But the best reason, as those who have devoted time, attention and resources to this goal know, is that it helps your company flourish. Says Gary Jacobson, President of the Indiana Packers Corporation, a successful mid-western meat processing company that has bucked industry trends by managing to grow its sales and profits over the years without relying on illegal labor, "We do it, not because we are afraid of ICE, or because we have to. It's just the right business decision. A legal workforce is a stable workforce. They come to work daily without fear. Our workers and our customers know that we respect the law, we compensate and train our employees well, and they contribute to the local community. It's a major reason for our success as a company." Jacobson's company is helping lead that industry away from practices that attract illegal workers. As governments at all levels flirt with ever more punitive laws and regulations, other corporate leaders should follow his example, and take control of their hiring process on their own schedule and in accordance with the company's best interest.

About The Author

Robert A. McGraw is a retired immigration law enforcement agent, and President of Omega Secure Solutions (, a national immigration and workplace compliance services consulting firm based in Annapolis, Maryland. He can be reached at

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.