California employers likely know their obligation to verify the employability of their newly hired workers through the federal I-9 process, to prevent the employment of undocumented workers. Under this process, employees present documentation establishing eligibility to work, and proof of identity. Federal regulations specify which documents are sufficient to establish each of these requirements. The employer reviews these documents to make sure they appear reasonably genuine. The employer and employee complete a Form I-9 documenting this process. The employer is responsible for ensuring that the I-9 verification paperwork is completed timely and correctly, and for maintaining these records and making them available for inspection upon request.

While this standard I-9 verification process may be all that is required for most employers under federal immigration law, some states have begun to impose additional measures aimed at stemming the illegal employment of undocumented workers. Specifically, with increasing frequency states are adopting an online voluntary federal program “E-Verify” and requiring employers to use it.

The United States Supreme Court recently rejected a challenge to an Arizona law requiring the use of E-Verify by all Arizona employers. The ruling will likely result in more states adopting similar measures. Even if not required, California employers may wish to consider voluntarily enrolling in the E-Verify program as an additional safeguard in the prevention of illegal hiring practices. However, agreeing to E-Verify is not without risk, so careful consideration must be given before making this decision.

What is “E-Verify?”

E-Verify is a free, Internet-based system operated by the Social Security Administration (“SSA”) and the Department of Homeland Security (“DHS”). It allows participating employers to electronically verify their employees’ identity and employment eligibility. Created by the Illegal Immigration Reform and Immigration Responsibility Act of 1996 (“IIRIRA”), E-Verify works by comparing information from an employee’ Form I-9 with information contained in SSA and DHS databases. After an employer collects the employee’s Form I-9 information, the employer enters that information into E-Verify, which compares that information against millions of government records before returning a result.

In most cases, E-Verify will register a “match” and verify the employee’s work authorization. However, if the information does not match the government’s records, the employer receives a “tentative nonconfirmation” response. The employer is required to inform the employee of the right to contest the result. The employee must then be given eight government workdays to visit an SSA office or call the DHS to attempt to resolve the discrepancy. E-Verify prohibits taking any action against the employee during the period of time. Only if the worker does not timely contest the tentative nonconfirmation, or if the SSA or DHS are unable to resolve the discrepancy, may an employer terminate the worker’s employment.

Employers wishing to use E-Verify must register in the program on the DHS’s website. As part of the registration process, the employer completes a Memorandum of Understanding (“MOU”), agreeing to follow the program’s rules. The program’s rules include providing specific training to the employer representative who will be performing the employment verification queries, prominently posting DHS-supplied E-Verify notices in the workplace, and limiting E-Verify to its designated use. Specifically, E-Verify may only be used to check an employee’s work authorization after he or she accepts an offer of employment and after completion of the employee’s Form I-9. In other words, employer cannot use E-Verify to pre-screen job applicants. Generally speaking, E-Verify can also not be used to check current employee’s employment authorization.

It is important to remember that E-Verify does not replace the Form I-9 process. By law, an employer must still request and review the employee’s proffered documentation and complete Form I-9s in a timely fashion generally, within three business days of the start of employment. Likewise, E-Verify does not exempt an employer from its obligation to maintain records confirming the work eligibility status of its employees, and to make those records available for inspection.

Though all employers must verify their employees’ employment eligibility through a Form I-9, for most employers, participation in E-Verify is voluntary although this may be changing.

Who Must Use E-Verify?

According to the federal government, more than 238,000 employers nationwide currently use the E-Verify system. Who are they? For starters, all federal agencies are required to use E-Verify for new hires. As of September 2009, certain federal contractors and subcontractors are required to use E-Verify to confirm the employment eligibility for all employees working on federal contracts. Legislation is currently pending before Congress (H.R. 282) to require that E-Verify be used for the entire workforce of the federal contractor or subcontractor, and not just for those individuals working on the fulfillment of a qualifying contract.

As stated, several states have passed laws requiring that some or all employers within the state use E-Verify to screen new employees. Arizona, Mississippi, and South Carolina require virtually all employers to use the E-Verify system to verify the work authorization for all newly hired workers. Several other states, including Colorado, Georgia, Indiana, Missouri and Oklahoma, mandate E-Verify participation for state contractors and subcontractors. Alabama requires employers to use E-Verify beginning January 1, 2012. Tennessee is phasing in the requirement, also beginning January 1, 2012. It will be fully implemented by 2013.

Currently, California has no statewide E-Verify law. However, as of January 2010, private businesses operating in Lancaster, California are required to use E-Verify for all new hires. Several Southern California cities have followed suit. Seeking to curb this trend, a current state legislative bill (A.B. 1236) attempts to prohibit California state or local governments from requiring non-government employers to use E-verify, except when required by federal law or as a condition of receiving federal funds. Unless and until this passes, however, employers must be attuned to their local requirements, and whether they require E-Verify.

Chamber of Commerce v. Whiting

The United States Supreme Court in Chamber of Commerce v. Whiting, confirmed states’ rights to impose E-Verify requirements on employers within their boundaries. On May 26, 2011, the Court upheld the Legal Arizona Workers Act (“LAWA”), an Arizona law requiring that penalized employers for employing illegal workers and required all Arizona employers use E-Verify.

Under LAWA, Arizona employers who knowingly or intentionally hire undocumented workers may have their business licenses suspended or revoked, depending on the culpability and frequency of the employer’s unlawful conduct. To help forestall illegal hiring practices, LAWA also mandates that all Arizona employers use E-Verify.

Following its passage in 2007, both businesses and civil rights groups challenged LAWA on several constitutional grounds. Specifically, they argued that federal immigration law preempted the LAWA provisions calling for the suspension and revocation of business licenses, as well as the required use of E-Verify. The federal district court rejected these arguments, concluding that LAWA was constitutional. The Ninth Circuit Court of Appeals subsequently affirmed this decision on appeal.

A 5-3 majority of the Supreme Court affirmed. The Court noted that the federal Immigration Reform and Control Act (“IRCA”) generally prohibits states from imposing “civil or criminal sanctions” on employers who employ undocumented workers. However, IRCA specifically allows states to impose such sanctions “through licensing and similar laws.” The Court held that LAWA’s license suspension and revocation provisions fell squarely within this “licensing and similar laws” exception, and were therefore not preempted.

As for LAWA’s E-Verify requirement, the Court likewise held it did not conflict with the federal scheme. On the contrary, the Court found that the two statutes were wholly consistent insofar as the consequences of failing to use E-Verify under both were the same -the employer forfeits an otherwise available “good faith” defense that it complied with the law prohibiting the employment of unauthorized workers. The court likewise reasoned that the federal statute setting up E-Verify, IIRIRA, contains no language limiting statesäó» abilities to regulate its use.

What the Whiting Decision Means

Employers with operations in Arizona, or any of the other states specifically requiring E-Verify, must immediately enroll in E-Verify (if not already enrolled) and consistently use it to confirm the employment eligibility for all new hires.

Moreover, it is likely that other states will now look to pass new legislation in the immigration/employment arena. Whether California follows suit by adopting legislation mandating the use of E-Verify, suspending or revoking violating employer’s business licenses, or creating new enforcement mechanisms altogether, remains to be seen.

In the interim, California employers should consider the potential benefits and risks of voluntarily enrolling in E-Verify now. As for advantages, in conjunction with an effective I-9 process, E-Verify provides a no-cost, relatively quick additional protection against the employment of undocumented workers. An employer that confirms the employment eligibility of a worker through E-Verify may benefit from a rebuttable presumption that it has operated in “good faith” and has not “knowingly” hired or continued to employ an unauthorized worker. From a public relations perspective, participating in E-Verify may boost an employer’s reputation as one who “plays by the rules,” and may dissuade undocumented workers from applying for employment.

However, with these potential benefits, also comes additional burdens and potential risks. As noted, employers must agree to abide by E-Verify’s numerous rules and terms as set forth in the MOU, including permitting the DHS to conduct compliance audits of the employer’s I-9s and E-Verification processes. Failing to follow these rules could create civil liability and result in monetary penalties for the employer.

E-Verify also adds “another step” in the I-9 process of verifying the work eligibility for all new hires, and thus creates additional work for human resources. Finally, with information comes responsibility. Just as E-Verify can help establish an employer’s compliance with immigration laws, it can likewise create a presumption of non-compliance, where an employer continues to employ someone after learning of an unreconciled issue with that individual’s work eligibility documentation.

What Employers Should Do

Immigration-related employment issues continue to be a “hot button topic” for employers. To avoid potential liability, employers must take these issues seriously and should implement the following steps to ensure their continued compliance with applicable laws:

  • Conduct an internal self-audit of your employment verification procedures, including your Form I-9 process. A handbook discussing proper Form I-9 procedures can be downloaded from the U.S. Citizenship and Immigration Services’ website at: http://www.uscis.gov/files/form/m-274.pdf.

  • If errors or omissions are discovered, promptly remedy any such oversights. In some instances, it may be necessary to consult competent employment or immigration counsel for advice on how best to handle these situations.

  • Know the state requirements regarding E-Verify. Employers operating in a state requiring E-Verify should take steps to enroll immediately. The consequences of non-compliance can range from inclusion on a “shaming” list posted on the Internet, to loss of the right to do business in a state. That is because states audit whether employers employ undocumented workers and E-Verify provides a good faith defense in case the government agency finds an undocumented worker is employed.

  • Employers that enroll in E-Verify must become aware of the legal obligations under the MOU.

  • Take steps to terminate the employment of unlawfully employed workers. However, do not do so prematurely. Errors in the information provided by the SSA and DHS do occur, and E-Verify and other immigration rules require that employees be given time to reconcile “mismatches” prior to their discharge.
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