Infosys Limited’s recent $34 million settlement with the U.S. Government resolved the threat of criminal charges against the company based on allegations of visa fraud. For our commentary on the False Claims Act allegations in the Government’s complaint click here. During the course of the investigation, U.S. Immigration and Customs Enforcement (ICE) audited the company’s Form I-9 files and reported that more than 80% of the company’s Forms I-9 contained “substantive” errors meriting civil money penalties. Using the company’s reported U.S. headcount and turnover rate, this translates to roughly over 13,500 violations and total potential civil money penalties of over $12.6 M at a base penalty rate of $935 per violation according to the ICE fine-setting matrix.
Over the course of the two-year investigation, Infosys voluntarily made a substantial investment in a new electronic Form I-9 compliance system and companywide Form I-9 compliance training in an effort to demonstrate its commitment to immigration compliance. Further, as a condition of settlement, Infosys agreed to hire an independent monitor at its expense to audit 4% the company’s I-9 forms annually and file I-9 compliance reports with ICE for two years, and to subject itself to unannounced reviews by ICE auditors.
Prior to the Infosys investigation, business and computer consulting companies like Infosys have not been targeted by ICE for Form I-9 audits. However, this is likely to change now that ICE has discovered that this industry is susceptible to Form I-9 violations, and the complexities of the Form I-9 recordkeeping rules relating to foreign temporary workers in the F-1, H-1B and L-1 categories, together with the rules governing workers brought on through mergers and acquisitions, virtually ensure that the government will find violations should it audit such firms.
Traditionally, the following I-9 substantive compliance errors are prevalent among H-1B dependent consulting and outsourcing businesses and expose such employers to sizeable civil money penalties:
1. Failure to use the proper I-9 Form. USCIS periodically issues a new version of the Form I-9. USCIS issued a revised Form I-9 on March 8, 2013, and mandated its use for employment verification purposes beginning May 7, 2013. The new version of the I-9 is two pages in length and has been substantially reconfigured from prior versions. New versions of the Form I-9 can be located at USCIS webpage I-9 Central. Employers should review this website to ensure that they are using the correct Form I-9.
2. Completing Forms I-9 for foreign workers not authorized to work in the United States pursuant to their visa status or otherwise. It is not unusual to encounter Forms I-9 that were completed by H-4 dependents and other temporary visa holders who are not authorized to work in the United States for the subject employer. Such a practice is deemed a knowing hire violation.
3. Failure to ensure that an employee fully completes Section 1 no later than the first day of active employment. As a result of recent administrative and judicial decisions, the substantive nature of Section 1 timing errors is now firmly established. Companies that employ newly arriving foreign temporary workers face particular challenges meeting this requirement as such workers have experienced delays in obtaining the I-94 Admission Number required for Section 1 of the Form I-9.
4. Employer Completion of Section 1 of the I-9. Whether for administrative convenience or efficiency, employers are completing Section 1 of their Forms I-9 themselves and merely presenting the completed Forms to their employees for their signature. USCIS rules prohibit this practice. Instead, if an employee requires assistance in completing Section 1, the individual who assists the employee in completing the Form I-9 must complete the Preparer/Translator Certification; notably, however, this assistance does not relieve the employee of his or her obligation to sign (or mark) and date the Section 1 attestation.
5. Failure to review the employee’s Section 2 verification documents in the presence of the employee. Although remote hiring is prevalent in the consulting industry, Form I-9 rules require in-person examination of all employee verification documents by the employer’s representative while the employee is physically present. Reviewing electronic copies of the employee’s verification documents is never acceptable.
6. Failure to record properly all required document verification information under Section 2. The document recordation requirements for foreign temporary workers vary depending upon visa category (e.g., H-1B vs. F-1/OPT), eligibility for an automatic 240-day work authorization extension (authorizing continuing employment with the same employer pending approval of the sponsor’s I-129 extension petition), AC-21 porting eligibility (for in-country H-1B workers changing employers while still in status with the prior employer), STEM extension status (for F-1/OPT students with a degree in science, technology, engineering or mathematics), and CAP-Gap extension eligibility (for F-1 students changing status to H-1B status effective October 1 of the year in which the H-1B petition is filed). Not all of the recordkeeping requirements for these varying situations are described in the instructions accompanying the Form I-9, for example, the proper way for the new employer of a porting H-1B worker to complete Section 2, List A pending approval of the employer’s I-129 petition. An experienced auditor can assist an employer in correcting improperly completed forms and ensuring that they are properly updated.
7. Failure to record the correct date of hire in Section 2 of the Form – corresponding with the date of hire reflected in the employer’s payroll records. The date of hire recorded in Section 2 is material to determining whether Sections 1 and 2 were completed in a timely manner. To avoid creating unnecessary liability for timeliness violations, all I-9 hire dates should be verified.
8. Failure to timely complete Section 3 of the Form I-9. Employees working pursuant to time-limited Department of Homeland Security (DHS) work authorization documents such as, for example, Employment Authorization Documents (i.e. work cards) are not permitted to work beyond the designated authorization date (subject to the 240-day extension exception for continuing H-1B workers and the STEM and Cap-Gap extensions available for qualifying F-1 students). Further, even if an employer has received USCIS approval to employ or continue to employ a temporary foreign worker, the employer must complete Section 3 of the employee’s Form I-9 prior to the expiration of the employee’s work authorization in Section 2. If an employer fails to do so, it is deemed a substantive I-9 violation.
9. Acquiring a new company and failing to ensure that the Forms I-9 of all employees of the acquired company are in compliance with Form I-9 regulations before the employees start employment for the acquiring company. USCIS rules permit an employer to place the employees of a newly acquired company on its payroll as of the closing date of the transaction, provided that the Forms I-9 of such workers reflect that they are legally authorized to work for the new employer. As a general rule, it is a best practice to complete new Forms I-9 prior to the closing date for all individuals who will be absorbed in the acquisition.
10. Failing to terminate employees upon the expiration of approved work status. Permitting an employee to work beyond the last day of DHS authorized work status constitutes the “knowing employment” of an unauthorized worker. Where visa status has lapsed, an employer is not permitted to retain or otherwise continue to pay an employee – regardless of the employee’s importance to fulfilling contractual commitments.
In budgeting for compliance spending in 2014, consulting firms that are dependent on a U.S. workforce of temporary foreign workers would be well advised to invest in a confidential Form I-9 compliance audit to assess the weaknesses in their compliance systems and initiate corrective action before being served with a 3-day notice of inspection by ICE. Making such an investment could save a company millions of dollars in fines and penalties for paperwork violations.