Laying Down The Law

For building service contractors, compliance with employment laws and correct classification of employees are among the most important legal ducks to get in a row. Contract and service industries such as janitorial, health care, restaurants and construction are increasingly being targeted and tracked by federal agencies because of common worker misclassification violations.

Companies that neglect their hiring practices may find themselves under investigation, audited and facing fines from the U.S. Department of Labor (DOL), the Internal Revenue Service (IRS), the Department of Homeland Security (DHS) and/or Immigrations and Customs Enforcement (ICE). The DOL’s Wage and Hour Division, in its Strategic Plan for Fiscal Years 2011-2016, is targeting what it calls “fissured industries,” or those with varied organizational methods of employment including subcontracting, franchising and independent consulting — this includes contract cleaning.

“Knowing that the Department of Homeland Security is out there, I think that contractors are actually making a bit more of an effort to make sure their workforce really is legal,” says Perry Heidecker, senior counsel with Milman Labuda Law Group, PLLC in Lake Success, N.Y.

The best ways to avoid this scrutinized attention from federal agencies — and to know how to deal with it if it comes — are for human resources staff to learn how to screen identification and work authorization documents, and to conduct internal I-9 audits. Any BSC can be audited by federal agencies acting on tips, and the more a company has in order prior to any audit, the better the chance of receiving leniency on mistakes or discrepancies.

“The DHS has announced that this year it will conduct a minimum of no less than 2,100 I-9 audits, and given their priorities, a fair share of them will be in the building services industry,” Heidecker says. “So it is a realistic expectation.”

The importance of filling out the Form I-9 properly can’t be understated; from employee information such as name, date of birth, Social Security number and address, to immigration status, and from indicating documentation to including correct expiration and re-verification of hire dates, employers need to be accurate and consistent.

This is where a solid, knowledgeable human resources team comes into play; every building service contractor needs an expert staff that will keep up with legislative mandates and changes, prioritize training in how to correctly fill out necessary paperwork and screen new hires using the tools available to employers. Some BSCs have taken this commitment to a new level, partnering with ICE to ensure they’re applying best practices.

IMAGE, E-Verify

Porter Industries of Loveland, Colo., and Phoenix-based CBN Building Maintenance have both completed Immigration and Customs Enforcement’s IMAGE (ICE Mutual Agreement between Government and Employers) Certification, which assists employers with secure hiring through education and training.

The biggest benefit of the IMAGE certification, Croft says, was the classroom training his administrative team received in spotting fake IDs. An ICE agent taught them how to spot fake driver’s licenses, Social Security cards, passports, visas and work permits.

“It’s fairly easy to spot fakes if you know what to look for,” Croft says.

But most employers aren’t perfect, even when they’ve put a lot of effort into making sure their I-9s are up to snuff. ICE performed a no-harm, no-foul review of the I-9s CBN had — even after staff had combed through them — and still found a handful of minor errors, Croft says.

U.S. Citizenship and Immigration Service (USCIS), an agency within DHS, is responsible for the E-Verify employment eligibility verification program.

E-Verify, which has been available for voluntary use for years, is increasingly being required by state and local governments. While E-Verify can be helpful, it has also faced criticism that it is flawed — most recently in California, where legislation prohibiting municipal mandates to use the free online system was passed in October.

Croft compares E-Verify to a “get out of jail free card.”

“The problem with E-Verify is if you don’t check the ID properly, as long as the name and Social Security number I send to the feds match, they’re happy with it,” he says. “So if I haven’t checked to confirm that the guy using that ID is the guy it belongs to, I can have an illegal on my payroll and not know it and the feds don’t know it.”

Another advantage of IMAGE over E-Verify is that you can use the former to check the employment authorization of your current workforce, says Steve Hendrickson, vice president and chief business development officer for Porter Industries. In contrast, E-Verify can only be used on new hires.

“You cannot use E-Verify on your existing workforce — it’s against the law,” he says. “Through IMAGE, you legally can have your whole workforce looked at.”

On the flip side, employers also need to make sure they’re adhering to the Immigration and Nationality Act, which prohibits employers from discriminating based on citizenship or immigration status or based on national origin. This is all the more reason for BSCs to make sure their hiring practices are following the letter of the law.

“HR people need to be proactive because it’s not something they can learn unless they really pursue it,” Hendrickson says. “It’s not hard but it has to be done right.”

Knowing the form

Once a job is offered and documents check out, then an I-9 must be filled out.

“There needs to be a job offer first; you can’t use it as a screening tool to decide who you’re going to interview and who you’re not going to,” Hendrickson says.

The I-9 is a deceptively simple form that has proven difficult for many employers to correctly fill out — mainly because they aren’t trained on how to do it and don’t know that it’s illegal to fill it out incorrectly.

Ignorance of the law is no excuse, says Hendrickson.

“An employer has a responsibility to know how the law is and to follow it,” he says.

The Form I-9’s purpose is to document new citizen and noncitizen employees hired after Nov. 6, 1986 (when the Immigration Reform and Control Act of 1986, which sought to preserve legal immigration but stop illegal immigration, was passed). All employees working in the United States must fill one out. The USCIS offers downloadable Form I-9s in English and Spanish as well as a downloadable handbook for employers with explicit instructions on how to fill out an I-9.

Section 1 of the form must be filled out by the employee, on or before his or her first paid day of work, and employers are responsible for ensuring this happens.

Section 2 must be filled out by the employer, who has three business days from the date of the beginning of employment to examine ID evidence and employment authorization. Employees may choose from a list of acceptable identity and employment authorization documents, including: documents that establish identity such as a driver’s license or state ID, military card or student ID with photograph; and those that establish employment authorization, such as Social Security cards and birth certificates; and documents that establish both, such as a U.S. passport or a permanent resident card.

These time frames matter, Heidecker says.

“Employers big and small, even if they want to comply with I-9 requirements, don’t get them done in time,” he says. “The DHS looks at those dates on the I-9 to see if they’re complying, and they can level penalties if the work isn’t done in time.”

While large and unionized companies face hiring and immigration issues on a daily basis and are more likely to have HR experts on staff, it is especially important for smaller companies to have a good grasp on what the laws are requiring.

Small companies are sometimes employing the workers who were forced out of large companies by I-9 audits, Heidecker says. However, small companies need to take it just as seriously as larger companies.

“If the DHS catches them, they’re going to be hit with very big penalties,” Heidecker says.

DHS does take business plans into account when assessing penalties, and those small companies that are built upon exploiting cheap labor from immigrant communities will be slammed harder with fines than average employers.

The biggest mistake that small employers make is not filling out I-9s at all, Heidecker says.

“There are companies that are startups or are very small and unsophisticated that might not even know about I-9s,” he says.

Another common mistake: employee misclassification, and this is huge in the cleaning industry. Whether it’s done out of ignorance or willfully in order to exploit workers, misclassifying employees as independent contractors will also net potentially big fines.

The best way to avoid disastrous audits — and to ensure that things are being followed to the letter of the law — is to perform internal I-9 audits.

Guidelines for internal I-9 audits

Heidecker outlines steps that can guide BSCs conducting an internal audit. These are a good place to start, he says, but they’re only a bandage to staunch the bleeding rather than a universal solution. Each company must approach an audit on many levels, he says, starting with policies and practices and continuing with law-abiding training and hiring.

“The review of policy and the training of people are things that the Department of Homeland Security looks at when they conduct an audit and they assess penalties,” Heidecker says.

If BSCs choose not to participate in E-Verify or IMAGE, they’ll need to sit down with their files and look over their I-9s themselves, making sure they’re correctly filled out, and that they’re maintained and stored in the right way. BSCs should either audit all I-9 forms or a truly random sample of I-9 forms, such as all employees born in the month of June. Heidecker recommends employers conduct a self-audit every year.

Based on the forms being audited, generate a list of employees — current as well as those who were terminated in the past three years — hired or rehired after Nov. 9, 1986 (the day the Immigration Reform and Control Act went into effect). Divide this list into two piles: one for active employees, with dates of hire noted, and one for those who have been terminated, with dates of hire and termination noted. These lists should show last name, first name, date of hire, date of termination, if applicable, and some distinguishing fact such as date of birth or Social Security number.

Retention dates should be calculated by comparing date of hire, date of termination and the date of the internal audit. Essentially, employers must retain I-9’s for all current employees hired after November 6, 1986.  In addition, they must retain I-9’s  for all former employees for the longer of three years from date of hire or one year from date of termination. Based on this, forms for persons hired before the target hire date whose employment ended before the determination date can be discarded; those I-9s no longer need to be retained.

Begin checking I-9 forms, working in the same order of the list. These forms should be kept in a separate file from other personnel files to protect other employee information in the case of an I-9 audit.

During this process, rather than writing on the forms, use sticky notes to indicate what information is incorrect or missing.

At this point, after forms have been reviewed, a BSC can begin to correct them. Any changes made during an internal audit should be dated and initialed with a note, and changes should be crossed out on the sticky notes as they are made. Sticky notes can be removed when all changes are made, and those forms can be re-filed. To keep track of which forms needed corrections, notate or highlight those names on the master list. This can help to identify areas of common mistakes for an employer.

Any current employees that do not have an I-9 form on record should fill one out as soon as possible.

Minimizing mistakes

BSCs that put themselves through internal audits learn a lot about how easy it is to make mistakes or errors on I-9s, underscoring the need for those on the administrative hiring team to know exactly how to fill out those forms.

“The most difficult part is going back, looking at your I-9 forms, identifying errors and trying to rectify them,” Heidecker says.

However, the DHS encourages employers to correct erroneous I-9s, as long as those changes are dated and initialed. Therefore, Heidecker says, it’s a good idea to go back and take another look at I-9s every so often.

“You have to keep those I-9 forms for a minimum of three years from date of hire or one year from date of termination, whichever is longer,” Heidecker says. “So in that period, you may lose a lot of those employees and lose your ability to get the information.”

Ensuring that I-9 retention is up-to-date is vital. Some companies, when audited by DHS, turn over all their records, including those that fall outside of that I-9 retention period, not realizing that the DHS can still penalize the employer for errors on those additional documents.

Another common error is related to photocopying of records.

“Some employers Photostat the supporting documents, and a common error is that you do it for some employees but not for others,” Heidecker says. “The law is very clear that if you keep Photostats of records for some employees, you’ve got to do it for all employees.”

Why is all of this so important? To begin with, BSCs face potentially huge fines for mistakes on I-9s, from $110 per missing item on each form, up to $1,100 per form — even if that employee is not an unauthorized worker.

Employers who hire unauthorized workers face fines between $250 and $5,500 per worker, and can be barred from government contracts for a year. Those who knowingly accept fraudulent documentation can face criminal prosecution as well.

Also, in the case of a federal audit, an employer who has gone through the I-9 audit checklist will be much more prepared to hand over just what is necessary, not more, not less.

“There’s a growing realization that once the Department of Homeland Security shows up at your door, there’s very little time to do anything about it,” Heidecker says. “Because the first notice you get of an external audit is a subpoena that gives you three days to hand over your I-9s. If you’re a company of any size, three days to gather your I-9s for the first time and look at them is just not adequate. You could be talking about anywhere from several dozen to several thousand people. I think a lot of contractors are saying it’s prudent to do some of this legwork in advance.”

The most important takeaways for BSCs from an internal audit should be: fill out I-9s for every employee, get them done on time, make sure they are filled out correctly, and make sure they are retained correctly.

“If you’re pretty religious about those four, the rest will fall into place pretty easily,” Heidecker says. “If you do it right, you’re insulating yourself really well from liability.”