Immigration Reform: Advice For Businesses In Troubled Times
The immigration debate and our nation's struggle with our complex and difficult border enforcement and labor supply needs are gripping headlines with massive immigration reform bills in the House and the Senate, huge protest rallies by immigrant groups, and aggressive worksite raids by the Department of Homeland Security ("DHS"). Garnering much less attention, but maybe more far-reaching is the United States Supreme Court's forthcoming decision on whether to allow class action lawsuits under the RICO Act against businesses accused of hiring unauthorized immigrants. This article reviews the most important developments and recommends some cost-effective solutions.
HIGHLIGHTS OF THE IMPORTANT LEGAL AND LEGISLATIVE DEVELOPMENTS
1. The Senate Immigration Bill.
On Thursday, May 25, 2006, a tenuous bipartisan coalition in the United States Senate passed an immigration reform and security bill called CIRA, the Comprehensive Immigration Reform Act of 2006. The bill includes numerous border enforcement and immigrant legalization provisions, but most relevant to businesses are:
- stricter I-9 document-review requirements;
- required use of a tedious electronic system for verifying new hires' legal status;
- a chief executive officer certification requirement;
- and significant penalty increases.
a. Stricter document-review requirements.
Current law requires businesses to review eligibility documents to establish an individual's identity and eligibility to work in the United States and attest to the document review in the I-9 Form. The employer fulfills this legal duty so long as the documents reasonably appear to be genuine on their face. The Senate bill would require businesses to consider the "totality of the circumstances" in evaluating whether the documents examined are genuine and establish an individual's identity and eligibility for employment.
Current law, however, contains an antidiscrimination provision that prohibits employers from refusing to honor documents that on their face reasonably appear to be genuine. CIRA does not revise that provision, potentially creating a quandary for businesses: Do not engage in a full investigation and violate CIRA; investigate too thoroughly and possibly violate current antidiscrimination laws.
b. Electronic system for verifying new hires' legal status.
The proposed electronic system requires a business to submit an individual's name, birth date and social security number (or equivalent) to the DHS within 3 days of hire. The DHS is required to provide a "confirmation" or tentative "nonconfirmation" response within 3 days. The business must notify the individual if the DHS's response is a tentative nonconfirmation. The individual has 10 days to contest the tentative nonconfirmation. If the individual contests the nonconfirmation, the DHS has 10 days to issue a final confirmation or nonconfirmation notice.
If the DHS has systemic problems timely processing final notices, it automatically receives an extension of not less than 180 days. During that time period, a business cannot terminate an individual's employment for being tentatively nonconfirmed. The bill therefore could stick individuals into "nonconfirmation purgatory," creating an economic disincentive for a business to develop the employee and a disincentive for the employee to invest time and energy into the employer.
More disconcerting, the Senate bill provides a tentatively nonconfirmed employee an additional ground for suing his or her employer. Employees on tentative nonconfirmation status are protected from termination because of the nonconfirmation status, so terminating an individual because he or she is nonconfirmed will be considered unlawful discrimination. Additionally, businesses that do not invest the time or energy into nonconfirmed individuals may also be found to have engaged in unlawful discrimination.
c. Chief executive officer certification.
The Senate bill authorizes the DHS in certain circumstances to require a business to certify -- under penalty of perjury -- that it is either in compliance with the law's documentation and electronic-verification requirements or has implemented a compliance program. The business's chief executive officer or similar official must sign the certificate. Because the bill allows for criminal sanctions and imprisonment, the new law would expose a business's CEO, owner, or other executive to jail time. This exposure would exist even though that individual was not personally responsible for any CIRA violations.
d. Increases in the penalties.
The bill also significantly increases the civil penalties that businesses would face, including fines of $20,000 for hiring undocumented workers. Additionally, the bill increases fines up to $6,000 for a single recordkeeping or verification violation.
Businesses may think they can at least breathe a sigh of relief because the bill still has to go to the conference committee and be reconciled with the House of Representatives' immigration bill. We interviewed Congressman Dana Rohrabacher (R-CA), to gauge the political climate and the probability of CIRA, or something like it, becoming law. Congressman Rohrabacher said: "It will take a supreme effort by the conferees of the House of Representatives and the Senate to reach a compromise. The reason is that the two bills from them are not similar bills. They are opposed in purpose and dissimilar in structure."
In fact, the House bill, H.R. 4437, contains even more serious challenges to businesses. It contains no guest worker or legalization provisions, increases current fines to a maximum of $40,000, and requires verification of all employees, not just new hires. "Whatever bill comes out and is finally passed will have a major employer-sanction provision and an employer-verification system," Mr. Rohrabacher stated when asked to predict the type of provisions the final bill will contain. The good news for businesses is that Congress seems committed to provide employers with the tools to properly verify workers' status -- through a new electronic verification system with the DHS. Also, if employers followed the verification process, they would be immune from liability for terminating employees and from sanctions, even if the DHS verification ultimately was wrong.
2. Department of Homeland Security's Renewed Enforcement Policy.
On April 19, 2006, the DHS raided operations of IFCO Systems, a manufacturer of crates and pallets, in twenty-six states throughout the United States. U.S. Immigration and Customs Enforcement agents arrested thousands of undocumented employees, and arrested seven current and former executives on charges they conspired to transport, harbor, and encourage unauthorized workers to reside in the United States. Apparently, IFCO initially became the target of a government investigation because the Social Security Administration had written IFCO over 13 times regarding over a thousand employees who had faulty Social Security numbers. The day following the raids, DHS Secretary Michael Chernoff held a press conference to emphasize the DHS's renewed commitment to enforcing immigration laws and imposing criminal sanctions on individual managers.
3. United States Supreme Court Hears Oral Argument On Whether Businesses Can Be Subject To Class Action Lawsuits Under RICO.
Possibly a more important development is the United States Supreme Court's decision to hear Mohawk Industries, Inc. v. Williams. In Mohawk, current and former employees brought a class action against the company and its managers alleging that they employed unauthorized immigrants to drive down wage rates and workers' compensation premiums. The plaintiffs based their lawsuit on alleging that Mohawk and its recruiting agencies engaged in racketeering activity under the Racketeering Influenced and Corrupt Organizations Act ("RICO") through alleged violations of immigration laws. The Supreme Court heard oral argument on this case on April 26, 2006 and its decision is forthcoming. If the Supreme Court allows RICO claims based on alleged immigration violations, businesses could be exposed to multimillion dollar class action verdicts because of alleged immigration violations.
RECOMMENDATIONS FOR PROTECTING YOUR BUSINESS
With the consequences of noncompliance becoming more catastrophic, businesses must implement a compliance program. Under current law, such a program can be established with relatively simple steps:
1) Develop a compliance statement and policy that sets forth:
- the business's intent to hire only authorized workers;
- procedures for hiring only authorized workers;
- procedures for complying with recordkeeping requirements; and
- procedures for responding to Social Security Administration inquires or other immigration-related inquiries;
2) Train and periodically retrain managers and supervisors regarding their obligations to comply with immigration laws and how to properly review authorization documents and complete the I-9 Forms;
3) Periodically audit the managers' and supervisors' hiring practices and the business's recordkeeping practices;
4) Discipline managers and supervisors who fail to comply with the business's compliance program; and
5) Periodically revisit and update the program for continued compliance.
If CIRA becomes law, employers can easily revise this compliance program to include new procedures that will be required. These would likely include: determining when the totality of the circumstances compels a more thorough review of an individual's eligibility documents, and training managers and supervisors how to handle "nonconfirmed" employees.
Ultimately, the existence of a strong immigration compliance program will protect your business from the potential risk of RICO based class action lawsuits, help you avoid the attention of U.S. Immigration and Customs Enforcement agents, and protect your executives from criminal prosecution. Also, if CIRA becomes law, it would specifically reduce the penalties imposed for immigration violations if a strong compliance program exists. Now, more than ever, businesses should focus upon creating a robust and effective immigration-compliance program, and stay attentive to developments out of Washington, D.C.
The attorneys at Carlton DiSante & Freudenberger LLP will be monitoring this legislation closely.