When Abercrombie & Fitch’s Michigan stores ran into problems with properly completing I-9 forms, it turned out to be a seven-figure mistake.

In September 2010, the U.S. Immigration and Customs Enforcement's (ICE) Office of Homeland Security Investigations announced a $1,047,110 fine for violations of the Immigration and Nationality Act that related to the clothing retailer’s obligation to verify the employment eligibility of its workers. The fine was imposed even though the clothing retailer fully cooperated with investigators, and there was no proof it hired illegal workers.

Though this example is from the retail world, the issue of properly completing I-9 forms is important for contractors as well-and could prove to be a costly mistake if handled incorrectly.

“Employers are responsible not only for the people they hire but also for the internal systems they choose to utilize to manage their employment process and those systems must result in effective compliance,” said Brian M. Moskowitz, special agent in charge of ICE HSI for Ohio and Michigan. “[The Abercrombie] settlement should serve as a warning to other companies that may not yet take the employment verification process seriously or provide it the attention it warrants.”

When it comes to the Abercrombie example, a November 2008 Form I-9 ICE audit revealed issues with the company’s electronic verification system that led to the fine. According to news reports, the problems were caused by a software system the company used.

This situation illustrates the problems even large companies can experience with I-9 forms and procedures, much less small- to mid-sized contracting firms. It also an example of how ICE has been, and will increase, cracking down on employers who make mistakes with their employment verification forms. In order to ensure compliance and avoid stress, business disruption and costly fines, companies need to ensure they have rigorous processes in place to verify employment eligibility.

Employers should be familiar with the I-9, or Employment Eligibility Verification, form since some variation of it has been mandatory since 1986. Enforcement for I-9 violations under the Immigration and Nationality Act are on the upswing with thousands of ICE Notices of Inspection being issued each year. The I-9 form is used by every employer to verify the identity and employment eligibility of all new employees to prove they are American citizens, U.S. nationals or immigrants authorized to work in the United States. The basics are relatively simple:

• An I-9 form must be completed within three days of employees starting work.
• I-9 forms must be kept on file for at least three years, or one year after employment ends.
• Employees can present a single document to prove both identity and employment eligibility, such as a U.S. passport or permanent resident card, or separate documents that establish identity, such as a driver’s license, and employment eligibility, such as a Social Security card. The list of acceptable documents appears on each I-9 form.
• Employers can use several online services, such as E-Verify, to quickly ensure that the information employees provide matches up with government records.

While completing an I-9 form may seem straightforward enough, it can quickly get complicated. Even contractors with the best of intentions and well-trained employees may find themselves trying to work through situations they never anticipated.

Some errors result from simple typos, misspellings or information left unintentionally blank. In some cases, employees may legitimately have documents with different last names. For example, a newly married or divorced employee may have changed his or her name on a driver’s license but not a Social Security card yet.

Discrimination, whether deliberate or inadvertent, is another challenge contractors need to consider. It may seem easiest to only hire “people who look like Americans” and avoid any concern with employment eligibility, but that kind of discrimination is illegal. Firms must treat immigrants who are in this country legally and eligible to work just as they would U.S. citizens.

Determining whether documents “reasonably appear” to be genuine is another problematic area and many companies may feel they are walking a fine line between being too flexible if documents look questionable and risking discrimination claims if they reject documents that an employee presents.

Employers can also run into complications when the Social Security number or driver’s license number an employee submits doesn’t match up with government records. Frequently, the problems lie with the government’s own record-keeping, but contractors still need to take specific actions to give employees a chance to correct any problems. Until a matter has been resolved, it’s illegal to take immediate adverse action against an employee when a mismatch is flagged.

Employers can help avoid costly fines by paying careful attention to their procedures surrounding this seemingly simple element of compliance.

Check back next week for some best practices for I-9 compliance.