The U.S. Immigration and Customs Enforcement’s (ICE) Office of Homeland Security Investigations (HSI) announced today it had reached a $1,047,110 fine settlement agreement with the clothing retailer Abercrombie & Fitch for numerous technology-related deficiencies in the company’s electronic I-9 system. According to the ICE press release, the settlement was reached as a result of a November 2008 I-9 audit of Abercrombie & Fitch’s retail stores in Michigan. Although details of the investigation have not been made public, it appears that the audit revealed severe problems with the company’s electronic I-9 system, which led ICE to question the integrity of the underlying I-9s and compound the assessed penalties and fines. Despite the apparent failure of the I-9 system to achieve its ultimate goal, ICE reported that there was no evidence that the company knowingly hired any undocumented workers (which would have led to even more severe fines).
Today’s announcement will undoubtedly cause a certain amount of panic for any employer that has adopted an electronic I-9 system or that is in the market for such a system. While panic (in small, controlled doses) can be a good thing, let’s see if we can temper it by analyzing this settlement agreement and providing some guidelines on how to assess an electronic I-9 solution (or vendor, as I shall refer to it hereinafter) for overall compliance to the regulations.
The 2006 interim final regulations (it’s not quite final, but we still really mean it)
As mentioned above, the Abercrombie & Fitch fine settlement resulted from an audit, which occurred 2 years ago (in 2008), before the electronic I-9 rule was finalized and before many electronic I-9 systems fully matured. In the wake of the 2006 “interim final” regulation, many employers chose to adopt a home-grown I-9 system or an application that was bundled with HR onboarding function (e.g., payroll or HRIS). While some of these systems appeared to function properly, they were often based very loosely on the interim regulations – lacking such core elements as an audit trail or an electronic signature. Whether this was a design choice made deliberately (or not), it seems clear that ICE intends to hold employers accountable for the requirements in the interim regulation (discussed briefly below).
But wait a minute, isn’t an electronic I-9 system supposed to reduce an employer’s I-9 liability, not increase it?
Yes, absolutely! However, as previously discussed, electronic I-9 software (whether it’s home-grown, bundled with another application, or a stand-alone system) must adhere to certain recordkeeping standards and technical safeguards in order to ensure that the underlying I-9s are accurate, authentic, and trustworthy. Moreover, the system must ultimately retain the same “name, content, or sequence of the data elements” on the paper I-9, a crucial point which is often lost in the rush to “go electronic.” While it’s certainly important to assess whether your new system has all of the flashy bells and whistles, it’s even more important to check that all of the basic elements are there: all I-9 fields (check), employee attestation (check), electronic signature (check), and so on. The main point to remember is that your I-9 system is first and foremost, a compliance system which must serve a rather unique (and often unforgiving) compliance function. Bells and whistles are great, but the fundamentals are absolutely crucial.
Ok, maybe that electronic I-9 system was lacking. But it’s the effort that counts, right?
Well, yes and no. While it’s certainly true that the law does enable employers to mount a good faith defense to certain technical or procedural I-9 violations (and the fact that you are using an I-9 system is a definite plus), it is less forgiving when it comes to improper electronic I-9s. Specifically, the regulations provide that if an employer chooses to complete an I-9 with an electronic signature and the system fails to comply with the various recordkeeping standards, ICE can essentially invalidate those I-9s. It’s like they never even existed! Is this too severe a punishment? Maybe. But it’s important to recall that under the law, the ultimate burden and responsibility for I-9 compliance (and I-9 compliance failures) rests squarely on the shoulders of the employer. Therefore, it’s not surprising that ICE would expect an employer to carefully choose the system it uses. Moreover, in the absence of a fundamental I-9 data point, do you really have an I-9 at all for ICE to review?
What are the right questions to ask of the vendor?
In a future blog post, we’ll explore the key to writing a good I-9 system “Request for Proposal” or RFP (with the assistance of counsel), but here are some initial considerations which will help you narrow the field.
1. Does the vendor have dedicated attorneys on staff with direct design/feature input into the system? (to prevent these types of major lapses)
2. Will the vendor provide third party independent evaluation of the system (preferably by an attorney with deep I-9 experience)?
3. What type of guarantees does the vendor provide in the contract (e.g., indemnification for gross negligence)?
4. Is the vendor able to provide 5 similarly situated client references that use the same I-9 system?
This last point about references, in particular, can be extremely important as it will reveal how well the vendor is supporting the product, releasing needed updates, and responding to constant changes in I-9 policy and procedure. You should also inquire from the references whether they have been subjected to an ICE audit using the vendor’s system, and how quickly the vendor was able to respond to ICE demands.
Buyer Beware
In addition to doing your positive due diligence, it’s equally important to scrutinize the market for vendors making overly broad claims that your new electronic I-9 system will guarantee perfect I-9s, allow you to avoid dealing with those pesky lawyers and will somehow magically cure all that ails you. As the saying goes, don’t believe the hype! While electronic I-9 systems have many advantages and are certainly the wave of the future, it is most definitely not a “flip the switch and you’re done” scenario. Rather, an electronic I-9 system demands several layers of careful planning, thoughtful discussions, difficult decisions, and above all else, thorough communication (with your departments, worksites, and yes most importantly, your trusted immigration counsel).
While we’re on the subject of counsel, it’s also important to realize there is no “one size fits all” type of solution when it comes to dealing with I-9 and E-Verify compliance. For that reason, it’s especially prudent to scrutinize those vendors that offer free legal services (bundled into the software) that will somehow steer you along the path to compliance. Needless to say, such promises can create a false sense of security, which, as we see from today’s announcement, may be fleeting indeed!
Where do I go from here?
In the coming weeks, this blog will continue our series of articles designed to explore the benefits and challenges of choosing an electronic I-9 system. This will include guest blogs about I-9 audits, RFPs, and other technical (and legal) issues that you should consider in light of today’s announcement. We also welcome your comments and feedback, so please drop me a line or write a comment to chime-in on this important compliance issue.
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