Every business, both small and large, needs to have good hiring practices in place. Proper hiring practices can help save you significant time and money down the road.
There are many things that go into running a successful business; one of those things is making sure you are crossing your Ts and dotting your Is on your hiring practices. The government requires that you have all the proper documentation for each and every employee your business hires. The government can “audit” (or review) your paperwork at any given time. They can also raid your business if they suspect you have undocumented workers working for the business. Since the Trump administration came into power in early 2017 the number of large raids on businesses has increased. Most recently a gardening company in Ohio had 114 people arrested by U.S. Immigration agents. Not only can undocumented workers get in trouble for working, employers can get in trouble for hiring those individuals and business owners can face fines and jail time for not complying with federal law.
Many business hire undocumented workers; most employers offer various reasons, including that it is cheaper to do so and/or the type of work does not usually appeal to people individuals who can legally work in this country. This is not always the case, and if it is proven to be true, the penalty for hiring undocumented workers is very high. In the past many employers knowingly participated in the hiring of undocumented employees because the risks appeared to be limited to a warning or a small fine. Some business owners even called it the “cost of doing business.” However, the position of the current administration is to crack down on these hiring practices. Potential consequences of hiring undocumented worker include: costly fines, immigration raids, and even criminal charges against the business owners.
Potential Fines & Jail Time
First offenders can be fined $250.00 to $2,000.00 per undocumented employee, as a civil penalty. The fine can more than double for a second offense, up to $5,000.00 per undocumented employee. Three of more offenses can carry up a $10,000.00 fine per undocumented employee. At that point the employer is risking the government coming after them for showing a pattern of knowingly employing undocumented workers and facing up to six months in jail. There is also a provision called “harboring,” where an employer employs ten or more undocumented individuals in one year. Additionally, there are criminal penalties for employing undocumented workers can result in monetary fines and possibly jail time. These criminal penalties are separate from any civil penalties assessed.
U.S. Immigration and Customs Enforcement is the agency within the Department of Homeland Security that enforces the requirements for proper documentation of employees. Employers need to make sure their I-9 forms are properly filled out and supporting documents are kept in a secure location. It is important for employers to keep the I-9 documents in a location separate from other personal files of employees due to other sensitive documents that the ICE agents won’t need. You are allowed to store this information electronically, but it is important to comply with all current federal regulations regarding the documents.
Some businesses try to get around the requirements of verifying whether an individual can work legally in the United States by hiring independent contractors. Businesses are not obligated to confirm work authorizations for independent contracts; however, if they know they are hiring undocumented workers they can still be held liable. Additionally, the practice of hiring an individual and labeling them an independent contractor, while he/she is really an employee can also cause additional problems. The general rule of classifying an individual as an employee or independent contractor focuses on control. An individual is considered an independent contractor, if the individual is given an assignment/goal, but has control over when the work will be done and how it will be done.
The Internal Revenue Service also requires that you use a Social Security Number when issuing W2s at the end of a year. If the potential employee gives you an ITIN they may not be eligible to work in the United States. An ITIN starts with the number “9” and is formatted in the same way a SSN is. Other concerns that the IRS might look into is an audit of your business tax returns. If you are claiming W2 wages for undocumented work as a business expense, the IRS may disallow those expenses through an audit and your business will then be hit with a higher tax liability, as well as additional penalties and interest.
Along with the I-9, an employer should also have the proper withholding documents for the IRS (W-4) and for the state, if the state has state income tax. Keeping copies of the withholding documents, along with required I-9 documents, will ensure you are taking the necessary steps to comply with federal and state law regarding hiring individuals who are authorized to work in the United States.
If you are concerned about complying with federal laws, please contact Ashley F. Morgan Law, PC. Our office can conduct an audit of your files to ensure you are complying with current regulations. Additionally, our attorneys regularly work with Human Resource departments or employees to guide them through current regulations and educate individuals about laws and expectations. Ensuring proper hiring practices can prevent many problems and additional costs down the road. Attorneys Ashley Morgan and Arthur Rosatti can help businesses ensure they are complying with federal and state laws.