The question of immigration and what to do about the estimated 11 million undocumented workers currently in the U.S. has produced a firestorm of controversy. Clearly, many of these workers provide valuable services and fill job vacancies that could not otherwise be filled. Fifty-eight percent of employment growth between 1996 and 2003 was due to foreign-born workers. 1 Politics and economics aside, small-business owners should understand their responsibilities when hiring any individual.
Verifying eligibility to work in the U.S.
Everyone, from a natural-born U.S. citizen to a foreign worker, must provide you with proof of employment eligibility. While U.S. citizens and nationals are automatically eligible, foreign workers need additional authorization (such as work visas). You cannot check eligibility during the recruitment process; you must check it after you've hired the person. Keep in mind that employment eligibility is not required if you outsource or subcontract through independent contractors.
Verification is done by having a new employee complete Form I-9, Employment Eligibility Verification form, from the U.S. Citizen and Immigration Services (formerly the Immigration and Nationalization Services) You can download the form from www.uscis.gov. The employee must show you originals of certain documents specified on the form. Anyone who fails to satisfactorily complete the form within three business days can be fired.
You do not have to file the form with USCIS. You simply retain it for inspection for at least three years from the date of hire or one year after employment is terminated, whichever is later.
It has been a crime since 1986 to hire an illegal worker. Any employer who hires an illegal worker is subject to fines, and even jail. A first offense can result in a penalty of up to $2,000. And you can be penalized for failing to keep proper records (up to $1,000 for each individual).
Important: Stay alert to immigration legislation, which may impose additional obligations on the part of the employers when hiring foreigners.
Under the Immigration Reform and Control Act (IRCA) you cannot discriminate against anyone in the workplace. The extent of this ban depends on the number of employees you have:
- Four or more employees: you are prohibited from discriminating against any person in hiring, discharging or recruiting because of national origin or citizenship status.
- 15 or more employees: you cannot discriminate when hiring, discharging, recruiting, making job assignments, fixing compensation or in any other terms and conditions of employment.
Caution: You cannot use Form I-9 to pre-screen employees for hiring.
Off the books, off the radar?
Some small business owners pay immigrant workers "under the table" for the work they do. This practice is not uncommon in some industries, such as construction and landscaping. Entrepreneurs who do so should immediately reevaluate this practice because they are exposing themselves to substantial legal and financial liability. Do the ends justify the means? Here are some items to consider:
- Taxes. The IRS can hold an employer personally liable for certain unpaid employment taxes with respect to wages paid to workers--even if they are illegal workers. And there are civil and criminal penalties for tax evasion.
- Insurance. Financial exposure from uncovered losses can be staggering. Worker's compensation may provide assistance to any worker, regardless of status. But insurance policies may only cover injured workers who are "on the books." An injured worker, regardless of status, can sue an employer -- some states let illegal workers recover for lost wages due to injury. While some illegal immigrants may be hesitant to pursue their claim because of deportation fears, there have been many cases where this concern did not stop legal action against employers.
- Other liability. USCIS and some states that find out about illegal workers can hold employers liable for civil and criminal penalties.
There are many factors to consider when hiring immigrants. Making a fully-informed decision is the best business tactic for all employers to take.
1 Economic Report of the President 2005
BARBARA WELTMAN is an attorney and a trusted professional advocate for small businesses and entrepreneurs. She is the author with such titles as J.K. Lasser’s Small Business Taxes and Smooth Failing, and she contributes regularly to American Express OPEN and SBA.gov. Her articles have appeared in the Wall Street Journal and U.S. News and World Report. Weltman is also the publisher of Idea of the Day and monthly e-newsletter Big Ideas for Small Business at www.barbaraweltman.com and hosts radio shows and podcasts, including Build Your Business radio. She has been named one of the 100 Small Business Influencers in the U.S. for the third year in a row.
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