Retail’s BIG Show Reveals BIG Concerns over I-9 and E-Verify Compliance

by John Fayon January 23, 2012

Every year in January the National Retail Federation (“NRF”) holds its annual Convention and Expo, which is aptly named “the Big Show,” drawing more than 22,000 retail professionals from around the world. While this year’s show was focused mostly on emerging technologies and trends in the industry, many of the US-based attendees expressed growing concern over the expansion of the E-Verify program and the steadily increasing likelihood of a Form I-9 paperwork audit.

Why all the doom and gloom surrounding a “simple” one-page form? According to the NRF, retailers operate more than 3.6 million U.S. establishments that support one in four U.S. jobs – 42 million working Americans. When you factor in the retail industry’s high turn-over rate and the increasing likelihood of an I-9 audit, that’s a whole lot of I-9s and E-Verify cases to be concerned about!

Retailer’s I-9 Challenge

Employers in the U.S. must ensure that an I-9 is completed for all new hires in order to document that the individual is authorized to work in the U.S. E-Verify takes the I-9 process a step farther by confirming the employee’s work authorization electronically after checking government databases. Sounds pretty straight-forward, right? Well, the problem for many in the retail industry is that I-9 compliance (i.e., ensuring it’s done right) is entrusted to a wide variety of players – from human resource managers to accountants to front-line managers. While each one of these roles can certainly handle the I-9 process, many in the field find it difficult to follow all of the procedures and keep up with changes amidst all of their other tasks. So inevitably, the I-9 is overlooked or ignored to a certain degree.

Top 5 I-9 and E-Verify Questions and Answers from Retail’s BIG Show

Which brings me to the main take-away from today’s blog: understanding retail concerns over I-9 and E-Verify compliance. According to the NRF, the retail industry is forecasted to grow at a rate faster than many other industries – which means more jobs, more hiring, and yes, more I-9 and E-Verify questions. Here are some of the questions I received during the NRF show (and my responses).

1. I see from your E-Verify map, that more states are mandating the use of E-Verify. We don’t use the system in our stores right now, but perhaps we should given the likelihood of nationwide E-Verify?

I’m going to resist taking out my crystal ball and answer this question more practically: to borrow a phrase from Bernie Wolfsdorf (immigration attorney extraordinaire), E-Verify appears to be a “runaway train” barreling down the I-9 compliance track, as legislators across the country continue to espouse its merits as the best (and currently only) way to verify employment eligibility electronically. For that reason, I think retailers should start preparing for mandatory E-Verify (in whatever form it may take) by reviewing all of the E-Verify program materials, discussing implementation with counsel and considering what changes should be made to accommodate specific E-Verify requirements (e.g., notice of participation, handling E-Verify mismatches, investigating employee complaints, streamlining through software, etc.)

2. How should E-Verify be managed- does it make more sense for my individual stores or restaurants to handle submissions to E-Verify or should this be managed centrally?

As with most areas of I-9 and E-Verify compliance, there is no “one size fits all” approach to managing E-Verify submissions. For some retailers, the decentralized method of allowing each store to submit will make sense, especially where those stores have dedicated human resource personnel on staff or other team members who are experienced in handling I-9 and E-Verify issues. I find that the vast majority of retailers, however, will usually want to centralize control of their E-Verify submissions to a select group of individuals (the “E-Verify Gurus”) who have taken all of the necessary training and are equipped to deal with the inevitable tricky situations which arise. Again, it’s always best to discuss this issue with counsel as circumstances may vary widely from company to company.

3. What is our potential financial exposure if we have failed to use E-Verify where required?

I received this question several times during the show, particularly from attendees who were staring with trepidation at our colorful E-Verify map. As it turns out, this is another one of those “difficult to answer” questions for which “it depends” is the only right answer. Some states such as Alabama, Arizona, and South Carolina have taken a hard stance on violation of state immigration laws (including E-Verify mandates) whereas many others have not included any specific E-Verify penalties (making them “without teeth” as critics would say). On the other hand, violators of the 2009 FAR Rule (which mandates E-Verify use for certain federal contractors and subcontractors) face substantial penalties for failing to use the system, including the loss of current and/or future contracts.

4. Hypothetically speaking, what happens if our store has not been completing I-9s at all?

Hypothetically speaking, you have a very big problem on your hands. Failure to complete an I-9 form for a new hire employee is consistently viewed by the government as the most serious of I-9 “paperwork” violations, because it represents a total failure of the verification requirements under the law. Even assuming your store has no unauthorized (or undocumented) workers, Immigration and Customs Enforcement (ICE) can still fine you $1,100 per missing I-9: which can lead to substantial civil penalties. For an example of how this can play out, look no further than the 2010 settlement with clothing giant, Abercrombie & Fitch, who agreed to pay over $1 million in fines for a faulty home-grown electronic I-9 system at one of their locations. As described in our blog here, A&F was shown little mercy despite the fact that they attempted (on some level) to do the right thing. As you can imagine, ICE has very little patience for employers who fail to complete an I-9 at all- especially since the form has now been around for over 25 years.

5. What’s in store (no pun intended) for electronic verification in the near future?

Retailers are no strangers to emerging technologies, and so it’s not surprising that many attendees asked me whether the government would be utilizing Radio Frequency Identification (RFID) in some fashion to address frequently expressed concerns with E-Verify (e.g., not 100% accurate, does not detect identity fraud, etc.). RFID use has been growing in the retail industry, enabling companies to manage inventory, authenticate a certain brand or even dynamically display marketing messages based on a product “tag”. Imagine picking up a Gillette razor at your local store and immediately seeing product information on a screen in front of you. Not so far away, believe me.

How would this play out in the employment eligibility verification world? To some degree, it’s already begun. Since 2007, U.S. passports have been implanted with RFID technology, and under the REAL ID Act of 2005, state driver’s licenses may also eventually include such chips as well. In addition, several members in Congress have recommended the use of non-forgeable biometric cards (requiring the collection of fingerprints, iris scans, etc) to reduce fraud, prevent pre-screening, and empower individuals to correct errors more easily.

So will we all be walking around with national IDs soon? Not necessarily. As one can imagine, an RFID-enabled card for ALL individuals would entail significant expense. Not to the mention the fact that a national ID of any kind will raise a host of privacy issues and concerns over how that information would be used.

The Bottom Line

As one of America’s largest industry sectors, retail accounts for a large percentage of our nation’s new job growth. Each one of those new jobs (to a large degree) requires an I-9 form and many will be checked against the government’s E-Verify system. Is your I-9 program currently in order? Are you using E-Verify where required? Would you be ready today if ICE showed up and asked for all of your past I-9s? If the answer is “no” to any of the above, now is the time to revamp your program by talking with counsel and adopting a smart electronic solution. Remember: retail means jobs, but ICE means enforcement.