Extracted from Law360
Staffing companies bear double exposure for potential discrimination violations related to not only their own direct hires, but also exposure related to persons recruited or hired for their clients.
As was evidenced in a recent U.S. Department of Justice, Immigrant and Employee Rights Section, or IER, settlement, a staffing company and its client, the end user, each and together share responsibility for compliance with U.S. immigration-related discrimination laws. On Aug. 26, the IER closed an investigation and secured a settlement when staffing company BreakthroughFuel LLC "discriminated," based on the instructions of their client, and both the staffing company and the client paid.[1]
With the passage of the Immigration Reform and Control Act in 1986, U.S. employers were deputized as quasi-U.S. immigration officers when Congress decided the best tool to stem the tide of unauthorized persons entering the U.S. was to require employers to verify the work authorization and identity of every worker in the country.[2]
For all employers, issues related to the employment verification process can easily lead to a Department of Jusitice IER investigation, but for staffing companies that risk is even greater.
For all employers, a variety of facts might lead to a DOJ IER investigation, for instance:
- A job posting on the internet includes the words "U.S. citizen."
- The employer only selects "U.S. Citizen" and "Permanent Resident," and not "H-1B" or "Alien," on an electronic recruitment screening tool to avoid having to consider candidates who need a work visa.
- Employment is terminated when E-Verify issues a final nonconfirmation to the employer.
- Email reminds the employee to bring their "extended document," rather than anything from the Form I-9's "List of Acceptable Documents" to HR to update their form.
- A human resources administrator tells a new employee their expired documentation is not acceptable.
- A manager tells an employee, "You can pick and present any document for your Form I-9, but I need to see your green card for E-Verify's photo tool."
- Someone, trying to be helpful, tells a newly hired person, "Don't forget to bring your green card on your first day in the office."
During a DOJ IER investigation, which can easily last three years, the DOJ may require an employer to produce thousands of pages of documentation, and to make numerous employees available as witnesses.
In addition to the stress and cost of the investigation, the results can include substantive penalty fines paid to the government, backpay to workers, compensation to potential job applicants, and years of DOJ monitoring on top of all the negative press.
For staffing companies though, in part because of the nature of the business, there are several unique factors that not only broaden the potential for investigations and expand on potential or actual violations, but also exacerbate the penalties.
High Number of Workers Hired
The IER seeks to assess a penalty, particularly settlement fines, based on the number of persons hired during a certain time, and the multiplier is greater for staffing companies.
Initially the penalty paid to the government was $100 per injured worker. Today, the penalty is $4,610, so quickly hiring a high number of persons greatly multiplies the total penalty.
High Turnover
The greater the number of hires and the greater the number of terminations, the greater the opportunity for a misunderstanding, miscommunication or error within the narrow scope of acceptable employment verification communications and processes.
One call to the DOJ's IER hotline or one job posting can lead to a nationwide multiyear company investigation.
Third-Party Job Requirement
Staffing companies typically recruit workers based on the job requirements and criteria of their client. The IER trolls the internet for words that might indicate a job offer is restricted only to certain persons.
For instance, a single staffing company job posting containing "U.S. citizen" can result in an IER investigation. Only by investigation might the IER learn that the restrictive requirement comes from a client.
Should a staffing company verify the legal basis of every element of a client's requirements? What is the staffing company's exposure if the staffing company fails to verify?
Also, third-party job requirements are not specific to the staffing company and may go through multiple administrative layers. These factors increase the chances of a staffing company not understanding the requirements for the posted job. Even something as simple as a cut-and-paste error may result in actual or potential discriminatory language.
Per the IER, even an accidental prohibited restriction is grounds to open an investigation and may be the basis of penalties.
No First Day of Work at the Office of the Staffing Company
Contrary to the traditional employment situation, where on day one the newly hired employee arrives at the office of the employer, in the staffing industry, the new employee often arrives at the client's facility, warehouse, plant or office. This difference creates additional complexities and processes for a staffing company's proper and timely completion of the Form I-9 and the related employment verification process.
This practice also increases risk to the staffing company because the company has little to no control over what might be said to the worker at the client's workplace.
Sometimes, especially because of the first-day- and third-day-of-work Form I-9 timing deadlines, a staffing company will rely on the client's staff to communicate with the new worker and complete the process — but the staffing company will be liable for any errors, including any misstatements.
This can lead to the late or inaccurate completion of the employment verification process, and the impression or reality that people are being treated differently based on their citizenship or nationality — all finable offenses for the staffing company.
Rehire
Unlike traditional employers, a staffing company provides short-term, temporary employment for its employees, which often results in the same person being rehired multiple times. At rehire, a staffing company has the option to complete a new Form I-9 or make use of the previously executed Form I-9, assuming it qualifies.[3]
While many companies may appreciate this option, options create complexity, and complexity can lead to error. The rules and guidance for this option are complicated, and can cause miscommunication and misunderstanding.
Short-Term Assignments
Among all the other noted issues, short-term assignments create E-Verify tentative nonconfirmation and final nonconfirmation timing issues, which can appear to be noncompliance or discrimination by the staffing company, including at the initial period of employment or any subsequent rehire.
Hiring Site
It is not uncommon for a staffing company's hiring location to be a job fair, or even a parking lot, corner coffee house or field. As a result, some portions of the onboarding process may be missed or truncated in order to move the process forward faster. Staffing companies need to take extra care to ensure that an unusual hiring site does not result in poor or failed practices.
Pipeline
Staffing companies often establish a pipeline of available workers, ready and teed up to meet client needs, often with but a few hours' notice. Some pipeline employees, though "hired," may remain in the pool and never be selected, while others are assigned to a role.
Which pipeline employee is selected to start working — and which is not — may simply be a function of who answers their phone. Regardless, the employee that is not selected, having completed their Form I-9, may think instead that this was discrimination against them. Their call to the IER hotline can lead to an IER investigation.[4]
E-Verify
E-Verify requires that notice of any tentative nonconfirmation of employment authorization be presented to the employee in person and within a certain number of days of employment. Again, staffing company employees may never work at the staffing company office, may live very far from the staffing company office, may not be able to travel to the staffing company office, may not have a laptop, may only work a day or two on a single or series of short assignments, or may quit for a permanent job.
As a result, it is more burdensome for staffing companies to ensure they have systems in place for complying with temporary nonconfirmation notice deadlines and for reviewing such notices the employees.
Form I-9 does not require that the employer make copies of documents, but if the employer uses E-Verify and an employee chooses to present certain documents from the truncated Form I-9 list of acceptable documents, the employer is required to make and retain copies of those items, but not a copy of everything.
This complexity creates another opportunity for confusion or misunderstanding, and for the perception that some people are being treated differently because of their citizenship or national origin.
Retention
Employers must maintain a Form I-9 for all current employees. The employer must keep the employee's Form I-9 for a total of three years after the employee's date of hire or one year after termination, whichever is later.
So, after termination of employment, purging the Form I-9 is authorized, but the purge date calculation analysis is complex, especially for staffing companies that rehire more often than conventional employers.
Using the rehire option on the prior Form I-9 results in two hire dates. If a staffing company calculates this incorrectly, the higher volume of employees and rehires increases the number of potential fines it may face.
Avoiding Hazards
How might a company comply and avoid common pitfalls?
As a general rule, during recruitment and onboarding, staffing companies should not mention or ask about a person's citizenship, national origin or immigration status.
There are potential exceptions, including (1) after a person shares that they need sponsorship or support to work, or (2) if a law, regulation, government contract, executive order or attorney general directive restricts eligibility for the position to a particular legal status.
Staffing companies should also:
- Have a robust compliance manual for employment eligibility verification.
- Understand that using certain language in job postings or otherwise may result in DOJ investigation, for example: "Only U.S. Citizens," "Only U.S. Citizens or Green Card Holders," "Must present U.S. birth certificate," "H-1Bs or OPT Candidates Preferred," etc.
- Consider viewing the IER's anti-discrimination provision training video, available on the DOJ Civil Rights Division website.[5]
- Enable applicants and employees to safely contact a senior person at the company if someone is being treated differently in the hiring, firing, recruiting, Form I-9 employment eligibility verification, reverification, E-verify or other process.
Conclusion
It is not known how many DOJ IER section investigations have happened during the past few years, but based on information posted by the DOJ on its website, the IER has secured millions of dollars in penalty fine settlements from 43 companies, including staffing companies, even though the companies deny discriminatory intent and the DOJ has not proven intentional discrimination against injured persons.[6]
Even after the U.S. Supreme Court's June decision in Loper-Bright Enterprises v. Raimondo, most companies agreed to settle in order to avoid litigation and to stop the costs related to the investigation, not willing to undertake this new, stronger opportunity to challenge the 2016 IER regulations or the IER's positions.
As a result, it seems that employers, and particularly staffing companies, will continue to be subject to costs and potential civil penalty fines from IER investigations.
[1] Aug. 26, 2024, IER settlement with BreakthroughFuel LLC, https://www.justice.gov/d9/2024-08/breakthroughfuel.pdf.
[2] The IRCA requires the employer to verify every worker hired after Nov. 7, 1986, and for those with expiring work authorization, continuous reverification of their expiring work authorization. Also, the Immigration and Nationality Act, at 8 U.S.C. § 1324b, prohibits "employment discrimination" against a protected person based on citizenship status or national origin. The Immigrant and Employee Rights Section of the Department of Justice's Civil Rights Division oversees 1324b education and investigations.
[3] Sometimes at a rehire the employer may rely on the previously completed Form I-9 but must update the rehire date section without the need to inspect work authorization documentation. If though the employment authorization expired, the employer must reverify employment authorization, either via the reverification section of the Form I-9 or a new Form I-9, excluding List B, and attach it to the employee's original Form I-9.
[4] Staffing company's operations and related employment verification issues so are unique that DHS created an alternative Form I-9 scenario: "Staffing agencies may choose to use either the date an employee is assigned to the employee's first job or the date the new employee is entered into the assignment pool as the first day of employment." See, https://www.uscis.gov/book/export/html/59502.
[5] https://www.justice.gov/crt/video/employer-training-avoiding-unlawful-immigration-related-employment-discrimination.
[6] https://www.justice.gov/crt/immigrant-and-employee-rights-section; https://www.justice.gov/crt/settlements-and-lawsuits.