Electronic I-9s: The Wait is Over After All These Years

It is expected that the Federal Register will publish the long-awaited rule on the electronic storage of Form I-9.

Prior to 1986, U.S. labor and employment laws had done little to minimize the incentives of unauthorized employment for foreign nationals in the United States. Consequently, in 1986, Congress passed the Immigration Reform and Control Act (the “IRCA”). The IRCA imposes both civil and criminal penalties on employers who knowingly hire, recruit, refer for a fee, or continue to employ foreign nationals who are not authorized to work in the United States. In order to enforce the obligations that were then imposed upon employers – such that they are now restricted to hiring only individuals who are authorized to work in the U.S. – the law requires employers to verify both the identity and employment eligibility of all new employees. Consequently, at the time of hiring, every employer must examine and record the evidence offered by the foreign national of his/her identity and employment authorization on the Department of Homeland Security’s (“DHS”) Form I-9, according to its instructions.

Since the passage of the IRCA, several pieces of legislation have been passed which attempt to control the unauthorized employment of foreign nationals. In particular, not long after the passage of the IRCA, as widespread employer discrimination and the availability of fraudulent documents began undermining the effectiveness of these new laws, Congress further amended these employer sanctions and anti-discrimination provisions with the passage of the Immigration Act of 1990 (“Immact ‘90”). The regulations incorporating the Immact ‘90’s improvements to the law subsequently became effective on November 21, 1991, the same date that the legacy INS issued a new version of the Handbook for Employers, the official book instructing employers on how to comply with the law.

In addition to verifying and recording each employees identity and employment eligibility, the employers are also required to retain their original, completed I-9 forms in either paper, microfilm or microfiche format. This documentation must be kept on site for the longer period of either three years after the date of hire or one year after the date of termination. Still, despite these alternatives, most employers nevertheless choose to keep paper versions of the form for the sake of convenience. As a result, since the original implementation of this I-9 requirement in 1988, the accumulation of paper documents by employers has reached nearly unmanageable levels, especially for larger businesses. Still, given the U.S. government’s renewed interest in enforcing these employment verification requirements – particularly in situations involving either security-sensitive industries or specific complaints related to unauthorized workers – it is imperative that employers continue to verify, complete and retain their I-9 documentation.

In response to the increasing frustration of U.S. employers, on October 11, 2004, the U.S. Senate approved H.R. 4306, the “I-9 E-Storage/E-Signature Bill” – a bill that permits employers to store, complete and sign versions of Form I-9 electronically. Without question, the passage of this legislation greatly reduces the burden that employers often face when trying to comply with these I-9 requirements. Clearly, this newer system would improve efficiency and save on resources currently spent processing and storing paper documents. Fortunately, the legislation was successfully passed by Congress and, on October 30, 2004 H.R. 4306 was signed into law by President Bush.

Included among the terms of this new legislation is a provision which provides DHS with 180 days to promulgate regulations before the electronic storage and signature provisions are implemented. In accordance with this provision, DHS drafted its suggested regulations and provided them to the Office of Management and Budget (the “OMB”) for review and comment. However, these draft regulations were then withdrawn from the OMB. Finally, in February of 2006, revised draft regulations were resubmitted to the OMB by DHS’ Immigration and Customs Enforcement branch (“ICE”), and on May 12, 2006, the OMB cleared this rule for final approval by ICE. ICE has approved this final rule for publication in the Federal Register in June.

Although the benefits of this new law to employers are undeniable, exactly how this new electronic system will be implemented remains unclear, as the legislation raised a number of points that are expected to be addressed in the implementing regulations, once finalized. First, the law does not specify exactly which types of electronic storage would be permitted under this new system. Secondly, the legislation does not indicate how electronic signatures will be handled. For instance, although USCIS has recently implemented an electronic signature mechanism for its electronic filing program, which requires users to “e-sign” electronic documents by selecting a checkbox that indicates the user’s approval of the information contained in the form, it is not yet known whether a comparable method will be adopted for purposes of electronically filing the Form I-9. Finally, the legislation does not clearly indicate whether it will have a retroactive effect. In other words, it remains unclear as to whether or not electronic storage will be an option for retaining existing I-9 forms.

In a press release issued by DHS they stated that their main purpose in issuing the rule is to clear that standards consistent with those utilized by the Internal Revenue Service for electronic storage of tax accounting records may be applied to the execution and storage of Form I-9. The “Electronic I-9 Rule” codifies the existing standards used by the IRS – the performance standards that taxpayers use for electronic tax accounting records storage. DHS expects that many employers will experience cost savings by storing these forms electronically rather than using conventional filing and storage methods. In addition, because of the automated way in which electronic forms are completed and retained, they will be less likely to contain errors. Electronically retained forms will be more easily searchable, which is important for verification, quality assurance and inspection purposes. Furthermore, improving the management of I-9 employment verification forms will enhance ICE’s ability to perform its worksite enforcement responsibilities, and bring greater accountability to the system.

In a press release issued by DHS Homeland Security Secretary Michael Chertoff stated “Most businesses want to do the right thing when it comes to employing legal workers. These new regulations will give U.S. businesses the necessary tools to increase the likelihood that they are employing workers consistent with our laws. They also help us to identify and prosecute employers who are blatantly abusing our immigration system.”

Again ICE has indicated we will see the Federal Register’s publication of the final regulations implementing the I-9 E-Storage/E-Signature Bill in mid-June. However, for purposes of interim guidance, ICE has issued guidelines related to the electronic storage process, and, in doing so, has referred to the IRS’ current process for storing electronic documents as noteworthy. For more information, please refer to the Agency’s website.

GT continues to track the progress of implementing these regulations and will provide updates on the latest developments in this area, once additional information becomes available.