Tech Giant Earmarks $35 Million for Immigration-Related Liabilities

Last Friday, publicly traded tech giant, Infosys, released its second quarterly financial statements. The Indian company provides a range of global technology, consulting, as well as outsourcing services to leading U.S. companies.  Aside from satisfying accounting requirements, quarterly financial statements seldom make for splashy headlines.

In this case though, the company has been under investigation since 2011 by the Department of Justice and the Department of Homeland Security (DHS) for immigration-related matters, including its use of B-1 visas, which triggered an audit by Immigration Customs & Enforcement (ICE) of the company’s I-9 forms.

THE $35 MILLION (₹219 CRORE) EARMARK

According to the company’s latest financial statement, it is currently and actively “engaged in discussions with the U.S. Attorney’s Office and other governmental departments.”  Thus, any penalty or fine amounts have not officially been levied by the government.

Note that the $35 million earmark is not reserved solely for I-9 fines (if any are levied), but for the entirety of the costs related to the company’s immigration-related investigation (including legal costs).

Sliding Scale I-9 Fines

For the uninitiated employers, I-9 penalty fines are levied on a sliding scale based on the total percentage of Forms I-9 containing substantive (and uncorrected technical) errors.  ICE also factors in “repeat offenders” by imposing higher fines on a sliding scale.

To illustrate, Company X is audited by ICE and provides 100 forms for the I-9 audit.

  • For 5 fineable errors, ICE will levy $110 per error (5% error rate).
  • For 10 fineable errors, ICE will levy $275 per error (10% error rate).
  • For 50 fineable errors, ICE will levy $935 per error (50% error rate).

The fines can also be increased or reduced based on aggravating or mitigating factors: 1) business size, 2) good faith, 3) seriousness, 4) unauthorized aliens, 5) history, and 6) cumulative adjustment.

 

However, in the case of Infosys, it will be interesting to see how ICE takes into consideration these aggravating and/or mitigating factors.  The company currently employs more than 156,000 employees worldwide although the exact number of U.S. employees has not been publicly disclosed.  The company revealed that “DHS has found errors in a significant percentage of its Forms I-9 that the DHS has reviewed.”  Assuming “significant” means more than 50% of the total number of Forms I-9 reviewed by ICE, it’s likely the company may be facing an I-9 fine in the 50% error rate range (that’s $953 per error).

THE IMPACT OF THE POTENTIAL LARGE FINES

The impact of potentially large immigration-related penalties on any company, including I-9 fines, are significant, particularly when news outlets are eager to report on the latest updates to high profile companies.

In its financial statement, Infosys made the following assessment of its current immigration investigation:

In the event that the U.S government undertakes any actions which limit the B-1 business visa program or other visa program that the company utilizes, imposes sanctions, fines or penalties on the company or its employees, or undertakes any other actions against the company arising from the investigations or discussions that are currently ongoing, this could materially and adversely affect the company’s business and results of operations.

The significant earmark of its financial reserves also has the impact to lower the company’s stock price by ₹3.84 per share, as indicated on the latest financial statement.

We’ll provide more updates once the government completes its investigation and issues a public statement on the matter. Stay tuned by subscribing to our newsletter.

THE TAKEAWAY

While many small to mid-size companies (including many of our blog readers) have tuned in to understand how they can stay I-9 compliant, larger organizations sometime face different challenges.

Because of its sheer size, HR staff at larger organizations may find it more difficult to implement an I-9 compliance program due to the volume of I-9 Forms to manage.  Fortunately, the tools to manage this process, like our Guardian I-9 and E-Verify software, already exists to help large organizations easily hop on the compliance bandwagon.

For many corporations who opt to conduct a cost-benefit analysis, the cost of the status quo (i.e. non-compliance) is far costlier than simply implementing best-practice I-9 compliance procedures.  One obvious cost of the status quo is earmarking reserve funds for compliance liabilities (such as the employer in today’s article).  With the increase in the number of I-9 audits by ICE, it’s no wonder employers are finally wising up to the potential liability that results when I-9 compliance is ignored.