Back to the “Basics”: Who is the Employer for I-9 Purposes?

[Editor’s Note: today’s blog is courtesy of Nici Kersey of Seyfarth Shaw LLP.]

This is one of the biggest questions that large organizations struggle with in the I-9 context:  Who do I list as the employer on my Form I-9?  The question seems simple, but the answer is anything but clear.

The applicable regulations define employer as “a person or entity … who engages the services or labor of an employee.”  (8 CFR 274a.1(g))   An “entity” is defined as a corporation, partnership, joint venture, or similar organization.  (8 CFR 274a.1(b))  Thus, many organizations take the position that each legal entity (determined by reference to Federal Employer Identification Number or FEIN) is a separate employer.  The consequence is that, any time an employee transfers from one legal entity to another within the same organization, the new legal entity treats the employee as a new hire, completing a new I-9 and, if the receiving legal entity is registered for E-Verify, running the “new hire” through the E-Verify system.  While this may be quite a bit of work, it is – for many – the cleanest way to handle I-9s.  One business unit won’t be blaming another for errors when an I-9 is forwarded, and I-9s are less likely to go missing in the transition.

Other organizations take the position that the employer is whichever body actually controls the employee’s work from day-to-day.  A 1993 INS memo (the “other” Virtue memo) confirms that this approach is acceptable when the entity treated as the “employer” is the entity with control over the hiring/firing of the employees for whom it completes/retains I-9s.  For a large organization with centralized HR functions, this approach may work well.

In reality, though, most organizations do not fit neatly into one box or another.  Some HR functions are centralized, but others are handled by the individual entities.  Payroll may be handled by a subset of the organization’s entities, and while some entities may list the larger organization’s name as “employer” on the I-9, other entities likely list their own.

The determination as to who is the employer should only be made after considering numerous factors:

  • Which entity is the entity with the most control over employees’ day-to-day activities?
  • Does the organization use E-Verify?  If so, how is the registration structured?  Does each legal entity have its own account?  Remember that, if the organization has federal contracts with the E-Verify clause, only the legal entity that holds the contract will be legally able (and required) to use the system for existing employees.
  • Does the organization sponsor employees for nonimmigrant or immigrant visas?  Recent Notices of Inspection from ICE have asked for information relating to such petitions.  Who is listed on the receipt/approval notices as the employer?  (There may be serious concerns if the organization lists one employer for one immigration purpose and a second for another immigration purpose.)
  • In the event of litigation, does the organization seek to limit liability to one of the smaller legal entities?  If so, listing the larger organization on the employees’ I-9 forms may add to the argument that the larger organization should be liable.  For some, that ship has sailed, and the larger organization may always be on the hook.  Others may be in a position to preserve some sovereignty.
  • Now that ICE has developed its large compliance center, staffed to audit the I-9s of large organizations, is the organization willing to risk having an inspection of a particular location spread to locations in an entire state – or nationwide?
  • If the organization uses an electronic I-9 software program, is the program sophisticated enough to organize the I-9s in such a way as to reflect the organization’s structure and to ensure that only the appropriate I-9s go through the E-Verify system?
  • Is the organization able to keep track of which employees are employed by which legal entities?  And is the organization able to transfer I-9s between legal entities easily?
  • Are there labor unions involved?  The unions will likely want to negotiate over this, as their members may end up completing numerous I-9s as they are transferred between entities.

While my preference has likely become clear (I was the kid who wouldn’t eat her corn if it had touched the peas), the decision – one way or the other – should not be made without considering the questions above – and likely others as well.  It is a big decision, affecting areas other than immigration.