Concessions and Confusion: The NEW Electronic I-9 final rule

[Editor’s Note: today’s blog is courtesy of Dawn Lurie and Kevin Lashus of Greenberg Traurig]

As expected the US Department of Homeland Security (DHS) today published the final rule amending the regulation to provide that employers—who complete and retain the Form I-9 (Employment Eligibility Verification)—may sign the form electronically and retain the form in an electronic format. Although DHS claims the rule makes only minor changes to the interim final rule promulgated on June 15, 2006, at first glance, there appears to be significant clarifications and allowances. Challenges remain: employers will need time to digest what this rule says and what is does not say.

This wouldn’t be an interesting blog post if we didn’t mention that reissuing the interim rule for further comment—in light of the proliferation of electronic verification software application providers in the marketplace as well as significant advances in technology—may have been much more productive.

Regardless, here’s what employers need to know.

(1) The final DHS regulation requires an employer to complete a Form I-9 within three business days of hire

Just three weeks ago, USCIS provided guidance to E-Verify users of the “Thursday rule.” Talk about bad timing. As it turns out, USCIS issued their “clarification” of the E-Verify “Thursday rule” while the electronic I-9 final rule was already sitting at OMB. One can only speculate how the interagency discussions went on the “three-day” subject, considering that DHS and ICE knew clarification was coming out on the definition of “three days” very shortly. Or, at least guidance on what ICE (and the rest of us) thought required clarification on the definition. Remember, in an outstanding effort to ensure consistency and solidarity between USCIS and ICE, ICE quickly agreed to “respect” the USCIS interpretation.

Whether publication of the electronic I-9 final rule changes that agreement remains to be seen. This is really the “ICEing” on the cake. In the past month, employers have seen critical I-9 training guidance going out through an E-Verify Redesign webinar and ambiguous guidance on the E-Verify website discussing “the hire date” (we do agree that the E-Verify hire date may not be the same as the date work began for pay) without clearly restating that the “Thursday Rule” is for I-9 completion and E-Verify completion. Additionally, this new electronic I-9 final rule may also beg further clarification of its definitions: three Federal business days (meaning, excluding Saturdays, Sundays, and holidays) or three routine business days (for employers open 365 days, no exclusions). In our initial discussions with ICE, they identified that their intent was to be reasonable. Business days appear to equate to Federal working days.

Even when businesses have weekend or varied schedules, the HR managers generally hire and complete paperwork on “business days during business hours”. Gut reaction: the forensic auditors may use this type of standard; so, if you need an accommodation, ICE may be inclined to give you one.

(2) DHS will allow competing paper and electronic systems.

This clarifies that an employer moving to an electronic system need not create digital images/data related to historical paper forms. However, from some employer’s perspective monitoring two distinct verification systems for compliance may be too difficult a logistical challenge. These particular employers have elected to go entirely electronic to take advantage of the ability to monitor compliance and provide for electronic reminders. We do believe this is a nice allowance, but at the same time, employers should continue to approach converting paper I-9s to electronic images very carefully, first discussing the benefits as well as the concerns (in particular audit related and privilege issues).

(3) DHS clarifies an “audit trail” does not include each time an electronic I-9 is viewed.

DHS is now conceding that maintaining a record of each time an electronic I-9 is viewed may be a little onerous. We do believe that this too is a reasonable allowance; but, because of the passage of time, it appears most reputable electronic verification software providers have already programmed their applications to monitor this activity. More importantly, most legal experts would still require a provider to include this portion of the trail.

(4) DHS allows for the discretionary provision of proof of the electronic transaction–no longer mandatory.

DHS also conceded that forcing employers to print a paper receipt of the electronic transaction may make no sense unless the employee requests the receipt. Conceivably, DHS recognized that forcing an employer to provide the paper receipt resulted in a quite ironic result–electronic forms reduced trash, but the frequently discarded receipt created trash.

(5) “Indexing” does not require “all” fields.

Perhaps the hidden gem within the new final rule is the admission that DHS now believes the requirement that the electronic storage system be “searchable by any data element” was too burdensome. Without giving any thought to the consequences, many well intentioned employers had assumed imaging their existing paper I-9s ultimately constituted an indexable system. However, given the divergent enforcement activity across different “Areas of Responsibility”—essentially the geographic areas over which an ICE Special-Agent-in-Charge (SAC) is responsible—it appears that in certain SAC offices such an optical storage system (i.e., a pdf or similar copy of the original form) violated the interim rule. The final rule identifies that not all of the “data element(s)” must be searchable, but that the system must provide a sense of “searchability” consistent with the amended 8 CFR Sec. 274a.2(e)(6).

So what does (e)(6) say?  It is now defined as:

a system that permits the identification and retrieval for viewing or reproducing of relevant documents and records maintained in an electronic storage system. * * * The requirement to maintain an indexing system does not require that a separate electronically stored documents and records description database be maintained if comparable results can be achieved without a separate description database

So, what does (e)(6) say again? . . . Right. The only thing for certain is that the DHS concedes all data elements need not be “searchable”. What the real definition of (e)(6) provides is still up for discussion.

While it is apparent that much thought, reasoning and common sense went into the rule, those of us that eat, sleep and drink I-9 compliance are left feeling a bit hungry. We wanted more after all this time, but fully understand the need for flexibility especially in light of the fast pace of technology. There are still open issues including the need for definitive standards on how electronic signatures will be handled as well as the specifics of how electronic storage for existing paper I-9s will be applied. Will the removal of the requirement to “index all fields” allow for scanning paper I-9s into PDF and treating them similar to microfiche? Will certain data fields still need to be ‘searchable”?

In sum, DHS has acknowledged that the interim rule may have been too onerous. That being said, it does not even begin to address all of the questions that manifested in recent years after the publishing of the interim final rule. What is quite clear is that the Government wants to advance the goals identified in the preamble of the original rule: employers may experience cost savings, increased compliance, and ease of inspection (for ICE Special Agents) if they decide to move to an electronic verification system. Going electronic is a decision that should be made carefully and should include many faces at the discussion table. Whether this final rule represents the last word on the topic is still subject to debate.