What Contractors Need to Know About E-Verify and IRCA

Because proper compliance with immigration law is complex, this article should not be construed as legal advice. Those seeking counsel about proper compliance with IRCA, E-Verify requirements, the Fair Labor Standards Act, or wage and hour laws should contact an employment attorney practicing in their state. For general questions, feel free to contact the author at ctrautman@andersonandjones.com.

Mention the word “immigration” in today’s political climate and be prepared for the conversation to take any number of turns. What starts as a friendly conversation could segue into a political debate about President Obama or Donald Trump, livening up or ruining a perfectly good Easter dinner.

But regardless of opinion or political identity, immigration law—and compliance therewith—is something about which most construction professionals should be talking. It is a necessary component of any employer’s operations and it is of particular concern to construction business owners. “Am I supposed to be E-Verifying my employees now?” and “How long do I have to store I-9 Forms?” are crucial questions for contractors.

At a minimum, it is essential for construction professionals to understand the basics of the Immigration Reform and Control Act (IRCA) of 1986 and E-Verify. By now, most business owners in the construction industry are familiar with E-Verify, as well as federal I-9 forms, which must be completed pursuant to IRCA. But with immigration reform becoming a hotly debated issue in the U.S., contractors should not only be prepared to comply with existing laws, they should also pay attention to what changes the future could hold.

IRCA

IRCA, a federal statute, makes it unlawful to hire “unauthorized aliens”, which the law defines as individuals who are not “lawfully admitted for permanent residence” or not otherwise authorized by the attorney general to be employed in the U.S. [8 U.S.C § 1324a(h) (2012)]. IRCA is the statute that requires all employees and employers to complete I-9 Forms; the employer must then retain the original forms during the employment of each active employee (and for three years after employees become inactive or are terminated). The statute’s intention is to require every employer, regardless of the number of individuals it employs, to verify all employees hired after Nov. 6, 1986, are authorized to work in the U.S.

As a practical matter, compliance with IRCA likely won’t ensure all employees are authorized to work in the U.S. However, correctly filling out the I-9 Form is crucial to avoid fines and other penalties from Immigration and Customs Enforcement (ICE), Washington, D.C. Employees and employers have obligations regarding the I-9 Form, so cooperation between both sides of an employment trans- action is key. Under IRCA, ICE has the authority to inspect I-9 Forms and conduct audits to ensure employers are complying.

Common, but often innocent, mistakes are made. For example, employers often fail to check the “status” box on the I-9 form or fail to have the employee sign the form. Also, inaccurate classification of employees as “active” or “inactive” can lead to trouble for employers who have stopped maintaining I-9 forms for employees who no longer work for the employer but who are still classified as “active”. Instituting company policies on what constitutes an “active” and “inactive” employee, as well as ensuring proper completion of I-9 forms, can help prevent ICE audits and the fines that could result.

E-VERIFY

Unlike IRCA, E-Verify is not a statute but an Internet-based system that allows businesses to determine the eligibility of their employees to work in the U.S. In many cases, E-Verify will more accurately determine an employee’s eligibility to work than the I-9 Form system under IRCA. E-Verify is available to all U.S. employers free of charge by the Washington-based U.S. Department of Homeland Security (DHS) but it gene- rally is not mandatory for employers.

Although E-Verify is technically voluntary, numerous states have enacted provisions requiring most employers to use E-Verify. These states include Alabama, Arizona, Colorado, Georgia, Idaho, Indiana, Florida, Louisiana, Minnesota, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Utah and Virginia. Additionally, pursuant to a presidential Executive Order and a subsequent Federal Acquisition Regulation rule, federal contractors—or those contractors doing business with the federal government—must use E-Verify.

Again, except in certain circumstances, enrollment in E-Verify is voluntary. Once enrolled, however, employers are required to post English and Spanish notices indicating the company’s participation in the program, as well as the Right to Work issued by the Office of Special Counsel for Immigration- Related Unfair Employment Practices, a division of the U.S. Department of Justice, Washington. These posters must be visible to prospective employees. To enroll, an employer simply needs to visit the E-Verify website and begin the process. Next, the employer enters into a written Memorandum of Understanding (MOU) with DHS and the U.S. Social Security Administration (SSA), Washington. This MOU provides the responsibilities of each party— employer/federal contractor, SSA and DHS.

BROADER ACTIONS

In recent years, President Obama and state governments have implemented changes to immigration law and policy that are impacting the construction industry. President Obama, in response to Congress not passing an immigration reform bill, announced a number of executive actions in November 2014. One such measure would allow certain undocumented immigrants to temporarily remain and work in the U.S. without fear of deportation. Because of pending litigation, this measure has not yet taken effect.

Although President Obama has attempted to prolong some immigrants’ ability to legally work in the U.S., several states have enacted legislation that could do the opposite. While the 19 states previously listed had made E-Verify mandatory for certain employers, some states have broadened the scope of situations requiring employers to use it. North Carolina, for example, had required all employers with 25 or more employees to use E-Verify as of 2013. But in October 2015, Gov. Pat McCrory signed into law a bill that requires all contractors and subcontractors on state construction projects to use E-Verify (N.C.G.S. § 143-133.3). The statute appears to require this without regard to a contractor’s number of employees, bringing North Carolina a step closer to South Carolina’s zero-tolerance policy for employment of undocumented immigrants.

In South Carolina, private employers who fail to E-Verify new hires could lose their licenses to do business in that state [S.C. Code Ann. § 41-8-10, et seq. (2012)]. The South Carolina law, and similar laws, easily could affect contractors from other states with more lenient policies; however, the South Carolina statute defines “private employer” to include any company transacting business in South Carolina, required to have a license issued by any state agency (including a business or construction license) and employing at least one person in South Carolina. Therefore, companies outside South Carolina that have a South Carolina office—or just one employee in South Carolina—likely will have to use E-Verify, which is becoming required in an increasing number of locations.

EMPLOYEE MISCLASSIFICATION

Importantly, E-Verify does not apply to independent contractors; companies that are required to use E-Verify need only verify the status of employees, not of independent contractors that contract with the company for work. This is noteworthy in light of another trending issue in the construction industry: employee misclassification. Employee misclassification occurs when a business wrongly classifies an employee as an independent contractor or vice versa. This is a violation of the federal Fair Labor Standards Act.

According to the U.S. Department of Labor’s (DOL’s) website, the DOL’s Wage and Hour Division is engaging in “strategic enforcement” to identify instances where companies are identifying workers as independent contractors even though they function like employees. Whether companies could be penalized for failing to E-Verify independent contractors who should have been classified as employees is unclear. However, it appears that eventually many employers will have to reclassify workers who are currently classified as “independent contractors” to “employees” to comply with federal contracts, state contracts or state laws that require use of E-Verify. It appears that this will inevitably result in employers being required to use E-Verify on an increasing number of workers.

Lessons Learned During a Merger

In August 2014, I purchased the assets of a fourth-generation, 133-year-old roofing contracting company with which I had been competing locally for a few years. As a relatively new contractor in the area (I had been in business just under nine years), I wanted a larger share of the commercial roofing market. The clients I hoped to inherit with this acquisition would help me to accomplish that goal.

I had no formal business training, nor knowledge of how to make such a merger work. I started my company with very little industry experience back in 2005; I had a working knowledge of roofing and a desire to be my own boss. Things had gone well, so I trusted that my instincts would guide me through the merger. I was operating on nothing more than a gut feeling that this merger would be a good thing and a blind assumption that I would be able to handle whatever challenges might come my way.

I began the dialogue with the company’s owner in early 2013 and it took until August 2014 to close the deal. There were plenty of challenges created by this process—definitely some things I handled well and some I did not.

The primary goal of this acquisition was to retain the company’s customer base, thus growing my own. Relationships were in place that went back years, even generations, and maintaining those relationships was of utmost importance. I had a plan in place to personally visit with or reach out to all of these customers within the first two weeks. I thought this would be one of the main challenges—certainly the most important thing to get right—but, surprisingly, it was one of the easiest things to achieve. The previous owner assured these customers I would continue to take care of them well and I think these customers’ trust and loyalty already was so solid that the accounts transferred over to me almost without question. As planned, I personally met most of my new customers within the first couple weeks, continued to serve their needs with the same people and took care of them with the same high level of service to which they had become accustomed. I am proud to say, after six months, we have retained 100 percent of these customers.

I am fond of saying, “I don’t know much, but I know exactly what I don’t know.” It’s the tenet to which I attribute what modicum of success I have had. I knew that I did not know how to manage a process like this! It was definitely a good move on my part to work with a consultant. It did not answer all the questions, nor did it eliminate all mistakes, but the insight and advice of someone who had been through similar processes was invaluable.

Before we closed on the deal, I told myself that despite what problems, issues or frustrations might arise, I would treat the first five months as an observational period rather than a time to implement changes. I was patient and held true to that timeframe. Trust takes a while to establish and people take a while to know. I am glad I waited to learn what I needed to know before making any significant changes.

The biggest challenge the merger created was in dealing with the significant increase in my employee count and all the associated human-resource issues that resulted. I had kept my business pretty light on hourly employees in the field, whereas the company I purchased had close to 30 full-time roofers. I had written an employee handbook prior to the merger but many of the policies had not yet been questioned or tested. Of course, in the first few days after the merger, I had a wave of guys coming at me with issues and problems with the new systems to which they would be subjected. I modified a few policies based on legitimate concerns and to ease the transition while I held firm on others. I should have had clearly defined and time-tested policies in place, so I would have been better prepared for the questions I was asked.

In hindsight, I think the biggest mistake I made was to agree to keep this sale completely confidential until the deal was confirmed and I had officially taken over. This meant the first time I met any of the employees they were already on my payroll. There had been no opportunity to meet existing employees, interview the office staff, or gain any insight into systems and processes prior to the day of the merger. I basically had to jump right in! That could have been avoided and would have prevented a lot of stress and at least one early layoff I had to make.

I should definitely have hired, if only temporarily, an additional office person to assist with the mountain of paperwork that was created. We used a Small Business Administration loan to finance the purchase, which added significantly to an already overwhelming workload. A backlog of paperwork was created that took a few months to sort out.

Although I do not consider the merger process completed, we are definitely over the hump and, despite a few challenges, it has turned out as I hoped it would. Our commercial revenues have increased as forecast and I feel good about the fact that, had I not purchased this business, the employees I gained would be unemployed right now. Instead, they are part of a growing company that aims to provide long-term security for them and their families.

Twice in the same day earlier this month I was asked, “What one thing have you learned from the process of buying another business?” I did not have a clue how to answer that question. Certainly I have learned a great many individual lessons and become the wiser for it, but I’m not sure how to boil it down to one thing. I guess it can be summed up with my favorite cliché:
“That which does not kill you makes you stronger.” Mistakes are inevitable, and they are good. If you are afraid to make them, you will accomplish nothing. You will learn way more from one mistake than you will from 10 good decisions. People will not notice your mistakes nearly as much as you think. So don’t hesitate; make the call; learn from it if you can; and move on.

On a personal note, I owe a very heartfelt and big thank you to Horace Thompson King III (Tommy) for being such a pleasure to work with and for making a difficult process much easier than it could have been.

Hiring Our Heroes Helps Veterans Find Employment in Roofing and Other Industries

When Grant Smith returned from active duty as a U.S. Infantryman in the Marine Corps, he was concerned about finding a job. He had been in the military since the age of 18 and, having been a rifleman, he did not believe he had any marketable skills that would lead him to a job with a future. Smith’s sergeant told him about a trade fair in Columbus, Ohio, in which potential employers would be available to interview veterans for a variety of jobs in the area. At the trade fair, Smith met Chad Muth, president of Muth & Co. Roofing, Westerville, Ohio, and was hired as an installer in the spring of 2013.

Fast-forward two years and Smith is now a field supervisor.

It was a win-win for Smith and Muth, and it was all thanks to the Hiring Our Heroes program.

HELPING VETERANS

Grant Smith (middle), a former U.S. Infantryman in the Marine Corps, was hired as an installer by Muth & Co. Roofing, Westerville, Ohio, through Hiring Our Heroes. Just two years later, he is a field supervisor.

Grant Smith (middle), a former U.S. Infantryman in the Marine Corps, was hired as an installer by Muth & Co. Roofing, Westerville, Ohio, through Hiring Our Heroes. Just two
years later, he is a field supervisor.


Hiring Our Heroes is a national initiative administered by the U.S. Chamber of Commerce Foundation, Washington, D.C. Its mission is to help veterans, active service members and their spouses transition back into the workforce through a series of hiring fairs held throughout the country, as well as through an online process. To date, more than 850 fairs have been held with 35,000 employers participating, including businesses of all sizes, as well as government and nonprofits. The program also offers employment workshops, résumé reviews and career coaching.

The initiative began four years ago as a response to the gap between businesses looking for skilled workers and those returning from the military with no idea where to look for employment. Job seekers and potential employers may attend hiring fairs at no charge.

“That is one thing that makes the program stand out and makes it so successful—small- and medium-sized businesses can come. A lot don’t have recruiters or HR, but they want to hire a vet, a quality worker,” says Kim Morton, communications manager for Hiring Our Heroes.

Though the numbers are not updated daily, Morton says her team has been able to track 25,000 hires made through the hiring fairs, and those are only from employers reporting back to the program.

The draw for employers is multifold. “Most employers are there because they know they’re going to get a quality employee,” Morton notes. “[Veterans] have had years of discipline and dedication. They know how to stay until the job is done and know how to problem solve; that is the No. 1 skill employers are looking for.”

In addition, Morton adds, veterans know how to work in flexible and uncertain conditions and can be resourceful to get the job done. “Once [a company] hires a vet, they want more, so we see employers coming time and time again,” she says.

Although the fairs are open to veterans of any era, Morton says the majority who attend are post-9/11 vets because their unemployment rate consistently has been higher than the national unemployment average. “For veterans under age 25, those numbers are closer to 20 percent. Those are the ones we see come to events the most,” Morton states.

In addition to in-person fairs, employers and veterans can find each other via online tools, such as a jobs portal and an employer best practices site, within the Hiring Our Heroes website. “Our goal is to ensure veterans, transitioning service members and military spouses are able to utilize our resources to connect with employers no matter where they are in the world,” Morton remarks.

PHOTO: MUTH & CO. ROOFING

Pages: 1 2

A Homeland Security Program Minimizes Administrative Headaches

Lines & Lundgreen Roofing and Insulation Inc. is a small family-owned business that was started in 1947. We have grown to be the largest roofing company in Yuma, Ariz. Jonathan Lines, the general manager, is the third-generation Lines to guide this company. He is taking the reins from his father, John Lines, and uncle, Steve Lundgreen, the current owners.

Unfortunately, we all know there is a lot of turnover in construction. Having to worry about eligibility for employment is a distraction from what we do. We have an office staff of two people. How do you train two people to become experts in all the different areas a businessperson needs to be aware of nowadays? It is just impossible.

A few years ago there was an article in the local newspaper about a raid on a local business. The purpose of the raid was to check for illegal workers. The article stated there were a number of illegals working at this site, and the business would receive fines above $10,000. I didn’t want to worry about this, but we were not experts on the different documents that could be used to prove eligibility and didn’t know how to look for illegal documents. I did not want to become an expert either. I thought I was doing what was needed.

A day or two after the article appeared, one of the owners was talking to a group of employees and said we would have to check all employees for document accuracy. He was joking, but we lost a surprising number of employees that morning. They just disappeared, and we all knew why. I knew that whatever we were doing was not working. Then we were audited by U.S. Immigration and Customs Enforcement (ICE). I was more than a little uneasy as they presented their badges and realized why they were in our office.

Our audit turned out to be a positive experience. ICE agents went through each of our I-9 forms. Then they held a meeting with us. They could see we had been making an honest attempt to use appropriate hiring processes. They helped us clear up the things we were doing wrong and encouraged us to take advantage of the best employment practices available to us on the Internet.

We were using E-Verify already; E-Verify is a free Internet-based system that allows businesses to determine the eligibility of their employees to work in the U.S. We now use E-Verify for I-9 documentation, socialsecurity.gov for Social Security number verification and Arizona’s New Reporting Center to withhold child support. We are in compliance and ICE does the verification. I no longer worry about these issues, which is one less headache for me.

The IMAGE Program

Lines and Lundgreen Roofing and Insulation Inc. was the second Yuma, Ariz., employer to partner with U.S. Immigration and Customs Enforcement’s (ICE’s) Homeland Security Investigations (HSI) in a nationwide program designed to strengthen hiring practices and combat the unlawful employment of unauthorized workers. Lines and Lundgreen Roofing and Insulation was certified as an ICE Mutual Agreement Between Government and Employers (IMAGE) partner.

Lines and Lundgreen is a roofing, insulation and acoustical ceiling installation firm with 46 employees serving Yuma County and the Imperial Valley. The company’s projects range from residential roof repairs to large commercial and government contracts, such as the F-35 simulator building at U.S. Marine Corps Air Station Yuma.

As part of the IMAGE program, ICE provides private companies with education and training on proper hiring procedures, including the use of employment screening tools, such as E-Verify. IMAGE-certified companies also undergo an audit of their I-9 forms to ensure current employees are eligible to work in the U.S.

Employers interested in learning more about IMAGE membership should visit its web page.

Survey Finds Labor Shortages Are Increasing

Nearly three-fourths of construction firms across the country report they are having trouble finding qualified craft workers to fill key spots, according to the results of an industry-wide survey released by the Associated General Contractors of America, Arlington, Va. Association officials called for immigration- and education-reform measures to help avoid worker shortages.

Of the 74 percent of responding firms that are having a hard time finding qualified craft workers, the most frequently reported difficulties are in filling onsite construction jobs, like carpenters, equipment operators and laborers. Fifty-three percent are having a hard time filling professional positions, especially project supervisors, estimators and engineers.

Eighty-six percent of respondents said they expect it will remain difficult or get harder to find qualified craft workers; 72 percent say the market for professional positions will remain hard or get worse. Seventy-four percent of respondents report there are not enough qualified craft workers available to meet future demand while 49 percent said there weren’t enough construction professionals available.

To prepare future construction workers, 48 percent of responding firms are mentoring future craft workers; 38 percent are participating in career fairs; and 33 percent are supporting high school-level construction skills academies. In addition, 47 percent of responding firms are offering internships for construction professionals.

Stephen E. Sandherr, CEO of the Associated General Contractors of America, says Congress needs to jettison arbitrary caps on construction workers that were included in immigration reform the Senate passed in 2013. “Lifting those restrictions will go a long way to ensuring construction jobs left vacant by domestic labor shortages go to workers who are in the country legally,” he says.

Sandherr urges elected and appointed officials to do more to ensure public-school students have an opportunity to participate in programs that teach skills, like construction. He adds skills-based programs offer students a more hands-on way to learn vital 21st century skills, such as math and science. Such programs also have been proven to reduce dropout rates and give students an opportunity to earn the higher pay and benefits that come with construction jobs.

Nearly 700 construction firms participated in the survey. View the national survey results and analysis, as well as results for 15 states with larger survey samples.