The Gig Is Up: Immigration Implications for the New Workforce

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By Laura D. Francis

The rise of the gig economy workforce is forcing a closer look at whether these workers should be considered employees or independent contractors. But with the spotlight on the implications for benefits and wage-and-hour issues, little attention has been paid to another critically important consideration: immigration and employment verification.

There’s a “slew of things” that companies will have to manage if their gig workers are reclassified as employees instead of independent contractors, Jorge Lopez of Littler Mendelson in Miami told Bloomberg BNA March 24.

And having to complete I-9 employment verification forms is “one of the collateral damages,” he said.

Employment Verification

Since 1986, the Immigration and Nationality Act has required employers to police unauthorized employment by using the government’s Form I-9 to make sure their employees are authorized to work in the U.S. Failure to do so can result in hefty fines if Immigration and Customs Enforcement pays a visit.

Considering that President Donald Trump has proposed increasing ICE’s ranks and enforcement activities, making sure those I-9s are in order will be critical.

The I-9 must be completed within three days of an employee’s hire date, but only for employees—not independent contractors. But what happens if an employer classifies gig workers as independent contractors and they are reclassified as employees later on?

The question becomes one of when a company becomes aware that its workers should be considered employees.

Keep Those Documents

In the case of a court order, employers should maintain proper documentation of that reclassification, including the date on which it occurred, said Lopez, chairman of his firm’s global mobility and immigration practice group.

That date should be considered the “date of hire” for purposes of completing the I-9, he said.

It’s not likely the government would hold improper classification against an employer if there was ambiguity about the workers’ status, Lopez said. So any time there wasn’t an I-9 in place before the workers were classified as employees isn’t likely to affect liability and penalties, he said.

ICE considers the three-day requirement to complete an I-9 to kick in when a worker becomes an “employee,” an ICE spokeswoman told Bloomberg BNA March 29.

Classification Must Be Legit

But employers also need to show that they had a legitimate belief their workers were independent contractors and that they weren’t just classifying them as such to avoid I-9 requirements, Vic Goel, managing partner of Goel & Anderson in Reston, Va., told Bloomberg BNA March 29.

ICE factors good faith into its determination of how much to fine employers, Ceridwen Koski of Ogletree Deakins in Denver told Bloomberg BNA March 23. For example, if an employer conducted a self-audit and discovered that I-9s were missing or improperly completed, it could get credit for correcting those errors, said Koski, a member of Ogletree’s immigration practice group.

But it’s “important to consult with immigration counsel as well as employment counsel in terms of making that determination” that workers are independent contractors at the outset, Goel said.

“ICE is certainly aware of the trend” of the gig economy, said Goel, chairman of the American Immigration Lawyers Association’s Business Immigration Committee.

Avoiding Liability?

“There is a perception that some employers may try to avoid liability for I-9 violations” by misclassifying employees, and it’s “more prevalent” with gig work, he said.

In the event of an ICE audit, the agency will want documentation of a classification decision, Goel said. “That can support you in the event of an audit,” he said.

Still, even completing the I-9 within three days of a reclassification is a tall order, Lopez said. Considering the effort involved across the board in making sure workers now have all the rights and benefits associated with employment, completing all employees’ I-9s in that time frame seems “almost impossible to do in that scenario,” he said.

“Hopefully there will be some sort of a grace period” to get everything in line, Goel said.

Staffing Agencies

Companies using workers from staffing agencies and treating them as independent contractors has always been on the radar for ICE and the Department of Homeland Security, Lopez said.

The government often will issue subpoenas asking the primary company if it works with any third-party staffing companies or other contractors, he said.

Sometimes agents want to “dig into that” to determine whether there’s a “proper” independent contractor relationship or whether there’s an “employment relationship being hidden,” Lopez said.

Even if there’s a pure independent contractor relationship, a company still can be on the hook if those workers are undocumented, Koski said.

Liability can be limited by drafting the contract to require the staffing agency to ensure that the workers have authorization, she said. But it can’t be avoided entirely, she said.

“It’s a concern for any company that is using independent contractors,” Koski said.

Don’t ‘Turn a Blind Eye.’

Employers could be liable if they have “reason to know” that a worker is undocumented but “turn a blind eye” because he or she is an independent contractor, Goel said. Knowingly hiring an undocumented immigrant, even as an independent contractor, is illegal, he said.

It’s still uncertain what the consequences would be if the administration or Congress creates a third category of worker for the gig economy that’s neither employee nor independent contractor, Goel said.

Although creation of a third category is far from a sure thing, it will be “interesting to see how it plays out,” he said.

To contact the reporter on this story: Laura D. Francis in Washington at lfrancis@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Christopher Opfer at copfer@bna.com

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