III. IRCA of 1986: Missing the Mark and Hitting Employers

Federal regulation prohibiting the hiring of illegal immigrants has existed for over twenty years. Passed in 1986, the Immigration Reform and Control Act48 (“IRCA”) contained four highly controversial provisions that were the result of compromise between those who believed employer sanctions would stop illegal immigration and those who believed employer sanctions would lead to discrimination against “foreign-looking people.”49 IRCA amended the Immigration and Nationality Act50 (“INA”) to provide limited amnesty to certain qualified illegal aliens, set forth penalties for employers who hired illegal aliens, instituted a program to ensure employer compliance, and enacted anti-discrimination provisions to punish employers who discriminate against an applicant on the basis of nationality or citizenship.51 Furthermore, IRCA gave nearly three million illegal immigrants residency status.52 Perhaps more importantly, by charging employers with the responsibility of verifying worker documentation under threat of civil or even criminal penalties, IRCA placed the future of immigration enforcement in the hands of the nation's employers.53 Part III examines IRCA's requirements for employers and outlines several problems that work to undermine its effectiveness.

A. Employer Responsibilities

IRCA instituted substantial requirements on employers in an effort to terminate the flow of illegal immigration into the United States. These requirements include prohibitions on hiring illegal aliens, compliance provisions to enable oversight by immigration authorities, and provisions to prevent employers from discriminating against legal immigrants.54 A brief overview of these provisions exposes the inherent complexities of the rules and explains why employers have difficulties in attempting to comply.

The first provision is the heart of the Act. Section 1324a prohibits employers from hiring an employee “knowing the [employee] is an unauthorized alien.”55 This rule extends to individual “persons,” such as a single-parent hiring a nanny, and “entities” like corporations or partnerships.56 The rule also applies to the hiring of independent contractors who employ illegal immigrants.57 The broad scope of the statute is illustrated in a recent enforcement action against mega-retailer Wal-Mart. DHS's Immigration and Customs Enforcement Division (“ICE”), the agency responsible for immigration enforcement, alleged that Wal-Mart hired an independent contractor to clean its stores even though Wal-Mart knew the company employed illegal aliens.58 Following a lengthy investigation, Wal-Mart agreed to pay $11 million to settle the case.59

In order to ensure employer compliance and allow certain employers to avoid a presumption that they “knowingly” hired illegal aliens, employers must participate in an “employment verification system.”60 Under this system, an employer must verify a potential employee is not an unauthorized alien by examining government-approved documents to establish both the employee's identity as well as their authorization for employment.61 The list of acceptable documents ranges from resident alien cards and passports to driver's licenses and social security cards.62 Employers are expected to verify that the documentation “reasonably appear[s]” genuine under penalty of perjury.63 Employers must retain the verification form in case the government decides to inspect it later.64 Failure to comply with these provisions could prove costly for employers. In addition to criminal sanctions, civil penalties could reach $5,000 for each violation of the hiring prohibitions.65 Violations of the compliance provisions could result in fines of $1,000 per violation.66

As a method to both protect the employer and provide incentive for compliance, IRCA provides that any employer who complies with the aforementioned system receives the benefit of a “good faith” defense in the event questions later arise regarding the employee's eligibility for employment.67 However, compliance is not an absolute defense. Courts have held that an employer's good faith compliance is subject to a “reasonable man” standard, meaning that, at a minimum, an employer's verification decision may be subject to review.68 Moreover, employers may be held to a “constructive knowledge” standard, which has special significance in the hiring of independent contractors.69 John Pearce, professor at the Villanova University School of Business, explains: “[A]n employer could be held liable for the hiring practices of an independent contractor if it has adequate notice that the contractor is employing illegal aliens,” even if the contractor was the one to review the employee's documentation.70

In addition to these requirements, IRCA demands that employers not over-reach when seeking to verify prospective employee documentation. Section 1324b prohibits “discrimination based on national origin or citizenship status.”71 While there are exceptions depending on the size of the business,72 employers who fail to honor documents that appear reasonable on their face could be subject to allegations of discrimination73 and penalties reaching $1,000 per incident.74

Although simplistic on its face, in practice IRCA requirements place a heavy burden on employers who are responsible for verifying and retaining a plethora of acceptable documentation. Non-compliance could result not only in hefty fines for an employer, but also additional turnover costs and lost productivity.

B. The Problematic Aftermath

With the implementation of IRCA, employers found themselves on the front line of the battle against illegal immigration. In the early years following IRCA's implementation, its apparent weaknesses75 enabled the number of illegal immigrants entering the country to soar to approximately 500,000 every year.76 As the number of illegal immigrants increased, so did employers' dependency on them as a source of cheap labor.77

The irony of the situation is that the intended consequence of IRCA's provisions (a moratorium on the hiring of illegal immigrants) was undermined by the very means used to effectuate it. Aptly referred to as the “deputization” of American employers, IRCA's primary flaw was the tremendous burden the compliance provisions placed on employers.78 With little government oversight, employers are expected to work to identify and exclude illegal immigrants while simultaneously exercising sufficient restraint to avoid discriminating against prospective employees.

The first challenge faced by employers that led to the failure of IRCA was the practical problem of identifying fraudulent documentation.79 The list of acceptable documentation includes approximately twenty-nine forms of identification, some of which are issued by the varying standards of state and local governments.80 For multi-state corporations, training staff to successfully identify fraudulent documents from among a wide variety of possibilities has proven difficult and time-consuming, and the results have been less than ideal. Moreover, the counterfeit document industry has become increasingly sophisticated, which makes fake documentation even more difficult to spot.

With an estimated eleven million illegal immigrants needing documents for employment, the counterfeit industry is thriving.81 Fifty dollars can buy an illegal immigrant sufficient documentation to gain employment.82 In 2005, a study conducted by the U.S. Government Accountability Office (GAO) found that the high level of “document and identity fraud made it difficult for employers who wanted to comply with the employment verification process.”83 In a separate report that same year, the GAO remarked to Congress that the “[n]umber and variety of acceptable documents hinders the verification process.”84

The ease with which such documents are counterfeited also allows employers who “knowingly” hire illegal immigrants to claim plausible deniability.85 Thus, the massive counterfeit industry renders IRCA ineffective by simultaneously preventing scrupulous employers from effectively detecting illegal immigrants and providing more security to employers who choose to violate the law by hiring illegal labor. But problems for employers do not end there.

Employers who identify what they perceive to be fraudulent documentation are faced with a second problem: choosing whether to hire the alleged alien and face potential sanctions by immigration officials, or to request additional documentation from the applicant and face a possible discrimination suit.86 IRCA's requirement of a good-faith documentation determination coupled with its prohibition against hiring discrimination has forced employers to choose between equally risky propositions.87 For example, a farmer in Florida was found liable for discriminating against six of his employees after he questioned their documentation and fired them when they could not produce any additional documents.88 One year earlier, the very same farmer had been fined $100,000 by immigration officials for violating IRCA's prohibitions against hiring illegal immigrants.89 Court decisions have not been very useful in helping employers manage their risks either. The grey line of the “reasonable man” standard employed by courts when reviewing employers' verification of documentation is of little guidance or comfort to an employer faced with a need for labor and a suspicious looking social security card.90

To add insult to injury, immigration officials have not been able to effectively enforce employer sanctions. In the early years following the passage of IRCA, the Immigration and Naturalization Service staffed only 350 people to oversee compliance and enforcement of the entire Act.91 The fact that the Act does not require employers to proactively send their document verification information to immigration officials compounded the staffing problem.92 Consequently, immigration officials never actually review the employer's decision unless they request the information directly from the employer, or when someone tips them off to the alleged misconduct.93 Thus, the current methodology not only provides dishonest employers with an additional layer of comfort when hiring illegal aliens, but, because of the nature of selective enforcement, employers who either choose to comply with the law or are forced to do so by immigration officials must then compete on an unfair playing field with employers who have not been targeted.

In recent years, SSA has attempted to assist immigration officials by sending “no-match” letters to employers who submit W-2 forms when employee social security numbers do not match its records.94 While this did increase the rate of identification somewhat, interest groups representing the dependent industries have lobbied to halt the practice.95

Despite its goal of preventing the hiring of illegal immigrants, IRCA clearly fostered employer dependency on illegal labor. By “deputizing” employers who had little or no training in counterfeit document detection and providing virtually no oversight by immigration authorities, the Act embodied the seeds of its own failure. The Basic Pilot Program and private enforcement actions were both passed in an effort to cure IRCA's deficiencies. Parts III and IV will compare these two methods, beginning with private enforcement actions.