Penalties for Hiring Illegal Workers

From the time you launched your first trial balloon about starting a business, you probably heard the refrain, "If there is no risk, there is no reward." The adage may be true enough, but after a few short months in business, you learn that risk comes in different shapes and sizes, with day-to-day risk registering entirely differently on the Richter scale of disruption than a risk that could threaten the veracity and reputation of your small business. On this front, the U.S. government makes it perfectly clear: No matter what you may have heard about the benefits of hiring undocumented workers; it is illegal to do so. The penalties can be severe, making it one business risk you should avoid at all costs.

Understand What Undocumented Means

The terms Undocumented and Illegal are used interchangeably to describe workers who are not authorized to work in the United States. They may be authorized to visit as tourists or students, but they are not authorized to hold a paying job.

To avoid detection, some employers pay illegal workers under the table in cash and off the books. The lack of a record of the transaction might provide the employer and worker with a cover story, but it's hardly ironclad or foolproof.

Playing dumb to the issue of an employee's legal status is not an option either. Employers are legally required to verify that everybody working for them is authorized to work in the United States. This verification takes place on the I-9 form, which is issued by the Department of Homeland Security's United States Citizenship and Immigration Services. It must be completed by every employee within three days of his start date.

Documents Must Accompany I-9s

Once completed, the form is not filed with the government, but employers are required to keep a copy on file. On it, employees are required to provide their:

  • Name
  • Address
  • City, state and ZIP code
  • Date of birth
  • Social Security number
  • Email address
  • Phone number

To prove citizenship, the I-9 must be accompanied by one document from List A or one document each from List B and List C. The documents on the lists include:

  • List A: A United States passport, green card or employment authorization card;
  • List B: A state driver's license, state identification card or school ID; and
  • List C: A United States birth certificate or Social Security card with no restriction.

An extended list of documents that may be used to prove citizenship is available on the IRS website.

Penalties Can Begin With I-9 Audits

You may have heard of an I-9 audit, which is precisely what it sounds like: a government audit of a business to ensure that its employees provided proof they are allowed to work legally in the U.S.

I-9 audits don't sneak up on a business, nor do the government agents who perform them. Often, a disgruntled former employee or customer triggers the audit.

If the government decides to pursue an audit, a business usually receives a Notice of Intent three days ahead of time. The audit itself may be conducted at the business or a government field office, and the I-9s and supporting documentation become the focus of the effort.

Errors made at this juncture can trigger fines from $110 to $1,100 per violation, which isn't cheap, but these amounts don't come close to the penalties for hiring illegal workers that can build up down the road.

Illegal Workers Can Hold Appeal

Some industries depend on illegal workers more than others. Without indulging in stereotypes, identifies the industries as agriculture, construction, hospitality, landscaping, manufacturing and restaurants. Jobs within these industries call for people to work long hours for low wages, which helps explain why turnover can be so high, and transients can be so commonplace.

Without justifying the conduct, some employers say they hire - and sometimes need to hire - illegal workers because:

  • They accept low wages that American-born residents often consider inferior.
  • They do not insist on receiving health insurance and other benefits.
  • They are less likely to report health and safety violations. Anyone in the country illegally is eager to avoid attention, not attract it.

Hiring Illegal Workers Is Only One Infraction

Employers can find themselves in trouble with the government if they do more than hire illegal immigrants. They can also face penalties if they:

  • Recruit illegal immigrants or
  • Refer immigrants to a job site and receive a placement fee.

Penalties Escalate With Repetition of Offense

Of the three offenses, hiring illegal immigrants is the most common, and the penalties can be severe, including:

  • A fine of between $250 and $2,000 per illegal employee for first-time offenders;
  • A fine of between $2,000 and $5,000 per illegal employee for second offenses;
  • A fine of between $3,000 and $10,000 per illegal employee for three or more offenses. "A pattern of knowingly employing illegal immigrants" can result in extra fines and up to six months in jail for an employer, the government says; and
  • Revocation of a business license.

Harboring illegal immigrants or giving jobs to 10 or more illegal immigrants in one year can incur the worst of the government's wrath. In these cases, an employer faces up to 10 years in prison.

Revisit Risk and Reward

By now, you may be revisiting the risk-and-reward refrain that takes on so many meanings for small-business owners. When it comes to hiring illegal workers, the risks have a compelling way of overshadowing any reward.