The Woes of WAL-MART: A Lesson In Independent Contractor Practices And Immigration Law (Non)Compliance

News headlines over the last 18 months have been sprinkled with reports of the federal government raiding and prosecuting employers for violations of the immigration laws. The government is looking beyond the mere labels of "independent contractor" to see if the employer had knowledge of its contractors' practices. In this type of environment, prudent employers who do not want to be the target of a federal investigation or prosecution will review their immigration law compliance efforts and make sure that they, and their executives, are not aware of violations by their contractors.

"Operation Rollback"

On October 23, 2003, federal officers from the Department of Homeland Security's Bureau of Immigration and Customs Enforcement (known as "ICE"; formerly known as the Immigration and Naturalization Service or "INS") entered 61 Wal-Mart® stores in 21 states nationwide and arrested more than 250 illegal immigrants. This plan of action was dubbed "Operation Rollback" undoubtedly as a pun on Wal-Mart's advertising emphasizing its rollback of prices. According to a press release posted on ICE's website on the day of the raids, the arrests were "part of an ongoing investigation into the illegal employment of unauthorized workers in this country."

According to law enforcement, these raids grew out of prior investigations in 1998 and 2001 concerning cleaning contractors at Wal-Mart retail stores. As for Wal-Mart, it has consistently maintained that the workers were employed by independent contractors that it hired to do cleaning services. However, the U.S. Attorney's Office issued a target letter to the retail giant that alleged that the company violated federal immigration laws, and a grand jury was convened in early December to consider the case against Wal-Mart. U.S. Attorneys and company representatives have remained closed-mouthed regarding the details of the grand jury meeting as required under federal rules surrounding grand jury secrecy. Whether or not Wal-Mart ultimately faces immigration-related charges or fines will likely turn upon whether Wal-Mart officials "knowingly employed" illegal immigrants. However, Wal-Mart officials have pledged their cooperation with federal prosecutors in the investigation.

RICO Charges

On November 10, some of the arrested immigrant janitorial workers filed a federal racketeering class action lawsuit against Wal-Mart in a New Jersey federal court, alleging that Wal-Mart violated the Racketeering Influenced and Corrupt Organizations (RICO) Act. According to the allegations in the complaint, all of the plaintiffs were undocumented aliens who worked for a contract cleaning service hired by Wal-Mart. All of these workers claim they were paid weekly compensation of $350-500 in cash, worked at least 60 hours per week, and were obligated to work 7 days a week. They also claim they received no overtime compensation, workers' compensation, or other benefits, nor did they have taxes or Social Security (FICA) withheld from their earnings.

The workers' complaint includes claims that Wal-Mart:

1. engaged in federal "racketeering activity," including mail fraud, wire fraud, and bringing in and harboring aliens;
2. engaged in a federal racketeering conspiracy "for the purpose of defrauding and injuring the plaintiffs";
3. conspired to violate the workers' civil rights by failing to pay them minimum wage, overtime, and by failing to provide them with workers' compensation and Social Security coverage;
4. failed to pay minimum wage and overtime under the Fair Labor Standards Act, and
5. committed other violations under New Jersey Wage and Hour Law and Anti-Discrimination Law.

The basis of the claims against Wal-Mart is that the company, as a joint employer of the workers, "engaged in and profited from a nationwide fraudulent scheme designed to defraud the United States government." In the lawsuit, it is alleged that Wal-Mart "routinely makes use of the labor of undocumented immigrants" and that these workers "present a ready pool of easily exploited labor."

What can you learn from Wal-Mart's plight?

ICE's raid on Wal-Mart and pending legal action against other large employers in the country indicate the federal government is increasing its immigration law enforcement activities. Employers should no longer turn a blind eye to their contractor's employment practices, and should make sure their own house is in order lest they be the next headline.

• Be sure you employ only those persons who may legally work in the United States!

All U.S. employers are responsible for completion and retention of Form I-9 for each individual they hire for employment in the United States. Employers must also comply with applicable immigration laws when requesting identification and eligibility-to-work documents in order to complete Form I-9. Follow these simple rules:

1. Fill out a Form I-9 for each new employee that you hire.
2. Retain the Form 1-9 for 3 years after the date the person begins work or 1 year after the person's employment is terminated, whichever is later; AND make the Form I-9 available for inspection to appropriate ICE (U.S. Immigration and Customs Enforcement) officials upon request.
3. If you wish to hire a foreign national, complete the appropriate documentation and submit to USCIS (U. S. Citizenship and Immigration Services) prior to hiring the worker. Consult your legal counsel for assistance if you wish to assist a worker with obtaining immigrant or non-immigrant status.
4. Do not discriminate on the basis of national origin or citizenship or require more or different documents from a particular individual.

• Re-verify authorization for current employees as necessary.

If an employee's work authorization expires, you must re-verify his or her employment eligibility. If the employee cannot provide you with proof of current work authorization, you cannot continue to employ that person.

• Know who your contractors are bringing on your work site!

To avoid seeing your company's name in the headlines, make sure your contractors are also in compliance with federal immigration laws. At a minimum, require your contractors to furnish you with copies of Forms I-9 and supporting documentation for the workers they bring onto your site. A failure to do so could result in an "Operation Rollback" at your work site!

• Conduct an audit of your company's I-9 practices.

Hopefully, ICE officials will never appear on your company's doorstep. But you can prepare your company for that visit should it ever take place. A periodic review of your company's I-9 forms and related practices will afford you the opportunity to correct any deficiencies in your documents and update your practices as necessary. You may consult counsel for advice in connection with performing your audit to ensure your documentation review is complete.

Social Security Administration "Mismatch Letters"

A "mismatch letter" is a letter from the Social Security Administration advising an employer that a particular Social Security Number of an employee fails to match Social Security Administration records for that employee. This can be a sign of document fraud by your employee - however, as described below, it is most often a simple clerical or other error.

• What does a mismatch letter say?

A mismatch letter typically advises an employer to do the following:

1. Determine whether the employer made an error in reporting the Social Security Numbers to the government.
2. Ask employees to check their latest Forms W-2 against the employees' Social Security cards and inform the employer of any name or number differences.
3. Remind the employees to report to the Social Security Administration any name changes due to marriage, divorce or other reasons.
4. Send those employees whose names and numbers do not match SSA records to the nearest SSA office to resolve the problem.

• What should I do if I receive a mismatch letter?

1. DON'T PANIC! The error is likely a clerical error.
2. Compare your employment records to the Forms W-2 submitted to the SSA.
3. If your employment records do not match, submit corrections to the SSA using Forms W-2c.
4. If your employment records do match, ask your employee to check his/her Social Security card and to inform you of any name or SSN difference between your records and his/her card. If your employment records are incorrect, correct your records. Remind all employees to report to the Social Security Administration any name changes due to marriage, divorce, or other reasons.
5. If the employment records match the information on the employee's Social Security card, have the employee contact any Social Security office to resolve the issue and inform you of any changes after the discrepancy has been resolved. Give the employee a reasonable time frame within which to inform you regarding the resolution of such discrepancy, and follow up with the employee to make sure your records are corrected.
6. HOWEVER, IF THE EMPLOYEE ADMITS TO UNAUTHORIZED EMPLOYMENT STATUS, TERMINATE HIS OR HER EMPLOYMENT IMMEDIATELY! If you fail to do so, you may be a participant in document fraud (not to mention that you would then be knowingly continuing to employ an unauthorized worker)!

• Can I discharge an employee based solely on a mismatch letter?

NO! It is not appropriate for you to discharge an employee based solely on a mismatch letter. Receipt of the letter is not a basis, in and of itself, for an employer to take any adverse action against an employee, such as laying off, suspending, firing, or discriminating against an employee who appears on the list. An employer that uses the information in a mismatch letter to justify taking any adverse action against an employee may violate federal law and could be subject to legal consequences.

REMEMBER-The mismatch letter makes no statement about an employee's immigration status, and you should not interpret a mismatch letter on its own to mean that an employee is not authorized to work in the United States.

*article courtesy of Carol Entelisano, centelisano@tannerguin.com.