www.electronici9.com According to the latest report from Morningstar, the first half of 2011 was an impressive one for mergers and acquisition deals, though it slowed for the second half of 2011. Overall deals still exceeded that of years prior. Along the same lines, Berkery Noyes? recent report confirms similar growth for 2011 in the education industry, with growing momentum for the first quarter of 2012. Apple?s recent announcement to launch textbooks via the iPad has also created a big buzz in the education sector. Mergers and acquisition deals, in fact, have peppered news outlets in recent months. Amidst the excitement of a merger or an acquisition, the challenges of staying I-9 compliant can easily be overlooked, particularly since most attorneys managing the M&A process are not traditionally immigration or employment attorneys, and the transaction itself can be lengthy and complex. In the context of I-9 compliance, mergers and acquisition deals occur in various forms, including mergers of companies to form a new entity, acquisition of other companies, consolidations and spin-offs, to name a few. The issues of concern are two-fold, assessing non-compliance liability before and after the deal. I-9 Risk Assessment Before a Merger or Acquisition Deal Due diligence is an important process for any financial transaction. From a Buyer?s perspective, assessing risk is usually the overarching objective in order to determine a fair purchase price. But how do we assess risk in the I-9 compliance arena? First and foremost, we start with an evaluation of the current enforcement climate. And in my November blog article discussing Secretary Janet Napolitano?s testimony before the U.S. House of representatives Committee, the statistics were startling! Since 2009, ICE conducted more than 6,000 I-9 audits of U.S. employers and issued more than $76 million in fines. The DOJ also increased criminal investigations of U.S. employers as a result of ICE I-9 audits. In short, the risks for non-compliance are not only real, but very costly. Potential Buyers should certainly take note, particularly where the legal ramifications involve transactions where a Buyer assumes most or all of a Seller?s liabilities. Here are some basic yet important considerations for pre-deal due diligence: 1. Evaluating a Seller?s I-9 Form Environment: This would involve understanding how I-9 forms have been completed, where the I-9 forms are housed, whether or not an electronic I-9 software solution was used and if so, whether the electronic I-9 solution contained the necessary security and recordkeeping controls that are compliant with ICE policy and federal regulations. 2. Conducting Soft Audits of the Sellers? Form I-9s: Timing, human resources, document volume and costs can often constrain this critical step. Nevertheless, the ability of a Buyer to conduct a soft audit of the Seller?s I-9 forms is a crucial step in assessing the value of a Seller?s assets against its liabilities. Where a Seller uses an electronic I-9 software solution to house and complete its I-9 forms, running a comprehensive audit report (available only in well-designed systems) can alleviate a lot of the up-front time and costs of conducting a soft audit. In addition, recruiting the assistance of external and experienced experts in I-9 compliance will help a Buyer determine potential monetary fines or penalties and help devise post-deal I-9 compliance strategies. Experts who have a history of successfully conducting I-9 audits will know how to balance the information contained in I-9 forms against additional payroll or Social Security Administration records. 3. Accessing Samples of I-9 Forms: When time, costs, and human resources cannot allow for a full and complete audit of all Seller?s I-9 forms, or the sheer number of I-9 forms would simply not be practicable, the alternative is to conduct a partial audit which looks at a representative sample of the Seller?s I-9 forms based on divisions, departments, regions, or whichever approach accurately represents the Seller?s organizational structure. 4. Assigning Monetary Figures to I-9 Form Errors: Audits are a good exercise in determining whether a Seller gets a passing or failing grade when it comes to I-9 compliance. Failing grades usually involve multiple technical and substantive errors, and/or other regulatory violations. Most I-9 audit experts can assist in assigning a monetary value to those errors such that the Seller can make a final, educated determination of what costs a Buyer could truly incur if the deal were to proceed. 5. Understanding the Seller?s Compliance Culture: In the event of an actual ICE audit, having a demonstrated practice of attempting to remain I-9 compliant indeed holds some weight in court. This is where a Seller?s ?Compliance Culture? can be converted into an asset. The ?Good Faith? defense has been invoked in numerous audit cases both in court and during actual ICE audits. Buyers should explore a Seller?s I-9 compliance policies, training and internal enforcement mechanisms, if any, to understand the Seller?s Compliance Culture. Armed with all the information above regarding a Seller?s I-9 compliance, a Buyer is now in a good position to assess a Seller?s liabilities (and hopefully make an informed decision on price). I-9 Risk Assessment After a Merger or Acquisition Deal The reality of most M&A transactions, however, is that I-9 compliance assessment is given little (if any) attention. Where Sellers are unable or unwilling to provide a Buyer pre-deal access to all of its I-9 forms for an audit, or where the Buyer simply could not conduct an audit of the I-9 forms, post-deal risks assessments can certainly be utilized. Steps 1 through 4 are helpful for post-deal Buyers in assessing potential I-9 penalties and/or fines. The following steps also allow post-deal Buyers to remediate any potential liabilities: 1. Transitioning I-9 Forms: Depending on the risk level for potential fines, the number of existing I-9 forms, the availability of human resources and experience of experts, Buyers must decide whether to impose a requirement for all of Seller?s employees to complete new I-9 forms, or to accept the existing I-9 forms. Successor in interest risks of this nature should be made in conjunction with experienced attorneys or I-9 compliance experts. For some companies, the transitioning of I-9 forms can be challenging by its sheer volume. Now would be the best time to investigate solutions to help with that onboarding process, including utilizing electronic I-9 software solutions to assist in migrating I-9 form data into one compliant repository. 2. Adopting a Compliance Culture: Given the environment government audits have created in recent years, it goes without saying that improving I-9 compliance is becoming both a requirement and a business necessity. Creating a company-wide policy and ensuring the policy is followed is a great way to reduce risk and facilitate a merger or acquisition. Staying I-9 compliant does not have to be a complex process even though M&A deals usually are. No doubt, the savvy Buyer will already have understood the risks of I-9 non-compliance and made headway into adopting and promoting a strong and comprehensive I-9 compliance policy. Disclaimer: The information contained in this blog post is provided for educational purposes only, and should not be construed as legal advice or as a substitute for legal counsel. If you have questions concerning mergers and acquisition as it relates to I-9 compliance, please contact an immigration attorney to obtain advice which is tailored to your unique situation.See More

www.electronici9.com Every year in January the National Retail Federation (?NRF?) holds its annual Convention and Expo, which is aptly named ?the Big Show,? drawing more than 22,000 retail professionals from around the world. While this year?s show was focused mostly on emerging technologies and trends in the industry, many of the US-based attendees expressed growing concern over the expansion of the E-Verify program and the steadily increasing likelihood of a Form I-9 paperwork audit. Why all the doom and gloom surrounding a ?simple? one-page form? According to the NRF, retailers operate more than 3.6 million U.S. establishments that support one in four U.S. jobs ? 42 million working Americans. When you factor in the retail industry?s high turn-over rate and the increasing likelihood of an I-9 audit, that?s a whole lot of I-9s and E-Verify cases to be concerned about! Retailer?s I-9 Challenge Employers in the U.S. must ensure that an I-9 is completed for all new hires in order to document that the individual is authorized to work in the U.S. E-Verify takes the I-9 process a step farther by confirming the employee?s work authorization electronically after checking government databases. Sounds pretty straight-forward, right? Well, the problem for many in the retail industry is that I-9 compliance (i.e., ensuring it?s done right) is entrusted to a wide variety of players ? from human resource managers to accountants to front-line managers. While each one of these roles can certainly handle the I-9 process, many in the field find it difficult to follow all of the procedures and keep up with changes amidst all of their other tasks. So inevitably, the I-9 is overlooked or ignored to a certain degree. Top 5 I-9 and E-Verify Questions and Answers from Retail?s BIG Show Which brings me to the main take-away from today?s blog: understanding retail concerns over I-9 and E-Verify compliance. According to the NRF, the retail industry is forecasted to grow at a rate faster than many other industries ? which means more jobs, more hiring, and yes, more I-9 and E-Verify questions. Here are some of the questions I received during the NRF show (and my responses). 1. I see from your E-Verify map, that more states are mandating the use of E-Verify. We don?t use the system in our stores right now, but perhaps we should given the likelihood of nationwide E-Verify? I?m going to resist taking out my crystal ball and answer this question more practically: to borrow a phrase from Bernie Wolfsdorf (immigration attorney extraordinaire), E-Verify appears to be a ?runaway train? barreling down the I-9 compliance track, as legislators across the country continue to espouse its merits as the best (and currently only) way to verify employment eligibility electronically. For that reason, I think retailers should start preparing for mandatory E-Verify (in whatever form it may take) by reviewing all of the E-Verify program materials, discussing implementation with counsel and considering what changes should be made to accommodate specific E-Verify requirements (e.g., notice of participation, handling E-Verify mismatches, investigating employee complaints, streamlining through software, etc.) 2. How should E-Verify be managed- does it make more sense for my individual stores or restaurants to handle submissions to E-Verify or should this be managed centrally? As with most areas of I-9 and E-Verify compliance, there is no ?one size fits all? approach to managing E-Verify submissions. For some retailers, the decentralized method of allowing each store to submit will make sense, especially where those stores have dedicated human resource personnel on staff or other team members who are experienced in handling I-9 and E-Verify issues. I find that the vast majority of retailers, however, will usually want to centralize control of their E-Verify submissions to a select group of individuals (the ?E-Verify Gurus?) who have taken all of the necessary training and are equipped to deal with the inevitable tricky situations which arise. Again, it?s always best to discuss this issue with counsel as circumstances may vary widely from company to company. 3. What is our potential financial exposure if we have failed to use E-Verify where required? I received this question several times during the show, particularly from attendees who were staring with trepidation at our colorful E-Verify map. As it turns out, this is another one of those ?difficult to answer? questions for which ?it depends? is the only right answer. Some states such as Alabama, Arizona, and South Carolina have taken a hard stance on violation of state immigration laws (including E-Verify mandates) whereas many others have not included any specific E-Verify penalties (making them ?without teeth? as critics would say). On the other hand, violators of the 2009 FAR Rule (which mandates E-Verify use for certain federal contractors and subcontractors) face substantial penalties for failing to use the system, including the loss of current and/or future contracts. 4. Hypothetically speaking, what happens if our store has not been completing I-9s at all? Hypothetically speaking, you have a very big problem on your hands. Failure to complete an I-9 form for a new hire employee is consistently viewed by the government as the most serious of I-9 ?paperwork? violations, because it represents a total failure of the verification requirements under the law. Even assuming your store has no unauthorized (or undocumented) workers, Immigration and Customs Enforcement (ICE) can still fine you $1,100 per missing I-9: which can lead to substantial civil penalties. For an example of how this can play out, look no further than the 2010 settlement with clothing giant, Abercrombie & Fitch, who agreed to pay over $1 million in fines for a faulty home-grown electronic I-9 system at one of their locations. As described in our blog here, A&F was shown little mercy despite the fact that they attempted (on some level) to do the right thing. As you can imagine, ICE has very little patience for employers who fail to complete an I-9 at all- especially since the form has now been around for over 25 years. 5. What?s in store (no pun intended) for electronic verification in the near future? Retailers are no strangers to emerging technologies, and so it?s not surprising that many attendees asked me whether the government would be utilizing Radio Frequency Identification (RFID) in some fashion to address frequently expressed concerns with E-Verify (e.g., not 100% accurate, does not detect identity fraud, etc.). RFID use has been growing in the retail industry, enabling companies to manage inventory, authenticate a certain brand or even dynamically display marketing messages based on a product ?tag?. Imagine picking up a Gillette razor at your local store and immediately seeing product information on a screen in front of you. Not so far away, believe me. How would this play out in the employment eligibility verification world? To some degree, it?s already begun. Since 2007, U.S. passports have been implanted with RFID technology, and under the REAL ID Act of 2005, state driver?s licenses may also eventually include such chips as well. In addition, several members in Congress have recommended the use of non-forgeable biometric cards (requiring the collection of fingerprints, iris scans, etc) to reduce fraud, prevent pre-screening, and empower individuals to correct errors more easily. So will we all be walking around with national IDs soon? Not necessarily. As one can imagine, an RFID-enabled card for ALL individuals would entail significant expense. Not to the mention the fact that a national ID of any kind will raise a host of privacy issues and concerns over how that information would be used. The Bottom Line As one of America?s largest industry sectors, retail accounts for a large percentage of our nation?s new job growth. Each one of those new jobs (to a large degree) requires an I-9 form and many will be checked against the government?s E-Verify system. Is your I-9 program currently in order? Are you using E-Verify where required? Would you be ready today if ICE showed up and asked for all of your past I-9s? If the answer is ?no? to any of the above, now is the time to revamp your program by talking with counsel and adopting a smart electronic solution. Remember: retail means jobs, but ICE means enforcement. To discuss this topic further or learn more about how an Electronic I-9 compliance & E-Verify system can help you meet federal and state law requirements, please call 877-725-4355 or click here. Our electronic I-9 experts and trusted attorney partners will be happy to address your unique I-9 and E-Verify challenges. See More