Independent Contractors and Subcontractors
Employers are required to complete Forms I-9 for employees. Employers are not required to complete Forms I-9 for independent contractors. This appears straight forward.
However, simply calling someone an independent contractor does not necessarily make them an independent contractor under the Form I-9 employment eligibility verification and employer sanctions laws.
The definition of an independent contractor depends on many factors that focus on how independent the worker really is. The Form I-9 employment eligibility verification and employer sanctions laws definition of an independent contractor draws upon, but is not the same as the IRS definition of an independent contractor for tax and withholding purposes. The fact that the IRS considers a worker to be self-employed does not necessarily mean that the worker will be considered an independent contractor or subcontractor for I-9 verification purposes.
Increasingly, Department of Homeland Security’s (DHS) I-9 enforcement arm Immigration and Customs Enforcement (ICE), as well as some state agencies, look beyond the mere labels of "independent contractor" to see if the employer had knowledge of its contractors' practices. 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.
"Independent contractors" are not limited to the construction industry. Workers in many types of work can be "independent contractors": Gardeners, janitorial workers, computer programmers, computer techs, clerical and secretarial workers, consultants, accountants, lawyers, and almost any "temporary" worker may be an "employee" for purposes of the employer's responsibility for the I-9.
An Independent Contractor or Subcontractor May Be Your “Employee”
The definition of "independent contractor" for Form I-9 employment eligibility verification and employer sanctions laws liability depends on a series of factors relating to the extent of control the employer has over the manner in which the work is to be performed.
These factors include:
- Whether the employee is salaried or non-salaried;
- Whether the employee is working on the employer's premises;
- The number of days a year the employee works on the employer's premises;
- Whether the employer or the independent contractor is paying the worker;
- Whether the employer or independent contractor provides the equipment the worker uses;
- The extent to which the employer's managers have day-to-day supervision over the worker and elements of control over the that work;
- Whether the independent or subcontractor provides its own on-site supervision;
- Whether the employee does assignments almost exclusively for the employer.
Employer Liability Concerns Even If an Independent Contractor
Assuming that the worker is an independent contractor the employer could still be liable for penalties if it uses the subcontractor or independent contractor with the knowledge that the workers are unauthorized for employment.
It is ILLEGAL to contract for labor of any person if you KNOW the person is not authorized to work in the United States.
The requisite “knowledge” is can only be determined on case-by-case basis. By law “knowing” includes “constructive knowledge”. “Constructive knowledge” is “knowledge which may be fairly inferred through notice of certain facts and circumstances which would lead a person, through exercise of reasonable care, to know about a certain condition.”
For example, if the employer knows a contractor has previously employed unauthorized aliens the employer may be held to have “constructive knowledge” if the contractor uses unauthorized workers again. If an employer brings onto its worksite a contractor with a checkered past then it should take precautionary steps to make sure the contractor now has its house in order.
“Constructive knowledge” may include, but is not limited to, situations where an employer:
1. Fails to complete or improperly completes the Form I-9, for example, the employer fails to sign the I-9 form, or does not assure that the employee has properly completed Section 1 of the form, such as by failing to enter an expiration date for employment authorization when the employee indicates that s/he is an alien with employment authorization;
2. Fails to have the employee complete an I-9, if the employee turns out to be unauthorized to work;
3. Has information available to it that would indicate that the alien is not authorized to work;
4. Continues to employ the alien without re-verifying his/her employment eligibility after the expiration date for employment eligibility listed by the alien in Section 1 of the I-9 form; or
5. Acts with reckless and wanton disregard for the legal consequences of permitting another individual to introduce an unauthorized alien into its work force or to act on its behalf.
Certainly an employer may not knowingly use an independent contractor to obtain the services of unauthorized alien workers. If an employer has knowledge that the contractor uses such workers, the employer will also be liable for an I-9 violation.
Many ICE enforcement actions are based on employer liability for subcontractor or independent contractor I-9 and employment eligibility verification. Employers have been assessed stiff corporate civil money damages and individual criminal liability when they do not verify employment authorization and complete I-9s when using independent contractor and subcontractors.
RICO lawsuits brought by competitors for unfairly competing through the use of unauthorized employees have resulted in treble compensatory damages, punitive damages and attorney's fees.
Many immigration lawyers with Form I-9 and employment eligibility verification experience suggest employers require their contractors to furnish them with copies of Forms I-9 and supporting documentation for the workers they bring onto the worksite.
Clients often ask me to assist them in preparing agreements to protect them from Form I-9 liabilities through independent contractors and subcontractors.
A responsible executive or manager should consult a knowledgeable immigration lawyer and develop procedures to remain compliant.
Employers must establish procedures to remain compliant with respect to indirect workers.