The Obama administration's half-hearted and spotty record of immigration enforcement at the workplace creates a big vacuum for state and local lawmakers to jump into. E-Verify mandates are a great start. State employer auditing programs are another effective tool, either in lieu of an E-Verify mandate or to enhance compliance with E-Verify and other requirements. Statistics from such initiatives in South Carolina demonstrate the value of employer auditing at the state and local level.
The country's first local auditing initiative was launched by Beaufort County, S.C., in response to complaints by local businesses of unfair competition from companies using illegal labor. (See my earlier blog on it here.) The county implemented an ordinance requiring all employers to examine the documents of new hires, complete the I-9 form, and set up a procedure to audit a sample of employers every year. In addition to auditing I-9 compliance, the county wanted to check that businesses were accurately reporting revenues. The county hired a private contractor, Advance Point Global, Inc. to conduct the audits.
The audits uncovered a huge number of employers who were not properly scrutinizing new hires, many illegal workers, and an enormous amount of under-reported revenue. Over a 21-month period, the inspectors audited 2,447 businesses and 15,567 I-9 forms. They found that nearly half (7,565) of the I-9 forms they inspected were deficient in some way. This could mean that the employers simply didn't understand the federal requirements; however, this cluelessness offers an opportunity for illegal workers to obtain work. The audits were viewed as a way to educate employers on how to properly perform their due diligence. No sanctions were to be imposed until the employers had a chance to correct themselves, and all of them did.
The auditors also found a lot of identity fraud, much of which might not have been detected by E-Verify. They referred more than 1,000 illegal workers for prosecution. The auditors also discovered instances of misclassification of employees as independent contractors, a practice sometimes used to hire illegal workers and/or evade paying payroll taxes and offering employee benefits.
Finally, the audits detected that about 40 percent of employers they audited were under-reporting revenue — to the tune of nearly half a billion dollars. This discovery enabled the county to increase collection of business license fees and other taxes, which helped finance the entire initiative.
The Beaufort County initiative accomplished far more than any comparable federal auditing or enforcement program could or would. Over roughly the same time period, in the three-state area of Georgia, North Carolina, and South Carolina, ICE conducted about 46 employer audits, finding 1,600 suspect workers at 14 companies and collecting about $130,000 in fines.
One big difference, besides the small scale of the ICE operations, is that under current policies ICE would almost never seek to prosecute or remove the illegal workers. A number of investigations that were in progress at the end of 2008 were suddenly dropped after the regime change.
In 2009, South Carolina enacted a state version of the Beaufort County I-9 initiative (not the business revenue auditing). In the first year, the state issued citations to about 200 employers (about 10 percent of those audited). The law includes a provision to allow non-compliant employers to avoid fines if they correct their practices within three days. Only one of the non-compliant employers failed to correct itself — a landscaping company in Charleston, which had its operating license suspended for 10 days, paid a fine of $11,500, and was on probation for one year. South Carolina employs 23 auditors (compared with one ICE auditor assigned to SC).
Many South Carolina businesses are supportive. Brad Dean, the president of the Myrtle Beach Chamber of Commerce, says the state requirements are appropriate and met with "minimal resistance" from employers.
