Hiring undocumented individuals, even accidentally, can hurt a business in obvious ways, such as fines, and more subtle ways, like the issues it can cause with your business's health care plans.
There are a number of penalties that employers can get slapped with when they hire people who aren't eligible to work in the U.S. The fines for this sort of breach of hiring regulations can get pretty big, especially for repeat offenders. Hiring someone that isn't eligible to work in the U.S. can result in a fine as small as $375 per employee, or as large $3,200 per offense, and this is just for the first time that you get caught.
From there, the penalties only increase. The maximum penalty for a second offense is $6,500, and if you get caught hiring an undocumented individual for the third time, your fine could get as high as $16,000 per worker. These fines are only one set of problems that you can come across if you aren't taking the time to carefully check each person you hire by going through the Form I-9 and utilizing E-Verify.
Health care could cause problems for hirers of undocumented individuals
Depending on what state your company is based in, health care issues could arise if you employ an undocumented immigrant, as the case of one California employer showed. The individual in question had two children born in the U.S. The twins were citizens since they were born here, and their father had utilized a false Social Security number in order to get hired. The newborns had medical issues though, problems that would incur $250,000 in medical expenses for one twin and $450,000 for the other.
The stop loss carrier investigated the medical claim and found that the father had used a false Social Security number on his Form I-9. As a result, the stop loss carrier determined that he was not an eligible employee, and the father was subsequently denied his claim. The $2,700 in premiums that the plan had paid in coverage for the father and his family was then refunded, and a lawsuit followed. The health care plan was based on the assumption that the father had handed the employer his permanent resident card, one which the hiring manager had believed was legitimate.
The court found that the question of whether or not the employee was eligible for health care coverage should be left up interpretation under federal or state law. In California, undocumented individuals are provided with a number of protections. Based on the state's statute the court found that the stop loss carrier was not authorized to deny the health care benefits simply because of the undocumented status of the worker.
Not every state has a statute such as the one in California, so employers should check out the laws in their own locale. There are more things to worry about other than government penalties, so employers should make sure they are doing everything to can to ensure they are completing their E-Verify background checks and maintaining Form I-9 compliance.