What are the penalties for employee misclassification on the I-9?

On Behalf of | Dec 9, 2022 | Employment Law -- Employer |

Since 1986, most employers in the U.S. have had an affirmative obligation to verify the identities and legal work authorization of all employees they hire. They do so by completing and retaining Form I-9, Employment Eligibility Verification. This requirement applies only to employees, though, and not to independent contractors.

As an employer, when you think about employee misclassification, your mind probably goes to the Fair Labor Standards Act or wage and hour laws. Still, if you misclassify employees as independent contractors for I-9 purposes, you are likely to face significant penalties.

No I-9 requirement

According to the U.S. Citizenship and Immigration Services, you only need I-9 forms for employees you hired after November 6, 1986. By contrast, you do not have to prepare or retain I-9 forms for any independent contractors, regardless of when you began working with them.

Independent contractor misclassification

The USCIS uses the FLSA’s definition of “independent contractor” to determine who is an independent contractor.

If you misclassify workers as independent contractors and do not obtain I-9 forms, though, you might face serious penalties. Indeed, a first-time paperwork violation might be as much as $2,507 for a missing I-9.

If the so-called independent contractor turns out to be an unauthorized worker, you may have to pay even steeper penalties. In theory, you could also have criminal liability for knowingly employing someone who lacks legal work authorization.

While ensuring you classify workers correctly for FLSA purposes is undoubtedly your primary concern, you obviously cannot overlook your I-9 obligations. Ultimately, if you have misclassified workers as independent contractors in the past, now may be the time to get your I-9 records in order.