In 2008, Mike Miller participated in various meetings at Homeland Security where we negotiated changes to the M-274 Handbook regarding I-9s. At that time the following provision was added to the Q and A section:
43. Q. I use a professional employer organization (PEO) that “co-employs” my employees. Am I responsible for Form I-9 compliance for these employees or is the PEO?
A. “Co-employment” arrangements can take many forms. As an employer, you continue to be re¬sponsible for compliance with Form I-9 require¬ments.
If the arrangement into which you have entered is one where an employer-employee relationship also exists between the PEO and the employee (e.g., the employee performs labor or services for the PEO), the PEO would be considered an employer for Form I-9 purposes and:
1. The PEO may rely upon the previously com¬pleted Form I-9 at the time of initial hire for each employee continuing employment as a co-employee of you and the PEO, or
2. The PEO may choose to complete new Forms I-9 at the time of co-employment.
If more co-employees are subsequently hired, only one Form I-9 must be completed by either the PEO or the client. However, both you and your PEO are responsible for complying with Form I-9 requirements, and DHS may impose penalties on either party for failure to do so. Penalties for verification violations, if any, may vary depending on:
- A party’s control or lack of control over Form I-9 process,
- Size of the business,
- Good faith in complying with Form I-9 re-quirements,
- The seriousness of the party’s violation,
- Whether or not the employee was an unau¬thorized alien,
- The history of the party’s previous violations and
- Other relevant factors.
The M-274 Handbook was later modified by Homeland Security and this section was omitted. Instead it was moved to Homeland Security’s website. Just recently, this section was deleted from the website in its entirety.
In addition, the instructions in the M-274 Handbook contain the following statement at “Who Must Complete Form I-9:”
Do not complete a Form I-9 for employees who are:
Employed by a contractor providing contract services (such as employee leasing or temporary agencies) and are providing labor to you;
When we reached out to Homeland Security to discuss the omission of the PEO language from the M-274 Handbook and website and the reference to “employee leasing” in the “Who Must Complete Form I-9” portion of the M-274 Handbook, we were told by a high-ranking official that the omission of the PEO language was “intentional” and was not inadvertent.
The treatment of I-9s in a PEO relationship is obviously an important issue to PEOs. Please contact us if you have any questions regarding these uncertain issues.
