Workers at M & N Foods’ fast-food restaurants are great at flipping burgers and making French fries, but not at filling out the federal forms new employees need in order to prove they are in the country legally and eligible to work.

So managers at the company, which owns 25 Carl’s Jr. franchises in California’s northern San Diego County, called in another kind of expert. They hired a software firm that helps clients by taking over filling out and storing the required forms, and doing it online.

M & N Foods’ experience has become more common since the U.S. Citizenship and Immigration Services ^[1] revised its Employment Eligibility Verification Form I-9 in late 2007 and put it on the Web.

By making I-9s available electronically, the federal agency wanted to make them easier to process, something businesses are required to do within the first three days of hiring a new employee. But as companies such as M & N Foods have discovered, it’s still a lot of work, especially for small businesses that don’t have a big HR staff or a lot of IT resources. Even so, the incentives for correctly handling the forms are huge. Under the Bush administration, the USCIS is cracking down on companies that hire illegal workers. Fines for companies that fail the agency’s I-9 audits are steep, up to $1,000 a form.

Third-party vendors can help

As a result, more companies are hiring third-party specialists to take over their I-9 paperwork. The demand has created a mini-boom of software vendors specializing in I-9 work, including a handful of start ups as well as a number of existing companies that do background checks or provide other HR services.

For small businesses, I-9 vendors provide Web-based software that customers can license for $5 to $10 per employee, with volume discounts for more workers, according to software company officials. In many cases, vendors’ I-9 software can be integrated into a company’s existing payroll or other HR software. Vendors store customers’ I-9 forms on computer servers at their own data centers and use encryption and other security measures so the information can’t be lost, hacked into or stolen, according to Barry Nadell, senior vice president with the background screening division of Kroll ^[2], a professional services firm. Storage is critical, because under USCIS regulations, companies are required to keep records for three years after someone is hired or a year after they leave, whatever’s longer.

Using an outside party to process I-9 is especially helpful for companies like M & N Foods that have a lot of branch offices, says Chas Patterson, vice president of sales and systems support at Form I-9 Compliance LLC ^[3], a Newport Beach, California, I-9 software firm. “People in a store, their job is retail not HR or IT, they’re not experts,” Patterson says. “This makes it so they don’t have to be experts. It removes a lot of worry on the corporate level.”
The ripple effect of compliance

Another reason that small businesses outsource I-9 administration: states such as Arizona and Tennessee have passed laws requiring companies to participate in the federal government’s E-Verify program. Using E-Verify, companies electronically submit new employees’ right-to-work documentation to Social Security Administration and Department of Homeland Security databases to instantly confirm that the person is cleared to start the job. Many I-9 software vendors offer an E-Verify service for an additional fee.

M & N Foods initially hired Form I-9 Compliance to audit existing paper I-9 forms. When the software vendor discovered things that could have led to problems, M & N Foods president Michael Borchard retained them to take over all I-9 work. M & N Foods has 500 to 600 employees, and because turnover in fast-food restaurants is high, the company is continually hiring or rehiring workers, which meant managers were constantly filling out forms. Now all that work is done through Form I-9 Compliance and is directly tied into M & N Foods’ payroll program. “Nobody gets a check unless they go on the website and make sure an I-9 is filled out, Borchard says.

Though Borchard declined to say how much the company spends on the service, it’s worth the extra expense “given the pitfalls in this area,” he says. “We don’t manage a huge HR staff that has a lot of time to spend on this. (Form I-9) is a little outsourced piece of the HR process.”

SIDEBAR: Vendors that Provide Compliance Software

Some other companies that provide I-9 compliance software and services include:

Accurate Background ^[4]

First Advantage ^[5]

i9Advantage ^[6]

Verified Person ^[7]

Verify I-9 ^[8]