I received an email last week from Kent Starwalt of the Tennessee Road Builders Association that reminded me of how important it is to check your particular state’s laws when you have a legal question. This particular issue involved the applicability of E-Verify, which varies by jurisdiction, and the recent changes to the law in Tennessee.

The Federal Law. E-Verify is a federal electronic work authorization verification service created by the U.S. Department of Homeland Security and first introduced in 2003. All employers are already required under federal law to verify the work status of new hires, via the I-9 process. This process requires employers to complete an employment eligibility form required by Homeland Security for new hires, excluding independent contractors.

Tennessee Law. The new Tennessee law now imposes these same requirements under state law. Effective July 1, 2012, employers with 200-499 employees must be in compliance with the “Tennessee Lawful Employment Act.” That law requires employers to check the employment eligibility of new hires and mandates that most Tennessee employers either use the federal E-Verify program or review certain identification documents of new employees and independent contractors.

Safe Harbor. An employer’s obligation to use the I-9 process under federal law will not change. However, the new law will remove the safe harbor protection for employers under current Tennessee law where the lawful verification information is later determined to be false. In addition, it will require employers to either request and maintain a copy of one of certain identification documents, such as a drivers license, or, alternatively, to enroll in the E-Verify program.

Unlike laws in several other states, the Tennessee law does not require employers to use E-Verify. Rather, it attempts to bring the existing employment verification process (essentially, the I-9 process) within the reach of the State, while also encouraging–but not requiring–the use of E-Verify. On the other hand, in one respect it goes further than certain other state laws, by also requiring businesses to review the driver’s licenses or other valid document for 1099 non-employees (independent contractors) to show lawful presence in the U.S.

The law provides a safe harbor for employers who use the E-Verify program to verify the status of an employee if the employee is later found to be in the country illegally.

Application in Stages. The provisions of the law took effect on January 1, 2012 for employers with 500 or more employees. It will apply to private employers with 6 to 199 employees on January 1, 2013. The law will not apply to employers with five or less employees. An employee is defined as "any individual for whom an employer must complete a Form I-9 pursuant to federal law and regulation, and does not include an independent contractor as defined by 8 USC Sec. 1324a and its regulations."

Violations. Employers who fail to follow to this law will be subject to harsh penalties. For a first violation, an employer will be subject to a penalty of $500 and an additional $500 for each non-verified employee or non-employee. A second violation will result in a $1,000 penalty and an additional $1,000 for each non-verified employee or non-employee. A third or subsequent violation will result in a penalty of $2,500 and an additional $2,500 for each non-verified employee or non-employee.

Image: Jonathan McIntosh