E-Verify system and tips rule change

John Hildebrand
John Hildebrand

E-Verify, an Internet-based system, helps employers accurately and quickly compare the information a newly hired employee provides on the I-9 Form about employment eligibility verification.

This information is compared against millions of government records and usually provides results in 3 to 5 seconds. If the information matches, an employee is eligible to work in the United States. If there’s a mismatch, however, E-Verify will alert the employer and the employee generally will be allowed to work while he or she resolves the problem.

Law requires companies to employ only individuals who may legally work in the United States – either U.S. citizens or foreign citizens with authorization. This diverse work force contributes greatly to the vibrancy and strength of our economy. But that attribute also attracts unauthorized employment.

Late last year, U.S. Citizenship and Immigration Services implemented a change to the E-Verify program that will use a tool intended to deter fraudulent use of Social Security numbers for employment eligibility verification. This tool allows the E-Verify system to “lock” Social Security numbers that appear to have been misused in a method comparable to that of credit card companies.

Before this security upgrade was enacted, the identifying information supplied by an employee likely could have passed through the Social Security Administration database and resulted in an authorized status in E-Verify, providing the employee authorization to work in the U.S. During that period, employers wouldn’t have been made aware of concerns like identity theft or fraudulent usage of such documents. The USCIS has indicated it will use a formula involving algorithms, detection reports and analysis to identify patterns of fraudulent Social Security number use and then lock those numbers within the E-Verify database.  

If an employee attempts to use a locked Social Security number, E-Verify will generate a tentative non-confirmation. An employee receiving a TNC communication may contest the finding by visiting a local Social Security Administration field office in the same way a credit report finding may be disputed. At that point, the employee’s status will be updated to employment authorized.

Starting this year, automatic gratuities in the hospitality industry — an automatic 18 percent tip for parties of six or more at  a restaurant, for example — will be treated by the Internal Revenue Service as service charges rather than tips. Unlike optional tips employees must report, service charges will be viewed as wages and employers will be responsible for reporting them. In addition, any such service charges will be considered part of employees’ regular rate of pay for purposes of calculating the overtime rate.

For a payment to be treated as a tip, generally all of the following factors must be met. The payment must be made free of compulsion. The customer must have the unrestricted right to determine the amount of the payment. The payment may not be dictated by employer policy or subject to negotiation. The customer must have the right to determine who receives the payment.

Employers in the hospitality industry should review their gratuity policies as well as their reporting and recordkeeping practices to ensure compliance with the new rule.