E-Verify and Professional Employer Organizations (PEOs)

As businesses look to trim costs and streamline operations, one option may be to partner with a professional employer organization (PEO) to handle the management of personnel. But when an employer is part of a PEO and is required to enroll in E-Verify, who is responsible for doing so? What is the best way for a PEO client company to enroll, and how can a PEO best serve its client companies regarding E-Verify?

What is a PEO?

professional employer organization (PEO) is a single source provider of services related to employee hiring and management. Business owners can outsource the management of human resources, employee benefits, payroll and workers’ compensation and other services. In some cases, the PEO may actually be the employer of record and complete and maintain all hiring paperwork including the I-9 form, even though the client company retains the authority to hire and fire these employees.

In general, there are two types of PEOs:

Co-employers: These PEOs hire a client company’s employees, thus becoming the employer of record for tax and insurance purposes. It then leases them back under contract to the original employer. Employees who work for the client of the PEO are considered to be the employees of both the PEO and the client company, even though the employee is performing only one set of services for both co-employers.

Administrative services organizations: These PEOs perform most or all of the services related to personnel management, but do not create a co-employment relationship. Tax and insurance filings are done by the PEO, but under the client company’s Federal Employer Identification Number (FEIN).

Who must enroll in E-Verify: the PEO or the client company?

While both the client company and the PEO are accountable for ensuring that they comply with Form I-9 and E-Verify rules, they may choose an enrollment that best suits their needs. The client company must ensure that either they or the PEO enroll and verify employees in E-Verify. Which party is best to enroll depends, primarily, on the relationship between the PEO and the client company.

In an ASO-client company relationship, the client company is typically required to enroll. The client company may 1) enroll directly in E-Verify; 2) enroll through an Employer Agent like Verify I-9; or 3) enroll through the PEO, if the PEO is authorized to act as an Employer Agent. Not all PEOs provide this service, so the latter may not be an option for the client company. Conversely, even if the PEO offers E-Verify as an Employer Agent, the client company is not obligated to use their service, but may do so for convenience.

`We are a PEO and want to offer E-Verify to our client companies`

A PEO faces several challenges regarding E-Verify compliance. For example, while E-Verify is voluntary on a federal level (except for federal contracts, for which it is required),  it has been mandated for employers in some states. In more states, E-Verify is required for an employer to bid on or hold a public contract. A PEO, especially those in a co-employer relationship, may have liability if a client company fails to comply with state law.

Legal requirements aside, a PEO may want to provide E-Verify as a service to its client companies that want it, but do not want to invest in the personnel and infrastructure to administer the program.

Verify I-9 can tailor our E-Verify service to meet the needs of professional employer organizations. We provide the following options:

  1. REFERRAL: The PEO can refer its client companies to us. We would enroll each individually in E-Verify under our agency, through our existing signup process. We would service client companies directly. For most PEOs, this is the simplest and cleanest solution.
  2. PRIVATE LABEL: We can partner with a PEO to provide E-Verify to its client companies. We will create a signup process with the PEO’s branding, and service clients under the PEO’s banner. Client companies would still be enrolled under our Employer Agency; it is not possible, under the agency agreement with the Department of Homeland Security, to completely eliminate our name from the process. In other words, client companies will enroll at a PEO-branded web site but sign an agreement that shows Verify I-9 LLC as the Employer Agent.
  3. EMPLOYER AGENCY MANAGEMENT: We can create and administer an Employer Agency for the PEO, to service the PEO’s client companies. We can provide a branded signup process and online helpdesk. In other words, we would provide to the PEO’s client companies the same quality service that we provide to our own, only through the PEO’s own agency. One advantage to this option is portability– at some point in the future, a PEO could easily hire another company to manage its agency, or take it in-house. The PEO would also control what client companies are charged for the service, if anything.

For more information about E-Verify, PEOs and our service, contact us.

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[This article was prepared from information provided by the Department of Homeland Security. This page was last reviewed on May 20, 2020.]