U.S. Department of Homeland Security M-274 Handbook

PEO Compass Readers,

Today I received a memo that originated from Michael Miller, FAPEO General Counsel, sent to all FAPEO members. I thought it best I share this message to all Compass readers.

In 2008 I 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 responsible for compliance with Form I-9 requirements.

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:

1. A party’s control or lack of control over Form I-9 process,
2. Size of the business,
3. Good faith in complying with Form I-9 requirements,
4. The seriousness of the party’s violation,
5. Whether or not the employee was an unauthorized alien,
6. The history of the party’s previous violations and
7. 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;

I reached out to Homeland Security today 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.  I was told by a high-ranking official that the omission of the PEO language was “intentional” and was not inadvertent.  After a significant discussion of the issues involved, I was told that Homeland Security was going to have to meet on this subject before they were willing to discuss this matter with our industry. 

The treatment of I-9s in a PEO relationship is obviously an important issue to PEOs. I will keep you updated as events unfold.”


Some may ask, what is a M-274?
The M-274 is a handbook for employers thats helps instruct on the processes by which one would need to complete a Form I-9. More information on the M-274 and I-9 can be found here: https://www.immigrationdirect.com/immigration-articles/index.html%3Fp=3549.html

We will be sure to keep a close eye and post updates as they come in.

Hope all is well,

Brian Urso
Risk Consultant

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