Immigration Reform and Control Act of 1986 (IRCA): What It Means for Employers

What it means in practice

IRCA is the 1986 law that put immigration compliance on every U.S. employer's desk. Its employment part has three sections: control of unlawful employment of aliens, unfair immigration-related employment practices, and document fraud (Pub. L. 99-603, Title I, Part A). Section 101 added section 274A to the Immigration and Nationality Act (INA), codified at 8 U.S.C. 1324a, and section 102 added the anti-discrimination provision at 8 U.S.C. 1324b. USCIS says employers must verify each new hire's identity and employment authorization, complete and retain a Form I-9 for each employee, and refrain from discriminating based on national origin, citizenship or immigration status, and that these provisions were later changed by the Immigration Act of 1990 and the 1996 Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) (M-274 Section 1.0). IRCA's legalization and agricultural worker titles are outside this page. The form itself is covered on our Form I-9 page.

Employer sanctions. Section 274A makes it unlawful to hire, or to recruit or refer for a fee, an alien knowing the alien is unauthorized, and to hire any individual without complying with the verification requirements (8 U.S.C. 1324a(a)(1)). It is also unlawful to continue employing someone after learning the person is, or has become, unauthorized (8 U.S.C. 1324a(a)(2)). An "unauthorized alien" is one who is neither a lawful permanent resident nor authorized to be employed by the INA or the government (8 U.S.C. 1324a(h)(3)). Using a contract or subcontract to obtain the labor of someone the employer knows is unauthorized counts as hiring that person (8 U.S.C. 1324a(a)(4)). "Knowing" includes constructive knowledge, knowledge fairly inferred from facts that would lead a person exercising reasonable care to know, such as failing to complete Form I-9 properly; it may not be inferred from a foreign appearance or accent (8 CFR 274a.1(l)). Employers also may not require a new hire to post a bond or indemnify them against liability under the section (8 U.S.C. 1324a(g)(1)).

Where Form I-9 came from. Section 274A(b) created the employment verification system. The employer attests, under penalty of perjury and on a form designated by regulation, that it examined either one document establishing identity and work authorization, such as a U.S. passport, or one of each; the employee attests to being a citizen or national, a lawful permanent resident, or otherwise authorized to work (8 U.S.C. 1324a(b)(1)-(2)). That form is Form I-9. The employer keeps it for inspection by DHS, IER or the Department of Labor (8 U.S.C. 1324a(b)(3)), its use is limited to enforcing the INA and certain federal fraud and perjury laws (8 U.S.C. 1324a(b)(5)), and the statute says nothing in it authorizes a national identification card (8 U.S.C. 1324a(c)).

Who is covered. Section 274A applies to any "person or other entity," including federal government entities (8 U.S.C. 1324a(a)(7)), with no small-employer exception; USCIS says a Form I-9 is required for every new employee hired after November 6, 1986 (M-274 Section 1.0). An employer is anyone, including an agent, who engages an employee's labor in the United States for wages or other remuneration; when labor comes through an independent contractor or contract arrangement, the contractor is the employer (8 CFR 274a.1(g)). Casual, sporadic domestic work in a private home is not employment (8 CFR 274a.1(h)). Recruiters and referrers for a fee are covered by the knowing-hire rule, but the paperwork rule reaches them only if they are agricultural associations, agricultural employers or farm labor contractors (8 U.S.C. 1324a(a)(1)(B)(ii)).

Employees hired before November 7, 1986. IRCA's grandfather provision says the hiring rule does not apply to hiring before enactment, and the continuing-employment rule does not apply to an alien hired before then (Pub. L. 99-603, sec. 101(a)(3), note to 8 U.S.C. 1324a). The regulation exempts from the paperwork and continuing-employment penalties employees hired prior to November 7, 1986 who are continuing in their employment with a reasonable expectation of employment at all times (8 CFR 274a.7(a)), and USCIS says not to complete Form I-9 for them (M-274 Section 2.0). The status ends if the employee quits, is terminated (including seasonal employment), is deported or departs under voluntary departure, or stops continuing in employment (8 CFR 274a.7(b)). Continuing employment includes approved leave, promotion, demotion or a raise, temporary layoff for lack of work, a strike, a transfer between units, and moving to a related, successor or reorganized employer that keeps the records (8 CFR 274a.2(b)(1)(viii)). Two examples from those rules: a worker hired in 1984 who was promoted and took approved medical leave stays grandfathered; a worker hired in 1984 who quit in 1990 and was rehired in 1995 lost the status on quitting, so the 1995 hire needs verification. The CNMI has a separate cutoff, which USCIS lists as November 27, 2009.

Unfair immigration-related employment practices. Section 274B bars discrimination against any individual, other than an unauthorized alien, in hiring, recruitment or referral for a fee, or discharge because of national origin or, for a "protected individual," citizenship status (8 U.S.C. 1324b(a)(1)). Protected individuals include U.S. citizens and nationals, lawful permanent residents, refugees and asylees; a permanent resident who does not apply for naturalization within six months of first becoming eligible is excluded (8 U.S.C. 1324b(a)(3)). "Hiring" covers the entire recruitment, selection and onboarding process (28 CFR 44.101(h)). Also covered are unfair documentary practices, meaning requesting more or different documents than required, or refusing documents that reasonably appear genuine, for a discriminatory purpose (8 U.S.C. 1324b(a)(6)), including limiting a person's choice of documents, in Form I-9 or E-Verify (28 CFR 44.101(f) and (j)); and intimidation or retaliation against anyone who files a charge or asserts these rights (8 U.S.C. 1324b(a)(5)).

The employee-count thresholds. The statute exempts employers with three or fewer employees, so the citizenship status and national origin rules start at four (8 U.S.C. 1324b(a)(2)(A)), and it excludes national origin claims covered by Title VII of the Civil Rights Act of 1964 (8 U.S.C. 1324b(a)(2)(B)). DOJ explains the result: citizenship status discrimination, employers with four or more employees; national origin, four to 14 employees; unfair documentary practices and retaliation, any size; the EEOC handles national origin claims against employers with 15 or more. Applying those rules: a shop with 3 employees is outside the citizenship and national origin rules but can still commit an unfair documentary practice; a business with 10 employees answers to IER on both; a business with 40 answers to IER on citizenship status and documents, and to the EEOC on national origin.

Exceptions. Citizenship requirements are allowed when required by law, regulation, executive order or a government contract, or when the Attorney General finds them essential to doing business with a government agency (8 U.S.C. 1324b(a)(2)(C)); USCIS says this "is rare and doesn't apply to the vast majority of jobs" (M-274 Section 11.2). It is also not an unfair practice to prefer a U.S. citizen or national over an alien who is equally qualified (8 U.S.C. 1324b(a)(4)).

How discrimination charges work. An affected person, someone on that person's behalf, or a DHS officer files a written charge with IER, formerly the Office of Special Counsel for Immigration-Related Unfair Employment Practices, within 180 days of the practice (8 U.S.C. 1324b(b)(1), (d)(3)). IER has 120 days to decide whether to file a complaint before an administrative law judge; if it does not, the charging party may file within 90 days of notice (8 U.S.C. 1324b(d)). The same facts cannot be charged with both IER and the EEOC (8 U.S.C. 1324b(b)(2)). DOJ says outcomes can include civil penalties, back pay, hiring orders and injunctive relief. An order may also require posting notices, training hiring staff and keeping applicant names and addresses for up to three years, and back pay cannot reach back more than two years before the charge (8 U.S.C. 1324b(g)(2)).

Penalty amounts. Statutory amounts are inflation-adjusted. For penalties assessed after July 3, 2025, for violations after November 2, 2015, 28 CFR 85.5 (eCFR, November 2026) lists: paperwork violations $288 to $2,861 per individual; knowing hire or continued employment $716 to $5,724 per unauthorized alien on a first order, $5,724 to $14,308 on a second and $8,586 to $28,619 after that; indemnity bonds $2,861 per violation; discrimination $590 to $4,730 per individual on a first order, $4,730 to $11,823 on a second and $7,093 to $23,647 after that; unfair documentary practices $236 to $2,364 per individual. As our own arithmetic, a documentary practice affecting three applicants gives $708 to $7,092 (3 x $236 and 3 x $2,364). A pattern or practice of knowing hires can bring a criminal fine of up to $3,000 per unauthorized alien and up to six months imprisonment (8 U.S.C. 1324a(f)(1)).

Good-faith protections. Good-faith compliance with verification is an affirmative defense to a knowing-hire charge (8 U.S.C. 1324a(a)(3)). A technical or procedural failure counts as compliance after a good-faith attempt, unless the employer did not correct it within at least 10 business days after the agency explained it, or engages in a pattern or practice of violations (8 U.S.C. 1324a(b)(6)).

How E-Verify relates to IRCA. E-Verify came later: IIRIRA directed pilot programs of employment eligibility confirmation, made participation voluntary unless specifically required, and gave confirmed hires a rebuttable presumption that the employer did not knowingly hire an unauthorized alien (Pub. L. 104-208, secs. 401-402, note to 8 U.S.C. 1324a). E-Verify says it "complements Form I-9 and is used to confirm information from Form I-9." It is required for most federal contractors, and over 20 states require it for certain employers; otherwise it is voluntary. A participating worksite must use it for all new hires and may not use it to prescreen applicants (E-Verify, Fact vs. Fiction).

Where states differ (examples). Section 274A preempts state or local sanctions on employers of unauthorized aliens other than through licensing and similar laws (8 U.S.C. 1324a(h)(2)), but states can set E-Verify rules. Florida requires public agencies, and since July 1, 2023 private employers with 25 or more employees, to use E-Verify for new employees and keep the documentation at least 3 years (section 448.095, Florida Statutes, 2026). North Carolina requires employers with 25 or more employees in the state to use E-Verify, excluding employees working less than nine months in a calendar year, and to keep the record during employment and one year after (N.C. Gen. Stat. 64-25, 64-26). Check the official site for each state where you hire.

Questions employers ask. Does IRCA apply with two employees? The sanctions and verification rules do; the citizenship and national origin rules start at four, while documentary practices and retaliation rules apply at any size. Can we hire only U.S. citizens? Only where a law, regulation, executive order or government contract requires it. Do pre-1986 staff need Forms I-9? Not while they remain continuing employees (8 CFR 274a.7). Does E-Verify replace Form I-9? No; it confirms information from the form. IER's employer hotline is 1-800-255-8155.

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