In today’s competitive talent market, many companies turn to executive search firms, headhunters, or staffing agencies to source qualified candidates. While outsourcing recruitment can streamline the hiring process, employers must remain mindful of their legal obligations under Form I-9 requirements. Understanding when the employer bears responsibility, and how this differs between staffing and search firm arrangements, is critical to avoiding costly compliance failures. This article outlines the fundamentals of Form I-9, the risks associated with outsourced recruitment, and best practices employers can adopt to maintain compliance.

What Is Form I-9?

Form I-9, Employment Eligibility Verification, is used to verify the identity and employment authorization of every individual hired for employment in the United States.

Under federal law, all U.S. employers, regardless of size, must:

1. Have each new hire complete Section 1 of Form I-9 on or before their first day of work.
2. Review the employee’s original identity and work authorization documents and complete Section 2 of Form I-9 within three business days of hire. (employer responsibility to complete Section 2)
3. Where required, re-verify employment authorization on Supplement B (formerly Section 3) of Form I-9 on or before the document expiration.
4. Retain Form I-9 for a specific period of time after an employee is terminated.
5. Retain I-9 documents for all current employees and make them available for inspection by DHS or other federal agencies upon request.

Failure to properly complete or maintain I-9s can result in civil penalties, criminal charges, and debarment from federal contracts.

How Outsourced Recruiting Through Search Firms Can Lead to I-9 Confusion

Many employers assume that when they use a search firm or headhunter, that firm handles all aspects of screening, including verifying legal work status. However, that assumption is often incorrect and can create confusion about who is responsible for Form I-9 compliance.

Search firms are typically engaged to:

• Identify, advertise for, and screen candidates;
• Present qualified applicants for employer review; and
• Sometimes assist with offer negotiations.

However, they are not the “employer of record.” This means they cannot and should not complete the Form I-9 for candidates hired directly by the client company. Understanding this distinction is critical. While search firms help identify talent, the legal obligation to verify work authorization always rests with the entity that directly hires and pays the employee. Confusing these roles can lead to costly compliance violations.

This differs from a staffing agency arrangement, where individuals are typically employed and paid by the agency itself and merely assigned to work at the client’s site for a temporary period of time.

When the Staffing Company Is the Employer of Record

In contrast to search firms, staffing companies operate under a different framework. A staffing company typically hires workers directly, places them on its payroll, and then assigns them to perform work at a client’s site. In these cases, the staffing company, not the client, is considered the employer of record for Form I-9 purposes.

• The staffing company is responsible for completing and maintaining I-9 records because it hires, pays wages, and issues the W-2.
• The client company generally does not complete a separate I-9, but should verify that the staffing company maintains a compliant process to ensure all placed workers are legally authorized to work.
• The client company should review its contract with the staffing company to confirm I-9 responsibilities and retain the right to audit its I-9 compliance process at any time to ensure compliance by the staffing company. This helps maintain accountability on the part of the staffing company.
• Employers could still be held liable under certain circumstances if the staffing company fails to comply with I-9 obligations.

Example: A manufacturing company contracts with a staffing firm to supply temporary assembly workers. The workers are on the staffing firm’s payroll and assigned to the company. The staffing firm must complete the I-9s, but the company should confirm compliance through contract language and audits with the staffing company.

When the Client Company Is the Employer

When a search firm identifies a candidate who will be directly hired and paid by the client, the client company is the legal employer and must complete the Form I-9.

• The employer must have the employee complete Section 1 as described above and the employer must examine original documents (or designate an authorized representative) and complete Section 2 of the Form I-9 within the required timeframe.
• The search firm’s screening and vetting process does not satisfy I-9 obligations.

Example: A company engages an executive search firm to find a new Chief Operating Officer. The firm presents candidates, but once the company hires one, the company, not the search firm, must complete the I-9.

 Key Takeaways

1. Outsourcing recruitment does not outsource compliance when the company is the actual employer.
2. Staffing companies as employers of record: Although staffing companies are usually responsible for I-9 compliance, client companies should review contracts, confirm responsibility, and retain audit rights. Employers could still face liability if the staffing firm fails to comply.
3. Search firms: The employer retains full responsibility for I-9 verification where the candidates are directly hired and paid by the client company. Hiring managers should be trained to understand that candidate sourcing does not transfer I-9 responsibility.
4. Auditing and monitoring: Employers should implement policies to review I-9 compliance regularly, regardless of whether candidates are sourced internally, through search firms, or via staffing agencies.

Employers increasingly rely on outside partners to help meet hiring demands. Understanding the difference between a staffing agency, which typically serves as the employer of record, and a search or headhunting firm, which only identifies candidates, is essential for compliance.

When employers know which party is responsible for completing and maintaining the Form I-9, and verify that the process is properly managed, they can avoid costly errors and enforcement risks. Clear agreements, defined responsibilities, and ongoing oversight ensure that outsourcing recruitment never results in outsourcing compliance.

Disclaimer: This article is provided for general informational purposes only and is not intended as legal advice. Employers should consult with qualified legal counsel regarding their specific circumstances and responsibilities related to Form I-9, staffing arrangements, or third-party recruitment.

To learn more about I-9 compliance and employer obligations, schedule a consultation with Krystal Alanis. 

By: Krystal Alanis

Krystal Alanis is a Partner at Reddy Neumann Brown PC and manages the firm’s PERM Labor Certification Department, where she oversees all EB-2 and EB-3 employment-based green card matters. Krystal guides clients from a variety of industries through the maze of the PERM Labor certification process and has handled thousands of PERM applications throughout her career with Reddy Neumann Brown PC. Krystal also guides employers and individuals through the I-140 and Adjustment of Status process, and assists clients with temporary work visa petitions (e.g., H-1B, TN, L-1, E-2). With over 13 years of immigration experience, Krystal is able to advise her clients with confidence and recognize any potential pitfalls that may arise.