Is It Illegal to Hire Undocumented Workers in California?

Yes, it is illegal to hire undocumented workers in California. Federal law prohibits it nationwide, and California stacks its own penalties, worker protections, and anti-retaliation rules on top. An employer who hires someone without work authorization risks federal civil fines starting at $716 per worker and climbing above $28,000 per worker for repeat violations, potential criminal prosecution, state penalties up to $10,000 per incident for related document abuse, unpaid wage claims from the workers themselves, tax exposure, and workers’ compensation liability. California also blocks the two moves employers most often try when things go wrong: threatening to report the worker to immigration, and reclassifying the worker as an independent contractor.

The Federal Prohibition

The Immigration Reform and Control Act of 1986 (IRCA) makes it unlawful for any employer to knowingly hire, recruit, or continue to employ a person who is not authorized to work in the United States. Every employer must verify identity and work authorization for each new hire, complete a Form I-9, and retain it.¹

“Knowingly” is broader than it sounds. Federal regulations extend it to constructive knowledge: facts and circumstances that would lead a reasonable person to know the worker isn’t authorized. Sloppy I-9 paperwork, ignoring red flags, and reckless disregard all count. An employer who cut corners can’t later plead ignorance. At the same time, knowledge cannot be inferred from foreign appearance or accent, and employers cannot demand more documents than the law requires.²

What the Federal Penalties Actually Look Like

Federal law splits penalties into two tracks. One track punishes the act of knowingly hiring or continuing to employ someone without authorization. The other punishes I-9 paperwork failures even where no unauthorized worker is found.

As of the January 2025 inflation adjustment, the civil fines for knowingly hiring, recruiting, or continuing to employ an unauthorized worker are:

First offense: $716 to $5,724 per worker
Second offense: $5,724 to $14,308 per worker
Third or subsequent offense: $8,586 to $28,619 per worker

The fines are per worker and adjusted each year for inflation.³ Ten unauthorized workers means ten times the exposure.

Paperwork violations run $288 to $2,861 per individual for violations occurring after November 2, 2015.³ During an audit covering an entire workforce, those figures multiply quickly.

An employer who engages in a pattern or practice of hiring unauthorized workers faces criminal prosecution with fines up to $3,000 per worker and imprisonment of up to six months.⁴ A single inadvertent hire won’t cross the criminal threshold. A staffing model built on unauthorized labor will.

What California Adds

California does not soften the federal rule. It adds parallel state penalties, gives undocumented workers full state-law rights, and criminalizes several of the workarounds employers try.

Document Abuse and Reverification

Under Labor Code Section 1019.1, requesting more or different documents than federal law requires, or refusing to accept documents that reasonably appear genuine, is punishable by up to $10,000 per violation.⁵ Labor Code Section 1019.2 separately bars reverifying a current employee’s work eligibility at a time or in a manner federal law doesn’t require, with the same $10,000 ceiling.⁶ Both statutes are aimed at employers who use the verification process as a weapon against workers who complain.

Workers’ Compensation

Workers’ compensation coverage applies to every employee, undocumented workers included. Failing to carry it is a misdemeanor under Labor Code Section 3700.5. A first conviction carries up to a year in county jail and a fine of at least $10,000 or double the premium that should have been paid. A second conviction raises the minimum fine to $50,000 or triple the unpaid premium.⁷

The Worker Can Sue You

Labor Code Section 1171.5 declares that every protection, right, and remedy under state law is available to workers regardless of immigration status. Immigration status is irrelevant to employer liability in a state-law enforcement proceeding, and no inquiry into status is allowed unless the party seeking it shows by clear and convincing evidence that the inquiry is necessary to comply with federal immigration law.⁸ An undocumented worker denied minimum wage or overtime can file a wage claim, sue for discrimination, and pursue the same remedies as any other worker. The one exception is reinstatement where federal law prohibits it.

You Cannot Threaten to Report the Worker

This is where employers create the largest hole for themselves. Labor Code Section 244 makes it an adverse action to report or threaten to report anyone’s immigration status to a government agency because that person has exercised a right under the Labor Code. Labor Code Section 1019 defines a broad list of “unfair immigration-related practices,” including threatening to contact immigration authorities, filing false reports, demanding additional documents, or misusing E-Verify.⁵

The practical consequence: an employer who hires someone, later learns or suspects the worker isn’t authorized, and then threatens to call ICE when the worker complains about unpaid wages has committed a separate, independently punishable violation. The threat itself is the wrong, regardless of the worker’s actual status.

You Cannot Reclassify Them as Contractors

Independent contractors are not subject to the I-9 process, so some employers try to relabel their way out of the hiring rules. California has largely closed that door.

The California Supreme Court’s 2018 Dynamex decision established the ABC test: every worker is presumed an employee unless the hiring entity proves the worker is free from the company’s control, performs work outside the company’s usual course of business, and has an independently established trade of the same type.⁹ Assembly Bill 5 codified the test in 2019. A label or signed contract calling someone a contractor doesn’t control the analysis.¹⁰

Employers who misclassify to avoid verification face compounding liability: back wages, unpaid payroll taxes, workers’ compensation penalties, and the verification violations they were trying to sidestep. The Labor Commissioner’s Office and the Employment Development Department both audit for misclassification, and a misclassification finding typically opens I-9 compliance to review as well.

Payroll Tax Exposure

Paying workers off the books to avoid the verification question opens a separate track through the IRS. Federal law requires withholding income taxes, Social Security, and Medicare from every employee’s wages regardless of immigration status. The Trust Fund Recovery Penalty under 26 U.S.C. § 6672 makes any “responsible person” who willfully fails to collect, account for, or pay over employment taxes personally liable for 100% of the unpaid tax. It reaches individual owners, officers, and bookkeepers who controlled payroll funds.¹¹ Willful failure to pay or file payroll tax returns can also lead to criminal prosecution with up to five years in prison.

Doing the I-9 Correctly (and Building a Good Faith Defense)

An employer who completes the I-9 properly has a real defense if a worker later turns out to be unauthorized. Good faith compliance with the verification requirements creates a rebuttable presumption that the employer did not knowingly hire an unauthorized worker.¹ The defense only works when the employer genuinely examined documents that appeared authentic.

The mechanics are straightforward. The employee completes Section 1 on or before the first day of work. The employer examines the worker’s documents and completes Section 2 within three business days of the first day.¹² The employee chooses which documents to present from the approved lists: one List A document proves both identity and work authorization, or one List B (identity) plus one List C (work authorization).¹³ Demanding a specific document, such as insisting on a green card when the worker offers a valid driver’s license and Social Security card, is itself a violation.

Correct errors by drawing a line through the wrong information, entering the correct data, and initialing and dating the change. Do not use correction fluid and do not backdate. Substantial errors, like an entire blank section, may require completing a new form with a written explanation attached.¹⁴

Employers enrolled in E-Verify have had the option since August 2023 to examine documents remotely. The employer reviews copies transmitted by the employee, then conducts a live video call where the employee presents the same documents on camera. The employer checks the alternative-procedure box on the I-9 and retains clear copies. The option must be applied consistently across all new hires at a given site, and employees can opt for in-person examination.¹⁵

California Boundaries on E-Verify and Immigration Enforcement

California limits private employers from using E-Verify beyond what federal law requires. Labor Code Section 2814 (enacted through Assembly Bill 622) bars using E-Verify to check existing employees or applicants who haven’t received a job offer, unless federal law mandates it or it’s a condition of federal funds. The statute states its purpose is to prevent employment discrimination, not to authorize hiring unauthorized workers.¹⁶

The Immigrant Worker Protection Act (AB 450) restricts how employers cooperate with federal immigration enforcement at the worksite. Employers cannot voluntarily consent to let an immigration enforcement agent enter non-public areas, and cannot voluntarily hand over employee records unless the agent presents a judicial warrant, a subpoena, or a Notice of Inspection specifically requesting I-9 forms.¹⁷ Violations carry civil penalties.

If You Get an Audit Notice

ICE opens most workplace investigations by issuing a Notice of Inspection requiring production of I-9 records, typically within three business days. Discrepancies can produce paperwork fines even when no unauthorized worker is found. If ICE identifies unauthorized employees, the employer must stop employing them.¹⁸ California audits come from the Labor Commissioner’s Office (wage theft, retaliation, unfair immigration-related practices) or the Employment Development Department (misclassification and unpaid payroll taxes).

The path is narrow. You must verify authorization but cannot over-verify. You must comply with lawful federal process but cannot voluntarily open your doors to immigration agents. You must stop employing workers you know are unauthorized but cannot retaliate against workers who assert their rights. Run an internal I-9 audit at least once a year, correct errors using the proper procedure, train every manager on what documents to accept and what they cannot demand, and if a Notice of Inspection or state audit letter arrives, call an employment attorney before responding. Counsel who specialize in employment eligibility and immigration compliance typically charge between $100 and $500 per hour, a fraction of what a mishandled audit can cost.

1
U.S. Citizenship and Immigration Services. Handbook for Employers – 1.0 Why Employers Must Verify Employment Authorization and Identity of New Employees
2
eCFR. 8 CFR 274a.1 – Definitions
3
Federal Register. Civil Monetary Penalty Adjustments for Inflation
4
Office of the Law Revision Counsel. 8 USC 1324a – Unlawful Employment of Aliens
5
Department of Industrial Relations. Laws that Prohibit Retaliation and Discrimination
6
California Legislative Information. California Code Labor Code 1019.2 – Unfair Immigration-Related Practices
7
California Legislative Information. California Code Labor Code 3700.5 – Failure to Secure Compensation
8
California Legislative Information. California Code Labor Code 1171.5 – Employment Protections for Individuals Regardless of Immigration Status
9
Department of Industrial Relations. Independent Contractor Versus Employee
10
Franchise Tax Board. Worker Classification and AB 5 FAQs
11
Office of the Law Revision Counsel. 26 USC 6672 – Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax
12
U.S. Citizenship and Immigration Services. Form I-9 Employment Eligibility Verification
13
U.S. Citizenship and Immigration Services. Form I-9 Acceptable Documents
14
U.S. Citizenship and Immigration Services. 9.0 Correcting Errors or Missing Information on Form I-9
15
U.S. Citizenship and Immigration Services. Remote Examination of Documents (Optional Alternative Procedure)
16
California Legislative Information. California Assembly Bill 622
17
California Department of Justice. Immigrant Worker Protection Act (AB 450) FAQ
18
U.S. Immigration and Customs Enforcement. Form I-9 Inspection Under Immigration and Nationality Act 274A