The Year in Review: Form I-9 Penalty Decisions in 2016

By Bruce E. Buchanan Jul 7, 2017
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No employer wants to receive the dreaded Notice of Intent to Fine (NIF) in connection with an audit of their I-9 forms. Dealing with an I-9 inspection alone is a costly affair, but the NIF can be downright crippling—particularly for small businesses. Fortunately, employers can appeal an adverse I-9 decision by requesting a hearing with the Office of the Chief Administrative Hearing Officer (OCAHO), an administrative court that reviews employer sanctions cases under the Immigration and Nationality Act.

Although OCAHO decisions adjudicating I-9 penalties have leveled off in the past few years, it is anticipated there will be many more decisions in future years as the number of Form I-9 inspections is on the rise in the Trump administration and, as shown below, employers continue to obtain significant decreases of I-9 penalties at OCAHO.

[SHRM members-only toolkit: Complying with Form I-9 Requirements]

In calendar year 2016, OCAHO issued 16 substantive decisions against employers in I-9 penalty cases. For a few employers, there were two or more decisions concerning substantive issues before the court reached a decision on the amount of the I-9 penalties. The number of cases is a slight increase from 2015, when there were 13 decisions but still much lower than the 30 decisions issued in 2013.

Analysis of the Decisions

One of the most interesting aspects of reviewing a year's worth of cases is determining the percent that OCAHO reduced proposed penalties issued by Immigration and Customs Enforcement (ICE). Such an analysis for 2016 shows there was a 31 percent lowering of ICE's proposed penalties [from a total of $1.2 million to $871,000].

Of the 16 decisions, OCAHO substantially lowered the penalties in all but three decisions: Golden Farm Market, Hair U Wear, and Para Tacos La Chilanga. The reduction in penalties is comparable to 2015 when the reduction was 32.8 percent.

Why did OCAHO decide to reduce (sometimes significantly) the penalties proposed by ICE? Mainly, OCAHO found as a matter of discretion that the penalties were too high because the maximum penalties should only be assessed for the most egregious violations. Since OCAHO did not find most errors were egregious violations, it lowered the penalties accordingly. Furthermore, OCAHO usually cited the general public policy of leniency toward small businesses as a significant factor in the penalty assessment. A third defense in some cases was the company's inability to pay the assessed fine, which was offered six times as an affirmative defense. OCAHO lowered the proposed penalties three times while declining to do so in three cases (Golden Farm Market, Pegasus Family Restaurant, and Jack's Produce Co.), based upon the employer's lack of sufficient documentation to support that defense.

Of the 16 employers involved in the decisions, there was not a dominant industry. Manufacturing, hospitality (restaurants), and grocery/retail stores each were represented by three employers. Construction, which is normally thought of as subject to many I-9 audits by ICE, was only represented by one employer.

Thirteen of the 16 employers that were the subject of OCAHO decisions were small employers, usually defined as under 100 employees. Interestingly, ICE did not always mitigate the fines by 5 percent because of an employer's size but OCAHO accepted the employer's defense if payroll records justified it.

Significant or Interesting Issues in OCAHO Decisions

There were a number of significant and/or interesting issues decided by OCAHO in 2016. One of the more interesting issues was raised in Frimmel Management, where the employer argued what is normally a criminal defense—"fruit of the poisonous tree." In this case, the Maricopa County Sheriff's Office had started a criminal investigation concerning undocumented workers at Frimmel Management. Although the criminal case was dismissed by a state court, ICE became aware of Frimmel's identity and served Frimmel with a Notice of Inspection (NOI).

OCAHO declined to dismiss the complaint based on the "fruit of the poisonous tree" defense because ICE merely obtained Frimmel's identity but did not receive any documents from the Sheriff's office.

A novel issue was raised in Ideal Transportation, where ICE charged the trucking company with many I-9 violations for its failure to timely prepare I-9 forms, which put the company at "high risk of employing undocumented workers." However, Ideal showed its truck drivers were required to be issued Transportation Worker Identification Credentials (TWIC) cards because they worked at a U.S. port. OCAHO found TWIC cards demonstrated its truck drivers were authorized to work. Thus, OCAHO reduced the penalties by about 75 percent.

The topic of supporting documents to the I-9 form was litigated in International Packaging. Here, International Packaging retained copies of List A, B and C documents but it did not provide them to ICE in response to their NOI and subpoena. The employer argued they were only requested in ICE's cover letter, not in the NOI or subpoena. OCAHO found presenting supporting documents is an affirmative defense; thus, it is incumbent on the employer on whether to produce, if not covered by the subpoena. Since International Packaging failed to present them, ICE could not consider them in determining whether the violation was substantive or technical.

In Pegasus Family Restaurant, OCAHO's finding of a mitigating factor was based on a novel argument. ICE determined the work-authorized employees' I-9 errors should receive 5 percent mitigation and there should be a 5 percent aggravating factor for the errors on the I-9 forms of undocumented workers. However, OCAHO found ICE failed to establish the workers' undocumented status; thus, this should be a mitigating factor, not an aggravating factor, as ICE assessed for the other penalties.

The failure of ICE to prove undocumented status of some employees was also an issue in Muniz Concrete and Contracting and SKZ Harvesting. In Muniz Concrete, OCAHO held that the fact that five employees had been listed on the Notice of Suspect Documents did not establish unauthorized status. Thus, OCAHO declined to find this as an aggravating factor.

A few other conclusions that OCAHO reiterated in its 2016 decisions were:

  • A prior warning notice does not establish a history of violations (SKZ Harvesting).
  • Poor rate of proper completion of I-9 forms does not equal bad faith (i.e. Solutions Group).
  • The five-year statute of limitations for timeliness errors is an effective defense in dismissing allegations (St. Croix Personnel Services).

Takeaways

OCAHO decisions serve as an important reminder of how easy it is to commit substantive violations when completing I-9 forms. The best strategy to address the potential compliance risk is to take the I-9 obligation seriously and prepare yourselves for the increasingly high risk of an ICE inspection. In doing so, I strongly suggest that you receive periodic training on immigration compliance issues, especially since a new I-9 form was introduced in 2016 and HR personnel change over time—causing mistakes to continue to be made by the new HR employee. You should also consider reviewing all of your I-9s on file to detect (and correct) past compliance mistakes.

Bruce E. Buchanan is an attorney at the Nashville and Atlanta offices of Sebelist Buchanan Law PLLC. © 2017 Bruce Buchanan. All rights reserved. Reposted with permission.

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