Chinese Restaurant Finds I-9 Penalties Distasteful

[Editor’s Note: Today’s blog discusses the dangers of negotiating I-9 penalties without the help of experienced legal counsel. Please read below and check out our special offer to download a free white paper on negotiating I-9 fines.]

It’s the one moment that all HR managers should be prepared to handle: an inspecting officer from Immigration and Customs Enforcement (“ICE”) shows up at your door demanding to see proof that you’re hiring a legal workforce – that you’re completing I-9 forms for all newly hired employees. There is a protocol to follow, documents to produce, and people to contact during the frenzied 72-hour period when you’re expected to make the I-9s and other documents available for inspection. And then you wait (sometimes, for a quite a while) with anticipation to learn the results of the audit – are we compliant? Did we survive the visit from the ICE man?

Then, your worst fears are realized – it’s a fine, a “paperwork” violation, to the tune of several thousand dollars. Whether you can pay is not even relevant to you right now – you just want to fight it. Contest the findings. Make the case that you should not have to pay such an exorbitant amount of money (or perhaps anything at all).

What happens next is extremely important. Along with the penalty paperwork, you notice that you actually have an opportunity to request a hearing before an administrative law judge within 30 days and respond to each one of ICE’s allegations in more detail. Now you’ve got one chance to set things straight – what do you do next? Who do you contact?

This brings us to another interesting I-9 anecdote, as recounted in the real-life case of U.S. v. Chen’s Wilmington, Inc., d/b/a Hibachi Grill Supreme Buffet Restaurant. Read-on to learn how this small North Carolina restaurant made the wrong decision when negotiating their I-9 fines – a choice which later proved costly and irreversible.

The Story

An accountant, a lawyer, and an ICE agent walk into a bar. The bartender looks up and asks, “Is this some kind of joke?” Obviously…yes (or at least an attempt at a joke), but interestingly, the case of US v. Chen’s Wilmington actually involves all three of the above individuals (although no drinking is alleged to have occurred).

According to the case, Chen’s Wilmington, Inc. is a small Chinese restaurant in Wilmington, North Carolina that is owned and operated by Yue Chen, a lawful permanent resident. After conducting an I-9 inspection, ICE demanded Ms. Chen pay civil penalties in the amount of $24,543.75 for twenty-five violations (or $981.75 per violation). Shortly thereafter, Ms. Chen filed an answer to the formal complaint with the Office of the Chief Administrative Hearing Officer (OCAHO), denying the allegations of I-9 misconduct – so far so good, right?

Next step in the process – pursuant to usual procedure, the court issued an order for prehearing statements from both parties (ICE and Ms. Chen) to make their cases. According to the record, ICE filed its response, but Ms. Chen sent nothing. The court (again through typical procedure) asked Ms. Chen why she didn’t file an argument and gave her another opportunity to explain herself.

Then, something strange happened. Before this deadline passed, ICE suddenly showed up with a settlement agreement signed by Ms. Chen. Okay great, they settled out of court. Hooray for Ms. Chen! But wait…if we look at the settlement agreement, we learn that she actually agreed to pay the full $24,000 amount – no reduction at all! Why didn’t she negotiate the fine?

The Accountant

As it turns out, Ms. Chen wasn’t entirely alone in her quest to resolve this I-9 dispute. According to the record, she was quite distraught over the I-9 fine and her ability to pay it. So much so, that she turned to her accountant to seek advice and counsel (it is a “financial matter” after all). ICE engaged in negotiations with the accountant for more than four months leading up to the filing of its complaint, and even continued negotiating with him afterwards. Then, for reasons completely unknown, both Ms. Chen and the accountant agreed to settle without reducing the penalties or fines at all. Case closed? Not quite.

Debtor’s Remorse

Fast-forward 4 months later, and Ms. Chen is back – this time with an attorney. She files a request for administrative review, and specifically asks the court to revoke the settlement agreement and return all funds paid to ICE based on the notion that ICE had taken advantage of the accountant’s lack of knowledge and experience in order to secure 100% of its proposed penalty. Ms. Chen (again through her attorney) went even further by noting that “OCAHO rules explicitly forbid representation by a non-attorney without prior approval from the ALJ.”

The Court’s Decision

Although it was a valiant effort, Ms. Chen’s last-ditch attempt to revoke the I-9 settlement agreement ultimately fell on deaf ears. The court noted that the accountant had not officially represented Ms. Chen in any capacity before the court, and instead appeared to be assisting her on the side. The most damaging evidence appeared to be Ms. Chen’s own signature – which appeared on all of the documents negotiated with ICE. Absence any evidence to the contrary, the court refused to find any misconduct on the part of ICE and let the full settlement amount stand.

Lessons Learned

Ms. Chen’s case (while disappointing to her) can actually serve as a great lesson to all employers who consider negotiating an I-9 fine by themselves (or with the help of other non-attorneys). As we’ve explained in the past, negotiating an I-9 audit is not for the faint of heart. In order to form a strategy, you will need to closely examine the nature of the I-9 errors, make determinations as to the running of the statute of limitations, and study prior case law to craft the best argument. You’ll also have to become familiar with the various ICE penalty guidance memos, which are not easy to digest.

The good news is that if you do engage counsel, your odds of reducing I-9 penalties are actually quite good. As fellow blogger and I-9 expert, Bruce Buchanan, has explained in the past, OCAHO tends to reduce fines by an average of 35% to 45% when litigated by employers — particularly in the case of small businesses where the ability to pay the fine is heavily weighted in their favor. Moreover, as we’ve seen in the recent past, there are occasions when ICE oversteps its bounds, and denies employers the opportunity to correct mistakes and reduce penalties and fines.

Want to learn more about negotiating I-9 fines with ICE (including strategies for penalty reductions?) Request our free article from attorney and I-9 expert Sharon Mehlman for best practices and tips to survive an I-9 ICE attack.

Click to here download a free white paper on negotiating I-9 fines.