Company Fined $600,000 for I-9 Violations

The Office of the Chief Administrative Hearing Officer (OCAHO) has ordered Hartmann Studio, Inc. to pay a fine of over $600,000, which is one of the largest fines that it has ever assessed for I-9 form violations not involving the knowing employment of undocumented workers. The violations were all substantive paperwork violations – the employer failing to sign Section 2 of the I-9 form, failing to timely prepare or present I-9 forms, failing to ensure employees properly completed Section 1 of the I-9 form, and failing to properly complete Section 3 of the I-9 form.

Hartmann Studios is an event design and production company, with offices in Richmond, California and Atlanta, Georgia. It produces a variety of events – charitable fundraisers, trade shows and civic events, such as victory parades for the San Francisco Giants after twice winning the World Series. Hartmann had gross revenue of $73 million in 2011. It has a collective bargaining agreement with the International Alliance of Theatrical Stage Employees Union, Local 16, which operates a hiring hall referring employees to Hartmann for separate project events.

In 2011, Immigration and Customs Enforcement (ICE) served Hartmann with a Notice of Inspection (NOI). At that time, Hartmann employed 718 individuals. In 2013, ICE issued a Notice of Intent to Fine (NIF) seeking $812,665.

When Local 16 refers an individual to Hartmann, it has the individual complete a “three-in-one” form combining a portion of the W-4 form, parts of Sections 1 and 2, and a check off authorization for Hartmann to deduct and remit 3.5% of the employee’s wages to the Union. All of the approximately 390 individuals referred by Local 16 completed the “three-in-one” form, except for Section 2 of the I-9 form. After receipt of this form, Hartmann failed to sign Section 2 of the I-9 form. Hartmann asserted it did not hire the individuals referred by the union. However, it is legally incorrect because even in a hiring hall situation, the company is the employer, not the Union.

ICE decided to only charge Hartmann with failure to sign Section 2 of the I-9 form even though the “three-in-one” form was a modification of the I-9 form and was not an adequate substitute for the actual I-9 form. See 8 C.F.R. § 274a(a)(2). If ICE had considered the I-9 form to be inadequate, as opposed to merely deficient, the company would have faced a much more serious charge.

Most of the other allegations were not in dispute. Hartmann conceded it failed to produce and/or timely present I-9 forms for 12 employees. Another six employees made substantive errors in Section 1 – did not check a box to indicate their immigration status; failed to sign the I-9 forms; or checked boxes reflecting permanent resident or authorized to work but failed to list their A numbers (and Hartmann did not retain a copy of the documents with their A numbers either). Lastly, Hartmann failed to complete Section 3 for three employees after their employment authorization expired.

In addition to the 390 “three-in one” I-9 forms that were not signed by Hartmann, the company also failed to sign Section 2 in another 389 forms. Hartmann’s controller testified he “did not view signing Section 2 as one of the key responsibilities in complying with the employment verification requirements.” Under the law, he was mistaken.

ICE sought over $800,000 in penalties based upon an error rate of approximately 90%, which caused the baseline penalty to be $935 per error. The penalty was aggravated by 5% for the seriousness of the violations. Another 5% was added to a portion of the I-9 errors due to the presence of 205 unauthorized workers in Hartmann’s workforce.

Hartmann asserted the penalties were excessive, sought to punish them as opposed to being a deterrent to future violations, and asserted the violations were not serious. OCAHO forcefully disagreed that the violations were not serious because almost all of the violations concerned a failure to prepare I-9 forms or failure to sign the Section 2 attestation, which are the most serious of possible violations.

However, OCAHO determined Hartmann’s conduct was not as bad as employers in three other recent cases where OCAHO declined to reduce the penalties. However, it did not want to set the penalties too low and create a situation where the penalties were “merely a cost of doing business.” Thus, OCAHO reduced the penalties to $605,250 with almost all of the violations assessed at $700 each.

Takeaways

Clearly, employers should always sign Section 2 of the I-9 form and not testify that signing such was not a key responsibility in employer compliance. Furthermore, if your company is using a union hiring hall, be careful of the paperwork that you are being sent. It is best that the employee and employer should complete the paperwork after the referral. Finally, under no circumstances use a “3 in 1” form for the I-9 form. Hartmann was lucky not to be charged with a more serious violation.

 

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Bruce E. Buchanan is an Attorney at the Nashville and Atlanta Offices of Siskind Susser, P.C. He represents individuals and employers in all aspects of immigration law, with an emphasis on employer immigration compliance, as well as employers in employment/labor law matters. He is Past-Chair of the Tennessee Bar Association’s Immigration Law Section from 2011 to 2012 and has been the editor of the TBA’s Immigration Law Section Newsletter and the TBA’s Labor and Employment Law Section Newsletter since 2009. Mr. Buchanan also serves on the Board of Directors for the Nashville International Center for Empowerment (NICE) and the United Cerebral Palsy of Middle Tennessee and Middle Tennessee Seminole Club. He is an associate member of the Mid-Tennessee Chapter of the Associated Builders & Contractors (ABC).