DOJ Announces Biggest I-9 Fines Ever – $34 Million

Record-setting I-9 fines are rare, which is what makes today’s article so unique!  Today, after a few weeks of hinting (which I wrote about here), the Department of Justice (DOJ) announced the largest immigration-related violation fine against tech giant Infosys Limited (INFY), a publicly traded company.

The Indian technology, consulting and outsourcing company has been under DOJ investigation since May 2011, when it received a federal subpoena to produce records regarding its B-1 visa practices.  The investigation was likely triggered by a civil whistleblower case of one of its employees having intimate knowledge of the immigration procedures within the company.  For more details on B-1 issues, click here.

Our article today focuses on the I-9 audit the company received from Immigration & Customs Enforcement (ICE) and the implications of that penalty.

During the ICE investigation, there was not much information revealed about the details of the ICE audit.  Today’s announcement provides much more insight into the non-compliance issues.  The settlement highlights of $34 million, $5 million is to be paid to Homeland Security Investigations, $5 million to the Department of State, and $24 million paid to the DOJ.

In the press release, the DOJ alleged that “Infosys failed to maintain I-9 records for many of its foreign nationals in the United States in 2010 and 2011 as required by law, including a widespread failure to update and re-verify the employment authorization status of a large percentage of its foreign national employees.”

To be fair though, Infosys had taken significant steps to mitigate its I-9 non-compliance.  According to the setttlement agreement, it had phased in a new electronic I-9 system to replace its “hard copy” system while also implementing new I-9 compliance procedures in 2011.  It also enrolled in and began using E-Verify in 2011.

Still, the audit revealed “more than 80 percent of Infosys’s I-9 forms for 2010 and 2011 contained substantive violations.”  [That’s at least $935 for each I-9 Form error.]  As a result, Infosys must submit to “additional auditing for I-9 forms“.  The auditing (of at least 4% of the company’s forms) must be conducted by an independent third-party auditor one year from the settlement and an additional year thereafter.

CORPORATE GOVERNANCE ISSUES (REVISITED)

Last year during the Stanford 2nd Annual Worksite Immigration Compliance Symposium, Professor Dan Siciliano made important predictions about how I-9 non-compliance could ultimately make corporate governance that much more costly for large, publicly traded companies.

In a nutshell, when a publicly traded company must answer to its shareholders, any non-compliance in its business procedures (such as the I-9 process) can incur significant costs to a company.  [We’ve seen this happen with Chipotle a few years ago, when the results of its I-9 audit by ICE resulted in the layoff of hundreds of workers, which also forced the company to highlight those costs in its filings with the Securities Exchange Commission.]

In this case, both the B-1 investigation and the Form I-9 audit results forced Infosys to admit, in its recent quarterly financial statements, how costly the penalties would be, and the impact it would have in devaluing the company’s stock price.

It seems that when I-9 non-compliance catches up with large corporations, it invariably makes a bigger splash; penalties are usually in the millions of dollars when fines are levied; and the press is “all over it”!

While some may argue that any press is good press, I can’t imagine a company spokesperson being excited about his/her job security during these times.

SHAREHOLDER LAWSUIT IMPLICATIONS

Other implications for a large corporation facing immigration-related penalties involving I-9 non-compliance include the fallout with shareholders.   What role did executive officers play in allowing non-compliance to occur?  The federal whistleblower case by the company’s employee provides a myriad of examples of alleged wrongdoing.  To what extent will this influence shareholders who are upset enough to litigate against the company?

According to the Wall Street Journal, the company recently posted earnings of $7.4 billion in its last fiscal year ending in March.  While it’s possible the company will escape unscathed from the I-9 fines, no doubt the company will be forced to rethink and reshape its I-9 compliance moving forward.

If corporations had been conveniently ignoring I-9 compliance warnings from their HR staff, now might be a good time to have a meeting, if only to be reassured.  For corporations ready to take the next step in getting into full I-9 compliance, now is a good time to check with our team to find out how Guardian I-9 and E-Verify System can simplify the process for your publicly traded organization.