OCAHO Substantially Reduces I-9 Penalties for Two Employers

The Office of Chief Administrative Hearing Officer (OCAHO) recently issued two decisions where it reduced the I-9 penalties for two employers by about 44 percent and 33 percent, respectively.

United States v. Century Hotels Corporation

In the first case, United States v. Century Hotels Corporation, Immigration and Customs Enforcement (ICE) alleged the employer failed to prepare I-9 forms for 19 employees and failed to ensure the proper completion of Section 1 and/or failed to properly complete Section 2 or 3 of the I-9 form for 40 employees.  Based upon an I-9 error rate of 54.5 percent, the baseline penalty was $935, which was aggravated by five percent for the 11 violations involving unauthorized employees. (The aggravating factor of seriousness of the violations was offset by the mitigating factor of the small size of the business.)  Thus, ICE sought a total of approximately $55,000.

Century Hotel’s Arguments

Century Hotels disputed ICE’s assertion that 11 employees were unauthorized workers.  OCAHO determined ICE’s review of its Homeland Security Central Index Systems (CIS) was faulty because it transposed some of the employees’ A numbers in its search results.  Thus, OCAHO held “The CIS printouts do not inspire confidence and fail to carry the burden of showing that the individuals…were unauthorized for employment.”

Century Hotels also argued it does not have the ability to pay the proposed penalties.  In support of this argument, Century provided evidence it was in the process of obtaining a Best Western franchise and in order to receive it that it must make capital improvements of over $1 million.  In the last two years, Century Hotels had a profit of $80,000 and a loss of $75,000, respectively.

OCAHO’s Decision

Although ICE disputed that Century Hotels was having financial difficulties, OCAHO held the “company’s cash-poor status will present difficulties in paying a penalty.”  Furthermore, OCAHO found ICE’s proposed penalties of 91 percent of the maximum possible was excessive in light of the magnitude of offenses and the company’s financial resources.

OCAHO found a penalty of $500 each for the failure to prepare/present I-9 forms for 19 employees and $400 each for all other violations, for a total of $25,500.  Interestingly, OCAHO added “the parties are encouraged to enter a payment schedule.”

United States v. Senox Corporation

In the second case, United States v. Senox Corporation, ICE charged the company with 54 counts of failing to prepare I-9 forms and 14 counts of failing to ensure the proper completion of Section 1 of the I-9 form and/or failing to properly complete Section 2.  The substantive errors by Senox mainly involved the failure of a company representative to sign Section 2.

Due to an error rate of 64%, the baseline penalty was $935, which was aggravated by 5 percent based on the large size of the company.  The total penalty sought by ICE was approximately $67,000.

OCAHO’s Decision

In a similar conclusion to the Century Hotels decision, OCAHO determined a proposed penalty of 90 percent of the maximum permissible was too high based upon the type of violations committed.  Furthermore, OCAHO found no bad faith by Senox, no history of previous violations, or any employment of unauthorized workers.

Based upon this analysis, OCAHO set the penalties at $700 each for failure to prepare /timely present 54 Form I-9s and $500 each for the other 14 violations for a total of $44,800.

Conclusion

These decisions are further proof that the most basic of I-9 compliance, timely preparation of the I-9 form, is the most likely to be violated by employers (at least in litigation before OCAHO).  However, despite these major violations by both employers, litigation before OCAHO reduced the penalties by between 33 to 44 percent.  Therefore, it appears both companies made the right decision to litigate the penalties before OCAHO.  Of course, we do not know if such reductions could also have been received through negotiations with ICE after the issuance of a Notice of Intent to Fine (NIF).