Squeezing Blood from Stone – Small Employers Appeal I-9 Fines to OCAHO

[Editor’s Note: Today’s blog is authored by Bruce E. Buchanan, an Attorney at the Nashville Office of Siskind Susser, P.C.]

Small employers caught in the grips of an Immigration and Customs Enforcement fine may find solace in their appeals to the Office of the Chief Administrative Hearing Officer (OCAHO).  In the first two months of 2013, OCAHO issued three decisions that substantially reduced the fines.  ICE, naturally, is on the defensive.

1. United States v. Taste of China – Fine reduced from $13,900 to $5,100

ICE issued a Notice of Inspection on February 18, 2011, requesting Taste of China’s I-9 forms.  Thirteen I-9 forms were produced even though it employed 14 employees. It claimed it lost the I-9 form for one employee. ICE issued fines of $13,900 based on $935 per violation (rate for 100% substantive violations), an aggravating 5% factor for lack of good faith and a 5% reduction for the small size of the company.  ICE charged Taste of China for failing to present an I-9 form for one employee, ensure completion of Section 1 of the I-9 for two employees (no status box checked), and failing to complete the Section 2 attestation for 10 employees. Taste of China asserted it should have been given 10 days to correct the 13 substantive errors but this argument failed, since employers receive only 10 days to correct technical errors. When the I-9 errors are substantive, the 10-day period to cure would be inconsequential. It also argued it utilized good faith, which OCAHO responded, “A poor rate of I-9 compliance is not sufficient to show bad faith absent some culpable conduct going beyond the mere failure comply.”  ICE’s continued use of this argument is consistently refuted by OCAHO.

Finally, Taste of China argued the penalties were excessive and would devastate the restaurant. OCAHO considered the company’s ability to pay stating, “The penalties requested are so near the maximum permissible as to appear disproportionate to the size and resources of the business, particularly in light of its character, (as) literally a ‘mom and pop’ operation.’” Furthermore, it stated “proportionality is critical to setting the penalties.” Thus, OCAHO reduced the final penalty amount to $5,100.

2. United States v. Nebeker, Inc. d/b/a Aire Serv – Fine reduced from $22,627 to $10,800

Nebeker, located in Layton, Utah, employs seven employees. After receiving a Notice of Inspection in September 2010 and providing the I-9 forms for the last three years.  ICE issued a Notice of Suspect Documents informing Nebeker that three employees appeared unauthorized for employment.  (Those employees were terminated after they were unable to supply Nebeker with appropriate employment authorization.) ICE also issued a NIF charging Nebeker with 12 violations of the Immigration Reform and Control Act, including deficiencies in Sections 1 and 2, acceptance of an invalid List C document; backdating I-9 forms, and failure to retain I-9 forms for seven former employees. ICE sought penalties of $22,627 ($1,028.50 per violation) but did not explain how it reached the fine assessment. Nebeker requested leniency because it was no longer in business, had significant debt, and its owner had filed for personal bankruptcy. Although ICE argued the bankruptcy petition and Nebeker was operating under an alter ego at the same location, OCAHO still ruled in favor of Nebeker. OCAHO found Nebeker failed to support its assertions with evidence but nevertheless found the penalties sought were “disproportionate to the size and character of the employer.” Thus, OCAHO reduced the total penalty to $10,800.

3. United States v. Fowler Equipment Co. – Fine Reduced from $77,418 to $41,400

Fowler Equipment, located in Union, New Jersey, has about 32 employees. ICE served a Notice of Inspection on Fowler on November 19, 2009. In May 2011, ICE issued a NIF seeking $77,418. The alleged violations include failing to prepare 17 I-9 forms, and 59 instances of failing to ensure the employee completed Section 1 or failed to properly complete Section 2 or 3 of the I-9 form.  ICE calculated the baseline penalty at $935 based on 90% of the I-9s involved violations and enhanced the penalties by 5% due to the company’s bad faith, resulting in a fine of $981 per violation. Additionally, ICE classified the 17 instances of failing to have I-9 forms for employees as serious, and enhanced those violations by 5% to $1,028.50.

On its failure to produce 17 Form I-9s and its failure to complete List A, B and C, Fowler reasoned that it had inspected and copied the applicable documents, and that it had completed I-9 forms for most of them after the fact.  Fowler also argued that the percentage of I-9 forms with violations is not located in the statute; thus, the analysis should be rejected.  OCAHO didn’t buy any of these defenses. On the issue of bad faith, Fowler denied it engaged in bad faith and that it was merely negligent. It also urged the court to reduce its fines by 5% because it was a small employer (with only 32 employees).  OCAHO found Fowler’s violations were serious and agreed it did not rise to the level of bad faith and agreed to reduce its fines by 5% because it constituted a small employer.  Furthermore, OCAHO added that Fowler deserved 5% reductions for no prior violations and no unauthorized workers on their payroll.  OCAHO concluded the penalties were “unduly harsh” and should be adjusted to the mid-range.  Thus, the total penalty assessed was reduced to $41,400.

Takeaway

The usual suspect conduct (deficiencies in Section 1 and 2) are common in these OCAHO cases.  Employers should take note to review its policies on “auditing” I-9 forms and curing any errors that would not aggravate the errors any more.  Consulting an experienced immigration attorney is always recommended, even when faced with an ICE audit. Overall, if the chances of getting ICE fines reduced are likely than not, it begs the question why employers don’t challenge ICE fines at OCAHO more often.  It may well be time for employers to explore those options.

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Bruce E. Buchanan is an Attorney at the Nashville Office 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).