The Impact of OCAHO Decisions on Employers

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

OCAHO is issuing a record number of decisions (on pace to triple their decisions concerning alleged I-9 form violations from 2012) and Immigration and Customs Enforcement (ICE) is conducting a record number of Notice of Inspections (NOI). Employers should know these enforcement activities will, at some point, impact their own I-9 compliance and recordkeeping.

More NOIs means more Notices of Intent to Fine (NIF) are issued. If employers opt to contest the NIFs, then the matter must be set for litigation. A little unknown fact though, is that ICE can realistically only afford to litigate a limited number of cases per year.  For employers, this opens up the opportunities to negotiate the penalty amounts with ICE though ICE would not readily admit to being amenable to negotiating fine amounts. With the severe reductions in penalties that OCAHO has provided employers recently, ICE may be at a disadvantage when it comes to negotiations. A recent example is a reduction of penalties by 80% in two Subway restaurant cases from $82,280 and $49,368 to $15,800 and $9,600, respectively.

How Does an Employer Seek a Reduction in Penalties?

First, a written request for a hearing within 30 days of service of the NIF must be lodged in order to preserve the employer’s rights to litigate, absent settlement. Without doing so, there is no incentive for ICE to consider an employer’s arguments in order to reduce the penalties.

Next, employers should considering conducting a thorough review of the NIF for any errors made by ICE in charging a violation was committed. (Remember, ICE officers are human and just as susceptible to making errors.) Examples of errors include failure to accurately count the three business days for the employer signing Section 2; determining a date was required in Section 3 when the employer only inadvertently signed Section 3 while signing and dating Section 2; and determining an employee did not provide his A# in Section 1 but failed to note it was provided in Section 2; thus, making it only a technical, not substantive error.

The Key to Reviewing the NIF

Finding errors can be doubly helpful.  It eliminates a number of violations and may lower the error percentage rate, triggering a lowering of the baseline fine amount. By way of illustration, if ICE found 80 substantive errors out of 200 Forms I-9, the error rate would be 40%. According to the Form I-9 fine matrix, the baseline penalty for a 40% error rate would be $770 per violation (for the first offense) for a total of fine of $61,600 (80 x $770).  Upon review, if an employer were able to successfully transform 20 of those errors from substantive to technical or eliminate them altogether, the new error rate would drop to 30%.  This drop in error rate would lower the baseline fine to $605 per violation for a new total of $36,300 (60 x $605).  The savings of $25,300 are significant!

A second method is to review the five mitigating/aggravating factors: size of business, good faith, seriousness of violations, whether any employees were unauthorized, and history of previous violations. Each is worth 5%.  Using these factors, employers can argue for a reduction of the penalties if ICE declined to mitigate the penalties or erroneously aggravated the penalties.

ICE’s Tactics for Aggravating Fines

Until recently, ICE aggravated every violation if it found any unauthorized employment of workers. However, after OCAHO repeatedly held this aggravating factor should be used on the violation concerning the unauthorized worker, ICE has changed its method of calculation on this factor.

Concerning size, ICE may not be aware of how many employees are currently employed or the company’s revenues. Often, there may be hundreds of Forms I-9 presented but only a small number of employees currently employed at any time due to high turnover. Thus, if behooves employers to factor in their small size as a 5% mitigating factor whenever this is applicable.

ICE often argues bad faith based upon a poor rate of I-9 compliance and attempts to aggravate penalties by 5%. However, OCAHO has consistently rejected this argument. If faced with this strategy from ICE, employers should consider rebutting this argument by showing negligence and not bad faith.

Methods for Reducing Penalties

Other methods for reducing penalties include reviewing violations that occurred beyond the five-year statute of limitations; violations that are technical, not substantive, errors; instances where an employee is hired before November 7, 1986 and does not require a Form I-9; instances where an employee was hired but worked less than three days and the alleged violation concerned Section 2; and instances where the individual was not an employee.

OCAHO has found that an employer’s poor financial condition, ability to pay and the disproportionately large penalties have all been important factors in reducing penalties. Although these arguments are less persuasive with ICE, providing documents to support these defenses can be convincing before OCAHO.

Large reductions in penalties like in the recent Subway restaurants cases are uncommon, but employers shouldn’t be shy about seeking a reduction in penalties.  As a legal advocate, it is personally very rewarding to achieve a significant reduction in a client’s penalties.

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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).