What are the Form I-9 Penalty Trends from 2013 OCAHO Decisions?

[Editor’s Note: Today’s blog is courtesy of Bruce E. Buchanan, an Attorney at the Nashville and Atlanta offices of Siskind Susser, P.C. As he has done in years past, Bruce discusses some important I-9 penalty decisions published in 2013 and their potential impact on employers.]

The first thing that stands out about 2013 decisions from the Office of Chief Administrative Hearing Officer (OCAHO) is that there was a major uptick in the number of substantive decisions – 30, up from 11 in 2012.  There were also eight decisions which involved Office of Special Counsel issues – such as discrimination and document abuse. (These decisions will not be discussed in this article.)

Substantial Reduction in Penalties through Litigation at OCAHO

Of the 30 substantive decisions concerning I-9 form violations, 29 of them involved the issue of the amount of penalties.  One decision, Ketchikan Drywall Services, Inc., was the acceptance of the 9th Circuit Court of Appeals’ decision affirming $173,250 in penalties. One of the most interesting points in these 28 decisions (discounting the Ketchikan case for the above reason) was the reduction in penalties assessed by OCAHO as compared with penalties actually sought by Immigration and Customs Enforcement (ICE). In 2012, OCAHO reduced penalties sought by ICE by an average of 45%, whereas in 2013, the average reduction increased to 46.5%.

Examples of OCAHO Decisions and Penalties Sought and Assessed

Below is a chart setting forth some of the OCAHO decisions, the penalties sought by ICE and the amount assessed by OCAHO.

Reasons for Reductions in Penalties

Of course, the question remains as to what led to the reduction in the penalties by OCAHO.  The primary reasons for the reductions were the poor financial conditions of the companies (20 decisions) and the court’s belief that the ICE penalties sought were “unduly punitive” on small employers (13 decisions).  This was consistent with the 2012 OCAHO decisions, in which these were the two primary factors for reducing the penalties.  On a few occasions, employers were successful in prevailing on legal issues which ultimately caused OCAHO to dismiss these allegations.

Interesting Legal Issues

There were also a few interesting legal issues that OCAHO tackled in 2013.  Two of the more significant ones were U.S. v. California Mantel and U.S. v. Occupational Resource Management, Inc.  In California Mantel, Inc., OCAHO faced the issue of whether the employer and ICE through their attorney had reached a settlement whereby the employer would pay $8000 in penalties in exchange for a dismissal of the case..  ICE asserted no agreement had been reached because it was seeking a Consent Decree, not a settlement with dismissal of the allegations.  OCAHO explored the e-mail communications between the two parties and concluded the parties had in fact agreed on such a settlement.

In Occupational Resource Management, OCAHO explored whether the employer had constructive knowledge of the employment of three unauthorized workers (they did, according to OCAHO’s decision).    The decision offers insight in analyzing constructive knowledge, which for many years has been difficult to determine.

OCAHO’s decision in U.S. v. Monadnock Mountain Spring Water, Inc. is unusual in that it did not firmly decide the amount of the penalty owed by the employer.  Rather, OCAHO, using ICE’s previous offer as a guide, gave the employer an option – pay 100% of the $14,630 penalty or pay $10,500 immediately.

In U.S. v. Super 8 Motel and Villella Italian Restaurant, the employer successfully argued that ICE had not set out with specificity 28 violations on certain I-9 forms; therefore OCAHO dismissed these allegations.  OCAHO also rejected ICE’s assertion that the failure to date and initial corrections made after being serviced with a Notice of Technical Failures automatically resulted in substantive violations.

OCAHO’s Rejection of Defenses

Two common employer defenses that OCAHO rejected include:  (1) lack of awareness of the requirement for employers to complete an I-9 form for their employees, and (2) the errors on the I-9 forms were technical, not substantive, errors and therefore the employer should have been given 10 days to correct the deficiencies.

Industries Affected by ICE Inspections       

It is also interesting to see the types of employers, which employers received penalties, and who decided to litigate them before OCAHO.  There were 16 decisions which involved restaurants.  The next highest was retail/distribution companies – four decisions.  Even though construction and manufacturing are normally viewed as industries, which are audited by ICE, there were only three decisions in those industries.

Conclusion

As this article reflects, 2013 was a busy year at OCAHO. Due to the fact that employers are getting so much relief from OCAHO  (an average reduction in penalties of 46.5%), I anticipate more employers will be challenging ICE’s assessed penalties. But remember, it is always best to get your I-9 forms and employees in order before ICE conducts an inspection so that you don’t face these potentially devastating penalties and the associated attorney fees needed to litigate the matter.

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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).