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Court finds I-9 penalties too spicy for Mexican restaurant

As employers, you all know that mistakes happen when completing the Form I-9. If you dare to look at your files (which you should), you’re likely to find all kinds of interesting, even creative ways in which your forms stray from the I-9 rules. One of my personal favorites was the company who viewed Section 2 documents as optional because “we’re pretty sure our employees are all legal.” And then of course there is the endless confusion over which documents should be recorded in which column. And don’t even get me started on Section 3.

To a degree, this is almost expected, especially when you consider that the average I-9 error rate is approximately 76% (according to DHS estimates). But what you may not know is how bad it can get when those I-9s are under the microscope of an Immigration and Customs Enforcement (ICE) investigation and audit. All of the sudden, those errors are amplified and multiplied across your entire organization along with ominous-sounding terms such as “failure,” “violation,” and of course, “penalty.”

While we often talk about I-9 errors (and auditing in general) on this blog, there’s nothing quite like a real case to illustrate the slippery slope of non-compliance. So today, we’ll discuss a recently published I-9 penalty court case involving a small Mexican restaurant that had some big challenges with their I-9 compliance program. But more importantly, we’ll reveal some interesting facts about how penalties are assessed – and what employers can do to prepare.

U.S. v. Farias Enterprises LLC (D/B/A Barajas Mexican Grill)

At the onset, it’s important to note that all of the case-related information presented in this blog is based upon the published OCAHO decision, U.S. v. Farias Enterprises LLC D/B/A Barajas Mexican Grill, 13 OCAHO no. 1338 (Jan. 2020). The respondent restaurant may not entirely agree with the facts presented (or arguments made) in this decision, and so I wouldn’t necessarily draw any conclusions about the company or the alleged violations.

With that in mind, here’s what we know. On September 26, 2017, ICE served the restaurant with a Notice of Inspection (NOI), demanding the company produce their I-9 forms as required by law. After the restaurant presented I-9s for 24 employees, the ICE auditor determined that all of the I-9s contained substantive paperwork violations and accordingly served the restaurant with a Notice of Intent to Fine (NIF). The total assessed fine was $46,922.40 – a fairly significant amount when you consider the small number of I-9s involved.

When the case came before the court, the restaurant admitted that it had failed to properly complete the I-9 on behalf of its 24 employees (in legal terms, there was no “genuine issue of material fact” with regards to their liability). However, the company argued that the fine was too high to pay without causing them great financial hardship. While the company did not produce any financial records to substantiate this claim, the court acknowledged that they were clearly a small business – employing only 7 full and part-time employees.

I-9 Fines and Penalties

To a large degree, assessing I-9 fines and penalties is one big balancing act. On the one side, you have ICE arguing that penalties must be meaningful in order to promote future compliance. And on the other, you have employers stating that fines should not be unduly punitive. In order to weigh and measure these competing objectives, the court must examine five statutory factors and determine whether each one should enhance, mitigate, or have no effect at all on the ultimate penalty assessed against the employer. These include 1) the size of the employer’s business, 2) the employer’s good faith, 3) the seriousness of the violations, 4) whether or not the individual was an unauthorized alien, and 5) the employer’s history of previous violations.

In the case at hand, all of the parties agreed that the restaurant is a small business and a reduction in fines was generally warranted. The presence of unauthorized workers and history of previous violations were treated as neutral factors since neither presented themselves in the case.  The court spent some time analyzing whether the employer acted in bad faith – an argument put forth by ICE. This involved examining whether the restaurant’s failure to complete the I-9s, turn them over to ICE in a timely fashion, and present an accurate account of employees rose to the level of bad faith. But in the end, the court held that ICE had not met its burden for that particular factor.

Seriousness of the Violations

One of the more interesting aspects of this case revolved around ICE’s contention that the I-9 violations were “serious” in nature and thus deserving of a higher fine. And to be sure, this case presents a smorgasbord of errors – highlighting in full display, that yes, it can get pretty bad. Here are few examples (which may sound familiar for many employers out there):

  • All of the I-9s lacked the employer’s attestation in section 2
  • All of the I-9s were either missing page two entirely, had a blank page two, or the employee had completed the employer attestation
  • One I-9 lacked the employee’s alien registration number
  • One I-9 was missing page one
  • Eighteen employees completed section 1 several weeks after the employee’s date of hire
  • One employee signed her I-9 more than two years after her date of hire
  • Two other I-9s were completed months after the employees’ dates of hire

In years past, the court has stated that the seriousness of a violation must be evaluated on a continuum because not all violations are necessarily equal. In this case however, the court summarily agreed with ICE that aggravation of the fines was warranted – particularly because none of the I-9s included an employer attestation, and all of the forms had multiple serious violations.

Inability to Pay

Last but not least, the court briefly addressed a “non-statutory” factor that is frequently raised by small employers – the inability to pay an I-9 penalty because of financial hardship. And while the restaurant tried to make this argument (even going so far as to argue that they make an important contribution to the rural and poor community in which they are located), the court ultimately set it aside as the company apparently failed to provide any evidence supporting their claim. As an aside, this is one of the reasons you need to hire an attorney when arguing these types of cases…

Penalty Range

In reviewing the amount of fines assessed, the court discussed the appropriate “penalty range” to use, an issue which often arises when the I-9s under inspection were completed some time ago. For many years, I-9 paperwork violations had been assessed at a range of $110 to $1,100 per form. However, in August 2016, the fine amounts for I-9 violations essentially doubled in size – courtesy of a new rule that increases monetary penalties across the board in order to account for inflation and to ensure that the fines continue to maintain their deterrent effect.

As a result, the applicable penalty range depends on the date of the violations and the date of assessment. If the violation occurred on or before November 2, 2015, the minimum penalty amount is $110 and the maximum is $1,100. When a violation occurs after November 2, 2015, and the penalty is assessed between February 4, 2017 and January 29, 2018, the minimum penalty amount is $220 and the maximum amount is $2,191.

The court ruled that the date of assessment is when ICE serves the NIF on an employer. But when does the violation actually occur? As the court explained, case law has long held that an I-9 paperwork error or omission is not a “one-time occurrence” but rather a violation which continues until corrected or until the employer is no longer required to retain the I-9 form. Following this logic, the 24 incomplete I-9s were all deemed to be continuing in nature since the restaurant had failed to make any corrections at all. This means the court looked at the higher penalty range in determining the penalties.

Ultimate Fine Assessment

At the end of the day, the court decided to mitigate the fines assessed against the restaurant (but only by a little bit), imposing a fine of $1,453 per violation, with a total fine of $34,872. In justifying this amount the court noted that they used a “mid-range penalty” and considered that the small business mitigating factor was offset by the aggravating factor of the seriousness of the violations. But these days, even a mid-range penalty can feel pretty steep when multiplied by the number of I-9s that may have something wrong with them.

Many employers complain that I-9 fines are not fair and equitable – why should we have to pay big bucks for minor “paperwork” errors, especially when we’ve otherwise been following the rules. To a large degree this is because ICE fines depend largely on a factor that is not explicitly set out in the statute – the percentage of violations as compared to the number of employees. Meanwhile, other factors (such as the employer size, good faith, and seriousness) are relegated to relatively small weighting adjustments.

Takeaways

Employers have no control over how their I-9s will be evaluated (and assessed) in the event of an inspection. While ICE endeavors to standardize their auditing practices across the country, many attorneys have reported vast discrepancies based upon where the inspection occurs. But what employers can control are how I-9s are completed in the first place and what steps to take in order to rectify mistakes.

With that said, here are three takeaways from today’s blog:

(1) I-9 violations come in many shapes and sizes, but employers should focus especially on those errors which are generally considered serious.

(2) ICE penalties depend largely on the percentage of violations compared to the number of employees, which means a simple problem can lead to massive liability – particularly for large organizations and those with frequent turnover. And contrary to popular belief, some of the largest fines do not even involve allegations of unauthorized workers.

(3) Most I-9 violations are considered “continuing violations” until they are corrected, and so employers should act now to remediate past compliance mistakes before the penalty ranges increase yet again.

That’s it for now! If you’d like more information on I-9 auditing tools or strategies for revamping your I-9 program, please contact us here.


About John Fay

John Fay is an immigration attorney and technologist with a deep applied knowledge of I-9 compliance and E-Verify rules and procedures. During his career, John has advised human resource managers and executives on a wide variety of corporate immigration compliance issues, including the implementation of electronic I-9 systems. In his current role, John serves as President at the LawLogix division of Hyland Software, Inc., where he oversees all aspects of the division’s operations and provides strategic leadership and direction in the development and support of Form I-9, E-Verify, and immigration case management software solutions.

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