Dealing with Skeletons in the Closet, Part II: Errors, omissions and inconsistencies on the I-9 Form

Yesterday, we began discussing the most recent I-9 penalty case (United States of America v. Ketchikan Drywall Services, Inc.), which provides an in-depth analysis of how the Office of the Chief Administrative Hearing Officer (OCAHO) treats certain Form I-9 mistakes and omissions.

>If you missed yesterday’s post or want to re-live the magic, feel free to check it out here. Today, we’ll wrap up our review of the Ketchikan case and provide some takeaways for organizations that are ready to clean their I-9 house.

Good Faith Effort to Comply

When we’re talking about I-9 skeletons (in the closet or otherwise), the first question which usually springs to mind is whether or not the form can be corrected. To answer that question, we look at the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA) which provided employers with the possibility of a “good faith” defense against technical or procedural violations of I-9 requirements (but not against those errors which are substantive in nature). Figuring out what is a substantive vs. a technical error is sadly not an exact science, and we inevitably wind up in the I-9 weeds when we endeavor to do so (you’ve been warned!). As I mentioned yesterday, a lot of this analysis is not only complicated, but also fact-specific, so it’s always a good idea to discuss your particular I-9 issues with experienced counsel. With that caveat in mind, let’s begin looking again at Ketchikan.

The government’s position throughout was that KDS substantially failed to properly verify that its employees were authorized to work in the U.S., whereas KDS argues that it made a “good faith” attempt to comply and that any failures were only technical or procedural in nature. In weighing these arguments, Judge Thomas relied upon the so-called “Virtue Memorandum” which defines what types of I-9 problems should be considered technical/procedural (can be corrected if good faith attempt has been made) versus those which are substantive (not correctible).

In particular, the Judge notes that a failure to complete an I-9 form at all for an employee is always a substantive violation as it defeats the purpose of the law. Other violations in section 1 of the form that are substantive rather than technical or procedural in nature include: the lack of an employee signature, lack of a check mark in any box, employee attestation not completed within three days of hire, and employee attestation to status as a lawful resident or authorized alien without providing an alien number and/or expiration date unless the employer included the A number in section 2 or on a legible copy of the document produced during the inspection. Violations in section 2 which are substantive include: the lack of an employer signature in the attestation section, listing of improper documents to establish identity or employment eligibility, and the lack of a complete document title, identification number, and/or expiration date where no legible copy of the document is retained with the I-9 and presented at the inspection.

Specific Failures in Sections 1 and 2 of KDS I-9 Forms

No Status Box Checked and no Alien Number Entered

According to the record, 30 employees did not check any box reflecting status as a U.S. citizen, lawful permanent resident or alien authorized for work, and did not write an Alien number on the line provided for this information. In some instances, KDS produced a copy of the resident alien or LPR card to the government, while in others it did not. Where KDS did produce a copy of the resident alien or LPR card, the company argued that there was no substantive violation because the employee was clearly claiming to be a lawful permanent resident by virtue of having presented the card and signed section 1. Moreover, where the company did not produce any document copies at all, KDS still argued that by signing the attestation, the employee did all that was necessary.

Once again, Judge Thomas quickly dismissed KDS’ novel position, stating that if Congress had intended only that an employee attest that he or she was authorized to work, there would plainly be no need to require the employee to check one of the boxes as the Form I-9 so clearly directs the employee to do. She went on to say that the employee’s signature on such a form would actually attest to nothing at all, and the statutory requirement would thus not be satisfied.

Lesson learned: The employee’s failure to attest to any immigration status in section 1 is a substantive violation which cannot be cured by presenting a copy of a document which proves that status. A new I-9 form should most likely be completed.

No Box Checked but an Alien number Entered

And then, we have 23 employees who did not check any box attesting to status as a U.S. citizen, lawful permanent resident or alien authorized for work, but did sign the form and write an Alien number on the line provided next to the words “A Lawful Permanent Resident.” In some cases, KDS copied the employee’s LPR card, whereas in other cases it copied the employee’s driver’s license and social security card. KDS argued that a person who writes an Alien number on the I-9 form next to the box indicating lawful permanent residency is clearly attesting to status as a permanent resident of the United States, and thus these omissions should not be substantive violations.

Judge Thomas agreed with KDS on this point, citing a previous OCAHO case where the employer did not check the box in section 2 for a social security card (on the 1987 version of the form where the documents were listed on page 1), but did write in the actual social security number in the space provided. In that case, the judge held that the employer had substantially complied with the requirement because it was clear that the document examined was a social security card. Accordingly, Judge Thomas found that when the employee writes an Alien number on the line next to the words, “A Lawful Permanent Resident,” and then signs the section 1 attestation, the employee is attesting to being a Lawful Permanent Resident and has substantially complied with the requirements of the statute.

Lesson Learned: Although employers may be comforted by Judge Thomas’ leniency for situations when no box is checked in section 1 but an A-number is provided, it’s important to remember that ICE will most likely not take this view when issuing a NIF. Therefore, it’s still best to discuss this type of error with counsel to determine whether it makes sense to have the employee correct the omission (if possible).

Box Checked but no Alien Number Entered

Two employees checked the box reflecting status as a lawful permanent resident, but did not enter an alien number on the line provided. For one of the employees, no copies of the supporting documents were provided to the government, whereas for the other, KDS produced copies of the employee’s driver’s license and social security card. KDS argued that by producing copies of the documents that show identity and employment authorization and by ensuring that the employee signed section 1, the employer has met its obligations under the statute.

Judge Thomas rejected both of these arguments, noting that neither a driver’s license nor a social security card includes the individual’s Alien number or immigration status. Moreover, when an LPR employee fails to write in an Alien number on the Form I-9, the government is unable to verify the employee’s status, defeating the purpose of the Form I-9. Therefore, the Judge considered both of these as substantive violations.

Lesson Learned: Whenever your employee checks the Lawful permanent resident box, you must ensure that an A-number is also provided.

Multiple Boxes Checked

Three employees checked more than one box in section 1 (specifically, two employees checked both lawful permanent resident and citizen of the United States, whereas the third employee checked both lawful permanent resident and alien authorized to work). In the first case, Judge Thomas noted that while a lawful permanent resident may become a citizen, no one can be both simultaneously. Therefore, she found substantive violations for both of these employees. Interestingly, however, she did not find a substantive violation for the employee who checked both LPR and alien authorized to work since “the statuses checked are not mutually exclusive.” While I’m not sure I agree with this particular reasoning, I certainly can see how an employee might be confused by the terminology.

Lesson Learned: Employers should carefully review their I-9s to ensure that the employee only checks one particular status. Employers should also strongly consider using a well-designed electronic I-9 system, which will enforce this rule.

Failure to Enter an Expiration Date for Alien Authorized to Work

One employee checked the box for “An alien authorized to work until . . . ,” but did not fill in the expiration date for the employment authorization. No document copies were produced to the government. ICE argued that without the work authorization date the attestation itself is incomplete, and that this is thus a substantive violation. KDS countered that by signing section 1 and showing documents, the employee has met the statutory responsibilities for section 1, and that the Virtue Memorandum is silent as to whether the failure to include the work authorization expiration date is a substantive violation.

Once again, Judge Thomas sided with ICE, noting that when the employer fails to ensure that the employee has written the expiration date of his or her employment authorization it is impossible for the government to determine at the time of inspection whether the employee is still authorized to work, thus defeating altogether the purpose of the I-9.

Lesson Learned: When an employee attests to being an alien authorized to work, employers should ensure (in most cases) that the employee also fills-in the expiration date. If the employee is a refugee or asylee (and thus authorized to work because of status), he or she should enter “N/A” or equivalent on the line calling for an expiration date. See page 10 of the June 2011 M-274 handbook for more information.

Photocopy of Incomplete I-9 used for Rehire

This one is rather unique, but is worth mentioning. Apparently, an employee was rehired within two months of the original hire date, and KDS chose to make a copy of the original I-9 (before section 2 had been signed) in order to prepare the new I-9. Sounds convenient, but the problem is that the employee signature on the subsequent new I-9 was not an original signature. According to the Judge, had KDS provided this information in section 3 of the original I-9 form, there would be no violation. But when KDS chose to complete a new I-9 form, rather than completing section 3 of the original I-9 form, the employee was required to sign section 1 of the new I-9 form and did not do so.

Lesson Learned: As a matter of policy, employers should decide whether they are going to complete new I-9 forms or section 3s for employees rehired within 3 years of the previous start date. Employers should never use a photocopied signature though when preparing a new Form I-9. 

Section 2 Violations

The Ketchikan case also provided several examples of section 2 failures which may (or may not) be substantive (uncorrectable) violations. Below is a quick summary table of the Judge’s decision and reasoning.

Penalties

Last but not least, we take a brief look at the issue of penalties assessed. As we’ve discussed in the past, the Immigration statute and regulations set the minimum and maximum range for civil money penalties for I-9 violations. Employers who fail to properly complete, retain, and/or present Forms I-9 for inspection may be subject to a civil penalty for violations occurring on or after September 29, 1999 from $110 to $1,100 per affected employee. The recommended base fine amount is determined by dividing the number of substantive violations by the total number of Forms I-9, which then results in a “violation percentage”.

Substantive / Uncorrected Technical Violation Fine Schedule
Substantive Verification Violations 1st Offense $110 – $1100 2nd Offense $110 – $1100 3rd Offense + $110 – $1100
0% – 9% $110 $550 $1,100
10% – 19% $275 $650 $1,100
20% – 29% $440 $750 $1,100
30% – 39% $605 $850 $1,100
40% – 49% $770 $950 $1,100
50% or more $935 $1,100 $1,100

 

Source: http://www.ice.gov/news/library/factsheets/i9-inspection.htm

The ICE Special Agent or Forensic Auditor will then apply an enhancement matrix (which can increase or decrease the fines) based upon 5 criteria: 1) the size of the business of the employer, 2) the good faith of the employer, 3) the seriousness of the violation(s), 4) whether or not the individuals involved were unauthorized aliens, and 5) any history of previous violations by the employer.

Enhancement Matrix
Factor Aggravating Mitigating Neutral
Business size + 5% – 5% +/- 0%
Good faith + 5% – 5% +/- 0%
Seriousness + 5% – 5% +/- 0%
Unauthorized Aliens + 5% – 5% +/- 0%
History + 5% – 5% +/- 0%
Cumulative Adjustment + 25% – 25% +/- 0%

 

Source: http://www.ice.gov/news/library/factsheets/i9-inspection.htm

In the case at hand, the auditor took the number of I-9s with substantive violations (271), then divided it by the total number of I-9s KDS produced to the government (535). Because the resulting percentage, 50.65%, exceeded 50%, the base fine was set at $935 per violation. The auditor then considered the statutory factors and concluded that all the base penalties should be aggravated by 10%, 5% each for the size of the business and 5% each for the seriousness of the violations. For 169 of the violations, the auditor said she aggravated the penalties by another 5% based on whether the individual involved was an unauthorized alien.

Since Judge Thomas found the company liable for only 225 of the 271 violations the government originally alleged, the resulting percentage was reduced to 42.06 % of the total, and the base fine was also reduced to $770 per violation, or a total of $173,250 for 225 violations. Judge Thomas then looked at the 5 statutory factors and determined that they were all neutral – no aggravating or mitigating effect. Here is a quick summary:

Size of the business: while KDS enjoyed consistent levels of revenue and income during the time it was examined, it could not, based on prior case law, be considered anything more than a small to medium size employer.

Good faith: It appeared that KDS chose to delegate its I-9 function to employees who were not qualified to perform the task – so no good faith. On the other hand, a dismal rate of compliance alone cannotbe used to increase a penalty based on bad faith.

Seriousness of the Violations: although failure to prepare an I-9 is a serious paperwork violation, the seriousness of all the violations must be evaluated on a continuum, and not all of the violations were equally serious.

Unauthorized aliens: absent some identification of specific individuals involved, a mere suspicion of unauthorized workers is not enough reason to aggravate fines.

Any history of previous violations: the government asserted this should be neutral, whereas KDS said their absence of unauthorized workers should be a mitigating factor. Judge Thomas held that case law does not require reduction of a penalty in every case just because an employer has not been shown to have violated the law in the past.

Conclusion

I always like to have a moral to my I-9 tales, so here are 4 broad takeaways from the Ketchikan case:

  1. ICE is fining ALL employers – even those without unauthorized workers
  2. Uncorrected technical paperwork violations can quickly turn into an uncorrectable mess if not handled properly
  3. Many I-9 mistakes can be prevented through attorney-led training and smart electronic tools; and
  4. Make no mistake about it – correcting I-9s and assessing potential penalties and fines is a complicated process. While I wish I could point everyone to a simple (one page maybe?) guide to correcting and dealing with I-9s, the fact remains that I-9 remediation involves careful analysis of government memoranda and guides, a holistic review of an employer’s compliance program, and most importantly, experience dealing with ICE investigations.

At the very least, employers should view this case as a definite wake-up call to address their I-9 skeletons sooner, rather than later!