Form I-9 Penalty Trends from 2014 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 during the past year and their potential impact on employers.]
In 2014, there were significantly fewer decisions issued by Office of Chief Administrative Hearing Officer (OCAHO) related to potential I-9 violations than in 2013. There were only 17 decisions in 2014 while there were 30 decisions in 2013. (A few employers had two or more decisions rendered on the same matter, which is counted as a single decision for purposes of this article.) However, there were more decisions in 2014 than 2012, when only 11 decisions issued.
SUMMARY OF 2014 OCAHO DECISIONS
The following decisions were issued in 2014 with penalties sought by ICE, and penalties assessed by OCAHO:
REDUCTION IN PENALTIES
ICE sought $1,554,883 in penalties in 2014 while OCAHO assessed $1,006,925 for an average reduction of 35.25%. This is a much lower reduction than in 2012 and 2013 when the reductions averaged 41.5% and 46.5%, respectively. This drop in the reduction of the penalties appears to be partially explainable by the fact that ICE’s second largest proposed penalty – $329,895 – was not reduced by OCAHO. Discounting the Durable case, the average reduction was 44.74%. In only two cases, Durable and Minerva Indian Cuisine, OCAHO declined to reduce ICE’s proposed penalties.
The main reason cited by OCAHO for reducing penalties was that the penalties were “excessive” and “unduly harsh”. This finding was made in at least 10 cases. Of those cases, OCAHO cited the Small Business Regulatory Enforcement Fairness Act as a significant factor in finding the penalties excessive in seven cases. Other factors in lowering the penalties were inability to pay, the “principle of proportionality”, and that company had ceased to exist, thus, there was no deterrent effect.
PROFILE OF EMPLOYERS TARGETED BY ICE
Employers want to know which industries are targeted for inspection by ICE. Although the OCAHO decisions only include cases actually litigated, those cases involve the following industries:
As for the size of the employers, 11 of the 17 employers were classified as small employers – usually defined as under 100 employees.
COMMON TYPES OF I-9 FORM ERRORS
In 13 out of 17 cases, the employer failed to prepare, or timely prepare, I-9 forms for the employees. This is usually the most common error committed by employers in cases litigated before OCAHO. In 12 out of the 17 decisions, the employer failed to properly ensure completion of Section 1 and/or failed to complete Section 2 of the I-9 form. These errors included failure to ensure the status was checked in Section 1; failure to ensure Section 1 was signed; failure to ensure the alien number was provided; failure of the employer to sign Section 2; failure to provide a document number and/or issuing authority in Section 2; failure to list documents from List B and/or C; and failure to complete any information in Section 2.
SIGNIFICANT OR INTERESTING LEGAL ISSUES
There were some significant or, at least interesting, legal issues in the 17 cases (outlined below by topic)
Knowingly Employing/Hiring Unauthorized Workers
In Jalisco’s Bar and Grill, OCAHO found the employer to have “knowingly” employed an unauthorized worker because that employee told his employer that he was unauthorized. However, in two other cases, Minerva Indian Cuisine, and Durable, OCAHO found the circumstances suggested the employers knowingly employed undocumented workers, but the facts did not conclusively prove such.
In Durable, OCAHO was faced with the issue of whether an employer is a repeat offender and thus subject to substantially higher penalties. The evidence clearly established that in 1989 Durable entered into a Settlement Agreement with INS whereby it agreed to pay $30,000 in fines for “knowingly” employing 17 undocumented workers. Durable discounted this settlement because it occurred almost 25 years ago under different ownership; thus, it should not be found to have a history of prior I-9 violations. ICE asserted Durable was the same corporate entity regardless of any change in owners. Furthermore, ICE argued that a fine was supposed to have a deterrent effect on employers, and that apparently, the $30,000 fine did not have a sufficient deterrent effect. OCAHO sided with ICE and found Durable was the same corporate entity; thus, it was a repeat offender.
Statute of Limitations
In Leeds Construction, ICE alleged the construction company employed 21 unauthorized workers. However, the evidence established their employment ceased beyond the five-year statute of limitations, set forth in § 28 U.S.C. 2462. Thus, OCAHO found no violations.
Signing Sections 2/3
A second interesting issue raised in Durable was whether the company’s execution of Section 3 excused its failure to execute Section 2. Durable argued it “complied with the spirit of Form I-9”; thus the 116 situations where this occurred did not support a violation. OCAHO disagreed, pointing out that signing Section 3 in lieu of Section 2 was insufficient, especially given that Section 3 “does not require either the date of hire or any issuing authority for any documents examined.” OCAHO found omitting the date of hire from the I-9 form “renders it impossible to determine whether the employee truly completed the attestation as to their citizenship or immigration status upon the date of hire” and whether it was timely completed. Similarly, OCAHO stated in M&D Masonry that the pre-signing of I-9 forms by the employer in Section 2 is wrong since the employer is not verifying the accuracy of the information in Section 2.
Employees working 3 days or less
Notably, OCAHO confirmed in Black and Blue Restaurant that employers will not normally be held responsible for having I-9 forms for employees working three days or less. However, in Speedy Gonzalez the company was unsuccessful in stretching a determination of when no I-9 form was required for employees who worked three days or less. In that situation, employees worked sporadically; thus, the company asserted that if an employee had worked three days or less but over four to six business days, it was excusable to not have a completed I-9 form. OCAHO disagreed because the employee was on the payroll for more than three business days.
Also, in Jalisco’s Bar and Grill, OCAHO confirmed the fact that when an employer’s I-9 forms are destroyed or damaged, the employer should promptly draft a memorandum on the applicable circumstances and should not backdate the I-9 forms that are completed to substitute for the damaged/destroyed I-9 forms. Similarly, Durable failed in its assertion that the 116 instances of signing Section 3 were valid reverifications because while the original I-9 forms could not be located, the HR employees believed I-9 forms were originally completed for these employees. Thus, the HR employees were merely reverifying the employees’ work authorization. OCAHO rejected this defense by stating the company’s belief had “no reasonable basis in fact or law and employers are not entitled to simply make up their own rules”.
No Violation for Lack of I-9s in Particular Circumstance
In Speedy Gonzalez, OCAHO reiterated a position that it has taken in the past – owners of a company with substantial control of the company do not need to complete I-9 forms. Moreover, it is well-established that if employers are listed on company records provided to ICE but there is no evidence that they were paid during the period covered by the Notice of Inspection, there is no requirement to produce I-9 forms for the individuals. Two companies, Speedy Gonzales and Dr. Schaus, used this defense successfully.
As previously stressed, litigation before OCAHO can result in substantial reductions in penalties. However, many of these reductions can be obtained in a well-articulated argument to ICE attorneys before the issuance of a complaint.
One final point – it is important for all employers, large and small, to conduct annual self-audits under the direction of an immigration compliance attorney and have a written I-9 Compliance Policy. If employers take both of these actions, their chances of liability for I-9 form violations will be significantly reduced.