The Year in Review: Form I-9 Penalty Decisions in 2016

[Editor’s Note: Today’s blog is courtesy of Bruce E. Buchanan, an attorney at the Nashville and Atlanta offices of Sebelist Buchanan Law PLLC. As he has done in years past, Bruce discusses some important I-9 penalty decisions published during the past year.]

No employer wants to receive the dreaded “Notice of Intent to Fine” (NIF) in connection with an audit of their I-9 forms. Dealing with an I-9 inspection alone is a costly affair, but the NIF can be downright crippling – particularly for small businesses. Fortunately, employers can appeal an adverse I-9 decision by requesting a hearing with the Office of Chief Administrative Hearing Officer (OCAHO), an administrative court that reviews employer sanctions cases under §274A of the Immigration and Nationality Act.

Although OCAHO decisions adjudicating I-9 penalties have leveled off in the past few years, it is anticipated there will be many more decisions in future years as the number of Form I-9 inspections is on the rise in the Trump administration and, as shown below, employers continue to obtain significant decreases of I-9 penalties at OCAHO.

In calendar year 2016, OCAHO issued 16 substantive decisions against employers in I-9 penalty cases. For a few employers, there were two or more decisions concerning substantive issues before the court reached a decision on the amount of the I-9 penalties. The number of cases is a slight increase from 2015, when there were 13 decisions but still much lower than the 30 decisions issued in 2013.

Below is a chart showing the penalty amount sought by Immigration and Customs Enforcement and the amount assessed by OCAHO.

Employer’s Name Penalty Sought by ICE OCAHO’s Decision
SKZ Harvesting $74,587 $29,600
Golden Farm Market $7,106 $7,106
Hair U Wear $5,329 $4,776
Safe-Air of Illinois $34,969 $18,450
Frimmel Management $391,391 $347,500
Golden Employment Group $305,525 $209,600
International Packaging $88,825 $38,050
Jack’s Produce Co. $15,988 $10,550
Muniz Concrete & Contracting $19,989 $16,275
Cawoods Produce $34,465 $14,575
Roscoe’s House of Chicken & Waffles $38,708 $18,350
Para Tacos la Chilanga $34,408 $33,379
Solutions Group Int’l $86,394 $56,150
St. Croix Personnel Services $16,690 $5,450
Ideal Transportation Co. $11,220 $2,700
Pegasus Family Restaurants $96,398 $58,850
Totals: $1,261,992 $871,361

Analysis of the Decisions

One of the most interesting aspects of reviewing a year’s worth of cases is determining the percent that OCAHO reduced ICE’s proposed penalties. Such an analysis for 2016 shows there was a 31% lowering of ICE’s proposed penalties. Of the 16 decisions, OCAHO substantially lowered the penalties in all but three decisions – Golden Farm Market, Hair U Wear, and Para Tacos La Chilanga. The reduction in penalties is comparable to 2015 when the reduction was 32.8%.

Why did OCAHO decide to reduce (sometimes significantly) the penalties proposed by ICE? Mainly, OCAHO found as a matter of discretion that the penalties were too high because the maximum penalties should only be assessed for the most egregious violations. Since OCAHO did not find most errors were egregious violations, it lowered the penalties accordingly. Furthermore, OCAHO usually cited the general public policy of leniency toward small businesses as a significant factor in the penalty assessment. A third defense in some cases was the company’s inability to pay the assessed fine, which was offered six times as an affirmative defense. OCAHO lowered the proposed penalties three times while declining to do so in three cases – Golden Farm Market, Pegasus Family Restaurant, and Jack’s Produce Co., based upon the employer’s lack of sufficient documentation to support that defense.

Of the 16 employers involved in the decisions, there was not a dominant industry. Manufacturing, hospitality (restaurants), and grocery/retail stores each were represented by three employers. Construction, which is normally thought of as subject to many I-9 audits by ICE, was only represented by one employer.

Thirteen of the 16 employers that were the subject of OCAHO decisions, were small employers – usually defined as under 100 employees. Interestingly, ICE did not always mitigate the fines by 5% because of an employer’s size but OCAHO accepted the employer’s defense if payroll records justified it.

Significant or Interesting Issues in OCAHO Decisions

There were a number of significant and/or interesting issues decided by OCAHO in 2016. One of the more interesting issues was raised in Frimmel Management, where the employer argued what is normally a criminal defense – “fruit of the poisonous tree.” In this case, the Maricopa County Sheriff’s Office had started a criminal investigation concerning undocumented workers at Frimmel Management. Although the criminal case was dismissed by a state court, ICE became aware of Frimmel’s identity and served Frimmel with a Notice of Inspection (NOI). OCAHO declined to dismiss the complaint based on the “fruit of the poisonous tree” defense because ICE merely obtained Frimmel’s identity but did not receive any documents from the Sheriff’s office.

A novel issue was raised in Ideal Transportation, where ICE charged the trucking company with many I-9 violations for its failure to timely prepare I-9 forms, which put the company at “high risk of employing undocumented workers.” However, Ideal showed its truck drivers were required to be issued “Transportation Worker Identification Credentials” (TWIC) cards because they worked at a U.S. port. OCAHO found TWIC cards demonstrated its truck drivers were authorized to work. Thus, OCAHO reduced the penalties by about 75%.

The topic of supporting documents to the I-9 form was litigated in International Packaging. Here, International Packaging retained copies of List A, B and C documents but it did not provide them to ICE in response to their NOI/subpoena. The employer argued they were only requested in ICE’s cover letter, not in the NOI or subpoena. OCAHO found presenting supporting documents is an affirmative defense; thus, it is incumbent on the employer on whether to produce, if not covered by the subpoena. Since International Packaging failed to present them, ICE could not consider them in determining whether the violation was substantive or technical.

In Pegasus Family Restaurant, OCAHO’s finding of a mitigating factor was based on a novel argument. ICE determined the work-authorized employees’ I-9 errors should receive 5% mitigation and there should be a 5% aggravating factor for the errors on the I-9 forms of undocumented workers. However, OCAHO found ICE failed to establish the workers’ undocumented status; thus, this should be a mitigating factor, not an aggravating factor, as ICE assessed for the other penalties.

The failure of ICE to prove undocumented status of some employees was also an issue in Muniz Concrete and Contracting and SKZ Harvesting. In Muniz Concrete, OCAHO held the fact that five employees had been listed on the Notice of Suspect Documents did not establish unauthorized status. Thus, OCAHO declined to find this as an aggravating factor.

A few other conclusions that OCAHO reiterated in its 2016 decisions were: a prior warning notice does not establish a history of violations (SKZ Harvesting); a poor rate of proper completion of I-9 forms does not equal bad faith (i.e. Solutions Group); and the five-year statute of limitations for timeliness errors is an effective defense in dismissing allegations (St. Croix Personnel Services).

Takeaways

OCAHO decisions serve as an important reminder of how easy it is to commit substantive violations when completing I-9 forms. The best strategy to address the potential compliance risk is to take the I-9 obligation seriously and prepare yourselves for the increasingly high risk of an ICE inspection. In doing so, I strongly suggest that you receive periodic training on immigration compliance issues, especially since a new I-9 form was introduced in 2016 and HR personnel change over time – causing mistakes to continue to be made by the new HR employee. You should also consider reviewing all of your I-9s on file to detect (and correct) past compliance mistakes.

About the Author

Bruce E. Buchanan is an Attorney at the Nashville and Atlanta offices of Sebelist Buchanan Law PLLC. 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 United Cerebral Palsy of Middle Tennessee and the Mid-South Lupus Foundation. He is an associate member of the Mid-Tennessee Chapter of the Associated Builders & Contractors (ABC).