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I-9 E-Verify Immigration Compliance

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  1. Horse Breeder Finishes “In the Money” with OCAHO

    By Bruce Buchanan, Siskind Susser

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    Making this the third decision involving horse racing stables in the last year, an OCAHO Administrative Law Judge (ALJ) reduced a breeder-employer’s penalties by about 50% to $35,900 in United States v. McPeek Racing Stables, 11 OCAHO no. 1249 (2015).

    McPeek Racing Stables trains thoroughbred race horses in New York, Kentucky and Florida and is owned by Kenneth McPeek, a horse trainer. On September 23, 2011, Immigration and Customs Enforcement (ICE) served a Notice of Inspection (NOI) on McPeek Racing Stables, which eventually led to a Notice of Intent to Fine. Count I of the complaint alleged McPeek Racing Stables failed to prepare I-9 forms for 62 employees. Count II alleged the company failed to ensure that 37 employees properly completed Section 1 of their I-9 forms, or it failed to properly complete Sections 2 or 3 of the I-9 forms.

    ICE initially set the baseline penalty at $770 per violation because McPeek Racing Stables had a 40-49% error rate on their I-9 forms. ICE mitigated the penalties by 5% for each of these factors – small business, no unauthorized workers present, a lack of history of previous violations and a lack of bad faith. However, it aggravated the penalties by 5% due to the seriousness of the violations. Thus, ICE sought a penalty of $654.50 per violation for a total of $64,795.50 in penalties.

    McPeek Racing Stables conceded liability for the 99 Form I-9 violations but disagreed with the amount of the penalties. It asserted the proposed penalties would force the company to close, and noted that the proposed penalties were more than 25% of McPeek’s 2013 income. However, McPeek offered only one tax return to support this argument. McPeek Racing Stables also argued that it had implemented I-9 Compliance Policy and Procedures in good faith, and that the horse racing industry is “transient”, which leads to a high staff turnover.

    OCAHO stated that the failure to prepare an I-9 form is the most serious violation, and the failure to insure proper completion of Section 1 and to properly prepare Section 2 are also very serious violations. However, apart from the seriousness of the violations, all other factors were in favor of McPeek Racing Stables. OCAHO declined to find inability to pay the penalties as a viable defense because McPeek Racing Stables has substantial assets.

    OCAHO held that “given the transient nature of the industry, and in light of the general public policy of leniency toward small entities”, the penalties should be lowered to $400 each for the 62 violations in Count I and $300 each for the 37 violations in Count II. The total penalties assessed by OCAHO are $35,900.

    The Takeaway

    Perhaps if McPeek had implemented an I-9 Compliance Policy before ICE served it with an NOI, the company could have avoided much of its liability. This case is another great example for the need for employers to have an I-9 Compliance Policy and to periodically self-audit to help detect missing I-9 forms and locate errors on existing forms.

    A copy of the decision is available here. Cite as: U.S. v. McPeek Racing Stables, 11 OCAHO no. 1249 (2015).

    ABOUT THE AUTHOR: Bruce Buchanan is an attorney with the law firm of Siskind Susser P.C. - www.visalaw.com - a full service U.S. immigration law firm representing employers and individuals nationwide for over 20 years. You can also follow Bruce on social media via Facebook and on Twitter @BuchananVisaLaw .

    Updated 05-07-2015 at 10:28 AM by BBuchanan

  2. OCAHO Rejects Most of Dentist’s Defenses

    By Bruce Buchanan, Siskind Susser

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    In the last decision of 2014 from the Office of the Chief Administrative Hearing Officer (OCAHO), the administrative law judge held that Dr. Robert Schaus, a dentist, was liable for failing to timely prepare and/or present I-9 forms for 10 employees at his dental office. The ALJ reduced his penalty from $10,030 to $5,400.

    Dr. Schaus’s dental practice is located in Clarence, New York, where it operates as a sole proprietorship. After Immigration and Customs Enforcement (ICE) served Schaus with a Notice of Inspection (NOI), he provided a list identifying the hire dates for eight current employees, and the hire and termination dates for three former employees, along with six I-9 forms and other requested documentation. Schaus identified two employees as working on an “as needed” basis and one employee who had been terminated when she joined the Army Reserves several years before.

    Schaus argued that he did not need to retain the I-9 forms of current employees, who had worked greater than three years. OCAHO rejected this defense as it is fundamentally “wrong as a matter of law”. An employer must always retain the I-9 forms of current employees, including those employees who are working on an as-needed basis.

    OCAHO dismissed one allegation related to the employee who had been terminated on September 20, 2010, when she joined the Army Reserves. Although the employee’s name was listed in quarterly reports for two years, no wages were reported in any of those quarters. Since the employee only was employed for five months, the duty to retain her I-9 form ended three years from her date of hire or April 19, 2013, four days before the NOI was issued.

    Schaus also asserted that certain I-9s contained only technical violations -- the omission of a date in Section 2 of the I-9 forms. If so, Schaus would get the opportunity to cure within ten days’ notice from the government. However, the violations concerned the failure to promptly prepare the I-9 forms, which is a substantive violation. Thus, OCAHO rejected this defense. In doing so, it stated a violation is not cured by a belated (after the NOI was served) or partial completion of the I-9 forms.

    In assessing the penalties for the paperwork violations, ICE set a baseline penalty of $935 for each of the employees hired before September 29, 1999, and $850 for each of the employees hired after September 29, 1999. ICE mitigated the penalty by five percent for each violation, based on the small size of Schaus’ business, and the absence of unauthorized workers. However, ICE aggravated the penalty by five percent for each violation, based on the business’s alleged bad faith in backdating the I-9s it presented and the seriousness of the violations. OCAHO agreed with the mitigation and aggravation of the penalties, except it determined the evidence did not support a finding of bad faith.

    OCAHO reduced the penalty from $10,030 to $5,400 because it should be closer to the “midrange” of permissible penalties and more in line with those imposed on other small family businesses with similar violations. For the six violations involving failure to timely prepare I-9 forms, the penalty was set at $500 per violation. For the four violations involving the failure to present I-9s, the penalty was set at $600 per violation.

    A copy of the OCAHO decision is available here.
    Cite as U.S. v. Dr. Robert Schaus, D.D.S., 11 OCAHO no. 1239 (2014).

    Updated 01-16-2015 at 09:54 AM by BBuchanan

  3. Arizona Businessman and Managers Sentenced for Immigration Violations

    By Bruce Buchanan, Siskind Susser

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    The former owner of Danny’s Family Car Wash and more than a dozen of the company’s former managers and supervisors, were sentenced in federal court in Arizona last month. The defendants pleaded guilty to their roles in a multi-year corporate scheme involving identity theft to employ undocumented immigrants.

    The investigation into the company was led by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) and resulted in the arrest of more than 30 suspects including operators, managers, and employees connected with Danny’s Family Car Wash.

    Beginning in April 2011, the car wash was audited by ICE HSI agents and forced to terminate over 900 employees after the audit found employees had presented fraudulent, insufficient, or ineligible documents at the time of their initial hire. The company attempted to replace the 900 employees with individuals who were authorized to work, but according to ICE those legal replacements were “too expensive” and the car wash’s owner, Danny Hendon, instructed his managers to “bring back” the old employees.

    As a result, Danny’s Family Car Wash was found to have engaged in a multi-year, company-wide scheme to rehire undocumented immigrants using stolen identities in order to pass E-Verify checks. The scheme continued until August 2013, when ICE HSI special agents executed search warrants at the car wash’s corporate headquarters and at various worksite locations. Over 230 unauthorized aliens were found working at the car wash’s locations on the day of the search.

    Danny’s Family Carwash owner, Danny Hendon, was sentenced to 12 months in prison and one year of home confinement. The corporate entities that composed the car wash chain forfeited bank accounts totaling $156,295.77, and Hendon agreed to divest himself of any future ownership, managerial or profit-sharing interest in the organization. The other defendants received sentences ranging from probation to three months in prison.

    This case is reminiscent of the Grand America Hotel and Waste Disposal cases in which company managers rehired unauthorized employees following compliance audits.

    A copy of the press release from ICE HSI can be found here.

    Cite as United States v. Danny’s Management Services LLC, et al., No. 13-CR-01143-PHX-NVW (D. Ariz.)
  4. Speedy Gonzalez Subject to Fines for Immigration Violations

    By Bruce Buchanan, Siskind Susser

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    In U.S. v. Speedy Gonzalez Construction, Inc., the Office of the Chief Administrative Hearing Officer (OCAHO) faced several interesting issues in determining the potential liability of the company. Speedy Gonzalez is a husband-and-wife-owned construction company, located in Glendale, Arizona. After Speedy Gonzalez provided its I-9 forms to Immigration and Customs Enforcement (ICE), it was served with two Notices of Suspect Documents identifying 83 individuals who appeared to be unauthorized for employment.

    ICE’s complaint alleged the company failed to prepare and/or present I-9 forms for 101 employees and failed to ensure the proper completion of Section 1 and/or failed to complete Section 2 or 3 of the I-9 forms. There was not a material factual dispute on most of the issues in the Complaint.

    For the nine employees who the company failed to ensure proper completion of Section 1 of the I-9 form, the errors involved:

    - failure of the employee to sign the I-9 form
    ;
    - failure of the employee to check a status box; and
    - failure to record a permanent resident’s alien number.

    Speedy Gonzalez raised a number of defenses to assert there were material disputes of fact. One defense was that some former employees worked fewer than three days or never worked for the company. Another defense used by the company was that its use of the E-Verify system for some of those individuals constituted “good faith compliance” and “is equivalent to the examination certification in Section 2.”

    In determining whether the failure to complete the I-9 form is excusable based on an employee’s failure to continue employment for more than three days, “the expectations of the parties with respect to the duration of employment, as well as the specific facts and circumstances surrounding the hire, must be evaluated on a case by case basis.”

    The facts demonstrated some of these employees may have worked less than three days but their days of employment were spread over four to six days. Thus, OCAHO found these employees were on the payroll for at least three days after hire – meaning the company had an obligation to obtain completed I-9 forms.

    However, Speedy Gonzalez prevailed on its claim that four employees were never on its payroll because the Arizona Unemployment Tax and Wage Reports did not reflect any wages paid to these four individuals.

    OCAHO rejected the construction company’s defense that its use of E-Verify was equivalent to Section 2 certification. The E-Verify Memorandum of Understanding specifically states the “employer understands that participation in E-Verify does not exempt the employer from the responsibility to complete, retain and make available for inspection Forms I-9 that relate to its employees.” Thus, the company’s use of E-Verify does not excuse its failure to properly complete Section 2 of the I-9 forms and present the forms for inspection.

    Speedy Gonzalez was successful in arguing that the husband-and-wife owners did not have to complete I-9 forms. OCAHO has held owners with substantial control over the company do not have to complete an I-9 form. Unfortunately, ICE tends to ignore this case law and continues to allege violations for the failure of owners to prepare I-9 forms.

    Lastly, Speedy Gonzalez attempted another defense – arguing that it “recreated” some of the I-9 forms after the NOI when the original I-9 forms were missing. However, it was unsuccessful because OCAHO held the company failed to present “a scintilla of evidence that the original forms ever actually existed.”

    OCAHO did not assess any penalties at this time; rather, it ordered ICE to file its penalty request and Speedy Gonzalez to respond to the proposed penalty.

    A copy of the OCAHO decision is available here.
    Cite as U.S. v. Speedy Gonzalez Construction, Inc., 11 OCAHO no. 1228 (2014)

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Size:  2.9 KB ABOUT THE AUTHOR: Bruce Buchanan is an attorney with the law firm of Siskind Susser P.C. - www.visalaw.com - a full service U.S. immigration law firm representing employers and individuals nationwide for over 20 years. You can also follow this author on social media via Facebook and on Twitter @BuchananVisaLaw .

    Updated 11-12-2014 at 10:09 AM by BBuchanan

  5. 7-Eleven Forfeiture is Largest in ICE History

    By Bruce Buchanan, Siskind Susser

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    In the largest criminal immigration forfeiture in ICE history, five franchisees and operators of 7-Eleven stores located on Long Island, New York and in Virginia pleaded guilty to committing wire fraud and concealing and harboring undocumented workers employed at their stores. When sentencing hearings are held in federal court at a later date, the defendants also face up to 10 years in prison.

    The defendants owned, managed, and controlled a total of 14 franchised 7-Eleven stores. They allegedly hired dozens of undocumented immigrants to work at the stores, provided them with stolen identities of U.S. citizens, housed them at residential properties owned by the defendants and stole their wages. In all, the defendants' activities generated over $182 million in proceeds which they split among themselves.

    As part of their plea agreements with the government, the defendants will:

    - forfeit the franchise rights to 14 franchised stores - ten in New York and four in Virginia;
    - forfeit five houses in New York worth more than $1.3 million; and
    - pay the sum of $2,621,114.97 in restitution for the back wages they stole from their workers.

    ICE took the opportunity to warn employers that this case should serve as an example to employers who "seek to profit on the back of an illegal workforce". This record-setting forfeiture is a reminder of last year's record-setting penalty of $34 million against Infosys Limited which resulted from that company's settlement with ICE-HSI for visa fraud and I-9 violations. Be sure to follow my blog, and stay up to date on these headline-grabbing forfeitures and penalties.

    Click here for a copy of the ICE press release.
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