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By Bruce Buchanan, Sebelist Buchanan Law
In another decision involving a small restaurant in Hamburg, the Office of Chief Administrative Hearing Officer (OCAHO) reduced the restaurant’s penalty from $46,657 to $33,725 for four violations of failing to prepare and/or present I-9 forms and 67 violations for failing to properly complete I-9 forms. See U.S. v. 3679 Commerce Place, Inc. d/b/a Waterstone Grill, 12 OCAHO no.1296 (2017).
Since Waterstone Grill admitted liability, the only issue before OCAHO was the amount of the penalties. Immigration and Customs Enforcement (ICE) used $935 as the baseline penalty per violation based on a violation rate of over 50%. In an unusual twist, ICE found a 25% mitigation was warranted based upon the restaurant’s good faith in preparing the I-9 Forms. Normally, the five statutory factors, including good faith, are worth the 5% mitigation or aggravation. ICE also mitigated by 5% each due to the restaurant’s small size and the 67 employees in Court II were determined to be eligible for employment. ICE aggravated by 5% for the seriousness of the violations.
Waterstone Grill asserted it deserved mitigation for three of the four employees in Count I because they were authorized to work and several non-statutory factors, including general public policy of leniency toward small businesses, its cooperation with ICE during the investigation, including enrolling in E-Verify, and its inability to pay the $47,000 penalty.
OCAHO found 25% mitigation for good faith was unwarranted, especially where ICE offered no explanation for the size of the mitigation. However, some mitigation, which was not defined, was warranted. Concerning its inability to pay, OCAHO found it failed to show it could not pay the penalty, but found the proposed penalty should be viewed in light of the company’s financial situation. Although OCAHO found an employer’s post-inspection remedial measures may support mitigation, it declined to find such here.
OCAHO found ICE failed to prove the employees in Count I were unauthorized to work. OCAHO stated “it does not always follow that a factor found not to be aggravating (which is normally where the factor of unauthorized workers is found) must necessarily and automatically be mitigating.” However, in this case, OCAHO decided this was a mitigating factor.
OCAHO determined the proposal penalty should be reduced to $475 each for a total penalty of $33,725. As the facts demonstrate, if Waterstone would have performed an internal I-9 audit before ICE arrived with the NOI, most of the I-9 violations could have been corrected and not subject to a penalty.
By: Bruce Buchanan, Sebelist Buchanan Law
In new ALJ James McHenry’s first decision, U.S. v. International Packaging, Inc., 12 OCAHO no. 1275a (Nov. 2016), the Office of Chief Administrative Hearing Officer (OCAHO) reduced the penalties proposed by Immigration & Customs Enforcement (ICE) from $88,825 to $38,050 for the 94 Form I-9 violations committed by International Packaging, Inc. (IPI).
Notice of Inspection and NIF
IPI was served with a Notice of Inspection and subpoena on February 17, 2011. On February 23, 2011, IPI produced some but not all its I-9 forms, inadvertently failing to produce 21 Form I-9s. ICE states it did not even learn of the existence of more employees until it examined IPI’s payroll records. After ICE requested nine of the 21 Form I-9s – all current employees – IPI complied.
On August 16, 2011, ICE issued a Notice of Intent to Fine (NIF). ICE alleged in Count I that IPI failed to produce 21 Form I-9s, and in Count II alleged that on 73 occasions, the company failed to enter certain data, such as document title, identification number or expiration date, in Lists A, B or C of Section 2. IPI failed to present any documentation attached to the I-9 forms. Thus, ICE asserts these are substantive errors, not technical ones, citing the Virtue Memorandum. IPI asserts that the supporting documentation was requested in a cover letter, not a subpoena; thus, ICE had “insufficient process” to allege these violations where the documentation, if presented, would have established these errors were technical.
For the 94 Form I-9 violations, ICE asserted a baseline penalty of $935 with a 5% mitigating factor due to IPI’s small size and a 5% aggravating factor for the seriousness of the offenses; the remaining three statutory factors were treated by ICE as neutral.
Earlier OCAHO Decision
In an earlier decision, U.S. v. International Packaging, Inc., 12 OCAHO no. 1275 (Apr. 2016), OCAHO sided with ICE and found nothing in the Virtue Memorandum requires an employer to copy and provide documents; rather, it is simply an affirmative defense. OCAHO found there was no conflict between 8 C.F.R. § 1324a.(b)(3) and the Virtue Memorandum. In this case, the employer did not provide the supporting documentation with the I-9 forms to ICE; therefore, the errors in Lists A, B and C were substantive. Furthermore, OCAHO found ICE is not required to ask for any supporting documentation; it is up to the employer to provide such and raise as an affirmative defense.
IPI asserted it demonstrated good faith before, during and after ICE’s audit. It specifically referenced IPI’s consultation with an immigration attorney several years before the audit on how to ensure compliance with the law. OCAHO found this reliance may have inadvertently caused subsequent confusion in ICE’s investigation – by failure to supply the backup supporting documentation for the I-9 Forms, which contributed to some of the violations. However, such reliance did demonstrate good-faith, which warrants some mitigation of the penalty.
Furthermore, IPI asserted through affidavits and financial documents that it could not afford to pay the proposed penalties and remain in business. Despite unclear financial records regarding the company’s financial condition and conclusory testimony, ALJ McHenry took the company’s finances into account because calculation of penalties is to be sufficiently meaningful for future compliance, not to force an employer out of business. Finally, ALJ McHenry cited IPI’s small size and the public policy of leniency toward small businesses.
Based upon these factors, OCAHO determined the penalty for failure to prepare and/or present I-9 Forms should be set at $500 per violation, rather than $935. As for the 73 substantive paperwork violations, OCAHO assessed those violations at $350 each.
IPI’s willingness to litigate the matter was advantageous from a financial perspective as it reduced the penalties by $50,000 or over 50%. This was despite losing on the initial legal issue of not being required to produce supporting documentation because it was not subpoenaed.
By Bruce Buchanan, Sebelist Buchanan Law PLLC
In one of its first decisions of 2016, the Office of Chief Administrative Hearing Officer (OCAHO) upheld the penalties of $7106 assessed by Immigration and Customs Enforcement (ICE) in Wave Green d/b/a/Golden Farm Market, 11 OCAHO no. 1267 (2016).
Golden Farm Market is a small grocery store in Buffalo, New York, which employs eight workers. After Golden Farm Market received a Notice of Inspection, it apparently had I-9 forms prepared for the first time for seven of its eight employees and did not present an I-9 form for the eighth employee.
Preparation of I-9 Forms after ICE Inspection
Golden Farm Market never admitted preparation of the I-9 forms at that time but the following evidence supported such a finding: all of the seven I-9 forms were prepared in the same handwriting; all of the I-9 forms used the March 8, 2013 edition even though two of the employees had hire dates of 2008 and 2012; and another employee’s I-9 form provided a hire date of January 1, 2012 while a List B document driver’s license was not issued until March 23, 2013. In order that backdating was not more obvious, none of the I-9 forms were signed or dated by Golden Farm Market or the employees.
Calculation of Penalty
Based upon the I-9 errors and omissions, ICE determined there was a 100% error rate; thus, the baseline penalty was $935. ICE mitigated the penalty by a total of 10% for Golden Farm Market being a small business and the lack of employment of undocumented workers. However, ICE added 5% based upon the aggravating factor of seriousness of the violations. ICE did not mitigate or aggregate the penalties for no prior history of I-9 violations and lack of good faith/bad faith. Overall, ICE assessed a penalty of $888.25 per violation.
Golden Farm Market did not offer any evidence to refute the allegations; rather, it just denied all allegations and refused to even stipulate to facts favorable to it. Golden Farm Market raised the issue of inability to pay but refused to comply with a subpoena for their financial records.
The Administrative Law Judge (ALJ) for OCAHO found in favor of ICE on all eight allegations. Furthermore, the ALJ agreed with ICE’s determinations on the mitigating and aggravating factors related to the penalties. Finally, the ALJ found Golden Farm Market had not established an inability to pay the penalties because it refused to provide its financial records even though subpoenaed by ICE. Thus, the ALJ adopted ICE’s proposed penalty of $7,106.
The employer’s conduct in this case was egregious because it failed to prepare any I-9 forms for newly hired employees, it provided I-9 forms to ICE which were newly prepared although it stated they were prepared in a timely manner, and the I-9 forms were unsigned and undated.
Golden Farm Market’s strategy of “stonewalling” ICE was highly ineffective and in most cases is counter-productive for your client. If Golden Farm Market had conducted an informal I-9 audit before the Notice of Inspection and corrected its errors by completing the I-9s without attempting to backdate them, their liability would have been substantially less.