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I-9 E-Verify Immigration Compliance

OCAHO Substantially Reduces Employer’s Penalties

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By: Bruce Buchanan, Sebelist Buchanan Law

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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’s Defenses

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.

OCAHO’s Decision

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.

Takeaway

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.

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