Immigration compliance and Form I-9 record-keeping requires diligence by employers because lapses present significant risks of fines and may trigger potential inspections.
The Governing Law
The Immigration Reform and Control Act of 1986 requires employers in the United States to verify the identity and work authorization of every employee hired after November 6, 1986. The verification must be recorded on Form I-9 and retained throughout the period of employment and for one year after the date of termination or for three years after the date of hire, whichever is later. In certain situations, re-verification of employment authorization must be conducted, as well. Although the I-9 form is only three pages long, it is supported by a 64-page handbook published by the Department of Homeland Security to help employers stay in compliance with the complex set of I-9 rules. The penalties for non-compliance, even if unintended, can be quite extensive with potential civil fines for technical errors, substantive errors, and knowing of hiring/continuing to employ violations. There are also potential criminal penalties “pattern or practice” I-9 violations.
Inspection Process and Common Fines and Levies for I-9 Errors
An I-9 inspection begins when Immigration & Customs Enforcement (ICE) serves notice on the employer, either in person or by mail. The employer then has three business days to submit an extensive list of documentation, including:
- I-9 forms for active employees as well as departed employees still within the document retention period
- a payroll run
- any written I-9 polices, documentation related to E-Verify compliance
- various business documents, such as articles of incorporation, business license, and corporate organizational charts
Upon receipt of the required documentation, ICE will proceed to review each I-9 form for compliance.
The reviewing officer will identify any technical/paperwork violations, substantive violations and knowing hire/continuing to employ violations. The employer will be notified of any technical/paperwork errors and given ten business days to correct them. If the employer is able to correct them and submits the corrections in time, those violations will avoid a fine. However, any technical/paperwork violations that remain uncorrected will convert into substantive violations.
ICE totals up the number of substantive violations and divides it by the number of error-free I-9 forms that the employer should have presented. This number becomes the error rate for substantive violations. For example, if an employer should have 100 perfect I-9 forms but ICE identifies errors on 70 of them, the substantive error rate will be 70%. The same calculation is made to determine the error rate for knowing hire/continuing to employ violations. Once the error rate is calculated, ICE refers to a graduated scale for the fine amount. For first-time offenders, the scale begins at $230 for error rates from 0-9% and tops out at $1948 for error rates at 50% and above. In the example above, if the error rate is 70%, it would translate to a fine amount of $1948 per violation. The total base violation for substantive errors would be $136,360 ($1948 x 70).
Additional Fine Amounts May Apply
Once the base violation for substantive and knowing hire/continuing to employ is determined, ICE can then raise or lower the fine amount by 25% based on five factors: 1) Business size, 2) good faith attempt to comply, 3) seriousness, 4)whether any unauthorized aliens were found, and 5) history of compliance. Each of these five factors can cause the base fine level to be adjusted up or down by 5%. In the example above, the final fine amount could range from $102,270 to $170,450.
ICE will then issue a Notice of Intent to Fine for the final fine amount. The employer can either agree to the fine amount and make arrangements to pay it, or challenge it in whole or in part by asking for a hearing before an administrative law judge.
I-9 Violations Often Trigger Scrutiny from Other Agencies
In addition to the fine structure described above, employers can also face fines and other penalties from the Department of Justice for I-9 related discrimination. These violations follow a separate and distinct fine structure operating under a different provision of the Immigration Reform and Control Act. Similarly, E-Verify violations can lead to separate penalties, such as debarment from the E-Verify program, state level penalties, and even the loss of a federal contract. Typically, once an employer is found to be out of compliance with one area of the I-9 regulations, a referral will be made to other federal and state agencies which can trigger additional agency audits and investigations, such as Wage & Hour investigations, OFCCP audit, and unannounced site visits by the Department of Homeland Security’s Fraud Detection & National Security unit.
To avoid compliance errors and the related fines and penalties, employers are advised to self-check their I-9 forms every 6-12 months and conduct an independent audit every 2-3 years. In the event of an ICE inspection, an employer should notify counsel immediately to aid in the response to ICE.