Financial burdens imposed upon an employer by non-immigration-related governmental entities is a factor that can be considered in lowering the assessed civil monetary penalty for the employer’s failure to complete the I-9 Employment Verification Forms for its employees in a proper and timely manner, even though such burdens were temporary, the Justice Department’s Office of the Chief Administrative Hearing Officer (OCAHO) recently held. United States of America v. Pharoah’s Gentleman’s Club, Inc. OCAHO Case No. 12A00061, July 18, 2013 (USDOL EOIR).
Pharoah’s, an adult entertainment business, was charged with failing to verify the employment authorization of 30 employees within 3 days of their hiring and completing their I-9 forms, and failing to ensure the proper completion of the I-9 for ten other employees. Pharoah’s conceded these allegations.
Moreover, the Government alleged that 22 of the I-9s that were subsequently produced in response to a Notice of Inspection had been backdated, warranting a finding of bad faith. The Government sought an order for civil fines totaling $38,335, an assessment of $935 for each of the 40 violations.
Pharoah’s contended that the sum sought by the government was excessive and that only the minimum fine allowed by law be assessed in view of the extreme financial pressures and setbacks it had recently incurred. They were: a recent New York State sales tax audit that resulted in additional liability of $120,000; another state assessment in the amount of $63,000 for unpaid unemployment insurance arising from misclassification of the employee status of their dancers from independent contractors to employee; and having to defend a $5,000,000.00 personal injury lawsuit that was not covered by any insurance.
On the issue of whether the production of the backdated I-9s constituted bad faith, Administrative Law Judge Ellen K. Thomas rejected the Government’s characterization as such in the absence of evidence of any instructions to contrary given to the employer by the inspectors at the time they serve the Notice of Inspection, and absent any evidence of other culpable conduct.
The ALJ also agreed with Pharoah’s contention that the amount sought by the Government was excessive in light of the state sales tax and unemployment insurance tax assessments and the costs that it was incurring in defending the personal injury suit. The ALJ stated that these liabilities could be considered in conjunction with the employer’s ability to pay a penalty in such proceedings. As a matter of discretion, the ALJ ordered Pharoah’s to pay a reduced fine of $17,500.