An Administrative Law Judge with the Office of the Chief Administrative Hearing Officer (OCAHO) recently penned a decision slashing Form I-9 penalties against a Kentucky-based trainer of thoroughbred race horses. The order is noteworthy because it reduced by roughly 50% otherwise rigidly calculated penalties sought by U.S. Immigration and Customs Enforcement (ICE) “as a matter of discretion.”
On review, the employer did not dispute ICE’s determination that it violated federal law by failing to complete I-9s for 58 employees, failing to ensure the I-9s of another 37 employees were complete, and failing to timely complete I-9s for an additional four employees. Given these violations, ICE calculated a baseline penalty of $770 per violation in accordance with its internal guidelines. It then mitigated the penalty by 20% based on four statutory factors: (1) small size of business (5%); (2) lack of unauthorized workers (5%); (3) no history of prior violations (5%); and (4) good faith (5%). ICE then aggravated the penalty by 5% based on the serious nature of the violations, resulting in a net reduction of only 15%, for a total penalty of $64,795.50.
The employer challenged the penalty on various grounds. First, the employer emphasized its small size and claimed the penalty was more than a quarter of its 2013 net income. According to the employer, such penalty would have a devastating impact on the business. Second, the employer explained that the horse racing industry is transient in nature, with high staff turnover, making I-9 compliance, including corrective action, difficult. Third, the employer reiterated its good faith efforts, including cooperating with ICE and instituting a plan after the ICE inspection, to ensure I-9 compliance.
Administrative Law Judge Ellen Thomas, who in a separate matter recently affirmed penalties against a Minnesota professional employer organization for I-9 violations, found a significant reduction was warranted in this case.
Judge Thomas agreed with ICE’s determination that the seriousness of the violations weighed against the employer and that the remaining four statutory factors weighed in the employer’s favor. Notably, Judge Thomas stated “[g]iven the transient nature of the industry, and in light of the general public policy of leniency toward small entities, . . . the penalties for this small employer will be adjusted as a matter of discretion to an amount closer to the low end of the midrange of potential penalties.” Accordingly, Judge Thomas reduced the penalties from $64,795.50 to $35,900, representing an almost 50% reduction.
The decision, of course, provides another reminder that all employers, both large and small, must comply with federal employment eligibility verification requirements. However, it also provides an argument for comparable employers to seek further reduction of ICE assessments, particularly small employers with modest net incomes and those employing transient workforces (e.g., restaurants). Although ICE policy is to allow only a 5% mitigation (or aggravation), if any, for each of the five factors discussed above, Judge Thomas’s order gives employers key arguments for seeking further mitigation, thereby helping minimize the impact of administrative penalties.