ICE not sweet on Texas Bakery with I-9 Problems


It’s a familiar refrain in the HR world – you try your best to complete I-9 forms for your newly hired employees (as required under the law), and yet mistakes and omissions still occur. Regardless of whether the violations are accidental or even deliberate, the end result is the same when ICE comes knocking at your door: you now have to produce those I-9 forms for inspection and be prepared to suffer the consequences.

But as we’ve described recently, what you do after receiving the initial Notice of Inspection (NOI) from ICE is just as important as your policies and practices which got you into this I-9 mess in the first place. One wrong move can easily make a bad I-9 situation much worst, especially if ICE begins to question your motives and intentions in complying with the law. As we’ve described in the past, an employer’s good faith (or lack thereof) is an extremely important factor – one which can ultimately determine whether you’re assessed a large fine or just a slap on the wrist.

Which brings us today’s sour tale involving a small Texas bakery in San Antonio with a big I-9 problem. But first, let’s start with a very corny (but still appropriate) I-9 joke:

Q: Why did the bakery decide to appeal ICE’s I-9 penalty finding?

A: Because it kneaded the dough.

And this was particularly true for Horno MSJ, Ltd., a small mom and pop bakery located in San Antonio, Texas which was started by a husband and wife team. According to a recently published OCAHO decision, ICE ordered the company to pay fines in excess of $30,000 for mistakes on 32 I-9s. Where did the company go wrong? And did they deserve such a (relatively) large fine? Let’s take a look!

Issue #1: When is an individual an employee for purposes of I-9 completion?

In reviewing the I-9s and payroll records, ICE found that there were 9 employees for whom the company had failed to provide an I-9 (one of the most serious violations of all). Shortly thereafter, the company found 5 of the “missing I-9s” and sent them over to ICE. Better late than never? Not really.

As it turns out, these I-9s created even more problems than they solved. Using a computerized record system, ICE discovered that the A-numbers and other identifiers provided on the I-9s were clearly fraudulent. How could they tell? Well, two of the I-9s had A-numbers that belonged to other individuals; one I-9 had a made-up A-number, and one I-9 had an SSN that belonged to a deceased individual!

In its motion for summary judgment, Horno first explained that they did not deliberately try to hide the I-9s from ICE (noting that they mistakenly kept a few of them in a separate office). The crux of their argument, however, was that the vast majority of the employees in question had actually quit prior to the ICE inspection and that 2 in particular had quit before the hiring process was even complete (hence no I-9 to turn over). The company further explained the payroll discrepancy for the 2 employees by noting that they pay their new hires for attending the initial orientation and evaluation. Sounds reasonable…but can they prove it?

Typically, an employer can demonstrate a sudden termination by providing ICE with payroll records which include the hire date, rate of pay, and date of termination. The end goal is to show that the employee was hired for continued employment and quit shortly thereafter (thus preventing the company from fulfilling its I-9 obligations within 3 days of hire).

Unfortunately though, Horno did not maintain details of the employee’s rate of pay or date of hire – which left the court with no choice but to evaluate whether the payroll matched the company’s story. In one instance, the employee was provided with 2 paychecks before termination, leading the court to determine that she was clearly an employee for more than 3 days. In the other instance, the employee had been paid over $65 for one day’s employment (substantially more than what she would have earned for an 8-hour day at minimum wage). Strike number 2.

Finally, the court put the entire issue to rest by noting that absent an extension of time, an employer cannot avoid liability for failure to timely present I-9 forms by submitting them to ICE at a later time in the process. Strike number 3.

Issue #2 – Can an employer correct serious I-9 errors and avoid liability?

In addition to the missing I-9s, ICE also charged the company with failing to ensure that I-9s for twenty-three employees were properly completed in sections 1, 2, and 3 (as applicable).

These errors included failure to sign section 2 (19 instances); missing document information; missing attestation in section 1; and missing signature in section 1. The bakery then attempted to correct some of the missing attestations by entering the date on which the I-9 should have been completed (i.e., backdating the signature).

In response, the court reminded Horno that under the regulations and DHS policy memos, I-9 errors can be broadly categorized into two groups: technical or procedural verification failures (which may be corrected within 10 days of the notice of deficiency) and substantive verification failures for which an employer may be immediately fined. Unfortunately for Horno, all of its I-9 mistakes fell into this second bucket and the court upheld ICE’s liability assessment for these twenty-three individuals.

Issue #3 – Did the company act in bad faith?

Having found Horno liable for all of the I-9 violations, OCAHO then turned its attention to the issue of penalties. As we’ve described in the past, an ICE Special Agent or Forensic Auditor will first determine the base I-9 fine (by dividing the number of substantive violations by the total number of I-9s) and then consider five statutory factors which may call for the enhancement or mitigation of the overall fine. Those factors include: 1) size of the business, 2) good faith, 3) seriousness of the violation(s), 4) whether or not the individuals involved were unauthorized workers, and 5) any history of previous violations by the employer. 

In its calculation of the fines, ICE actually treated the “good faith” factor as neutral, implying that the company’s conduct should not lead to an enhancement of the fine. However, as the court noted, ICE was clearly upset with Horno’s response during the audit - particularly the backdating of the I-9 forms. Moreover, ICE also went so far as to suggest that one of Horno’s owners should be knowledgeable in I-9 procedures since she herself was an immigrant who had gone through the immigration and nationality process.

In the end, the court disagreed with ICE, noting that OCAHO case law has long held that bad faith requires “a showing of culpable conduct beyond merely a high rate of violations, and that even a dismal rate of I-9 compliance is not sufficient to make that showing.” The court also remarked that the owner’s experience of naturalizing as a citizen could hardly provide her with any expertise in the I-9 hiring process. Finally, as with similar cases, the court ultimately decided to adjust the I-9 fines to an amount closer to the midrange of permissible penalties (resulting in a total assessed fine of $14,600).

Lessons Learned

While the company ultimately scored a victory in reducing its fines by more than 50%, they still had to go through the considerable expense (and stress) of duking it out with ICE on the issues of liability and penalties. To a degree, this was unavoidable. But as described above, the company certainly didn’t help matters by failing to present all of the I-9s requested during the initial investigation AND then backdating its other forms to boot!

So how could the bakery have avoided this sticky fate? As we’ve explained in the past, employers would be well-served to contact an experienced immigration attorney who has expertise in responding to I-9 audits (and negotiating fines). In addition, companies should strongly consider conducting a self-audit (under the direction of counsel) in order to fix mistakes long before ICE comes knocking at the door (with a subpoena in hand). By following these best practices, employers (of any size) can put their best foot forward with ICE and significantly reduce the likelihood of ending up in court.

This post originally appeared on LawLogix. Reprinted with permission.

About The Author

John Fay

John Fay is an immigration attorney and technologist with a deep applied knowledge of I-9 compliance and E-Verify rules and procedures. During his career, John has advised human resource managers and executives on a wide variety of corporate immigration compliance issues, including the implementation of electronic I-9 systems. In his current role, John serves as Executive Vice President and General Counsel at LawLogix, where he is responsible for overseeing product design and functionality while ensuring compliance with ever-changing government rules.