The Office of the Chief Administrative Hearing Officer (OCAHO) recently issued two decisions involving Subway restaurants in North Carolina - Siwan & Sons d/b/a Subway, #35029 & #23095, and Siwan & Brothers, Inc. d/b/a Subway, #37616.   In these two cases, Immigration and Customs Enforcement (ICE) sought penalties of $82,280 and $49,368, respectively. In both cases, OCAHO drastically reduced the penalties - by about 8o%. This result is similar to the result in 2010 when OCAHO decided another case involving a Subway franchisee in North Carolina. (Word to North Carolina Subway franchisees - carefully review your current I-9 forms or better yet have an immigration compliance attorney conduct an audit.)

In December 2009, ICE served each company with a Notice of Inspection (NOI) requesting the I-9 forms of current employees and former employees in the past two years. Although the companies produced 88 Form I-9s and 52 Form I-9s, respectively, they only had less than 10 employees at each facility. ICE charged Subway, #'s 35029 and 23095, with 65 violations, involving failing to complete the I-9 forms in the required three-day period and backdating the I-9 forms, and eight violations of failure to present the I-9 forms of former employees. In Subway, # 37616, ICE charged the company failing to complete 45 employees' I-9 forms in a timely manner, backdating the I-9 forms, failing to produce the I-9 forms of three current or former employees and/or failing to complete Section 2 or 3.  

ICE found each company's I-9 forms had over 80% error rate; thus, the baseline fine per violation was set at $935. As for the five factors, ICE argued the companies were not entitled to the 5% mitigating factor of being a small employer even though they had few current employees because Subway franchise owners had the benefit of corporate human resources training, including I-9 compliance. Rather, it treated the size of the employers as a neutral factor. Moreover, it aggravated the fines by 5% each for lack of good faith - backdating the I-9 forms and seriousness of the violations.

The franchisee owner conceded the I-9 forms produced by the companies appeared to have been backdated. He explained he copied the employees' original I-9 forms onto new I-9 forms when the USCIS introduced a new version in 2009 because he thought all of the employees' I-9 forms had to
be on the new version. Thereafter, he apparently destroyed the original I-9 forms. (Never destroy an I-9 form of a current or former employee unless it can be legally purged.) The owner blamed his error on his limited knowledge of English.  OCAHO accepted the franchisee's explanation concerning the appearance of backdating the I-9 forms and refused to find this was evidence of lack of good faith.

The Subway franchisee also argued IT was a small employer, that the size of the franchisor was irrelevant; thus, they should receive the 5% mitigation. OCAHO agreed, as it has previously held, the size of the franchisor is not relevant to the determination as to the size of the franchisee.

Furthermore, Subway asserted the penalties were unjust and would force the closing of the businesses.  OCAHO essentially agreed in finding "the penalties were excessive in light of the record as a whole", especially since the requested penalties were "so near the maximum possible as to appear out of proportion to the size and resources" of the small family restaurant operations. OCAHO cited prior case law that proportionality is critical to setting penalties and the penalties cannot be "unduly punitive." Therefore, OCAHO reduced the penalties to $200 per violation, thereby reducing the penalties to $15,800 and $9600, respectively.

Employers, especially smaller employers, continue to receive favorable results through litigation at OCAHO.