An employer that hires only authorized workers can still be charged hefty fines for pure I-9 paperwork errors. Fines range from $110 to $1,100 for each substantive paperwork violation, including failure to complete a new employee's I-9 within 3 days of the hire date and failure to ensure an employee checks the box in section 1 of the I-9 form attesting to whether s/he is a U.S. citizen, a U.S. national, a lawful permanent resident, or an alien authorized to work until a specified date. With the recent establishment of the Employment Compliance Inspection Center (ECIC) in Crystal City, Virginia, U.S. Immigration & Customs Enforcement (ICE) now has more resources to audit large employers (1,000+ employees). Still, I-9 inspections over the past few years have affected mostly small employers.

Employers fined for I-9 violations may appeal their case to the Office of the Chief Administrative Hearing Officer (OCAHO). Three recent OCAHO decisions show that ICE continues to levy substantial I-9 fines against small employers while OCAHO continues to use its discretion to lower the fines by 50% or more.

In United States v. Pegasus Restaurant, 10 OCAHO No. 1143 (2012), ICE sought a total penalty of $131,554.50 for missing I-9 records. Pegasus employed an average of 55 workers and faced the typical turnover rate in the restaurant industry. During its audit, ICE discovered that Pegasus failed to fill out any I-9 forms for the 134 individuals it employed during the three-year investigative period. Of the 134 employees, four were not authorized to work. ICE imposed a penalty of $981.75 for each of the 134 violations.  

Pegasus appealed to OCAHO, which agreed that the proposed fine was disproportionate based on the restaurant's size and resources. OCAHO noted that the penalty should be sufficiently meaningful to deter future violations without being "unduly punitive" in light of the employer's resources. Therefore, the judge reduced the penalty from $981.75 to $350 for each of the 130 violations, but refused to lower the penalty involving the four unauthorized workers. In total, the penalty dropped by about 62% to $49,427. The court concluded that the reduced fine is "still sufficiently substantial to have a significant deterrent effect going forward."

In United States v. Ice Castles Daycare Too, Inc., 10 OCAHO No. 1142 (2011), ICE sought a total penalty of $55,352 for missing I-9 records. The daycare center employed an average of 30 employees and experienced a high turnover rate. During its audit, ICE found that Ice Castles conducted standard background checks and examined appropriate documents to determine employment eligibility. But it did not complete any I-9 forms for the 74 employees it hired during the three-year investigative period. Considering the mitigating factors -- good faith of the employer, no unauthorized workers, and no history of violations -- ICE lowered the penalty from the baseline amount of $935 to $748 for each of the 74 violations.  

Ice Castles appealed to OCAHO, arguing that the $55,352 fine could put them out of business because its ordinary business income from 2006 to 2009 was $21,000, ($4,000), $5,500, and $38,000, respectively. Based on the day care center's inability to pay, small size, and verification of employment eligibility, OCAHO reduced the penalty by about 66% to $18,500.

In United States v. Snack Attack Deli, Inc., 10 OCAHO No. 1137 (2010) (Subway case), ICE sought a total fine of $111,078.00 for missing I-9 records and improperly completed I-9 forms. During its I-9 inspection in early 2009 on Snack Attack Deli, a Subway franchisee located in Fayetteville, North Carolina, ICE found that Snack Attack had committed 108 I-9 violations. In Count 1, ICE alleged that Snack Attack hired 11 named individuals from 2006 through February 2009 and failed to ensure that they properly completed section 1 of form I-9 or failed itself to properly complete section 2 or section 3 of the form. Count II alleged that Snack Attack hired 97 named individuals between 2006 and February 2009 for whom it failed to prepare forms I-9 at all. ICE sought $1,028.50 for each violation, which was close to the allowed maximum.  

Snack Attack appealed, asserting that the fine would cripple its business and likely lead to the loss of jobs. Further, the fine was based entirely on missing I-9 records and improperly completed I-9 forms, rather than the hiring of unauthorized workers. On review, OCAHO considered non-statutory factors "such as the depressed economy and the difficulty any displaced employee would have in finding other work." Pointing to the company's inability to pay, relatively small size, and lack of prior violations, the judge reduced the fine of $1,028.50 per violation to $300 for each violation of Count 1 and $250 for each violation of Count II. In sum, the total proposed penalty was cut by about 75% to $27,150.  

Two recent decisions where OCAHO did not reduce the penalties for I-9 violations by over 50% are United States v. Alyn Industries, 10 OCAHO No. 1141 (2011), and United States v. Ketchihan Drywall Services, 10 OCAHO No. 1139 (2011). In both cases, the employers were not small and had the ability to pay substantial fines. Still, the fines against Alyn Industries and Ketchihan Drywall were reduced significantly from $63,767 to $43,000 and from $286.624.25 to $173,250, respectively.