The I-9 Audit: Why You Should Care and How You Can Prepare

Posted by Elizabeth Coonan in March 2012 on 3/1/2012

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United States Immigration and Customs Enforcement (“ICE”), the investigative arm of the Department of Homeland Security, has shifted its focus from targeting individual unauthorized workers in favor of a strategy that targets the businesses that employ them. ICE has significant resources available to accomplish this objective, but the current mechanism of choice is the Form I-9 audit. The purpose of a Form I-9 audit is to confirm that the employer is verifying employment eligibility of each employee and properly completing and maintaining the Form I-9. An I-9 audit is initiated upon service of a Notice of Inspection.

In 2011, ICE issued 2,393 Notices of Inspection. This represents an increase of more than 375% over those issued in 2008. ICE also recently issued a statement that it expects to conduct more than 3,000 I-9 audits in 2012, indicating that audits will be carried out in concentrated surges and will focus on employers who use the hiring of unauthorized aliens as an integral part of their business model.

The Immigration Reform and Control Act, passed in 1986, requires all United States employers to verify the identity and employment eligibility of employees. Subsequently, the Immigration and Nationality Act designated the Form I-9 as the requisite tool for documenting the verification process. When executing the Form I-9, the employer certifies that it has taken the required steps to confirm that the subject employee is who they purport to be and that they are authorized to work in the United States. Failure to properly verify the employment of each new hire can result in civil and criminal sanctions. Given ICE’s new policy regarding audits, never before has I-9 compliance been so important.

Once completed, the Form I-9 is not deposited with the Department of Homeland Security (“DHS”). Instead, it is retained by the employer and must be able to be produced for inspection upon inquiry by ICE or another authorized governmental agency or official. The Notice of Inspection typically provides the employer only three days to respond and extensions of time are rarely given. The larger the workforce, the more arduous it can be to respond within the three day period, especially if the employer’s forms are not in order.

Federal regulations require employers to retain the Form I-9 for three years after the date of hire of the employee or one year after the date that employment is terminated, whichever is later. The scope of the Notice of Inspection typically requires the production of Form I-9s for all current employees and a subset of former employees. The Notice may also command the company to provide its tax returns, payroll information and organizational documents. Because an inspection typically requires the company to produce documents for both current and former employees, it is crucial that the forms be completed correctly initially as the opportunity to correct the forms following an employee’s departure is substantially diminished.

ICE has an arsenal of penalties, sanctions and criminal charges it can impose upon violators. These include sanctions for paperwork violations, hiring violations and pattern and practice violations. A paperwork violation involves an employer’s failure to properly execute or retain the Form I-9. A paperwork violation can be technical or substantive in nature. A substantive paperwork violation includes, but is not limited to, failing to ensure that the employee completes Form I-9. A technical violation includes, but is not limited to, failure of the employee to date Section 1 of the Form I-9 at the time of hire, failure of the employer to date Section 2 of the Form I-9 within three business days or less of the hire date or failure to include the hire date. A paperwork violation carries a penalty of $110 to $1,100 per violation. In determining the amount of the penalty, DHS will consider the size of the business, whether the employer acted in good faith, the seriousness of the violation, whether or not any of the individuals were unauthorized aliens and whether there is a history of prior violations. An employer accused of a paperwork violation or a hiring violation may have a defense if it can show it exercised good faith in attempting to comply with the law. However, the defense is limited to technical or procedural discrepancies only, and a failure to correct the discrepancies within 10 days after they have been identified by the agency will eliminate the employer’s ability to assert the defense.

A hiring violation occurs when the employer knowingly hires an unauthorized individual. If it is determined that an employer has hired or continues to employ an unauthorized worker, the employer may be enjoined from continuing to engage in the activity and may be required to pay a penalty. The law imposes a three-tiered civil penalty structure: $375 to $3,200 for each unauthorized worker for the first offense; $3,200 to $6,500 for each unauthorized worker for the second offense; and $4,300 to $16,000 for each unauthorized worker for the third or subsequent offense. The amount of the penalty assessed is based upon whether the employer knew that an individual was unauthorized to work in the United States, yet employed or continued to employ that person.

If ICE determines that an employer has engaged in a pattern or practice of illegal hiring it may impose a penalty of up to $3,000 for each unauthorized employee and imprisonment up to six months. An employer accused of engaging in a pattern or practice of illegal hiring is not permitted to take advantage of the good faith compliance defense.

If an employer is required to produce 150 I-9 forms through the course of an audit and substantive violations are found for half of those forms, an employer can expect to be assessed with a penalty in excess of $80,000. In the most egregious cases, personal liability, including criminal and civil liability, may be imposed upon the company’s officers and hiring managers.

By implementing a few controls, you can substantially limit your potential liability. First, we recommend that an employer provide all hiring supervisors with training on proper Form I-9 completion. Consideration should also be given to developing an internal immigration compliance policy. Finally, we recommend that you consider working with counsel to conduct an internal audit of all Form I-9s to determine whether technical deficiencies exist. Some deficiencies may be corrected, saving the company a significant amount in fines and penalties. Developing a plan for an internal audit requires careful planning. For additional information regarding Form I-9 audits and immigration compliance, contact the author at coonan@brownwinick.com or (515) 242-2408 or contact the BrownWinick attorney with whom you regularly work with.

Elizabeth A. Coonan is a member at BrownWinick and assists clients in the areas of employment, workers’ compensation and business immigration law. Beth can be reached at 515-242-2408 or coonan@brownwinick.com.