Failure to prepare I-9 forms within three business days is substantive INA violation

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By Joy Waltemath

By Brandi O. Brown, J.D.

An employer audited and then fined by the INS for failure to complete I-9 forms on behalf over 50 employees, even though it kept their identifying documents on file, was unable to obtain relief from an administrative law judge’s decision in favor of the agency upon its petition for review by the Second Circuit. Applying Skidmore deference to an internal memorandum issued by the federal agency that distinguished between technical and substantive violations, the court found the ALJ correctly determined that the audit demonstrated substantive violations. The court denied the petition for review (Buffalo Transportation, Inc. v. United States of America, December 22, 2016, Droney, C.).

Employer audited, fined. In August 2013, the Immigration and Customs Enforcement of the Department of Homeland Security audited the petitioner, Buffalo Transportation, Inc., and determined that it had failed to complete Forms I-9 for 54 employees within three business days of their hire. In fact, the employer failed to fill out section 2 of the forms for those employees until it received the agency’s notice of inspection. The audit also found the employer failed to retain completed Forms I-9 for 84 former employees. The federal agency served the employer with a notice of intent to fine it almost $800 for each violation under 8 C.F.R. section 274a.10(b)(2) and internal guidelines, with a total of almost $110,000 in fines.

ALJ review reduces fine. The employer requested a hearing before an ALJ and both parties submitted briefing and evidence. The ALJ granted the parties’ motions for summary decision in part. Specifically, the ALJ found the employer had committed 81 violations for not retaining Form I-9 for former employees for the required time period and 54 violations for current employees for failure to prepare Forms I-9 within three business days as required. However, the ALJ adjusted the penalty to $600 per violation for the former employees and $500 per violation for current employees, bringing the total fine down to $75,600. The employer petitioned the Second Circuit for review of the order of the Office of the Chief Administrative Hearing Officer for the Executive Office of Immigration Review.

Reviewing the order under the arbitrary and capricious standard, the appeals court considered whether the employer had committed substantive violations, as the agency had concluded, or technical/procedural violations as contended by the employer. Under 8 U.S.C. sec. 1324a(b), employers are required to verify that their workers are legally authorized to work in the United States and, for that purpose, are required to complete Form I-9s for new hires within three business days of hire. The employer must retain those forms and be able to provide them for inspection upon three business days’ notice. For terminated workers the employer must retain the forms for one year. The INS issued interim guidance in 1997 (the “Virtue Memorandum”) about what constituted a “technical or procedural violation” as opposed to a substantive violation. If the employer’s failure met the requirements of showing a technical or procedural violation and the employer demonstrated a “good faith attempt to comply,” then it would be “considered to have complied” with the form requirements and could avoid fines.

Guidance said substantive violation. Applying Skidmore deference under the APA to the Virtue Memorandum, which it found to be well-reasoned and thorough, the court agreed that failure to prepare Forms I-9 within three business days of hire is a substantive violation of the INA. The regulation, the court explained, clearly indicated that the employer had to have its employees fill out the form, verify the documentation, and that both the employer and employee had to sign the form within three business days’ of the employee’s hire. Failure to do so is a substantive violation. Thus, the 54 forms presented during the audit contained substantive violations—there was no genuine dispute that they had been completed within three business days of the employees’ hiring dates. Nor was the court dissuaded from this conclusion by the argument that the employer had substantially complied with the verification requirements because it had kept the employees’ identifying documents on file—the regulations had explicitly rejected that approach.

The court was also unpersuaded by the employer’s argument that it should have been given a warning notice prior to receiving notice of the agency’s intent to fine. The regulation makes provision of such a warning discretionary. Moreover, the court concluded that the ALJ made an allowable judgment in determining the amount of fines to assess. The ALJ gave “well-reasoned bases for the fine amounts” based on the specific circumstances of the employer.

Source:: Employment Law Daily Newsfeed


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