Avoiding Costly Mistakes: Lessons Learned from Recent I-9 Enforcement

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1 Avoiding Costly Mistakes: Lessons Learned from Recent I-9 Enforcement Christine D. Mehfoud, Esq. Spotts Fain, PC Blog: November 18,

2 3 Employer s Employment Verification Obligations ALL U.S. employers have immigration-related compliance obligations. Regardless of whether or not they employ any Foreign Nationals Regardless of size Regardless of industry Regardless of geographic location 4 Employer s Employment Eligibility Verification Obligations Employers are required to verify the identity and employment eligibility of their employees using the Form I-9. Employers must prepare and maintain the Form I-9s and make them available for inspection on three days notice. A Form I-9 must be completed for each new employee by the end of the first (Section 1) and third (Section 2) day of work. Each failure to accurately prepare, maintain or produce the Form I-9 is a separate violation under the law. 8 U.S.C. 1324a(b) 2

3 5 Anti-discrimination obligations Federal immigration law also restricts employers from discriminating against new hires during the course of the Form I-9 process. Blog -- "Walking the Line" Section 1 (on or before first day of work) Section 2 (on or before 3 rd business day of work) Section 3 (if applicable, on or before work authorization expiration date) 6 3

4 7 The Form I-9 process is complex and interactive. deceptively simple one of the most misunderstood federal government forms. The process is just as important as its content. Blog -- "Form I-9 Quiz" 8 Penalties can be severe Prison Time from up to six months for knowingly hiring an illegal worker to 10 years for harboring Civil Fines up to $16,000 per worker Asset Forfeiture Debarment Loss of Business License Lost Productivity Attorneys Fees Negative Publicity And often, other crimes such as tax fraud, social security fraud, money laundering, identity theft, bank fraud and false statements are uncovered during what begins as an immigration-related investigation. 4

5 9 10 Don t rely on I-9s or other forms created by other companies Hartmann Studios, Inc. $602,250 in civil money penalties for I-9 paperwork violations Employer is solely liable for I-9 completion Union three-in-one form not sufficient (see also Abercrombie & Fitch electronic I-9s) 5

6 11 Mere paperwork violations are costly Hartmann Studios Paperwork violation = errors caused by failure to accurately complete the I-9 No evidence of intentional employment of unauthorized workers Signing Section 2 is a legal requirement Other paperwork violations: Failure to ensure employees check a status box in Section 1 Failure to ensure employees sign Section 1 Failure to ensure employees enter alien number (if applicable) in Section 1 Missing List A, B and/or C documents Blog Mere Paperwork Violations in I-9 Process Lead to $600,000 Fine 12 Do Not Tell Employees Which Documents To Present Luis Esparza Services, Inc. (LES) DOJ OSC Unfair documentary practices requiring LPR to present green card Blog -- "Employer Suffers $320,000 Penalty for Telling Workers What Documents to Show When Hired" 6

7 13 Review Employee s Completion of Section 1 Durable, Inc. (1988 audit - $30,000 fine and cease and desist order; 2011 audit - $330,000 fine) Employee s failures in Section 1 = employer s civil penalty Employees failure to check a box indicating their status in the U.S. is a substantive violation which exposes employer to civil penalties Employer cannot add information to Section 1 during an audit 14 A signature in Section 3 cannot replace a missing Section 2 signature Durable Inc. Employer signed in wrong location (Section 3 and not Section 2) Section 3 signature does not replace Section 2 signature. 7

8 15 If you ve been previously inspected and received a Warning Notice or Fine, step up your game. Durable Inc. Aggravated fine to maximum of $1,100 per I-9 because failure to institute a process to ensure compliance in 20+ years since Enhancement Matrix Business Size Good Faith Seriousness Unauthorized Aliens History 16 Do not accept photocopies of documents or rely on someone else s review. Employer Solutions Staffing Group, $200,000 Do not rely on photocopied forms sent by an affiliate who previously hired your employees The person who signs Section 2 is signing under penalty of perjury that they personally examined the employee s original documents. Penalties imposed on all employers even if no unauthorized workers in the workforce 8

9 17 Do not create a fake subcontractor to hire undocumented workers Kansas drywall contractor Scheme to pay undocumented workers in cash through a fake drywall subcontractor Harboring, money laundering and bank fraud Maximum penalties could reach 30 years in prison and fines of up to $1 million per count 18 If an ICE inspection reveals unauthorized workers, do not continue to employ Broetje Orchards, $2.5 Million 2012 ICE inspection revealed 1,700 workers not authorized to work 2015 follow-up inspection found 950 unauthorized workers 9

10 19 After ICE finds employees are not authorized and you terminate, do NOT hire them back Danny s Family Car Wash Owner and 13 managers sentenced to prison for up to 1 year in prison and 1 year probation; $156,000 forfeiture 2011 inspection = termination of over 900 employees Rehired old employees after lawful employees hired proved ineffective and/or too expensive August 2013 search warrants executed and over 230 unauthorized workers found on date of search. 20 Do not create shell companies to rehire previously identified unauthorized workers Grand America Hotels and Resorts Forfeit nearly $2 million + remedial measures likely to cost $500,000 Rehired unauthorized workers after I-9 inspection in 2010 identified 133 employees not authorized to work Conspirators created three temporary employment agencies to rehire 43 unauthorized employees; most workers returned using different names and fraudulent identity documents 10

11 21 Do not forget to reverify RSV Pools Knowingly hiring unauthorized aliens Allowing employees who were legally authorized to work at the time they were hired continue to work after heir work status expired Paying employees in cash so that they did not appear on RSV books 22 Do not provide false identities to your employees 7-Eleven (five franchisees and operators of stores in NY and VA) Used stolen identities of US citizens, including deceased and children, to conceal their scheme to knowingly employ unauthorized workers 11

12 23 Be careful if providing employee housing 7-Eleven (five franchisees and operators of stores in NY and VA) Harbored illegal alien workers at houses by providing unregulated boarding houses 24 E-Verify is Not a Panacea E-Verify monitoring has prompted numerous investigations of late Monitoring & Compliance actively reviewing and referring to ICE and/or DOJ OSC Blog -- "E-Verify Use = Increased Government Scrutiny" 12

13 25 E-Verify = Increased Government Scrutiny M&C/OSC MOU M&C will refer [to OSC] all matters that may involve an individual act or a pattern or practice of employment discrimination on the basis of national origin or citizenship status; document abuse; or retaliation and will also refer all matters that may involve the misuse, abuse, or fraudulent use of E-Verify that can result in the adverse treatment of employees. (Emphasis added). Likewise, OSC will share information relating to suspected employer or employee misuse, abuse, or fraudulent use of E-Verify with USCIS. M&C/ICE MOU M&C will refer suspected employer and employee misuse, abuse, and fraudulent use of E-Verify to ICE for investigative consideration concerning matters within ICE s jurisdiction. (Emphasis added). 26 Be Flexible and Seek Out Regular Updates and Training Changes Are Coming. Executive Action Comprehensive Immigration Reform? Piecemeal Immigration Reform E-Verify Mandates Visa Fraud Investigations Form I-9 Inspections DOJ OSC investigations E-Verify Inspections 13

14 27 Do respond appropriately to an I-9 Notice of Inspection (NOI) When served, politely request 3-days to produce Form I-9s. Obtain a business card or contact information for the agent. Contact experienced counsel immediately. There is much than can be done to affect outcome of inspection, but time is of the essence. 28 Form I-9 Inspection Process 14

15 29 30 Enforcement Aimed at Employers is Here to Stay 11,000,000 illegal immigrants in U.S. Employers viewed as the magnet that draws illegal immigrants into the U.S. Election impact Executive Action HSI E-Verify M&C DOL Wage & Hour Blog -- "Recent Penalties" 15

16 31 Risk Management: Immigration/Employee Eligibility compliance is a must All employers: Written policies and procedures Form I-9 document retention and storage plan Annual Form I-9 audit and training (CAUTION - we highly recommend using experienced immigration counsel for auditing) Annual E-Verify assessment (or more often as needed) New-hire process review and training Regular review of immigration-related contractual provisions If applicable: Reverification process Annual E-Verify audit and training Review of employer-sponsored visa programs (i.e., H-1B, B-1) Participation in any merger/acquisitions 32 Key Takeaways Are you in compliance? Does your HR Team know what a Form I-9 is? Are they accurately completing and maintaining them? Have they received training within the last year? Have you audited within the last year? Have you been inspected? If yes, when was the inspection and what was the result? Does your team know how to respond to an inspection? Does your team have knowledge of unauthorized workers? E-Verify? Do you participate in E-Verify? If so, has your team been trained? If not, are you required to participate? Should you participate? 16

17 33 Questions or Comments? Christine D. Mehfoud Blog: LinkedIn: The contents of this training were created by Christine D. Mehfoud, Esq., Spotts Fain PC, and are protected by copyright. The contents are used by permission. Contents 2015 Spotts Fain PC (used by permission). 17