Employment Alert: A Scary Cautionary Tale About I-9 Forms | Brouse McDowell | Ohio Law Firm

Employment Alert: A Scary Cautionary Tale About I-9 Forms

By Stephen P. Bond on May 19, 2022

In 1986, the federal government instituted a program requiring employers to check on the immigration status of all applicants before employing them. To accomplish this, the government promulgated the “I-9 Form,” which calls for the presentation to, and review by, employers of various documents pertaining to the individual. Unlike many other federal employment regulations, this one applies to all employers, regardless of size.

In a nutshell, the I-9 Form calls for each job applicant to complete the “Employee” portion of the Form, identifying him or herself and designating why he or she is legally authorized to work on the first day of his/her employment. It then requires the employee to come forward with his/her choice from a variety of documents that will establish both identity and authorization to work and must be reviewed and identified by the employer on the Form within 3 days. These records must be maintained by the employer throughout that employment and for a year thereafter.

If you have been lulled into a false sense of feeling these forms are not really important just because you aren’t required to file them anywhere, or because they aren’t discussed much these days in the media or educational forums, you may be interested in what happened to a “small” business earlier this year.

Randy and Sally operate their own business in Washington State – a staffing agency they have run for over 26 years. They have built it up to seven offices, financed by a mortgage on their house, and a loan from a retirement account. Between the two of them, they are earning around $90,000 a year.

They maintain a regular staff of 40-45 to operate the business; and they regularly employ another 500-600, which can swell to 1,500 when businesses in the area need agricultural workers. Despite the pandemic, they maintained everyone on the staff and even provided paid childcare to employees. They had the benefit of $1,000,000 as a PPP loan, while also having an outstanding tax bill for $272,000.

In September 2016 someone made an anonymous tip to the Department of Homeland Security1 – which triggered them sending a notice that they would be conducting an audit of the company’s I-9 Forms, asking for records on all current employees, and going back three years. Though the government is only required to allow three days to produce their records, here, they gave 9 days’ notice. In this case, there were records maintained at all their offices; staff onsite collected the originals, and Randy drove to each location and picked them up. All told, three boxes of records containing 4,000 forms were sent to the government — without taking the time to make copies2

The records then sat in a government office for months. Nearly two years after the initial request for records was made, the government completed its audit and advised the employer that they found many irregularities. First, there were 213 Forms where the records showed that they were not filled out within either the one-day or three-day time requirements mentioned above. Second, there were 1,011 Forms with mistakes – anything from a missing box to a missed checkbox, or a checkbox that was marked but was wrong, and even unsigned papers. Finally, in 178 cases, the Forms reflected that someone had tried to backdate information on a form to make it look like it had been filled in correctly from the start.

This matter, begun in 2016, didn’t come to trial until June of 2021 – and didn’t reach a final decision until just this past January3. For each of the Forms filled in later than they were supposed to have been, the fine4 was $731.50 ($155,809.50); for the Forms with missing or wrong information, the fine was $1,100.00 ($1,112,000.00); and for the Forms that were backdated, the fine was $1,457.30 each, ($259,399.40) the largest per-file fine, because the government views that kind of conduct as acting in bad faith.  

In other words, in a matter that may have seemed of small concern in the company routine, the dispute took some 6 years, during which the company incurred hundreds of thousands in legal fees, only to be fined $1,527,308.905.  The company is now appealing to the federal court of appeals6 – no decision is anticipated until at least this fall.

There are lessons to be learned from their bad experience. For one, it is so important that hiring staff be fully conversant with these Forms, the requirements for completing them in detail, and the need for a routine to be followed with each employee in each and every case.

Second, an employer should develop a system for the maintenance of these Forms in a format so that they can be identified, pulled, and compiled, if need be, within three days – for an employer with five employees, that seems readily doable; but for an employer with hundreds of employees, perhaps in multiple offices, that can be daunting unless planned for. Employers frequently maintain these Forms in each individual employee’s “personnel file” – but if an auditor walked in and wanted to see all the Forms for the last 3 years, you may not want to be forced to assign someone to pull each personnel file one at a time.

Third, an employer should give serious consideration to conducting a self-audit of these Forms either to confirm that procedures are being routinely followed to the letter, or to identify missing Forms or those missing information, while there is still an opportunity to resolve the problems. And in that regard, one further lesson to be learned is that, even after the fact, there are ways to appropriately deal with Forms that have not been completed timely and correctly – but “fudging” them is not among them.  To summarize what the Judge stated in this case:

        Timely completion of I-9 forms is the standard.
     An employer who has failed to timely complete an I-9 form in many instances has a choice — to, with full candor, complete the form and date it on the day of completion; or to backdate the form to make it appear as if it was timely completed. The first option will undoubtedly generate a civil penalty upon inspection. The second option, which lacks candor, could result in no penalty should the auditor not catch the backdated forms.

        Employers should be encouraged to act with candor.
    This final order presents an opportunity to impress upon this Respondent, the importance of candor in the I-9 form process. Accordingly, backdated forms will merit a higher civil penalty than the untimely completed forms.

1 Complaints typically are filed by disgruntled former employees, applicants who were not hired, or current employees concerned over the practices conducted.

2 Turned out later that this was a problem, the government claiming there were over 500 forms missing; and the employer claiming – they must have been in the boxes we sent you.

3 US v. R & SL Inc., OCAHO Case No. 19A00044, 2022 WL 1396204.

4 The government is authorized to issue fines for paperwork violations based on a sliding scale from $237 per Form, to $2,360 per Form, for a first offense – if it turns out someone was actually illegally hired, the fine scale runs as high as $4,722.

5 Even a “small” case can lead to significant fines.  See, e.g., US v. Sanjay Jeram Corporation, OCAHO Case No. 2021A00022, 2022 WL 661530 (fine of $19,480.00 sought based on 20 Forms); US v. Louie’s Wine Dive, LLC, OCAHO Case No. 2021A00059, 2021 WL 6753791 (fine of $48,877.50 issued for 25 incomplete Forms); US v. Maverick Construction LLC, OCAHO Case No. 2020A00049, 2021 WL 6753792 (fine of $286,356.00 sought for 136 missing Forms); US v. Psychosomatic Fitness LLC, OCAHO Case No. 2020A00063, 2021 WL 2351676 (based on 22 incomplete Forms and 88 missing Forms, government issued fines of $22,000.00 and $114,400, respectively).  Note, these are all cases based on paperwork – there was no allegation that anyone illegal had actually been hired as a result.

6 Case No. 22-70026 (9th Cir.).

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