Are You in Compliance With the Revised Form I-9? Violations Pose a Threat to Your Business. Small businesses can now be hit hard, for administrative errors or "technical" violations, rather than for just substantive ones.
By Patrick Valtin Edited by Dan Bova
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Small business owners know that a primary condition for expansion is their ability to attract and select great talent. But what many of them might ignore is that lack of compliance with the federal government employment verification form -- the I-9 -- could represent a serious threat to their business's profitability and, worse, its survival:
As proof, we need only look at Wednesday's immigration raids against 98 7-Eleven franchise stores, resulting in 21 arrests of suspected illegal aliens.
A big factor here is the I-9's rapidly changing regulations. Last year, 2017, was a dynamic period for ICE, or the federal agency known as Immigration & Customs Enforcement. A series of changes to I-9 rules in the last six months of the year opened the door to potential legal trouble for thousands of small businesses that are unprepared for the new compliance requirements.
What you need to know
Employers are responsible for verifying the identity and employment authorization of each person they hire. Noncompliance with those verification requirements is a civil violation that's as serious as knowingly hiring or continuing to employ an unauthorized alien here in the United States. It can also result in heavy fines and penalties.
In November of 2016, a new "smart" online Form I-9 version was released, aimed at minimizing the rate of errors/omissions and ensuring a higher rate of employer compliance. In July 2017, a newly revised Form I-9 was issued, which became mandatory on Sept. 18, 2017.
New and higher penalties were also implemented: As of August of 2016, fines for all Form I-9 compliance violations had doubled from their previous levels. Those fines now range from $110 to $1,100 per violation up to a range of $216 to $2,156 -- not per individual form, but per error or omission on that form.
Indeed, ICE's regulations allow a fine for each error on an I-9; and the agency can also fine a company based upon its percentage of I-9s containing substantive or uncorrected technical errors.
Federal oversight has tightened.
More than ever before, small business owners and their HR managers should be devoting considerable time and resources to conduct extensive self-audits in anticipation of any Form I-9 audit by ICE, which can occur with as little as a three-day notice. This burden of staying up to date with all applicable Form I-9 policy changes has become a real challenge. And small businesses can be hit hard for administrative errors and "technical" violations, rather than for just substantive ones.
An example? Buffalo Transportation Co, a small business providing transportation services for individuals traveling to medical appointments, paid the price for lack of compliance on one of these "technical" points. The employer had failed to fill out Form I-9s at the time of hire for any of its 54 employees and was audited by ICE.
According to federal law, Section 1 of the I-9 must be completed no later than the first day of employment, and Section 2 must be completed within three days of the first date of employment.
ICE issued the company a $109,000 fine (reduced to $75,000 after its appeal to an administrative law judge). Buffalo Transportation's argument, before the Second Circuit, U.S. Court of Appeals, that the violation was only a technical one, rather than a substantive one, was rejected, in late 2016. In fact, ICE has since amended its regulations to remove the distinction between technical and substantive violations, thereby eliminating the good faith defense.
In the same violations context, Hartmann Studios was recently hit with a fine in excess of $600,000, primarily for failing to sign I-9 forms at the time they were completed. ICE also levied a $400,000 fine against Panda Express in July 2017 for I-9 violations.
Big fines can mean devastation.
Penalties of this magnitude, levied against a small business, can lead to utter devastation.
And there's no relief in sight: The government is only expected to intensify its spotlight on employers, in search of multiple violations per form. Most experts expect this ncrease in light of the Trump administration's focus on enforcement of immigration laws. Acting ICE Director Thomas Homan recently issued a directive "to increase the level of Homeland Security and Immigration (HIS) enforcement by four to five times."
Related: 3 Ways Entrepreneurs Can Protect Employees From Trump's Immigration Executive Order
And ICE is ramping up its ranks in response: The agency's current 6,000 enforcement officers and 6,000 special agents are reportedly going to increase in number by an additional 10,000 mandated officers and agents, to support an expected exponential increase in audits and enforcements.
What small businesses and startups can/should do.
What should you do? Here are some tips to protect your company against I-9-related penalties. First, remember:
- Section 1 of I-9 must be completed by each employee at "the time of hire," defined as the period of time after the job offer has been accepted and before the end of the employee's first day of active employment.
- Section 2 must be completed within three business days of the date of hire.
- The instruction document and List of Acceptable Documents (page 3 of the Form I-9) should be made available to employees at the time they complete Section 1 of the form.
Employees are free to choose which legal documents they submit to establish their identity and eligibility to work in the United States. They must present original, unexpired documents in person to the company representative completing Section 2 of the I-9.
I-9s should also be stored in a secure location separate from personnel files. If photocopies of documents are made, they should be retained with the I-9s and presented during an investigation or audit by an authorized agency.
Completed I-9s must be retained for as long as an individual is employed. I-9s for employees who have separated must be retained for three years after the date of hire (first day of work for pay) or one year after the date employment ends, whichever is later.
Businesses, moreover, should ensure that electronic I-9 data is correctly input and fully compliant with the regulations. ICE can ask for an Excel spreadsheet to review I-9 and E-verify data. Data that is incorrectly entered or appears illogical can lead to hefty penalties.
For independent contractors, meanwhile, an I-9 is a must.
Overall, the best way to minimize your company's liability is to conduct I-9 periodic internal audits and, when necessary, to follow specific (United States Citizenship and Immigration Services (USCIS) procedures for correcting errors or omissions.
Related: How to Avoid Regulatory Fire in the Gig Economy
Audits should be conducted by someone knowledgeable about immigration, I-9 requirements and USCIS rules, to ensure that your immigration compliance program meets the objectives set forth in the U.S. Federal Sentencing Guidelines. Significant reductions in corporate liability are available when isolated misconduct occurs, but a generally effective compliance program is in place.
