Employers Awaiting the Results of an I-9 Audit Initiated After November 2, 2016 May Be in For an Unpleasant Shock

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An obscure provision in the Bipartisan Budget Act of 2015, which took effect November 2, 2015, dramatically changed the formula for calculating inflation adjustments to existing federal penalty schedules, including the penalties for knowingly hiring or continuing to employ an undocumented alien worker and for failing to prepare and maintain properly completed USCIS I-9 paperwork forms. On June 16, 2016, the U.S. Department of Justice (DOJ) published an interim final rule implementing the new formula beginning with fine citations issued on and after August 1, 2016.   

The new penalty range for paperwork violations has been reset in the range of $216 to $2,156 per non-compliant I-9 Form (i.e., a Form containing one or more substantive violations or uncorrected technical violations) —  a 151% increase over the current range of $110 to $1100 per non-compliant Form. Where the needle falls within the fine range is dictated by the percentage of non-compliant Forms within the total inventory of forms subject to an ICE (U.S. Immigration and Customs Enforcement) inspection notice.   When an employers’ non-compliance rate reaches 50%, the current base rate fine per cited I-9 Form is $935, subject to adjustment up or down by a set of mitigating and aggravating factors each valued at 5% of the base fine.  ICE has yet to release the base rates for the new I-9 violation fine schedule — but the 50% non-compliance ratio is likely to yield a base rate fine of approximately $1,768 for each non-compliant Form I-9 identified by ICE auditors.

The increased fine range for knowing hire/continuing-to-employ violations has similarly been adjusted upwards by a factor of 51%.  Should ICE charge an employer with knowing hire violations arising after November 1, 2015, in a first offense case the monetary penalty for each such unauthorized worker would be set between $539 and $4,313 — depending upon the employer’s overall non-compliance rate and the presence of aggravating and mitigating factors.  

Given the substantial increase in I-9 and knowing hire fine rates, prudent employers should seek legal advice about their options for correcting past violations before ICE knocks at the door.  Once an inspection notice is served, it’s too late to correct substantive violations — which frequently push up the overall non-compliance rate above the 50% level, triggering assessment of the highest base rate fines within the authorized range.  

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