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 annually, 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. DOJ updated the penalty schedules again on February 3, 2017, sending the limits for fines levied on or after February 3, 2017, even higher.
The 2017 adjusted penalty range for first-time paperwork violations has been reset in the range of $220 to $2,191 per non-compliant I-9 Form (i.e., a Form containing one or more substantive violations or uncorrected technical violations) — a dramatic increase over the $110 to $1100 range in effect from 1998 until the 2016 increase was implemented in 2016. Roughly speaking, employers should expect to pay double fine amounts in effect up to August 1, 2016.
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 2017 base rate fine per cited I-9 Form is expected to approximate $1860, subject to adjustment up or down by a set of mitigating and aggravating factors each valued at 5% of the base fine. Fines for knowing hire violations issued after February 3, 2017, will range from $578 to $4384 in a first offense case per capita.
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.