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Get ready for Form I-9 audit: ICE agent is coming

In 2010, the innocuous-looking one page Form I-9 led to record penalties, criminal charges, and federal-contract debarments against employers. All indications are that federal immigration-law enforcement focused on I-9 audits is likely to be even more aggressive in 2011, as the government just announced another massive number of audits of employer records.

The rise of I-9 audits

The federal government’s focus on Form I-9 began in April 2009 when the Obama administration announced a new worksite enforcement strategy. The new strategy is to penalize employers that knowingly hire illegal workers, marking a dramatic shift from the prior decade, when the focus was on detecting and apprehending illegal workers.

As the focus of the federal government’s immigration policy shifted from targeting employees to targeting employers, so too did the means for carrying out this policy. In short, workplace raids have largely been replaced with I-9 audits.

The form has its roots in the Immigration Reform and Control Act of 1986, which makes it unlawful for employers to knowingly hire unauthorized workers. This law correspondingly requires employers to verify that the employees they hire are eligible to work in the United States. Form I-9 is the tool for implementing these mandates, making it the logical starting point for government investigators geared toward ferreting out noncompliant employers.

Aggressive enforcement by ICE

The federal agency tasked with carrying out I-9 audits is U.S. Immigration and Customs Enforcement, the principal investigative arm of the U.S. Department of Homeland Security.

ICE has approached its work with tenacity. Penalties, criminal charges, audits conducted, and debarments all increased dramatically in fiscal year 2010 over the previous fiscal year.

In FY 2010, ICE agents:

•             Recovered record high penalties of $6.9 million from businesses, up from $1.03 million in FY 2009;

•             Criminally charged 187 business owners or managers with immigration violations, as compared with 114 in FY 2009;

•             Conducted 2,196 Form I-9 audits, compared with 1,444 in FY 2009; and

•             Debarred 146 businesses or individuals from holding federal contracts, compared with 83 in FY 2009.

ICE has also launched massive “audit initiatives” on a nationwide, regional or industry-wide basis.

In July 2009, ICE audited 654 employers nationwide. Then in November 2009, ICE audited 1,000 employers involved in what it called “critical infrastructure” (i.e., in industries involving public safety and national security). ICE targeted 180 companies in five southern states in March 2010 and then in September 2010, audited yet another 500 companies nationwide.

In February 2011, ICE issued notices of inspection to 1,000 employers.

Electronic completion and storage pitfalls

Employers that have switched from a manual system for completing and storing Form I-9 to an electronic one may be particularly vulnerable. ICE’s recent audit of clothing retailer Abercrombie & Fitch illustrates this point.

A&F agreed to pay a fine of $1.05 million following a Form I-9 audit of its Michigan stores. This penalty was particularly significant because no unauthorized workers were found among A&F’s employees. The fine resulted from “numerous technology-related deficiencies” in A&F’s system for carrying out its I-9 obligations.

ICE requires employers that electronically complete and/or store Form I-9 to follow detailed, highly technical compliance regulations. One of ICE’s many requirements is for employers to retain an audit trail (a record showing who has accessed the system and the actions performed within or on the system during a given period of time) when a Form I-9 is created, completed, updated, modified, altered, or corrected.

As the A&F fine suggests, this and ICE’s numerous other technical requirements present a trap for unwary employers.

Additionally, employers must ensure that any Form I-9 electronic completion and storage activity also complies with any applicable state law imposing independent obligations to protect personal information, such as the Massachusetts data security law.

It’s important to note that the electronic completion and storage of Form I-9 is separate from the federal Internet-based “E-Verify” system.

A friendly ICE auditor?

Another common mistake employers make is to receive a notice of inspection from ICE and not take the audit seriously. Form I-9 audits do not usually entail multiple ICE agents arriving with guns, as was common during worksite raids in the past. As a result, many employers let their guard down when the “friendly” ICE auditor arrives at the door.

Many employers fail to take the audit seriously, a mistake that typically results in a notice of significant fines when it is generally too late to address problems that would have mitigated the fine amount.

Recommendations for employers

Employers are encouraged to confer with employment counsel now to ensure that they are administering, completing and storing Form I-9 in a timely and appropriate manner. As ICE’s audits typically entail little advance notice, implementing best practices now is highly recommended.

In addition, it is crucial to be sure that the entire workplace is ready for a government audit on short notice. In this regard, ICE will advise other federal agencies of any other violations observed during ICE’s visit, such as report apparent safety violations to OSHA or report to the Department of Labor the failure to post required notices.

An excellent way to get started, or to maintain an existing compliant Form I-9 program, is to provide on- or off-site training to those supervisors, managers and human resources officials involved in the Form I-9 function.

Finally, employers that complete and/or store Form I-9 electronically should confer with both employment counsel and information-technology experts to ensure compliance with ICE’s numerous technical requirements.

William E. Hannum III is managing partner at Schwartz Hannum, a labor and employment firm representing management in Andover, Mass.

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