From February 2023¹ to the present, the Office of the Chief Administrative Hearing Officer (OCAHO) issued four decisions concerning the amount of I-9 penalties.² In all four cases, the employers underwent Immigration and Customs Enforcement (ICE) I-9 audits pursuant to a Notice of Inspection (NOI). On average, OCAHO reduced the penalties by 24.36%.

Below is a summary of these decisions:

Determining When Assessment is Made on Penalties

The most interesting of these cases is the third case, 17 OCAHO no. 1470e, as it discussed when the assessment (or imposition of the penalties) should be decided. In its complaint, ICE proposed a penalty of $90,387.20 for the employer’s failure to timely prepare and/or present I-9 forms for 46 employees. The Chief Administrative Law Judge (Chief ALJ) issued a Final Order on Penalties, assessing a total civil penalty of $56,580 against Respondent. In its Final Order on Penalties, the Chief ALJ determined that, for purpose of establishing the appropriate penalty range, the date of assessment is the date that ICE served a Notice of Intent to Fine (NIF) on Respondent.

The Chief Administrative Hearing Officer’s (CAHO) Notification of Administrative Review observed the conflict between the Chief ALJ’s analysis and the OCAHO decisions. Thus, CAHO James McHenry held that the final order by OCAHO is the date upon which the final assessment of the penalties is determined, not the date of the NIF, as was previously held by the Chief ALJ. In reaching this conclusion, the CAHO thoroughly reviewed relevant statutory language, regulatory provisions, prior OCHO interpretations [note that until 2020, the assessment was made on the date of the final order], dictionary definitions, usage by federal courts, usage by parties before OCAHO, and policy considerations. After this review, the CAHO found:

[I]n accordance with the ordinary and plain meaning of the term “assessment,” an assessment is the determination or imposition of a civil money penalty for violations of 8 U.S.C. § 1324a, and that penalty—i.e., an assessment—only takes effect upon the issuance of an administratively final order. According to this interpretation, the agency which issues the final order is the one that makes the assessment. If DHS issues the final order, then DHS makes the assessment; if OCAHO issues the final order, then OCAHO makes the assessment. Further, under this interpretation, the penalty contained in DHS’s NIF—and, subsequently, in a complaint if the case is filed with OCAHO—is simply a proposed penalty. Because a proposed penalty is neither imposed nor determined with finality, it is not an assessment. In fact, a NIF (Form I-763) itself never imposes or finally determines a penalty, for even if a respondent fails to request a hearing, DHS must issue a separate final order (Form I-764) which is the instrument that actually imposes a civil money penalty for violations of 8 U.S.C. § 1324a.

17 OCAHO no. 1470e at 4-5.

In his decision, the CAHO overruled the Chief ALJ, as well as United States v. Farias Enters. LLC, 13 OCAHO no. 1338 at 7 & n. 3 (2020), which stated:

[A]n assessment is a proposed civil money penalty, rather than a final order, and the assessment of a civil money penalty is distinct from the final determination of such a penalty. Consequently, under this interpretation only DHS may assess civil money penalties for violations of 8 U.S.C. § 1324a because only DHS issues a NIF. Moreover, under this interpretation of an assessment, DHS's calculation of the penalty range reflected in the NIF is binding on OCAHO.

Id. at 5.

Based on this conclusion, the CAHO did not disturb the Chief ALJ’S determination of penalties of $56,580 because they appeared reasonable and proportional.

Although the CAHO’s analysis may be legally correct, it should be noted that it makes it more difficult for employers to determine their potential exposure when considering settlement. However, knowing that OCAHO historically lowers the penalties if an employer litigates at OCAHO, this decision will likely have insignificant impact on whether a matter is settled or litigated.  

Use of Five Statutory Factors

In 16 OCAHO no. 1436b, Respondent failed to prepare any Forms I-9 in advance of receiving an NOI, which requested all of their Forms I-9. Following receipt of the NOI, Respondent provided ICE 24 Forms I-9, which it prepared after receipt of the NOI. (ICE does not consider Forms I-9 prepared after receipt of an NOI.) ICE calculated a civil monetary penalty of $107,140.00, for failure to prepare and/or present 55 Forms I-9. The decision evaluated the five statutory factors³ that will cause the penalties to be mitigated or aggravated 5%.

For the first mitigating factor, size of the employer, ICE noted that Respondent’s was a neutral factor, but the OCAHO ALJ found that since Respondent only employed 22 employees, it was entitled to a 5% mitigating factor. The OCAHO ALJ found the second factor, employer acting in good faith/bad faith, as neutral because although Respondent had a 100% violation rate, the violation rate did not warrant a finding of bad faith. The third factor (seriousness), was considered as a 5% aggravating factor because OCAHO normally views all I-9 violations as serious. The OCAHO ALJ found the fourth factor employment of undocumented workers, to be a 5% aggravating factor for the two employees who were found to be undocumented. The OCAHO ALJ found fifth factor (history of prior violations), a neutral factor because this was Respondent’s first violation. The ALJ ultimately determined that rather than assess each violation  at $1,948, a $1,500 penalty should be assessed for each of the 53 violations concerning authorized workers, and a penalty of $2,000 should be assessed for each of the remaining two undocumented workers. Thus, the ALJ reduced the penalties from $107,140 to $83,500.

Inability to Pay Defense

In the second case, 17 OCAHO no. 1465a, Respondent was charged with: (a) failure to ensure that 45 employees properly completed Section 1 and/or failed to properly complete Section 2 or 3 of Form I-9; and (b) failure to prepare and/or present the Form I-9 for 20 employees. In its defense, Respondent asserted an inability to pay $130,390 in penalties due to its poor financial health. However, Respondent’s only evidence to support its position was tax statements, which show that gross income was substantially reduced in 2019. The ALJ found “Respondent’s evidence is not detailed enough to show a complete picture of its overall financial health, however. Evidence such as cash flow or balance sheets would provide a better picture of whether the company has the ability to pay the fine.” Despite finding Respondent’s defense unavailing, the ALJ still determined the baseline penalty of $2,006 per violation was excessive and lowered the penalties to “mid-range,” meaning $1,300 to $1,350 per violation. Thus, the penalties were reduced from $130,390 to $85,000. 

Failure to Complete Section 2 of the I-9 Form

In the last case, 18 OCAHO no. 1483a, ICE alleged that Respondent (a) failed to prepare and/or present a Form I-9 for one worker, and (b) failed to ensure proper completion of Forms I-9 for an additional 48 employees. ICE sought a penalty of $92,460. The evidence established that one worker was employed by Respondent when he was in the United States on a visitor visa. As such, that person was not authorized to work; thus, the ALJ found a clear violation. Additionally, Respondent submitted 48 Forms I-9 that were missing the second page, which contains Sections 2 and 3 of the Form. The ALJ found that OCAHO precedent holds that “Failure to complete any part of section 2, including an employer’s failure to sign his or her name is a serious violation.”  The ALJ therefore increased the penalty on Count I from $2,081 to $2,500, for employing a worker without authorization to work, and for Count II, left the penalty unchanged at $1,882.90 for each of the 48 workers. Overall, the ALJ increased the penalties from $92,460.30 to $92,879.20.

Despite 18 OCAHO no. 1483a, there is a continuing trend of OCAHO decreasing the average amount of penalties between 24% and 40%. Therefore, it is often beneficial to litigate before OCAHO. Alternatively, after a NIF is filed but before a complaint is issued, employers should consider using the possibility of litigation before OCAHO to negotiate lower penalties with ICE .

Employers seeking more information on I-9 compliance trends can contact their immigration attorney.