Ace the audit

Features - Cover Story

Business owners must be vigilant to keep accurate I-9 forms or face intense federal scrutiny that may result in hefty fines, or worse.

March 7, 2018

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You likely have scads of paperwork filed away, including Form I-9 for employment eligibility verification. But how closely are you examining these forms once they’re completed? If you’re not scrutinizing every line and every box of that form, members of the U.S. Immigration and Customs Enforcement (ICE) will, and at a cost.

All employers must complete and retain Form I-9 for every person they hire after Nov. 6, 1986, in the U.S., as long as the person works for pay or other type of payment. Make certain the Form I-9 you’re using is the correct version. Look at the revision date printed on the bottom left corner of the form, and not the expiration date printed at the top of the form. At press time, only forms showing “Rev. 07/17/2017” are valid. All versions, including notices of revised versions, are located on the U.S. Citizenship and Immigration Services (CIS) site at Employers may use the online SmartI-9 form, which is an electronic form that was designed to help prevent mistakes.

Employers must keep original Forms I-9 for all current employees. However, I-9s of former employees must be kept for at least three years from the date of hire or for one year after the employee is no longer employed, whichever is longer.

If these forms are not filled out correctly or filed and handled improperly, the offending company is likely to be audited.

An I-9 audit could happen at any time, and every employer must be prepared, says David Jones, partner at Fisher & Phillips LLP’s Memphis office. Any number of things can trigger an audit, he says, such as dealings with the Department of Labor, the Equal Employment Opportunity Commission or the Occupational Safety & Health Administration, any of which can alert ICE. The CIS, which oversees the E-Verify program, may receive data that would be referred to ICE, information may come in on a tip line, or ICE may be conducting targeted investigations, he adds.

According to the Society for Human Resource Management, ICE audited 1,360 organizations in 2017, resulting in 71 indictments and 55 convictions of business owners and managers. In January, ICE targeted 7-11 stores across the U.S. with audits and raids. Those actions “send a strong message to U.S. businesses that hire and employ an illegal workforce: ICE will enforce the law, and if you are found to be breaking the law, you will be held accountable,” says ICE deputy director Thomas D. Homan, in a released statement. “Businesses that hire illegal workers are a pull factor for illegal immigration and we are working hard to remove this magnet. ICE will continue its efforts to protect jobs for American workers by eliminating unfair competitive advantages for companies that exploit illegal immigration.”

The Associated Press reports that ICE’s Homeland Security Investigations acting director Derek Benner says ICE is "gearing up for ... large-scale compliance inspections" this year. "It's not going to be limited to large companies or any particular industry — big, medium and small,” he tells the AP.

There is a concern of more aggressive worksite enforcement from ICE, including using tools such as audits or raids, says Craig Regelbrugge, senior vice president of industry advocacy and research at AmericanHort.

“I’ve heard reports of audits ticking up in California, and part of what we’re seeing there is tension between the state and the feds in regards to immigration. We’re seeing a bit of a showdown between the California Attorney General and ICE,” Regelbrugge says.

But all growers need to be prepared for audits, not just ones based in California.

“The people who keep the economy going are the ones caught in the cross hairs,” he says. “There’s this public perception that these folks are being paid under the table and taking jobs. But in reality, these are hardworking, experienced members of our extended family.”

And growers must have a contingency plan and coping strategies in place if, after an audit, they lose a chunk of their workforce, he adds.

“We can’t ignore the emotional angle for those left behind if workers are deported. That’s something we don’t talk much about, but it’s so important,” he says.

The audit process

In the case of an audit, ICE sends the employer a Notice of Inspection, and the employer has three business days to supply ICE with all of its I-9s. Companies may ask for an extension, Jones says.

“ICE is going to ask you for an I-9 on all active employees hired after a certain date, as well as payroll records, an electronic spreadsheet with all employee names and basic company information. They may also ask for quarterly tax records,” Jones adds. “With any type of audit, make sure you keep copies of anything you supply to the government.”

The paperwork review typically takes a few weeks, but depending on the size of the business, it could take a few months.

When technical or procedural violations are found, an employer is given 10 business days to make corrections. An employer may receive a monetary fine for all substantive and uncorrected technical violations. Employers determined to have knowingly hired or continued to employ unauthorized workers will be required to cease the unlawful activity, may be fined, and could be criminally prosecuted.

Penalties for substantive violations, which includes failing to produce a Form I-9, range from $110 to $1,100 per violation. Monetary penalties for “knowingly hire” and “continuing to employ” violations range from $375 to $16,000 per violation. According to ICE, it considers five factors to determine penalty amounts: the size of the business, good faith effort to comply, seriousness of violation, whether the violation involved unauthorized workers, and history of previous violations.

ICE will notify the audited party, in writing, of the results of the inspection once completed. The most common notices are:

  • Notice of Inspection Results – also known as a "compliance letter," used to notify a business that they were found to be in compliance.
  • Notice of Suspect Documents – advises the employer that based on a review of the Forms I-9 and documentation submitted by the employee, ICE has determined that an employee is unauthorized to work and advises the employer of the possible criminal and civil penalties for continuing to employ that individual. ICE provides the employer and employee an opportunity to present additional documentation to demonstrate work authorization if they believe the finding is in error.
  • Notice of Discrepancies – advises the employer that based on a review of the Forms I-9 and documentation submitted by the employee, ICE has been unable to determine their work eligibility. The employer should provide the employee with a copy of the notice, and give the employee an opportunity to present ICE with additional documentation to establish their employment eligibility.
  • Notice of Technical or Procedural Failures – identifies technical violations identified during the inspection and gives the employer ten business days to correct the forms. After ten business days, uncorrected technical and procedural failures will become substantive violations.
  • Warning Notice – issued in circumstances where substantive verification violations were identified, but circumstances do not warrant a monetary penalty and there is the expectation of future compliance by the employer.
  • Notice of Intent to Fine (NIF) – may be issued for substantive, uncorrected technical, knowingly hire and continuing to employ violations.

In instances where a NIF is served, charging documents will be provided specifying the violations committed by the employer. The employer has the opportunity to either negotiate a settlement with ICE or request a hearing before the Office of the Chief Administrative Hearing Officer (OCAHO) within 30 days of receipt of the NIF. If the employer takes no action after receiving a NIF, ICE will issue a Final Order.

Always be ready

Even growers who are participating in E-Verify should be prepared for a potential audit, says Joe Bailey, human resources director at Bailey Nurseries, which has been audited by ICE in the past.

The best way to be prepared and get through an audit is to have trained staff that understands every detail of the form and how to fill it out properly, he says.

Bailey Nurseries employs more than 1,000 people system-wide, which equates to a lot of paperwork, including I-9s.

“In our case, they [ICE] went back three years with this last audit,” he explains. “Out of over 1,000 employees, they found one person with what they call suspicious documents, and that person was no longer employed by us. Our paperwork was as close to perfect as you can get it.

“We received a notice of intention to fine, but ICE was incorrect on several of the things they marked as violations, and we’ve appealed those.”

Bailey Nurseries had copies of all documents for every employee that matched up with every original the company handed over to ICE for the audit.

“Some people may think of having copies of all those documents a liability, but we think it’s a necessity,” he says. “Make sure all your paperwork is well organized.”

Bailey conducts internal audits. Employment or immigration attorneys will also conduct mock audits and help correct any mistakes, he says.

“You’ve got the peace of mind that you’ve checked all your paperwork. Make it a practice to do an internal audit at least every year,” he adds.

Willoway Nurseries in Avon, Ohio, has been preparing for audits for a number of years, although an official audit has not happened yet, says Emily Showalter, the nursery’s chief operations officer. The nursery conducts internal audits and created a standard operating procedure for filling out and handling I-9s.

“If we have an ICE audit, we can show them our procedures, which shows we take this seriously,” she says.

Showalter and the rest of her HR staff are trained in the rules of filling out and handling I-9s. Willoway runs quarterly checks of employees who should have I-9s, and those checklists are kept with the I-9 files.

“The checks and the internal audits are not that difficult. We’d rather be proactive,” she says.

Showalter and her staff keep immaculate notes and organize the mountain of paperwork.

“You can’t drop everything to get all your paperwork in line in three days for an audit, so that’s why you have to be organized,” she adds. “If we understand the fine details, we can show good effort [in the event of an audit] and have all these things ready.”

And in the case of a disaster, make sure the forms are in a fire-safe area, she says.