On December 22, 2016, the U.S. Court of Appeals for the Second Circuit issued its decision in Buffalo Transportation, Inc. v. United States of America. In that decision, the Court denied the company’s petition for review and upheld the findings issued by the Office of the Chief Administrative Hearing Officer regarding substantive I-9 violations and a $75,000 fine.
As background, Buffalo Transportation, Inc. is a small corporation operated out of Buffalo, New York. The company provides transportation for individuals who need assistance traveling to doctors’ offices and hospitals for medical appointments.
In August of 2013, U.S. Immigration and Customs Enforcement (ICE) issued an I-9 audit notification to the company. During the audit process, ICE determined that all 54 of the company’s I-9 forms, which are utilized to confirm each employee’s identity and authorization to accept employment in the United States, were completed and signed on an untimely basis. According to Immigration and Nationality Act section 274A, employers are required to review documentation and complete the I-9 forms within three business days of hire. In this case, it was determined that the 54 forms were completed and signed in response to the audit notification.
As a result of these findings, Buffalo Transportation, Inc. was fined $75,000. The original fine of close to $110,000 was adjusted by an Administrative Law Judge after assessing, among other things, the size of the company and a lack of bad faith.
Buffalo Transportation, Inc. sought review by the Second Circuit. The company specifically argued that the failure to timely complete the I-9 forms should have been deemed a procedural error, for which a good faith argument is available, rather than a substantive error. The Court denied the arguments and upheld all aspects of the decision.
In particular, the Court gave deference to a 1997 policy memorandum issued by the former Immigration and Naturalization Service (INS), which provided guidance on the difference between substantive and procedural errors in the context of I-9 completion. According to the memo, a substantive error is one that undermines the statutory requirements of employment verification. A procedural error is one that is small and easily solvable. In utilizing this guidance, the Court agreed with the administrative decision that the complete failure to complete an I-9 form within the allotted three business days of hire is substantive. On the other hand, a procedural error is more akin to inadvertently placing the wrong birth date on the form. By upholding the finding that the 54 violations were substantive, the Court also upheld the $75,000 fine lodged against the company.
This decision, and particularly the reliance on a legacy INS memo, signals that there likely is no room for change anytime soon. I-9 compliance has been and will continue to be a major issue for U.S. companies. As this case demonstrates, the failure to understand the I-9 process and adhere to the statutory requirements can have a significant financial impact.
The Immigration team at Barclay Damon, LLP is well versed in I-9 issues and is ready to assist clients with questions and self-audits to help ensure compliance.