Small Businesses Remain Targets of Immigration and Customs Enforcement

To verify identity and employment eligibility, federal law requires every employer to timely complete and maintain a Form I-9 for each employee. Some small businesses mistakenly believe that they are not a likely target for enforcement of these requirements because they do not employ a large work force or they employ no foreign nationals. To believe this is a mistake.

In recent years, Immigration and Customs Enforcement ("ICE") has increased its focus on small businesses. What small business owners might consider minor paperwork violations, ICE may view as "serious" offenses, leading the enforcement agency to seek the maximum penalties for each violation. The results can devastate a small business--some cannot sustain the fine and are forced to close for business, at least temporarily.

The following four cases decided over the last year highlight the continuing enforcement focus on small businesses and the financial impact a Form I-9 inspection can have on small businesses.

1. Black & Blue Restaurant (New York): After an I-9 inspection, Black & Blue faced more than 300 alleged violations and a requested fine of $264,605--nearly half its annual revenue--despite the fact that there were no unauthorized workers employed at its restaurant. Just like many restaurants, Black & Blue had a number of employees who quit after just one or two shifts. So when ICE accused it of failing to properly complete I-9s for nearly 300 employees, Black & Blue argued that almost 50 of those employees worked for less than three days or no longer worked at Black & Blue at the time of ICE's inspection. The judge hearing the case agreed that Black & Blue's ability to comply with I-9 requirements had been frustrated when employees quit within 3 days of hire and it could not be liable for those employees. However, the judge also recognized that the duty to maintain an employee's I-9 continues for three years or one year after termination, whichever is longer. Black & Blue was therefore in violation for any employees terminated during those respective periods and forced to pay a substantial fine.

1. Mr. Mike's Pizza, Inc. (New York): Like most mom-and-pop pizza shops, Mr. Mike's staff of 10-12 consisted mostly of personal friends from the local community. Only a few foreign nationals worked at the restaurant, all of whom were hired through a staffing agency. When Mr. Mike's received a Notice of Inspection ("NOI") from ICE, it realized that it had not completed any Form I-9s for its employees and proceeded to do so. Because all of the I-9s were completed untimely, ICE sought a penalty of $14,960--not a significant break from the maximum fine of $17,600, considering that Mr. Mike's was a small business that did not employ any unauthorized workers. A judge concluded that "ICE is correct in finding that the violations are serious," and imposed a fine.

1. Kobe Sapporo Japanese, Inc. (North Carolina): Located in Smithfield, North Carolina, where unemployment has hovered around 10% for several years, the sushi restaurant Kobe Sapporo was losing money to the tune of nearly $20,000 per year. When ICE served it with an NOI, it had not completed any I-9s for 26 employees hired over several years. When it belatedly had employees prepare Section 1 of the I-9, the employees backdated the form. Kobe Sapporo then failed to properly complete Sections 2 and 3, and failed altogether to complete I-9s for four employees. Based primarily on the "backdating" of I-9s as an aggravating factor, ICE sought a fine of $29,452.50, approximately 90% of the maximum fine.

1. Crescent City Meat Company, Inc. (Louisiana): Crescent City Meat is a small family business employing fewer than ten employees (several of whom are family). Its owner did not know that it needed to complete the Form I-9 for each employee. When issued a NOI, Crescent City Meat was unable to prepare forms for its employees retroactively due to documents lost during Hurricane Katrina. These arguments failed to prevent ICE from pursuing charges. The business was charged with failure to prepare and maintain I-9s. ICE sought a fine of $14,025.

In each of these cases, a Form I-9 compliance program designed for a small business may have avoided an ICE investigation and penalty.