Q&A: Correcting I-9s and documentation errors for DHS audit

Question

An HR person who was new to the company received a Department of Homeland Security request for I-9 and E-Verify documentation. They did an initial review and discovered that there is no formal compliance infrastructure in place. Further, two employees have no W-2s, 1099s, I-9s, or any formal employment records, and they are also receiving disability benefits, which were intentionally not reported to avoid wage disclosures.

The HR person wants to correct course but is unsure how to terminate the unlawful arrangements or respond to the audit without further incriminating themselves or the company.

What guidance can you offer about the following?

1. How to respond truthfully and appropriately to the DHS audit request.
2. How to handle termination or separation from the two individuals paid off the books.
3. Whether voluntary disclosure or self-reporting may mitigate penalties.

Answer

Please be advised that the HR Hotline can provide guidance on general legal considerations but does not provide legal advice and should not be used as a substitute for legal advice from a qualified attorney licensed in your state.

General information regarding DHS Audits

All employers are subject to being audited by the DHS at any time/frequency. The administrative inspection process is initiated with the service of a Notice of Inspection (NOI) upon an employer. Pursuant to 8 C.F.R § 274a.2(b)(2)(ii), employers receive at least three business days to produce the Form(s) I-9 requested in the NOI. In addition, Homeland Security Investigations (HSI) generally requests that the employer provide supporting documentation, which may include, but is not limited to, a copy of the employer’s payroll, a list of active and terminated employees, articles of incorporation, and business licenses.

When an employer responds to a NOI by producing Form(s) I-9, HSI agents and/or auditors conduct an inspection of the Form(s) I-9 for compliance.

When HSI finds technical or procedural failures, the employer receives at least 10 business days to make corrections, pursuant to INA §274A(b)(6)(B) (8 U.S.C. § 1324a(b)(6)(B)). An employer may receive a monetary fine for all substantive violations and uncorrected technical or procedural failures. Auditors will be checking for incomplete, incorrect, or missing forms.

Upon completing its inspection of an employer’s Form(s) I-9 and any related supporting documentation, HSI will notify the employer of its findings in writing by issuing one of the following notices:

• Notice of inspection results: Also known as a “Compliance Letter,” this notice is used to notify a business that it is in compliance with applicable employee eligibility verification requirements.
• Notice of suspect documents: Advises the employer that, based on a review of the Form(s) I-9 and documentation submitted by relevant employee(s), HSI has determined that the documentation presented by employee(s) does not relate to the employee(s) or is otherwise not valid for employment. This notice also advises the employer of the possible criminal and civil penalties for continuing to employ unauthorized workers. HSI provides the employer and employee(s) an opportunity to provide documentation demonstrating valid U.S. work authorization if they believe the finding is in error.
• Notice of discrepancies: Advises the employer that, based on a review of the Form(s) I-9 and any related documentation submitted by employee(s), HSI has been unable to determine the employees’ eligibility to work in the U.S. The employer should provide the employee(s) with a copy of the notice, as well as an opportunity to present HSI with additional documentation establishing valid U.S. employment eligibility.
• Notice of technical or procedural failures: Identifies technical or procedural failures found during the inspection of Form(s) I-9 and gives the employer at least ten business days to correct the forms. After this correction period ends, uncorrected technical or procedural failures become substantive violations.
• Warning notice: Issued when substantive verification violations were identified, but there is an expectation of future compliance by the employer. However, a Warning Notice should not be issued in the following circumstances: instances where: (1) the employer was previously the subject of a Warning Notice or a Notice of Intent to Fine; (2) the employer was notified of technical or procedural failures and failed to correct them within the allotted 10-business day period; (3) the employer had a 100% failure to prepare and present Form(s) I-9; (4) the employer hired unauthorized workers as a result of substantive violations; or, (5) there is any evidence of fraud in the completion of Form I-9 (e.g., backdating) on the part of the employer. Companies that are served a Warning Notice may be subject to a follow-up NOI six months, or later, after a Warning Notice is issued to ensure compliance. A reinspection may be contingent on resources.
• Notice of Intent to Fine (NIF): May be issued for substantive violations, uncorrected technical or procedural failures, knowingly hired violations, and/or continuing to employ violations.

In instances where a NIF is served, charging documents specifying the alleged violations committed by the employer will be provided. Pursuant to 5 U.S.C. §§ 554-557, the employer is entitled to a hearing before an Administrative Law Judge at the Office of the Chief Administrative Hearing Officer (OCAHO). This request must be made within 30 calendar days of receipt of the NIF.

I-9 mistakes and penalties can be costly.  There are generally two types of violations in the I-9 process: knowingly hiring undocumented workers, and paperwork violations. If unauthorized employees are discovered in the course of a government audit, the I-9 penalties for knowingly hiring undocumented workers can range from $716 to $5,724 per employee.  But an audit does not have to reveal undocumented workers in order to subject a company to penalties. Employers can be found liable for I-9 violations if the I-9 records are deficient or improperly completed, even if all employees are authorized to work. That is because of the paperwork violations provision that can be, and always is, assessed independently of the immigration status of the underlying employees. The I-9 penalties for paperwork violations alone (i.e., deficient I-9 paperwork) range from $ 288 to $2,861 per form, even if the employees are working legally. In certain situations, criminal penalties can be assessed. Business leaders can face up to 10 years in prison for knowingly employing undocumented workers.

ICE raids

​An ICE raid is an event in which DHS officials seek to enter a workplace to conduct inspections and to detain individuals without documented permission to work in the United States. ICE raids are highly disruptive to the workplace, often involving immediate inspections and detentions.

To conduct an ICE raid, the DHS officers should present a warrant to search specific areas that are not open to the public. Employers will want to identify a manager/owner in the workplace to interact with DHS officials on-site. Such designated individual will want to request identification and ask for clarification on the purpose and scope of their visit. They will want to request and examine the search warrant, ensuring it is signed by a judge.  A copy should be made and provided to legal counsel. If DHS officials have a warrant, they will take the position that they are entitled to immediate access to the premises and records. They will not wait for an attorney to arrive or provide 3 days to gather documents.

A judicial warrant is a formal written order that gives ICE agents the authorization to make an arrest, a seizure, or a search. To be valid, the judicial warrant must be signed by a US district court (or a state court) judge, include the location to be searched, the persons or items to be seized, and be dated and issued within the past 10 days. Administrative warrants are not from a court and do NOT allow agents to enter nonpublic areas without permission—they read “Department of Homeland Security” and are on Forms I-200 or I-205.

If DHS officials do not have a warrant, the company will want to state that it does not consent to a search and immediately contact their attorney. However, if DHS officials do search with or without a warrant, employers will not want to obstruct ICE actions or engage in hostile actions. Employers should not hide employees, shred documents or provide false information.

Employees have the right to decline to answer questions posed by ICE agents. If ICE agents are questioning employees, ask whether the employee has been informed of their rights, including their right to remain silent or to speak with an attorney. If employees request an attorney, the interview should end.

I-9 form general recordkeeping requirements and internal audit best practices

In the future, this employer will likely want to be sure that their I-9 recordkeeping is accurate by conducting periodic audits. The Immigration Reform and Control Act of 1986 (IRCA) requires employers to verify that individuals are eligible to work by completing an Employment Eligibility Verification Form, known as Form I-9. This process requires inspection of certain supporting documents that establish identity and employment eligibility. Employers may not specify which documents the new hire must provide. Rather, employees may select their preferred documents from a List of Acceptable Documents detailed within Form I-9.

Employers may only accept original documents and those that appear to be genuine and relate to the person presenting them. While regulations do not require employers to copy and retain the documents presented by individuals, it is acceptable to do so. However, if such copies will be retained, remember to follow the same procedure for all new hires.

Employers may opt to complete Form I-9 on paper, but store the form electronically, or may choose to both complete and retain Form I-9 wholly electronically. There is no requirement regarding the storage location of I-9 forms; however, employers must be able to present them to government officials for inspection within 3 days of the date on which the forms are requested.

I-9 forms (and related documentation) must be retained for the duration of employment for current employees. Upon termination of employment, forms should be retained for 3 years after the worker is hired or for 1 year after termination, whichever is longer.

Most employers keep employee Form I-9s in one file, organized chronologically by year, instead of in each employee’s individual file. Although not required by law, separating this information from individual personnel files ensures that the forms can be produced quickly and that federal investigators see only the Form I-9 information and not all of the employer’s files. This practice also helps keep supervisors and management from basing employment decisions on information about an individual’s national origin which is protected under discrimination law.

Form I-9 records (which includes copies of supporting identification documentation) may be retained in paper, microfiche, microfilm, or electronic formats. See 8 U.S.C. §1324a(b)(3). If you keep them in electronic form, you do not have to have a paper signature from employees.

With respect to saving I-9 ID documents, if an employer does not participate in E-Verify, there is no requirement to make copies of documents. Some employers retain copies of documents for legal defense purposes. However, you should be aware that copying documents does not relieve employers of their obligation to fully complete Section 2 of the Form I-9, nor is it an acceptable substitute for proper completion of the Form I-9 in general. If copies or electronic images of the employee’s documents are made, they must either be retained with the Form I-9 or stored with the employee’s records. The USCIS addresses the retention of I-9 ID documents in section 10.2 of the handbook.

Current employees with missing I-9s

First, an employer will want to check to see that there is an I-9 form on file for every current employee. If there are current employees without an I-9, they will want to verify these employees to work in the United States as quickly as possible. While employers are not required to have I-9 forms on file for employees hired before November 8, 1986, all other current employees must have an I-9 on file. An employer should contact employees, explain that the documentation is required under federal law, and that they will need to provide such documents in order to work for the company. If possible, such notification should be both verbal and written. An employer should provide a deadline for the employee to provide documentation, which should be ideally the next business day. Current dates should be used when completing the Form I-9. The date of hire is the employee’s actual date of hire, which may have been years earlier. A short memo to the corrected Form I-9 explaining that there was no I-9 on file and that the employee completed the I-9 at the time of the audit should be attached to the completed I-9.

If an employee cannot find their documents, the United States Citizenship and Immigration Services (USCIS) Handbook for Employers indicates that certain receipts may be acceptable for a specific period of time in lieu of the actual document. Generally, a receipt for a lost, stolen, or damaged document may be acceptable for 90 days. There are also document receipts that may be presented for refugees and lawful permanent residents. Receipts that fall outside of the requirements established by USCIS may not be an acceptable replacement for a List A, List B or List C document.

The UCSIS provides guidance on self-audits and correcting mistakes (see also guidance from the Office of Special Counsel). When auditing I-9s, employers should be checking for the following potential errors in Section 1:

• Whether the employee entered their full name, other names used, address, and date of birth
• If the employee is a lawful permanent resident, whether they entered their A-number/USCIS number
• If the employee is an alien authorized to work in the U.S., whether the employee entered their A-Number/USCIS Number or Form I-94 admission number after selecting “An alien authorized to work until”
• Whether the employee signed and dated the attestation
• Whether the employee entered their first day of employment (“date of hire”)
• Employee should have checked one of the boxes indicating that they are a citizen or noncitizen national of the U.S., a lawful permanent resident, or an alien authorized to work until a specified date—or checks multiple boxes attesting to more than one of the above
• If the form was completed by a preparer or translator, they should have completed the certification block in Supplement A

Note that in Section 1, the social security number is voluntary, except for employers that participate in the E-Verify program. Email address and telephone number are also optional fields.

In Section 2, employers should be sure that they:

• Entered the acceptable List A, or List B and C documents
• Entered the document title, issuing authority, number(s) or expiration date for the documentation presented
• Signed and entered their title, full name, and the date
• Completed Section 2 by the third business day after the date the employee began employment, or, if the employee is hired for 3 business days or less, at the time the employee started employment

The UCSIS also recommends that employers ensure that:

• “The information on the form is clear and can be read.
• The date entered in Section 2 as the date the employee began employment matches the date in payroll records.
• Highlighting marks, hole punches and staples do not interfere with an authorized official’s ability to read the information on the form.
• Copies of the documentation retained with Form I-9 are clear and legible if copies of the documentation are made.
• Abbreviations used are widely understood. Do not use an abbreviation that is not widely known.
• All applicable sections of the form are completed.
• The current version of the Form I-9 is used.
• The English version of the form is completed unless the form is being completed in Puerto Rico. The Spanish version is approved for use only in Puerto Rico.
• Employees are treated in a non-discriminatory manner.”

The UCSIS also has a Handbook for Employers M-274 that this employer may find useful.

Section 3 needs only be completed if the employee’s work authorization expired or if the employee has been rehired. Active U.S citizens and permanent employees should not be reverified.

Making corrections

To correct the form, an employer should draw a line through the incorrect information, enter the correct information, and initial and date the correction. They may also redo the section on a new Form I-9 and attach it to the old form. A note should be included in the file regarding the reasons you made changes or completed a new form. Employers may not conceal any changes made on the form, such as by erasing text, using correction fluid, or backdating.

Lost/missing forms

With respect to I-9 forms that were either lost or never completed, the USCIS advises in its I-9 Central Questions and Answers: “If a Form I-9 was never completed or is missing, the current version of the Form I-9 should be completed as soon as possible. Employers should not backdate the form but should clearly state the actual date employment began in the certification portion of Section 2. Employers should attach a signed and dated explanation of the corrective action taken.”

The UCSIS has also provided Guidance for Employers Conducting Internal Employment Eligibility Verification Form I-9 Audits. Some of the main points of this Guidance are as follows:

• While not required by law, an employer may conduct an internal audit of Forms I-9 to ensure ongoing compliance with the employer sanctions provision of the INA. An employer may choose to review all Forms I-9 or a sample of Forms I-9 selected based on neutral and non-discriminatory criteria.
• What can an employer do to avoid conducting internal audits that are discriminatory or retaliatory? Internal audits should not be conducted on the basis of an employee’s citizenship status or national origin, or in retaliation against any employee or employees for any reason.
• Employees needing assistance to correct or enter omitted information in Section 1 can have a preparer and/or translator help with the correction or omitted information.
• If an internal audit reveals that the wrong version of the I-9 form was used, the employer may correct the error by stapling the outdated completed form to a blank current version and signing the current blank version noting why the current blank version is attached (e.g., wrong edition was used at time of hire). Alternatively, the employer may draft an explanation and attach it to the outdated completed Form I-9 explaining that the wrong form was filled out correctly and in good faith.
• If an employer thinks that a document does not appear to be genuine or to relate to the person who presented it, the employer should address its concern with the employee and provide the employee with the opportunity to choose a different document to present from the Lists of Acceptable Documents. An employer may not conclude without foundation that a photocopy of an employee’s Form I-9 documentation is not genuine or does not relate to the individual. For an employer that has photocopied Form I-9 documentation, it should recognize that it may not be able to definitively determine the genuineness of Form I-9 documentation based on photocopies of the documentation. An employer should not request documentation from an employee solely because photocopies of documents are unclear.
• An employer may not request specific documents when correcting a Form I-9 as part of an internal audit.

Terminated employees

With respect to terminated employees, employers should use a similar process to correct any errors you find on I-9s retained for terminated employees. Note however, that employers will not be able to correct any errors that require the employee’s input, such as missing documentation or missing signatures.

Audit logs

Many employers also find it useful to document their audit by keeping an audit log. In this log, you will document the results of the audit, including any errors or omissions that were found and the steps that were taken to correct them.

Other legal issues

​This employer may also be subject to civil and criminal penalties under other federal and state laws. For example, there could be liability for federal income and FICA taxes, as well as state income taxes. This employer also likely owes contributions to federal and state unemployment insurance taxes, as well as workers’ compensation coverage premiums. Further, an employer paying an employee off the books would have difficulty defending itself should an employee claim that they were not being paid minimum wage and/or overtime. An employer who is knowingly enabling an employee to fraudulently receive government benefits could also be held liable under certain circumstances.

Recommendations

​We cannot provide legal advice on how this employer should communicate with the DHS or what they should disclose. The administration has emphasized its interest in mitigating employer penalties for immigration violations and providing training resources to employers. For example, DHS has launched the HSI Mutual Agreement between Government and Employers (IMAGE) Program, through which employers give ICE access to their I-9 records, and ICE waives or significantly reduces potential fines for non-criminal violations.

The program emphasizes self-policing and rewards participation by forgoing subsequent I-9 inspections for four years. However, knowingly hiring an illegal employee disqualifies a business from becoming a member. Similarly, the DOJ has increased incentives for companies to self-report criminal violations—including, in some cases, allowing companies who self-report to avoid criminal prosecution. However, we would strongly recommend that this employer retain an attorney to help them navigate any such reporting process.

We also cannot advise on whether this employer should terminate these employees, other than to say that an employer should not be employing a worker “under the table” nor should an employer be employing a worker who is not authorized to work in the United States. However, an employer should be sure that they have given the employees the opportunity to provide I-9 documentation (see Current employees with missing I-9s above).

Due to the potential for substantial civil and criminal penalties, and the current regulatory environment in which the new administration is taking increased action and tougher enforcement of immigration laws, we would strongly recommend that this employer consult with legal counsel to help guide them through the DHS audit process and their communications with and responses to governmental authorities.

Legal counsel can help employers audit I-9s, make allowable corrections to minimize penalties and, if necessary, negotiate a short extension for gathering records. They can also communicate and work with ICE officials to streamline the audit process to keep ICE agents away from the worksite. Furthermore, legal counsel will be able to assist them with assessing and mitigating potential liability under various federal and state laws.

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