Ms. Sova

Hospitality Law

I-9 Compliance: What Hotel Employers Should Do Before ICE Comes Knocking

By Kristine Sova, Attorney, Venable LLP

Co-authored by Lesley Pate Marlin, Attorney, Venable LLP

While seemingly unimportant, those pesky one-pagers known as the “Form I-9” that all employers are required to complete for new hires can be the source of significant liability. Since taking office, the Obama Administration has been targeting employer compliance with I-9 paperwork and has drastically increased the number of I-9 audits conducted by U.S. Immigration and Customs Enforcement (ICE).

The result? In fiscal year 2010, ICE agents recovered penalties of $6.9 million from businesses, criminally charged nearly 200 business owners and managers with immigration violations, and conducted more than 2,000 compliance audits of employer-prepared I-9 work eligibility forms.

Unfortunately, 2011 has not provided a reprieve for employers. Midway through fiscal year 2011, ICE agents already recovered record penalties of $7.1 million from businesses, criminally charged nearly 160 business owners and managers with immigration violations, and conducted more than 2,300 compliance audits of employer-prepared I-9 forms.

Hotels are Among the Employers Most Likely to be Audited

ICE no longer randomly selects employers for I-9 audits. Instead, ICE targets employers based upon leads and intelligence, whether it be from the public, a referral from another law enforcement agency (such as the Department of Labor), or a news article. In addition, ICE concentrates upon industries notorious for hiring of illegal immigrants as well as businesses that may present vulnerabilities at critical infrastructure sites. As a result, hotels, particularly ones located near airports or mass transit, can expect a greater likelihood of audit.

Why Hotel Employers Should Take Precautionary Measures to Ensure I-9 Compliance

Financial penalties and criminal charges are not the only risks that hotel employers face if they are audited by ICE. Additional penalties include debarment for employers participating in federal contracts or receiving other government benefits. Other risks involve claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), which includes workplace immigration claims on the list of criminal acts supporting RICO claims; claims of discrimination, which are typically filed by the U.S. Department of Justice following an ICE audit; and shareholder suits, which generally allege that by hiring illegal workers, the company jeopardized the company’s legal and financial standing, resulting in harm to its shareholders.

In the context of a mergers and acquisitions, I-9 issues can devalue a company, leading to a lower purchase price. Further, in high-risk industries, the mere happening of an audit can result in the loss of an entire workforce. In those instances, employers have been forced into multi-week closures while new employees are hired and trained. ICE audits also raise public relations and customer perception issues for many employers, resulting in loss of business.

Proactive Steps Hotel Employers Should Take Now

With hotel employers facing such a multitude of potential penalties and sanctions, the best course of action for any hotel employer is to be proactive. The ICE audit process begins with service of a notice of inspection (NOI) that requires an employer to turn over all of its I-9 forms on only three business days’ notice. Although not unheard of, extensions of time are typically only for an additional day or two. With the time between notice and audit providing barely enough time to account for all employees working at most hotels, it is important for hotel employers to review their compliance status and make any possible corrections in advance of any inspection by ICE.

Self Audit Early and Often

The first step any hotel employer should take is to conduct a self audit of its I-9 forms. When conducting a self audit, hotel employers should:

1. Confirm that the hotel has an I-9 form on file for: (a) every current employee; (b) every employee hired within the last three years, whether or not the employee is still employed; and (c) every former employee who left employment within the previous one year period.

2. Discard any I-9 forms the hotel is no longer required to maintain.

3. Confirm the hotel has a consistent practice on photocopying supporting I-9 documents from Lists A, B, and/or C. Photocopying supporting I-9 documentation is not required, but selective photocopying of documents for some, but not all, employees may expose a hotel employer to claims of discrimination based on national origin or some other protected basis.

4. Confirm all I-9 forms are filled out completely and correctly. Even one seemingly innocent error can result in a penalty, which ranges from $110 to $1,100 for each paperwork violation. Moreover, many hotels fail to realize that under the Immigration Control and Reform Act of 1986 (IRCA), which imposes criminal and civil liability for knowingly hiring and continuing to employ unauthorized aliens, “knowing” employment of unauthorized aliens does not have to be based upon either actual or constructive knowledge.

An employer will be considered to have constructive knowledge of an IRCA violation if certain facts or circumstances support the inference that the employer knows that a worker is not authorized to work in the United States. Constructive knowledge has been imputed to employers in each of the following instances: (a) when an employer fails to complete an I-9 form; (b) when an employer improperly completes an I-9 form; (c) when an employer fails to re-verify a worker’s expired employment authorization; or (d) when an employer ignores a no-match letter from the Social Security Administration (SSA). The penalties for knowingly hiring and continuing to employ violations range from $375 to $16,000, with repeat offenders receiving penalties at the higher end.

1. Provide advance notice to any unions before correcting any I-9 paperwork of any bargaining unit employees. Many collective bargaining agreements require advance notice to the union of any “work authorization issues” involving their membership. In the absence of an advance notice requirement, hotels should consider providing advance notice to the union anyway as part of its union relations practice.

2. Be transparent about making corrections. Hotels that are subject to an ICE audit in the future will want ICE investigators to know what steps the hotel took to audit and correct its I-9 paperwork. To this end, hotels can either (a) strike a line (in a different color ink) through the incorrect information on an old I-9 form, note the correct information on the old I-9 form, and date and initial those changes, or (b) complete a new I-9 form. However, hotel employers should not discard the old I-9 form so that they may demonstrate to ICE investigators that they completed an I-9 form at the time of an employee’s hire.

3. Complete a new I-9 form if any required I-9 forms are missing.

4. Maintain I-9 forms separately from other personnel files. Doing so will prevent sensitive information from being revealed during an audit.

5. Make a note in the hotel’s segregated I-9 paperwork file that a self audit was completed on or as of a particular date.

In conjunction with any self audit of I-9 paperwork, hotels should audit no-match letters received from SSA. These letters inform employers that a reported name or Social Security Number does not match SSA’s records. The purpose of a no-match letter is to obtain corrected information to help SSA identify the employee to whom certain earnings belong in order for SSA to post the earnings to the correctly identified worker’s earnings record. When ICE conducts an audit of a company’s I-9 records, one of the items normally requested are no-match letters received from SSA. Since ICE may view an employer’s failure to respond to a no-match letter as an employer’s knowing employment of an unauthorized alien, it is equally important for hotels to maintain no-match letters and investigate each letter that is received.

Hotels should consider re-auditing every four to six months to ensure paperwork is current. Re-auditing less frequently is acceptable if the hotel’s workforce is small and the hotel does not see a high level of turnover in employment.

Developing and Following a Compliance Plan

In addition to conducting self audits, hotel employers should also prepare and follow a compliance plan. The plan should include a description of the roles and accountability of the various departments and positions in the hotel, along with time frames in which certain actions should occur. Specifically, the compliance plan should include a mechanism for the hotel to: (1) complete and maintain I-9 forms, including calendaring reminders for re-verifying employment of employees with expiring employment authorization; (2) conduct self audits of immigration paperwork on a recurring basis; (3) respond to any SSA “no match” letter received by the hotel; (4) respond to any NOIs received from ICE; and (5) deal with any instances where the hotel learns that any of its workers are not authorized to work in the U.S. In addition, any compliance plan should describe how and when certain issues should be escalated to certain members of upper management, in-house counsel, and outside counsel.

Once the compliance plan is in place, hotels should conduct staff training and ensure that employees not only understand the plan, but that employees have the tools necessary to implement the plan.

Hotel employers should be mindful that employment standards and processes relating to immigration compliance continue to be debated at the federal and state law level and should expect this area of the law to be in flux for the foreseeable future. Therefore, after developing any compliance plan, hotel employers should stay up to date on any immigration compliance standards, regularly update the compliance plan to account for any changes in applicable law and regulations, and train employees on any changes to the compliance plan.

While no employer can avoid being the subject of an ICE audit, any hotel that self audits regularly and implements a compliance plan will be able to demonstrate a good faith effort to remain compliant with immigration laws, two factors considered by ICE when determining penalties that could ultimately spare a hotel serious penalties.

This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can only be provided in response to specific fact situations.

This article was co-authored by Lesley Pate Marlin. Ms. Pate Marlin concentrates her practice at Venable LLP on labor and employment counseling and litigation where she represents employers in a variety of industries, including hospitality, hotels, restaurants, and entertainment. Ms. Marlin counsels her clients on employment practices, policies, and decisions and assists them in developing strategies to achieve their business objectives while minimizing the risk of litigation and complying with the various employment laws, including Title VII, the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA) (Title I and Title III), the Family and Medical Leave Act (FMLA), the Genetic Information Nondiscrimination Act (GINA), the Fair Labor Standards Act (FLSA), the Worker Adjustment and Retraining Notification Act (WARN), the Uniformed Services Employment and Reemployment Rights Act (USERRA), state leave laws and state wage and hour laws. She conducts training for employers on equal employment opportunity compliance, sexual harassment, disability or religious accommodation, FMLA, performance reviews, and employment law developments. Ms. Marlin defends employers in federal and state courts, as well as in arbitration and before administrative agencies. Ms. Marlin is actively involved in the legal profession and the community. For more information, please visit http://www.venable.com/lesley-pate-marlin

Kristine Sova is an attorney with Venable LLP concentrating in the areas of employment and labor law. Ms. Sova focuses a large part of her practice on the hospitality industry. As a graduate of the French Culinary Institute’s Restaurant Management Program, she has a unique insider’s perspective on the business of hotels, restaurants, taverns, and caterers. Ms. Sova draws upon this insight to provide practical, real-world advice and counsel that is tailored to suit her hospitality clients’ business needs. In her practice, Ms. Sova defends employers against allegations of federal, state and local equal employment opportunity, reasonable accommodation, leave, and wage-and-hour law violations. Ms. Sova also devotes a substantial portion of her practice to counseling employers on ways to avoid litigation through business decisions, such as advising on issues pertaining to employee relations, policy and practice development and implementation, employment contracts and separation agreements, termination of employment, and reductions in force, and regularly training managerial and rank-and-file employees on harassment, discrimination and retaliation prevention. Ms. Sova can be contacted at 212-808-5662 or kasova@venable.com Extended Bio...

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