Recent federal litigation has cast an open question on whether employers should pay fines for I-9 penalties. 

Immigration and Customs Enforcement (“ICE”) has the authority to inspect the I-9 forms of any US employer. If ICE finds technical and/or substantive errors in a company’s I-9 forms it has the authority to fine that company up to $3,200 per unauthorized worker and up to $1,100 for each paperwork violation. For companies with thousands of employees fines can reach six and seven figure values.

Employers are able to negotiate the size of those fines with ICE. If the negotiations sputter, an employer can choose to challenge the final fine at an administrative court at the Department of Justice called the Office of Chief Administrative Hearing Officer (“OCAHO”). That administrative court often reduces the size of imposed fines.

The Department of Justice has opened an investigation and proceedings against SpaceX for nationality discrimination issues unrelated to I-9 compliance. The Government’s proceedings took place before the same administrative body, OCAHO. A federal judge in Texas issued an injunction in those proceedings, SpaceX v Carol Bell, stating that OCAHO has a constitutional flaw, because its decisions are not reviewable by the Attorney General.

If the logic of the decision in the injunction is applied to I-9 fines, employers may similarly have constitutional arguments that OCAHO is not constitutionally suited to review I-9 fines issued by ICE. With that in mind, an employer fined by ICE may choose to challenge its fine at OCAHO, as there is no other avenue for review, and then seek an injunction to challenge that administrative court’s ability to review the matter at all.

For companies facing substantial I-9 fines, there may be reason to explore this option more fully. For companies facing fines $25,000 or less, there is likely a logic just to accept the fine and pay it, as the cost of litigation is likely to exceed the cost of the fine.

Meltzer Hellrung will continue to monitor the SpaceX litigation and the impact on OCAHO and I-9 enforcement.