Immigration Compliance for the Restaurant and Foodservice Industry: What to Do BEFORE (and After) the Government Comes Knocking - March 4, 2012 ...

Immigration Compliance for the
Restaurant and Foodservice Industry:
 What to Do BEFORE (and After) the
   Government Comes Knocking
                             March 4, 2012

                               Presented by
                       Kristine A. Sova and
                         Dismas N. Locaria
                             of Venable LLP

                                      © 2012 Venable LLP

Renewed Enforcement Focus on
Hiring of Undocumented Workers

 Since 2009, the Obama Administration has been targeting employer
  compliance with I-9 paperwork
 The result?
      – Drastic increase in I-9 audits conducted by U.S.
         Immigration and Customs and Enforcement (ICE)

                                                        © 2012 Venable LLP

Renewed Enforcement Focus on
Hiring of Undocumented Workers
(cont’d)
  • The figures?
              FY 2009         FY 2010        FY 2011

  Penalties   $1.03 million   $6.9 million   $10.4 million

  Criminal    114 business    187 business   221 business
  Charges     owners and      owners and     owners and
              managers        managers       managers

  Audits      1,444           2,196          2,496 employers
              employers       employers

                                                               © 2012 Venable LLP

Renewed Enforcement Focus on
Hiring of Undocumented Workers
(cont’d)
    Who is being targeted?

      – Large OR small companies
      – Companies that are the subject of a tip or lead
      – Companies that are the subject of audit or
        investigation by any other governmental agency
      – Specific industries, such as the restaurant industry

                                                       © 2012 Venable LLP

What is at stake with an I-9 audit?
    At the ICE level:

       – Knowingly hiring and continuing to employ
         violations – $375 to $16,000, with repeat offenders
         receiving penalties at higher end

       – Paperwork violations – $110 to $1,100 for each
         violation

       – Debarment by ICE with respect to participation in
         future federal contracts and from receiving other
         government benefits

                                                          © 2012 Venable LLP

What is at stake with an I-9 audit?
(cont’d)
    Other:

      – RICO claims

      – Discrimination complaints

      – Shareholder suits

      – Difficulties with M&A

                                    © 2012 Venable LLP

Debarment
 A lesser known, but potentially ruinous consequence of an
  Immigration and Nationality Act (“INA”) violation is debarment

 Debarment is neither a criminal nor civil action, it is an
  administrative action
   – Not to be imposed for punishment
       • To ensure the public interest is protected from
         unscrupulous businesses and individuals
   – Entities and individuals are judged on whether they are
     “presently responsible”

                                                        © 2012 Venable LLP

Debarment (cont’d)
  INA Basis for Debarment
    – A company or individual may be debarred if:
       • It is a government contractor; and
       • There exists a basis for debarment
          – Pursuant to Executive Order 12989, an INA
            violation is a basis for at least a one-year
            debarment
          – Conviction of an INA violation is sufficient
            evidence
          – An indictment is adequate evidence for
            suspension (a temporary debarment)

                                                     © 2012 Venable LLP

Debarment (cont’d)
   The real question is: Are you a “government
    contractor”?

   The Federal Acquisition Regulation defines a
    government contractor as an entity/individual that:
       “Directly or indirectly (e.g., through an affiliate),
       submits offers for or is awarded, or reasonably
       may be expected to submit offers for or be
       awarded, a Government contract…”
     48 C.F.R. §9.403 (emphasis added)

                                                           © 2012 Venable LLP

Debarment (cont’d)
   ICE has taken a very expansive view of this definition
    – interpreting “reasonably may be expected,” to
    include all companies/individuals located within the
    U.S.
   Based on this definition, ICE:
     – Issues notices of proposed debarment to U.S.
        companies and individuals as a matter of course
        for INA violations
     – To date, ICE has issued hundreds of notices of
        proposed debarment to entities/individuals, many
        of which are not traditional government contractors

                                                      © 2012 Venable LLP

Debarment (cont’d)
           ICE Debarments

  Year      Entity Debarments Individual
                              Debarments

  2011      97               115

  2010      97               49

  2009      30               53

                                           © 2012 Venable LLP

Ramifications of Debarment
  Ramifications of Debarment:
    – Prohibits the awarding of new contracts or
      subcontracts from the Federal government
    – Listing on public websites:
       • Excluded Parties List System (EPLS)
       • Federal Awardee Performance and
         Integrity Information System (FAPIIS)

                                            © 2012 Venable LLP

Ramifications of Debarment
(cont’d)
 Practical implications for entities that are not
  traditional federal contractors?
   – State/local governments inquire as to federal
     debarment status before awarding contracts
   – Large private entities inquire as to debarment status
      • Government contractors cannot subcontract with
        debarred entities
      • Do not want to be associated with debarred entities
   – Reputational harm
   – Imputation of conviction/debarment to owner, principal,
     management

                                                     © 2012 Venable LLP

Ramifications of Debarment
(cont’d)
   Individual debarment
    – In addition to above implications, ineligible to
      participate in federal subsidized programs –
      federally backed home loans, federally subsidized
      student loans, etc.
    – Remain eligible for public entitlements (e.g., social
      security benefits, etc.)
    – Listed on the EPLS and FAPIIS
    – Cannot hold a principal, board, executive or
      managerial position with an entity that receives
      federal contracts or subcontracts

                                                       © 2012 Venable LLP

ICE Audit: What to Expect and
How to Respond
  Inspection process begins with service of Notice of
   Inspection (NOI) on employer – notice compels production
   of I-9 forms

  NOI will also often request supporting documentation – i.e.,
   payroll, current list of employees, Articles of Incorporation,
   and business licenses, as well as no-match letters issued by
   Social Security Administration (SSA)

                                                         © 2012 Venable LLP

ICE Audit: What to Expect and
How to Respond (cont’d)
   Employer Response to NOI:
    – Insist on 3 business days’ notice before inspection
      of I-9 forms (this is minimum amount of notice the
      federal agency must provide)
    – Document any communications with government
    – Keep a copy of all documents provided to
      government
    – Carefully note any violations alleged by the auditor

                                                     © 2012 Venable LLP

ICE Audit: What to Expect and
How to Respond (cont’d)
   Government will notify audited employer of results of
    inspection, in writing, once completed
   Types of Notices:
     – Notice of Inspection Results
     – Notice of Suspect Documents
     – Notice of Discrepancies
     – Notice of Technical or Procedural Failures
     – Warning Notice
     – Notice of Intent to Fine

                                                       © 2012 Venable LLP

ICE Audit: What to Expect and
How to Respond (cont’d)
  Notice of Intent to Fine (NIF)
    – Charging documents will be provided specifying the
      violations committed by the employer
    – Employer can either negotiate a settlement or request
      a hearing before the Office of the Chief Administrative
      Hearing Officer (OCAHO) within 30 days of receipt of
      the NIF
    – If employer takes no action after receiving a NIF, ICE
      will issue a Final Order
    – If hearing is requested, OCAHO assigns case to an
      Administrative Law Judge, and sends all parties a copy
      of a Notice of Hearing and government’s complaint,
      putting the adjudicative process in motion

                                                       © 2012 Venable LLP

ICE Audit: What to Expect and
How to Respond (cont’d)
   Determination of Recommended Fines in NIF is based
    on a formula involving:

     – Percentage relating to violations and number of
       employees

     – Tiered fine schedule

     – Enhancement/mitigation matrix

                                                    © 2012 Venable LLP

ICE Audit: What to Expect and
How to Respond (cont’d)

  Challenging Debarments
   – Administrative process
      • Respond to notice in writing
      • In-person meeting with ICE debarment official
   – Adverse final decisions
      • Seek reconsideration
      • File suit in federal district court

                                                    © 2012 Venable LLP

I-9 and Employment Eligibility
“Best” Practices
  Properly Completing an I-9 Form

  Self-Audit of I-9 Forms

  Compliance Plan

  E-Verify / IMAGE Program / I-9 Compliance Software

                                                   © 2012 Venable LLP

Properly Completing the Form I-9,
Employment Eligibility
Verification Form
    Employers must complete an I-9 form each time they
     hire any person to perform labor or services in the U.S.
     in return for wages or other renumeration (e.g., food
     and lodging).

    The form requires that the employee present his/her
     employer an original document or documents showing
     his/her identity and employment authorization within 3
     business days of the date employment begins.

                                                       © 2012 Venable LLP

Properly Completing the Form I-9,
Employment Eligibility
Verification Form (cont’d)
  The I-9 form identifies proper forms of documentation that
   an employer may accept. (Note: Some aliens have and
   present an Individual Taxpayer Identification Number (ITIN)
   from the Internal Revenue Service to employers. An ITIN is
   never acceptable for employment eligibility verification
   purposes.)

  Employer must re-verify an employee’s employment if the
   employee indicates that he/she is only authorized to work in
   the U.S. for a specified period of time or if the employee has
   a name change.

                                                         © 2012 Venable LLP

Guidelines for Self-Audits of I-9
Forms
      Confirm there is an I-9 form on file for:
        – Every current employee,
        – Every employee hired within the last three years,
           whether or not still employed, and
        – Every former employee who left employment within the
           previous year
      Discard any I-9 forms you are no longer required to maintain
      Confirm there is a consistent practice on photocopying
       supporting documents
      Confirm all I-9 forms are filled out completely and correctly
        – Be transparent about any corrections that are made
        – Complete new form for any required forms that are
           missing, if possible

                                                              © 2012 Venable LLP

Guidelines for Compliance Plans
 •   Plan should include:
      – Description of roles/accountability of various departments
         and/or positions in your restaurant/organization
      – Time-frames in which actions should occur
      – Mechanisms to address:
          • Allegations that your restaurant’s workers are unauthorized
          • Discrepancies in payroll and identity information regarding
             your employees
      – Description of how and when certain issues should be
         escalated to upper management, in-house counsel, and
         outside counsel
      – Union relations/obligations
 •   Conduct staff training on plan and ensure employees have the
     necessary tools to implement the plan
 •   Update plan to reflect changes in the law or regulations and train
     employees on those changes

                                                                © 2012 Venable LLP

E-Verify / IMAGE Program / I-9
Compliance Software
  E-Verify / IMAGE Program
    – Pros: Mitigating factor
    – Cons: Government access to employer information;
      invitation/agreement to government audit; no safe harbor
  I-9 Compliance Software
    – Pros: Some programs assist with quality control; some
      programs store data online
    – Cons: Not all programs comply with law/regulation,
      creating liability

                                                      © 2012 Venable LLP

Additional Resources
  For updates, go to: www.uscis.gov (select “Resources” and
   then “Get Email Updates”)

  Revised “Handbook for Employers (M-274)” from USCIS
   (revised June 1, 2011), available at:
   www.uscis.gov/files/form/m-274.pdf

  I-9 Central (launched by USCIS in mid-May 2011) is a new
   online resource center that contains resources, tips, and
   guidance to properly complete the Form I-9, available at:
   www.uscis.gov/I-9central

                                                      © 2012 Venable LLP

Questions?

Contact information:

  Kristine A. Sova     Dismas N. Locaria
  212.808.5662         202.344.8013
  kasova@venable.com   dlocaria@venable.com

                                        © 2012 Venable LLP