15-3959-ag Buffalo Transportation Inc. v. United States of America

1 2 In the 3 United States Court of Appeals 4 For the Second Circuit 5 6 7 August Term, 2016 8 No. 15‐3959‐ag 9 10 BUFFALO TRANSPORTATION, INC. 11 Petitioner‐Appellant, 12 v. 13 14 UNITED STATES OF AMERICA, 15 Respondent‐Appellee. 16 17 18 Petition for review of order of the Office of the Chief Administrative 19 Hearing Officer for the Executive Office of Immigration Review 20 21 22 SUBMITTED: OCTOBER 6, 2016 23 DECIDED: DECEMBER 22, 2016 24 25 26 Before: NEWMAN, LYNCH, and DRONEY, Circuit Judges. 27 28 29

1 30 Petition for review of order of the Office of the Chief 31 Administrative Hearing Officer for the Executive Office of 32 Immigration Review that found petitioner to have committed 33 violations regarding verifications of its employees’ immigration 34 status. The Administrative Law Judge found that petitioner had 35 committed numerous substantive violations. The Administrative 36 Law Judge also found that the fines imposed for the substantive 37 violations were not excessive. We DENY the petition for review. 38 39 40 Stephen F. Szymoniak, Law Office of 41 Stephen F. Szymoniak, Williamsville, New 42 York, for Petitioner‐Appellant. 43 44 Andrew N. O’Malley, Trial Attorney, 45 Benjamin C. Mizer, Principal Deputy 46 Assistant Attorney General, Bernard A. 47 Joseph, Trial Attorney, Office of 48 Immigration Litigation, United States 49 Department of Justice, Washington, D.C. for 50 Respondent‐Appellee. 51 52 53 DRONEY, Circuit Judge: 54 55 Buffalo Transportation, Inc. (“Buffalo Transportation”)

56 petitioned pursuant to 8 U.S.C. § 1324a(e)(8) for review of a final

57 order of the Office of the Chief Administrative Hearing Officer for

58 the Executive Office of Immigration Review (“OCAHO”) that found

2 59 it to have committed substantive violations of Section 274A(b) of the

60 Immigration and Nationality Act (“INA”) and affirmed the

61 imposition of fines by Immigration and Customs Enforcement of the

62 Department of Homeland Security (“ICE”). The Administrative Law

63 Judge (“ALJ”) found that Buffalo Transportation had not timely

64 complied with the requirements of 8 U.S.C. § 1324a(b) and related

65 regulations that require employers to verify that an employee is

66 legally authorized to work in the United States through executing a

67 Form I‐9 for each employee within three business days of hire.

68 Buffalo Transportation petitioned this Court for review of the ALJ’s

69 decision on the grounds that the violations were “procedural” rather

70 than substantive, and that ICE should have issued a warning rather

71 than imposing fines. Buffalo Transportation also contends that the

72 fines imposed were unreasonably high. We agree with the ALJ’s

73 determination of liability and adjustments of ICE’s original fine

74 amounts, and therefore DENY the petition for review.

3 75 BACKGROUND

76 Buffalo Transportation is located in Buffalo, New York,

77 and provides transportation services to individuals for medical

78 appointments. On August 22, 2013, ICE notified Buffalo

79 Transportation of a scheduled audit of its Forms I‐9 to occur on

80 August 28, 2013. At the audit, ICE found that six of the completed

81 Forms I‐9 had technical or procedural errors and allowed Buffalo

82 Transportation to correct those errors. ICE also found, however, that

83 all 54 of the completed Forms I‐9 were not created within three

84 business days of the employees’ hiring dates, and that Buffalo

85 Transportation did not properly retain completed Forms I‐9 for 84

86 former employees. On March 14, 2014, ICE served Buffalo

87 Transportation with a Notice of Intent to Fine in the amount of

88 $794.75 per violation (for a total of $109,675.50) which it calculated

89 using the regulatory scheme at 8 C.F.R. § 274a.10(b)(2) and its own

90 internal guidelines. These guidelines set the base and maximum

4 91 fines for various types of violations and adjust the fines for

92 aggravating and mitigating circumstances. See ICE, Fact Sheet: I‐9

93 Inspection Overview, available at https://www.ice.gov/factsheets/i9‐

94 inspection (last visited Oct. 11, 2016).

95 After receiving the Notice of Intent to Fine, Buffalo

96 Transportation requested a hearing before an ALJ, as permitted by 5

. Both Buffalo Transportation and ICE submitted

98 briefing and evidence in support of their motions for a summary

99 decision. The ALJ granted in part both Buffalo Transportation’s and

100 ICE’s motions for summary decision.1 The ALJ found Buffalo

101 Transportation to have committed 81 violations for not retaining the

102 Forms I‐9 for former employees for the proper time period (the later

103 of three years from date of hire, or if terminated, one year from

1 Motions for summary decisions are governed by

(c), which provides that an ALJ “shall enter a summary decision for either party if the pleadings, affidavits, material obtained by discovery or otherwise, or matters officially noticed show that there is no genuine issue as to any material fact and that a party is entitled to summary decision.” If a party raises a genuine question of material fact, then the ALJ shall hold an evidentiary hearing.

§ 68.38 (e).

5 104 termination) and 54 violations for current employees for Forms I‐9

105 not prepared within three business days of hire.2 The ALJ also

106 determined that the fines assessed by ICE were excessive, and

107 adjusted the penalty to $600 per violation for the former employees

108 and $500 per violation for the current employees. Thus, the total fine

109 that the ALJ assessed was $75,600. In making these adjustments to

110 ICE’s fines, the ALJ considered Buffalo Transportation’s financial

111 situation as well as other mitigating factors pursuant to 8 C.F.R.

112 § 274a.10 (b)(2)(i)‐(v). See J.A. 45.

113 DISCUSSION

114 I. Standard of Review

115 We review an order of the OCAHO issued pursuant to 8

116 U.S.C. § 1324a under the arbitrary and capricious standard. 8 U.S.C.

117 § 1324a(e)(8); see Alaska Dep’t of Envtl. Conservation v. E.P.A.,

461, 496–97 (2004) (applying arbitrary and capricious standard when

2 A review of the Forms I‐9 reflects that many of the forms were prepared immediately prior to the inspection and more than three business days from the hiring date. See, e.g., Record on Appeal at 214‐15.

6 119 the statute itself does not specify a standard for judicial review of

120 agency action). We review an agency’s factual determinations under

121 the substantial evidence standard, N.Y. & Atl. Ry. Co. v. Surface

122 Transp. Bd.,

(2d Cir. 2011) (citations omitted), while

123 we review an agency’s determinations on questions of law de novo,

124 see Nwozuzu v. Holder,

(2d Cir. 2013) (citations

125 omitted).

126 II. Substantive Violations

127 Section 274A(b) of the Immigration and Nationality Act

128 requires employers to verify that their employees are legally

129 authorized to work in the United States. 8 U.S.C. § 1324a(b).

130 Regulations designate the Employment Eligibility Verification Form

131 (“Form I‐9”) for this purpose, 8 C.F.R. § 274a.2(a)(2), and employers

132 must complete these forms within three business days of hire, id.

133 § 274a.2(b)(1)(ii). An employer must retain these forms and provide

134 them for inspection by ICE upon three business days’ notice for

7 135 current employees, and retain forms for one year for terminated

136 employees. Id. § 274a.2(b)(2)(i)‐(ii). If an employer does not comply

137 with these requirements, it may face civil penalties between $110

138 and $1,100 per individual violation. Id. § 274a.10(b)(2) (for violations

139 prior to November 2, 2015). An employer may be “considered to

140 have complied” with the Form I‐9 requirements if there is only a

141 “technical or procedural failure” so long as the employer made a

142 “good faith attempt to comply.” 8 U.S.C. § 1324a(b)(6)(A). To avail

143 itself of the good faith defense, an employer must also correct the

144 relevant violations within ten business days of receiving notice of

145 the technical or procedural failings. Id. § 1324a(b)(6)(B).

146 The Immigration and Naturalization Services (the

147 predecessor agency to ICE) (“INS”) issued interim guidance about

148 what constitutes a “technical or procedural violation” as opposed to

149 a “substantive violation” for which the good faith defense would not

150 be available. Memorandum of Paul W. Virtue, INS Office of

8 151 Programs, Interim Guidelines: Section 274A(b)(6) of the INA (March

152 6, 1997), available at 74 Interpreter Releases 706, App. I (April 28,

153 1997) (“Virtue Memorandum”). ICE has continued to follow that

154 guidance. The OCAHO has consistently relied on the Virtue

155 Memorandum to determine that the failure of an employer to

156 complete a Form I‐9 is a substantive violation of Section 274a.2. See

157 United States v. Anodizing Indust., Inc., 10 OCAHO 1184 (2013); United

158 States v. Platinum Builders of Cent. Fla., Inc., 10 OCAHO 1199 (2013).

159 Formal adjudications and agency‐promulgated rules are given

160 considerable deference under the Administrative Procedure Act and

161 Chevron. See Chevron, USA, Inc. v. Nat. Res. Def. Council, Inc.,

837, 844 (1984); Kruse v. Wells Fargo Home Mortgage, Inc.,

,

163 55 (2d Cir. 2004). An informal agency interpretation that is neither a

164 formal adjudication nor a promulgated rule may still receive

165 deference under Skidmore v. Swift & Co.,

(1944). Such

166 informal agency guidance receives deference “‘according to its

9 167 persuasiveness,’ as evidenced by the ‘thoroughness evident in [the

168 agency’s] consideration, the validity of its reasoning, its consistency

169 with earlier and later pronouncements, and all those factors which

170 give it power to persuade.’” Estate of Landers v. Leavitt,

,

171 107 (2d Cir. 2008) as amended (Jan. 15, 2009) (quoting United States v.

172 Mead Corp.,

(2001)) (internal citation omitted);

173 see also Ketchikan Drywall Servs., Inc. v. Immigration & Customs Enf’t,

174

, 1112–13 (9th Cir. 2013) (applying Skidmore deference

175 to the Virtue Memorandum). We apply Skidmore deference to the

176 Virtue Memorandum because we find it well‐reasoned and

177 thorough. It distinguishes between violations that effectively

178 undermine immigration requirements (such as not filling out the

179 form at all, or not including the employee’s name) and those that

180 create small but solvable problems (such as an omitted birth date).

181 Moreover, the agency has greater expertise “when it comes to

182 determining which omissions are substantive and which ought to be

10 183 excused.” Ketchikan,

. Thus, we agree with the

184 Virtue Memorandum, and with prior decisions of the OCAHO, see,

185 e.g., United States v. Dr. Robert Schaus, D.D.S., 11 OCAHO 1239

186 (2014), that failing to prepare Forms I‐9 within three business days of

187 hire is a substantive violation of the INA and its accompanying

188 regulations.

189 The regulation clearly states that employers must have

190 employees fill out the Form I‐9, verify the employee’s

191 documentation, and have both employee and employer sign the

192 form within three business days of hire. Failure to prepare a Form I‐

193 9 constitutes a substantive violation, Virtue Memorandum at 3, and

194 necessarily includes the failure to prepare a Form I‐9 within the time

195 allotted by the regulations—here, three business days. The ALJ

196 correctly determined that the 54 Forms I‐9 presented to ICE at the

197 audit contained substantive violations, as there is no genuine

198 dispute that any of the 54 forms had been completed within three

11 199 business days of the employees’ hiring dates. Indeed, it appears that

200 Buffalo Transportation only prepared the 54 Forms I‐9 for its current

201 employees in response to ICE’s notice of inspection.

202 Buffalo Transportation contends that it should have been

203 given a Warning Notice pursuant to 8 C.F.R. § 274a.9(c) before

204 receiving the ICE Notice of Intent to Fine. The government contends

205 that this argument is unexhausted. Even assuming that Buffalo

206 Transportation properly raised the warning notice claim, it is

207 without merit. The regulation permits ICE or the Department of

208 Labor “in their discretion” to give a warning of violations. Id. It

209 does not require ICE to do so.

210 Buffalo Transportation also argues that it substantially

211 complied with the employee verification requirements by keeping

212 each employee’s identifying documents on file. That argument is

213 unavailing, however, because the relevant regulations explicitly

214 reject that approach: “[C]opying . . . of [underlying documents] and

12 215 retention of the copy or electronic image does not relieve the

216 employer from the requirement to fully complete section 2 of the

217 Form I‐9.” 8 C.F.R. § 274a.2(b)(3); see Ketchikan,

218 (rejecting the same argument).

219 III. Fines

220 Buffalo Transportation also challenges the amount of the fines

221 imposed by the ALJ as arbitrary. ICE imposed a fine of $794.75 per

222 violation, which it calculated using the regulatory scheme at 8 C.F.R.

223 § 274a.10(b)(2) and its own internal guidelines, which ICE uses to set

224 the base penalty and adjust the fine for aggravating and mitigating

225 circumstances.3 See ICE, Fact Sheet: I‐9 Inspection Overview, available

226 at https://www.ice.gov/factsheets/i9‐inspection (last visited Oct. 11,

227 2016). The ALJ considered that Buffalo Transportation was a small

228 business, did not act in bad faith, lacked a history of violations, and

3 Both the relevant statute and regulations include the following factors: (i) size of the business of the employer being charged, (ii) the good faith of the employer, (iii) the seriousness of the violation, (iv) whether or not the individual was an unauthorized alien, and (v) the history of previous violations of the employer. 8 U.S.C. § 1324a(e)(5); 8 C.F.R. § 274a.10(b)(2).

13 229 that there was no evidence that Buffalo Transportation had hired

230 unauthorized workers as mitigating factors. The ALJ also considered

231 Buffalo Transportation’s financial situation. In light of this evidence,

232 Buffalo Transportation’s arguments, and the statutory and non‐

233 statutory factors—including Buffalo Transportation’s ability to

234 pay—the ALJ reduced the fines to $600 per violation for past

235 employees and $500 per violation for current employees.

236 When reviewing agency fines our inquiry is limited to

237 whether the agency made “an allowable judgment in [its] choice of

238 the remedy.” United States v. Int’l Bhd. of Teamsters,

, 143

239 (2d Cir. 1999) (internal quotation marks omitted). We conclude that

240 the ALJ made such an allowable judgment here in determining the

241 amount of the fines after properly assessing the various factors,

242 including the seriousness and number of the violations.

243 Buffalo Transportation next argues that because the regulation

244 provides for a broad range of allowable fines (from $110 to $1,100)

14 245 and the Virtue Memorandum includes no specific guidance, the ALJ

246 impermissibly made an arbitrary determination as to the amounts of

247 the fines. Buffalo Transportation also contends that other similarly‐

248 situated employers received larger reductions from ICE‐imposed

249 fines than it did. We do not find these arguments convincing. The

250 ALJ provided well‐reasoned bases for the fine amounts based on

251 Buffalo Transportation’s specific circumstances.

252 * * *

253 For the foregoing reasons, we hold that the ALJ’s

254 determinations regarding liability were not arbitrary and capricious

255 and were supported by substantial evidence, and that the fines were

256 within the ALJ’s allowable discretion. Accordingly, we DENY the

257 petition for review.

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