The Importance of an I-9 Form - Immigration and Customs Enforcement Sanctions Followed by SEC Probe

by Poyner Spruill LLP

​ICE’s Increasing Audit Activity

The publicly traded Chipotle Mexican Grill restaurant chain (Chipotle) is a recent high profile example of an Immigration and Customs Enforcement (ICE) audit with an unusual conclusion:  a Securities and Exchange Commission (SEC) probe.  Since 2009, ICE has conducted over 7,500 audits and imposed over $80 million in fines. In 2011 alone, ICE conducted 2,740 audits and assessed over $7 million in fines. 

The I-9 Form

The I-9 Form is deceptively simple and should be a key part of an employer’s hiring process for any new employee.  Failure to take the I-9 process seriously, or the use of an external I-9 vendor whose I-9 compliance and storage program is flawed, can be seriously disruptive of a business, unleashing exponentially larger problems, including SEC follow-up for publicly traded companies as was the case of Chipotle.

ICE Investigates Chipotle and SEC Follows Up

In 2010, ICE investigated Chipotle’s hiring practices in Minnesota by auditing its I-9 Forms and hiring practices. Following that audit, Chipotle terminated approximately 450 workers whose documentation proving identity and employment authorization were problematic. In 2011, ICE proceeded to audit Chipotle’s I-9s and hiring practices in other states, including Washington, D.C.  Chipotle’s hiring practices in D.C. were referred by ICE to the US Attorney’s Criminal Division.  Subsequently the SEC subpoenaed Chipotle’s headquarters requiring that it provide information regarding employees’ work authorization, related public statements and information.  That investigation was ongoing at the release of this article.

Connection between ICE Audit and SEC Investigation

Why has the SEC followed up on an ICE audit?  Chipotle is a publicly traded company within the purview of the SEC.  But this type of sequential activity most likely gained momentum because of joint investigations by ICE, the Department of Homeland Security, and the US Attorney’s office.  While the SEC has a mandate to ensure that publicly traded companies adequately disclose risk to their investors, there are no express disclosure requirements under securities laws relating to immigration and employment.  However, the requirement that a company adequately discloses risks would seem to include immigration and employment because of the potentially punishing repercussions associated with an ICE audit of  and sanctions against the company.  Legal fees, shareholders’ suits and bad public relations can further erode a company’s fiscal health and standing – associated exposure.

Examples of ICE Sanctions

Aside from the disruption of operations and attendant expenses as well as the negative publicity, the fines or even a settlement resulting from an ICE audit can be extremely onerous.  Recently, a Texas vegetation management company paid $2 million in settlement as part of a criminal non-prosecution agreement.  A second recent example provides the potentially devastating results in terms of fines and imprisonment when there is a total failure to complete I-9s for workers that were transported and/or harbored as part of a conspiracy to hire illegal workers.  If convicted, the field operations supervisor of  the company in question faces a maximum aggregate sentence of 100 years in prison, a fine of $5 million, a supervised release term of 60 years, and a special assessment of $2,000. The company itself faces a total maximum fine of $10 million, a probation term of five years on each count, and a special assessment totaling $8,000.

Pro-Active Measures

ICE stresses that the integrity of employment records are of the same importance as those of tax records.  Lack of or defective I-9s are a “smoking gun” for ICE to decide whether to prosecute an employer.  Meticulous I-9 completion and policies with annual self-audits are the best protection in the event of an ICE audit.
In an effort to decrease paper and ensure streamlined record-keeping, many employers are turning to external vendors that provide electronic I-9 programs, frequently choosing a comprehensive software package that includes electronic I-9 and even E-Verify as part of other payroll and benefit functions.  However, the company can be found liable by ICE for any I-9 violations or flaws in an external vendor’s I-9 program, even when the deficiencies are due to the program itself.  Likewise, an employer can also become the target of a Department of Justice suit for an overreaching I-9 process in its vendor’s software that results in employment discrimination.


The deceptively simple I-9’s completion should be taken as seriously as any other federal filing.  Given the short notice ICE may or may not provide before an audit or raid and the potentially draconian consequences for I-9 errors or omissions, an annual legal audit is a prudent measure to be fully prepared for ICE.  Publicly traded companies are now audited more easily by ICE due to its relatively new Employer Compliance Inspection Center in Virginia for larger employers’ audits.   Further, the SEC has demonstrated that it may follow up to protect shareholders because of the materiality of any illegal hiring practices.  While bundled HR software that includes I-9 compliance may seem attractive, the vendor must be selected carefully by the company, with a diligent analysis, preferably by experienced immigration counsel, of the program’s legality and vendor obligations.


Written by:

Poyner Spruill LLP

Poyner Spruill LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.