Business Law
summer 2022





Staffing firm
fined $1.5M
for I-9 violations

A staffing firm is facing a $1.5 million fine after an Administrative Law Judge found the company liable for I-9 violations.

The family-owned staffing agency has offices in Washington and Oregon.

While they employ fewer than 50 fulltime employees, they hire hundreds of seasonal workers throughout the year.

The Department of Homeland Security recently announced new, increased fines for Form I-9 penalties.

Acting on a tip, Immigration and Customs Enforcement officials initiated a Form I-9 audit.

Nearly two years later, ICE issued a notice of intent to fine, alleging more than 1,800 form violations and seeking more than $2 million in penalties.

The ALJ found the firm liable for more than 1,500 violations, including failing to prepare the I-9 form properly, backdating forms, and failing to reverify temporary employment authorization.

The ALJ found the firm liable for more than 1,500 violations, including failing to prepare the I-9 form properly, backdating forms, and failing to reverify temporary employment authorization.

Improperly prepared forms were found to have numerous deficiencies, including:

  • No category of employment authorization
  • No alien registration number (where applicable)
  • No signature by a new hire, attesting that they were authorized to work in the U.S.
  • Missing or incorrect employer attestation regarding document review and verification
  • Missing or invalid documents (under I-9 acceptable documents)

In her decision, the ALJ reduced the fine for all but the nearly 180 forms where backdating was evident.

“This final order presents an opportunity to impress upon this Respondent, the importance of candor in the I-9 form process. Accordingly, backdated forms (in Count IV) will merit a higher civil penalty than the untimely completed forms (in Count III),” the judge said.

Review your compliance

The Department of Homeland Security recently announced new, increased fines for Form I-9 penalties.

The fine for paperwork or technical violations ranges from $252 to $2,507 per form.

Fines for knowingly hiring or continuing to employ an unauthorized worker (for which the firm above was not found liable) range from $590 to $4,722 for a first offense.

Companies are generally advised to keep worker training up to date for anyone handling the I-9 process and to complete regular internal audits to ensure the process is being followed thoroughly and accurately.

Talk to an attorney to ensure your business is complying with all regulations.

DOJ takes
tougher stance on
white collar crime

The Department of Justice has announced it’s taking a tougher stance on corporate wrongdoing and white-collar crime.

Messages from the DOJ indicate that the agency is stepping up enforcement in virtually all areas of white-collar crime.

Two areas of particular focus: deterring repeat corporate misconduct and enhanced efforts toward individual prosecution.

Corporations under investigation will need to provide the names of all workers connected to the crime, not just those “substantially involved.”

For example, corporations under investigation will need to provide the names of all workers connected to the crime, not just those “substantially involved.”

The move revives an Obama-era policy that had been softened under the Trump administration.

Among the changes is a policy directing prosecutors to consider all corporate wrongdoing when determining resolution agreements.

Previously, prosecutors could only review cases with similar facts.

Now, the DOJ will review a company’s full regulatory, criminal, and civil record.

The DOJ is also keeping a closer watch on companies with probationary or non-prosecution deals.

That could include the use of outside monitors to verify compliance, something that can be expensive and burdensome for the subject companies.

Companies that aren’t adhering to the terms of their agreement could be subjected to indictment.

Identifying fraud
by workers

No one likes to think the workers they hired would steal from them, but nearly two out of three businesses have been victims of employee fraud, reports the U.S. Chamber of Commerce.

Fraud conducted by employees costs an employer, on average, $60,000 for every incident. But when managers and supervisors are involved, fraud costs can jump to $180,000 per event, according to a report from the Association of Certified Fraud Examiners.

Fraud can take many forms. These are some of the most common:

  • Misuse of company assets, such as selling company scrap, renting out company equipment, or carrying out a competitive business using company materials
  • Skimming cash
  • Payroll fraud, including ghost employee schemes and timesheet fraud
  • Data theft, including intellectual property and customers’ personal data
  • Unauthorized credit card purchases
  • Accounting fraud, including payments to fake vendors or bank transfers to the worker’s own account

If you suspect fraud has occurred, you need to investigate carefully to preserve the integrity of any evidence. Maintain strict confidentiality to avoid defamation risks or alerting accomplices.

Decide if the worker should be suspended right away or if theft would be better detected by monitoring employee actions. If you choose suspension, remember to revoke all access privileges, including office keys, credit cards, and passwords.

If fraud is substantiated, to avoid defamation problems it may be best to terminate a worker for alternate reasons, such as “failure to follow procedures,” rather than making an outright accusation of theft or fraud.

Talk to your insurance agent to see if you have coverage that would assist a recovery effort. Notice and proof of claim procedures must be followed carefully. Be careful not to do anything that would compromise the insurer’s rights against third parties, such as the worker who committed the theft.

If you don’t have insurance coverage, or it’s insufficient, you will need to decide whether to pursue a civil suit or press criminal charges.

Businesses may need
to notify workers
about tracking devices

Businesses use vehicle tracking devices for a variety of reasons.

Worker location data can help improve routing, safety, record keeping, and customer service. Emerging state laws, however, mean that a growing number of companies must notify workers when tracking devices are in use.

In a new law that went into effect in April, the state of New Jersey established requirements over worker monitoring. New York, California, Connecticut, Delaware, and Illinois also all place restrictions on employee monitoring outside the workplace.

The New Jersey law, which is specific to vehicle monitoring, applies regardless of whether the worker uses a company-owned vehicle or a personal vehicle. Tracking devices covered under the law would include cellphone apps with geolocation technology, insurance safe driving monitors, and GPS locators.

Under the law, companies must provide written notice to current workers and new hires. A company that knowingly uses a vehicle tracking device without providing such notice may be subject to a civil penalty of up to $1,000 for the first violation and up to $2,500 for violations thereafter.

The New Jersey law exempts tracking devices used solely for expense reimbursement. The law expressly acknowledges that it does not supersede regulations governing interstate commerce, including devices mandated by the Federal Motor Carrier Safety Administration.

Businesses are advised to audit the tracking devices used in workers’ vehicles as well as geolocation tools on their mobile devices. Build a thorough understanding of all the ways workers are being monitored and know the applicable laws in your state.

Consider whether worker tracking activity meets a justifiable business need. If tracking exceeds business requirements, update company practices and technology accordingly.

Be sure you have a written tracking policy that outlines when and how workers can expect to be monitored. Communicate the policy to all workers and ask them to provide acknowledgment.

Ensure that the company has adequate safeguards for workers’ location data. Pay attention to data security and access privileges to protect workers from potential “bad actors” both inside and outside the organization.

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your referrals

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Tips for background checks

Many businesses rely on background checks when making important hiring decisions. In doing so, they need to comply with a patchwork of local, state, and federal laws.

While federal law does not generally bar criminal background checks, state and local laws may limit when or how you may use this information. Likewise, there are clear federal rules you need to follow when conducting credit checks, with state laws overlapping.

For example, some states only allow background checks after you have made a conditional job offer. Others limit how you use a candidate’s criminal history. Here is some general advice:

  1. Consistent process. When deciding to conduct background checks, apply the same standards to every applicant for that position. You can run into legal issues if you run a haphazard process and it’s found, for example, that you tend to conduct more background checks for people of a certain race or other protected status.
  2. Notices and consent. If you use a third-party screening agency, you must comply with the requirements of the Fair Credit Reporting Act. That includes notifying candidates ahead of time and obtaining their written consent.
    If you make an adverse hiring decision based on the background data, you must notify the applicant, provide them with a copy of the report, and give them an opportunity to refute its contents. You don’t want to miss out on a good team member because a background report was incorrect.
  3. Criminal history. Many states, counties, and local municipalities have so called “ban-the-box” laws that prohibit businesses from asking about criminal history on job applications. Generally, businesses can ask about criminal background later in the process.
    However, laws vary on how you can use this information. The Equal Employment Opportunity Commission has non-binding guidance that indicates that businesses should generally avoid blanket bans on workers with prior convictions. Instead, businesses should create an individualized screening tool that takes other factors into consideration.
    States take different approaches. New York, for example, requires companies to weigh eight different factors (e.g., time elapsed since offense, age at time of offense, severity) before making adverse hiring decisions.
  4. Credit history. Some states prohibit the use of credit reports for hiring decisions. As a rule, businesses should only obtain credit reports when it’s clearly relevant to the position and would be considered a business necessity.
  5. Legal advice. Talk to an attorney to make sure your background check process is in line with all applicable local, state, and federal laws. Even if you use an accredited third-party to conduct your background checks, it’s a good idea to have your own legal counsel review their forms. Ultimately the responsibility for any violations will lie with the employer.

Employee handbook reviews recommended

The National Labor Relations Board may be updating its framework for workplace rules and employee handbooks. A ruling is expected within the next several months that could affect any number of company policies.

The NLRB framework has implications for policies surrounding arbitration, moonlighting, strikes, cell phones, social media activity, confidentiality, gag orders, communicating with the media, workplace conduct, and more.

Under the Trump-era board, the NLRB applied the Boeing case with respect to employee handbooks. The Boeing test balanced alleged employee rights restrictions against a company’s business justifications for implementing a policy. The Boeing framework was considered more flexible and business-friendly, and many companies adjusted their handbooks accordingly.

The previous standard, adopted under the Lutheran Heritage case, prohibited handbook policies that an employee could “reasonably construe” to prohibit certain protected actions. For example, a policy that prohibited sharing of “confidential information” would be considered unlawful if it failed to outline exceptions for protected activity, such as sharing employee compensation information.

Critics say the Lutheran Heritage test often left companies guessing over what would and wouldn’t fail an NLRB challenge.

A public comment period closed in early March, but a final decision is still unlikely for several months. Risk-adverse businesses might want to start reviewing their handbooks now. That will give companies more time to plan for the new, restrictive interpretations that may be coming.