Forensic Update

Reflections on information management within the legal and regulatory arena

Regulator fines company $1M for poor HR record-keeping, despite absence of illegal hiring practices…

Posted by Johnny Lee on October 26, 2010

U.S. Immigration and Customs EnforcementIn late September of this year, the United States Immigration and Customs Enforcement office (“ICE”), a segment of the Department of Homeland Security, levied a $1 million fine against clothier Abercrombie & Fitch’s (“A&F”) record-keeping failures related to its obligations under the Immigration and Nationality Act.  Remarkably, this fine was imposed despite the fact that there was no evidence that A&F knowingly hired a single unauthorized worker.

In late 2008, ICE conducted an audit of A&F’s stores in Michigan and found a series of deficiencies in the company’s I-9 verification technology.  This fine flows directly from those audit findings.  Again, ICE was imposing a penalty strictly related to deficiencies in A&F’s ability to demonstrate that its I-9 verification protocols were sound; ICE did not allege that A&F had employed unauthorized workers.

Khaalid Walls, spokesman for ICE, indicated that the message here is that “we want employers to know that their employee documentation is just as important to the federal government as their financial records” [emphasis added].  The special agent in charge of ICE’s Michigan operations, Brian Moskowitz, elaborated on this point, stating that “employers are responsible, not only for the people they hire, but also for the internal systems they choose to utilize to manage their employment process and those systems must result in effective compliance.”

Moskowitz went on to say that the settlement “should serve as a warning to other companies that may not yet take the employment-verification process seriously or provide it the attention it warrants.”  What is truly remarkable here is that this appears to be a trend among federal regulatory agencies (q.v., FINRA Fines Firm $1.2 Million for Failure to Archive Email Properly and similar links below) to levy fines and focus enforcement on the manner of record-keeping, rather than discrete evidence of a violation.

Companies embrace electronic filing systems (and other automated records management solutions) to increase efficiency and to make compliance efforts easier and more reliable over time.  While this is certainly laudable, the government is sending a strong and unambiguous message that purchasing software does not a records management program make.  Put differently, for companies automating record-keeping, the system(s) selected need to contemplate the nuances of the regulations with which the company seeks to comply.  The failure to do so can be expensive—even in the absence of a bona fide violation that the regulation sets out to prevent.

A short list of notable regulatory fines related to record-keeping deficiencies:

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One Response to “Regulator fines company $1M for poor HR record-keeping, despite absence of illegal hiring practices…”

  1. […] This post was mentioned on Twitter by Kelvin Arcelay. Johnny Lee said: Regulator fines company $1M for poor HR record-keeping, despite absence of illegal hiring practices: [ http://forensicupdate.com/2010/10/26/i9-fine ]

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