By Bruce Buchanan, Siskind Susser, PC


In a recent decision, U.S. v. Homestead Metal Recycling Corp., 11 OCAHO no. 1251 (2015), an Administrative Law Judge (ALJ) of the Office of Chief Administrative Hearing Officer (OCAHO) found two owners were legally considered employees; thus, the company should have completed I-9 forms for them. However, the ALJ reduced Homestead’s penalties to $2,450 because almost all of the statutory factors weighed heavily in the employer’s favor, especially the general public policy of leniency toward small entities.

After Immigration and Customs Enforcement (ICE) served a Notice of Inspection (NOI) on Homestead, the company failed to present I-9 forms for seven employees. Thereafter, ICE issued a Notice of Intent to Fine (NIF), alleging Homestead failed to timely prepare and/or present I-9 forms for seven employees, including Alejandro Morua and Teresa Rabassa.
Homestead argued Morua and Rabassa were two of its present owners; thus, it did not need to have I-9 forms for them.

The evidence reflected Homestead had only one owner,
Otto San Roman, at the time of the NOI. ICE said Homestead’s interrogatory answers showed Rabassa became a 10% owner while Morua became a 20% owner after the NOI. Additionally, ICE argued the two individuals had only de minimus corporate voting rights, and were unable to direct or influence corporate affairs. Furthermore, Homestead identified Morua on documents presented to ICE as a “manager” or “foreman,” not company officer, partner, or owner. ICE said that his employment was subject to the control and direction of San Roman.

Legal Standards for Finding an Employee

Under the law, an individual is not an employee of the business if he or she, through an ownership interest, controls all or part of the business. The U.S. Supreme Court foundcommon law agency principles are applied in this analysis with the principal factor being that of control of the business. Clackamas Gastroenterology Assocs. v. Wells, 538 U.S. 440, 448 (2003).

The only evidence that Homestead presented to support its defense were incorporation documents listing Morua and Rabassa as officers of the company, but these documents were not filed until after issuance of the NOI. Furthermore, the ALJ found San Roman was the only individual “having the power of the purse” - he was the only one authorized to conduct transactions from Homestead’s bank account. Morua and Rabassa appeared on both Homestead’s employee roster and on its payroll registry. The fact that Homestead asserted Morua is in charge of the company’s day-to-day operations and Rabassa runs the administrative functions are not sufficient indicia of control to establish that they were not employees at the time of the NOI.

Small Business Owner Status Helps Homestead Reduce the Penalties

The ALJ found all the statutory factors, except the seriousness of the violations, weighed heavily in Homestead’s favor, especially the general public policy of leniency toward small entities under the Small Business Regulatory Enforcement Fairness Act of 1996. Furthermore, ICE’s proposed penalty was more than 50% of Homestead’s bank balance. Therefore, the ALJ reduced the penalties from $5,890.50 to $2,450, a reduction of over 58%.

Take Away – Owners must have Meaningful Control of the Business

In determining whether a company must have an I-9 form for an owner, one must determine whether the owner has meaningful control of the company. In two recent decisions, U.S. v. Santiago’s Restaurant and U.S. v. Jalisco’s Bar and Grill, Inc., OCAHO found an owner with meaningful control of a company did not have to complete an I-9 form for that individual. However, in the present case, the two individuals’ ownership status did not provide for any control of Homestead. The underlying principle in this analysis is one cannot be an employer and an employee. Thus, if it can be established an individual’s ownership status causes him to be in control of the company, he is an employer, not an employee.