Office of Chief Administrative Hearing Officer (OCHAO) held, in United States v. Santiago's Repacking, Inc., 10 OCHAHO no. 1153 (2012), a partner, who has meaningful control and management of the partnership, is not required to complete an I-9 form for the partnership. However, his partnership's failure to have any I-9s of their 24 current employees or 30 former employees for the past six months is a clear violation of Immigration Reform and Control Act of 1986 (IRCA). Thus, Santiago's Repacking was fined for the failure to have the I-9 forms of 54 employees. However, the partnership successfully had the penalties reduced by about 60%.


Santiago's Repackaging is located in Nogales, Arizona. It was served with a Notice of Inspection on July 1, 2009 requesting their I-9 forms and payroll records for current employees, and those employees terminated since January 1, 2009. Santiago was only able to produce one I-9 form, a partially completed one for one of its three partners.


Santiago asserted it reviewed and maintained the applicable documentation for all newly- hired employees but was unaware of the need to complete I-9 forms. Of course, retention of applicable
documentation without completion of the I-9s is a clear violation of IRCA.


Santiago argued it was not required to complete an I-9 for a partner because he is not an employee of the company. After a thorough analysis of the applicable case law, including Clackamas Gastroenterology Associates v. Wells, 538 U.S. 440 (2003), Simpson v. Ernest & Young, 100 F.3d 436 (6th Cir. 1996), and Solon v. Kaplan, 398 F. 3d 629 (7th Cir. 2005), OCAHO held: "Unlike the
partners found to qualify as employees in Simpson, Santiago's Repacking is not a large national firm in which any "partner" lacked meaningful control or voting rights. Santiago Moreno is one of only three original partners in Santiago's Repacking . . . has a one-third interest and shares equally in profits and losses as well as in the management of the partnership business. The government made no suggestion that Moreno is subject to supervision, discipline, or performance evaluations, or that apart from the appearance of his name on the unemployment tax and wage reports, there are any other indicia of employee status. The preponderance of the evidence accordingly indicates that Moreno's status is that of a working partner, not an employee."


As for the fines, ICE set a baseline at $935 per violation based upon the fact it violated IRCA on 100% of the employees reviewed. It mitigated the fine by 5% because it was a small business. However, it increased the baseline by 5% each for the seriousness of the violations and the fact that over 1/2 of the employees reviewed were unauthorized. Overall, ICE sought a civil fine of $52, 500.


OCAHO, as it is apt to do, saw fit to lower the fines. It stated: "This is a small company with ordinary business income in 2010 of only $58,457; its payroll for that entire year was $226,531. The penalties as proposed are thus quite close to the total of the company's business income for 2010. In the exercise of discretion the penalties will be adjusted to $400.00 for each of the violations in Count I and $350.00 for each of the violations in Count II for a total of $20,100."


In this case, it certainly was worthwhile for Santiago's Repackaging to challenge ICE's allegations. By doing so, it had one of the three counts dismissed while reducing the penalty by about 60% for the other two counts.   


Even if an employer has not had legal representation during an ICE audit (which is not a wise decision), it should certainly obtain counsel before agreeing to pay any fines. Counsel can
evaluate the matter and determine the best course of action.