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House Bill 56

On June 9, 2011, Alabama Governor Robert Bentley signed into law HB 56, a sweeping immigration law covering many topics including law enforcement, contract law, education, and employment. Of particular concern for employers are two provisions: sections 16 and 17.

Section 16 prohibits employers from deducting as business expenses wages or compensation paid to an unauthorized alien, and businesses that knowingly violate this provision can be liable for a penalty of 10 times the deduction claimed. Section 17 makes it a discriminatory practice for an employer to fail to hire a job applicant, or discharge an employee, who is either a U.S. citizen or authorized alien while retaining or hiring an individual the business knows, or reasonably should know, is an unauthorized alien. Employers violating section 17 can be subject to a civil suit, and the prevailing party may recover compensatory damages and reasonable attorneys’ fees.

None of the three lawsuits directly challenges the E-verify provisions of HB 56. However, the lawsuits filed by the religious and public interest entities do seek to have the law declared unconstitutional in its entirety.

The DOJ’s Complaint

The DOJ’s complaint alleges that the provisions of HB 56 are preempted by federal law and violate the Supremacy Clause of the U.S. Constitution. The Supremacy Clause, found in Article VI, Clause 2 of the Constitution, states that the “Constitution, and the Laws of the United States . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” The DOJ contends that “the federal government has preeminent authority to regulate immigrations matters” which is “derive[d] from the United States Constitution and numerous acts of Congress.” While the DOJ acknowledges that states may exercise their police power in a way that incidentally or indirectly affects aliens, the complaint asserts that states “may not establish [their] own immigration policy or enforce state laws in a manner that interferes with the federal immigration law.”

If HB 56 becomes law, the DOJ contends, “[i]t will conflict with longstanding federal law governing the registration and employment of aliens.” As the DOJ points out, the licensing savings clause of the Immigration Reform and Control Act of 1986 (IRCA), 8 U.S.C. § 1324a(h)(2), states that “[s]tate or local laws imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ, or recruit or refer for a fee for employment, unauthorized aliens” are specifically preempted by the IRCA. Accordingly, because HB 56 imposes sanctions on employers and potential employers of unauthorized aliens, and it is not a licensing or similar law, HB 56 is preempted. Moreover, the DOJ argues that the federal government has not ceded to the states its legislative and regulatory authority over immigration, noting that “Congress has further exercised its authority over immigration and the status of aliens.” Federal law, argues the DOJ, prohibits hiring, recruiting, or referring for a fee, unauthorized aliens, and the continued employment of unauthorized aliens once an employer discovers their unauthorized status.

Implications for Employers

In the meantime, employers should assume that the challenged provisions of HB 56 will go into effect no later than September 29, 2011. Because the E-Verify provisions, as noted above, have not been specifically challenged, employers should continue preparations to be enrolled in E-Verify by the statutory deadlines of January 1, 2012 (for employers who contract with or receive incentives or grants from the state) and April 1, 2012 (for all other employers). Regardless of whether the law is upheld or struck down, employers should continue to take steps to ensure they remain in compliance with federal immigration law. These steps include: (1) auditing current Form I-9's to correct any errors; (2) training personnel on properly completing Form I-9's; and (3) reviewing, revising, and developing policies for storing and retaining I-9 documents.

Because the unsuccessful parties may appeal the matter, complete and final resolution may be several months away. Thus, employers should consider seeking the advice of experienced employment and/or immigration law counsel to determine the best strategies and practices following the court's ruling.

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Matter of Al Wazzan

In Matter of Al Wazzan, 25 I&N Dec. 359 (AAO 2010) [initially decided Jan. 12, 2005], the applicant’s employer filed an initial immigrant visa petition in 1998, which the director denied on February 2, 2000. An appeal was dismissed on January 8, 2001. The employer filed a second petition on August 26, 2002, and the applicant filed an application for adjustment of status on September 18, 2002 – both were denied over one year later, in August and September 2003, respectively.

The applicant argued that the director erred in denying his application for adjustment of status because resolution took over 180 days. This argument was based on a 2000 amendment to 8 U.S.C. § 1182(a)(5)(A)(iv), which stated that:

A petition . . . for an individual whose application for adjustment of status . . . has been filed and remained unadjudicated for 180 days or more shall remain valid with respect to a new job if the individual changes jobs or employers if the new job is in the same or a similar occupational classification as the job for which the petition was filed.

The applicant contended that the petition became “valid” if the agency did not resolve the matter within six months. The AAO noted that this interpretation would have immigration courts “construe the term ‘valid’ to include denied or unadjudicated petitions.”

The AAO found no basis for the applicant’s interpretation. After examining the statute’s plain language, legislative history, prior immigration decisions, and recognizing that petitions could only be approved after USCIS investigated a petition and determined eligibility, it concluded that it “would be irrational to believe that Congress intended to throw out the entire statutorily mandated scheme regulating immigrant visas whenever that scheme requires more than 180 days to effectuate.”

Concerning petitioner’s argument that the legislative intent was to alleviate immigration petition backlogs, the AAO held this interpretation “would create a situation where ineligible aliens would gain a ‘valid’ visa simply by filing frivolous visa petitions and adjustment applications, thereby increasing USCIS backlogs, in the hopes that the application might remain unadjudicated for 180 days.”

Accordingly, because the applicant’s visa petition had been properly denied, the applicant was ineligible to have his immigration status adjusted and denial of the applications was proper.

Matter of Chawathe

The primary question presented in Matter of Chawathe, 25 I&N Dec. 369 (AAO 2010) [initially decided Jan. 11, 2006], was “whether a publicly traded corporation may be considered an ‘American firm or corporation,’ [for immigration law purposes]... when its stock ownership is widely dispersed and there is no readily available means to determine the nationality of its owners.”

In Chawathe, the applicant was a U.S. permanent resident who intended to apply for U.S. citizenship, but would be working overseas for between two to three years. To qualify for citizenship, the applicant would need to reside continuously in the U.S. as a lawful permanent resident for the five years prior to filing an application, and be physically present in the United States for at least half of the residency period. However, the law provides that no period of absence from the United States will break the residency continuity if the individual was: (1) physically present and residing in the U.S., after gaining permanent residency, for an uninterrupted one-year period; and (2) employed by an “American firm or corporation” or subsidiary thereof.

Seeking to preserve his U.S. residency, the applicant filed the required preservation of residency petition. The director denied the petition based on two determinations: (1) that the applicant did not work for an American firm or corporation; and (2) that the applicant’s temporary overseas employer did not qualify as a subsidiary of an American firm or corporation. The applicant appealed both determinations.

American Firm or Corporation

The AAO held that a company’s incorporation in a U.S. state does not in itself establish the entity as an American firm or corporation. To qualify, more than 50% of the company must be owned by American citizens. In Chawathe, proving ownership would be an onerous task: the applicant’s employer was a publicly-traded company on the New York and San Francisco stock exchanges that could issue 4.1 billion shares, so the applicant would need to demonstrate that American citizens owned more than 2.05 billion shares. Understanding the difficulty of tracing nationalities and ownership interests of public companies, the AAO found it “reasonable to presume” a public company qualified as an American firm or corporation for immigration law purposes if the company was both incorporated in the United States and traded its stock exclusively on U.S. stock markets.

Subsidiaries

The AAO also concluded that the applicant had demonstrated that his temporary overseas employer was a subsidiary of an American firm or corporation. The temporary overseas employer was listed as a subsidiary in the company’s Securities and Exchange Commission (SEC) filings. Moreover, the applicant provided a letter from the American company’s Assistant to the President stating that the temporary overseas employer was a wholly-owned subsidiary, and that although the applicant would be working for the temporary overseas employer for two to three years his salary would be paid by the American company. The AAO held that, although the applicant could have provided more probative evidence of the temporary overseas employer’s subsidiary status, the SEC filing and corporate letter established, by a preponderance of the evidence, that the temporary overseas employer was a wholly-owned subsidiary of the applicant’s American employer. Because qualifying for citizenship based on permanent resident status only required the applicant to prove his eligibility by a preponderance of the evidence (compared to the heightened standard of “clear and convincing evidence” for petitions based on marriage), he provided sufficient evidence for the director to conclude that “more likely than not” the applicant satisfied his burden of proof.

Accordingly, the AAO sustained the appeal, finding the employer an American firm or corporation and the temporary overseas employer a qualifying subsidiary, and concluding that the applicant met the requirements for preserving his U.S. residency while abroad.

Among other provisions, the law:

• allows police officers to arrest individuals unable to provide documentation demonstrating their legal right to be in the United States;
• allows police officers to charge illegal immigrants with criminal trespassing;
• allows state residents to sue Arizona’s local or state officials or agencies if they “adopt[] or implement[] a policy or practice that limits or restricts the enforcement of federal immigration laws to less than the full extent permitted by federal law.”

The law also contains provisions regarding verification of employment authorization. Since December 31, 2007, Arizona employers have been required to use E-Verify, the federal electronic employment verification system, to authenticate employees’ legal work status. The new law amends existing provisions to require employers to retain employee verification records for either the duration of the employee’s employment or at least three years, whichever is longer.

Additionally, the new law establishes an affirmative defense of “entrapment” for employers charged with knowingly or intentionally employing unauthorized aliens. To successfully assert the defense, employers must prove, by a preponderance of the evidence, that:

• law enforcement officers or their agents, and not the employer, started the idea of knowingly or intentionally hiring an unauthorized alien;
• law enforcement officers or their agents urged and induced the employer to knowingly or intentionally hire an unauthorized alien; and
• the employer was not predisposed to commit the violation before law enforcement officers or their agents urged and induced the employer to commit the violation.

However, an employer will not be deemed “entrapped” if it was predisposed to knowingly or intentionally hire unauthorized aliens and the law enforcement officers or their agents “merely provided the employer with an opportunity to commit the violation.”