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The court held that Sections 16 and 17 are both likely preempted by the Immigration Reform and Control Act of 1986, 8 U.S.C. § 1324a(h)(2), which states: “The provisions of this section preempt any state or local law imposing civil or criminal sanctions (other than through licensing or similar laws) upon those who employee, or recruit or refer for a fee for employment, unauthorized aliens.” In reaching this conclusion, the court stated that Sections 16 and 17 contain “sanctions” within the meaning of the federal statute.

The ruling does not address the E-Verify provisions of HB 56 previously addressed in this blog, and those provisions will go into effect as scheduled. Employers should continue to make preparations to ensure that they comply with the E-Verify provisions on a timely basis. Failure to comply may result in an employer being debarred from state contracts, having its state government grants or incentives cancelled, and its business license suspended or revoked for up to 60 days. For a second offense, an employer may have its business license revoked permanently, so serious consequences for non-compliance are still intact following the September 28 ruling. The preliminary injunction will remain in effect until final judgment is entered on the lawsuit, which likely will not occur for several months. In the meantime, Alabama employers should continue to monitor this case and consider seeking the advice of experienced employment and/or immigration law counsel to determine the best strategies and practice following this ruling. 

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.

Photo credit: MBPhoto, Inc.

In a recent article appearing in Corporate Counsel, Littler Shareholder Ian Macdonald observes that ICE is targeting specific industries: those that traditionally hire a large volume of undocumented workers, e.g., agriculture, construction; and others whose employees are privy to sensitive government information. He recommends that employers vulnerable to ICE inspections avoid fines by taking proactive steps such as:

• performing a self-audit;
• streamlining the Form I-9 process;
• implementing a record system allowing quick document production;
• correcting any deficiencies; and
• terminating undocumented workers.

Macdonald also notes that audits are less likely–and, in the event an audit occurs, punishment potentially less harsh–for companies with a record of government cooperation. For example, an employer’s enrollment in and use of the E-Verify program to authenticate individuals’ legal work status may be factored in by immigration enforcement officials during audits.

In the event of an audit, Macdonald recommends swift action using a three-phase approach:

• Phase 1: Review I-9 and payroll records, Social Security “No Match” letters, and cure deficiencies within three days.
• Phase 2: Build a rapport with ICE and cooperate with the agency.
• Phase 3: If a penalty is imposed, have counsel evaluate fines and attempt to negotiate down excessive penalties.

Photo credit: Aggressive Entertainment

Additionally, the Georgia Attorney General is authorized to conduct investigations into employers’ compliance and can bring any civil or criminal action he or she “deems necessary to ensure compliance.” Employers found to have committed a “good faith violation” will have 30 days to demonstrate to the Attorney General that they have complied with the statute’s requirements.

The law’s enforcement provisions include authorizing law enforcement officers to investigate the immigration status of a criminal suspect upon belief that the suspect may be in the country illegally, and criminalizing the transport or harboring of illegal immigrants.

Reuters reports that the measure has its fair share of critics. In addition to President Obama, who spoke out against the bill last month, critics contend that the law will hurt tourism and investment. Moreover, opponents fear that, like Arizona, Georgia will be subject to an economic boycott and costly litigation.

Administrative Burden

Businesses unwilling to use E-Verify often point to the associated administrative burden. The Department of Homeland Security (DHS), which runs E-Verify, acknowledges that simply preparing to use E-Verify requires between a few days to several months, depending on a business’s size and processes. Human resources staff must devote time to enrolling in the program, and learning how to use it (via DHS manuals or online tutorials). Conducting the verification process and addressing issues that arise if E-Verify finds an individual ineligible to work requires time and resources.

However, the risks of noncompliance are significant. As previously reported here, the current administration’s approach to immigration enforcement centers upon employer audits. In April 2009, DHS issued a fact sheet, which revised its Worksite Enforcement Strategy to strengthen its focus on employer noncompliance. Two months later, 652 businesses received Notices of Inspections from Immigration and Customs Enforcement; at the end of the year, in December 2009, 1,000 faced audits, and the trend continues in 2010. From October 2009 to July 2010, businesses in Texas alone were fined over $600,000.

Also, although federal law makes E-Verify mandatory only for federal contractors, an increasing number of state and local governments have passed laws mandating the use of E-Verify. These laws typically apply only to public employers and contractors, but some states and municipalities require private employers to use E-Verify. In certain states and municipalities with proposed or actual immigration-related laws, use of E-Verify benefits employers because it provides a good faith defense to hiring violations.

The Legal Workforce

The lack of an available and willing legal workforce is another justification companies put forth for not using E-Verify. As an agricultural employer told The Fresno Bee, “[E-Verify] may work for Costco, but Costco doesn't have the problem I have,” i.e., a legal workforce shortage. The United Farm Workers of America, a large agricultural workers union, recently ran a campaign called “Take Our Jobs” that challenged individuals with legal U.S. work status to take illegal immigrants’ positions working in the fields. As noted by The Hill, only seven individuals accepted the challenge, the most notable being Stephen Colbert of Comedy Central’s “The Colbert Report,” who testified (in character) about his experience before the House Judiciary Committee’s Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law.

Farmers interviewed by The Fresno Bee stated their preference for a legal workforce, and some pending bills aim for this result. In October 2010, Senator Saxby Chambliss introduced a bill (S. 3912) that aims to provide a non-amnesty option for temporary agricultural workers and streamline the H-2A temporary worker program. The Menendez-Leahy comprehensive immigration reform bill seeks, among other things, to address shortcomings in existing worker programs that have led to undocumented migration.

Employers or individuals wanting to learn more about E-Verify can read Littler’s Insight, A Basic Guide to E-Verify and Related Immigration Compliance: Everything Federal Contractors and Others Need to Know to Comply with E-Verify Requirements, this blog’s E-Verify entries, or visit the DHS E-Verify page.

More often than not, according to the Chronicle’s analysis of received documents, no criminal or civil penalties will follow if an employer’s payroll is purged of undocumented employees. Although audits have become the current administration’s immigration enforcement strategy, and ICE has issued fines for noncompliance, the Chronicle’s report suggests that many of the larger fines resulted from actions taken (or commenced) during the previous administration.

In response to the analysis, Brett Dreyer, the head of ICE’s worksite enforcement unit, stated that ICE tries to identify and focus on employers who are “turning a blind eye” to workers’ legal status (as opposed to those who unintentionally accept fraudulent documents). 

Photo credit: dem10

New Jersey

New Jersey has also introduced two bills, Senate Bill 1842 and Assembly Bill 2600, which would prohibit the employment of unauthorized workers and require all employers who employ 100 or more employees to verify the employment eligibility of all new employees through E-Verify beginning January 1, 2011; compliance for smaller employers would begin on January 1, 2012.

In New Jersey, a rebuttable presumption that an employer did not intentionally or knowingly employ an unauthorized alien will exist if E-Verify was used for verification purposes. Violations can result in sanctions ranging from $100 to $1,000 and suspension and/or revocation of business licenses, depending on the severity of the offense. The New Jersey legislation, unlike the Pennsylvania bills, contains no retaliation provisions.

S1842 was introduced in May 2010 and referred to the Senate Labor Committee. A2600, also introduced in May 2010, was referred to the Assembly Labor Committee.

Employer Audits

The New Jersey and the Pennsylvania proposals also contain enforcement mechanisms. Under the proposed measures, the Pennsylvania and New Jersey labor departments would conduct employer audits and investigate complaint-based allegations to ensure employer compliance. Given the current climate surrounding immigration, it is not surprising that both states have included audits as an enforcement tool. As we previously discussed on this blog, the centerpiece of the Obama administration’s immigration enforcement strategy is the employer audit and, thus far, federal agencies have doled out considerable fines for non-complying employers.

If an audit reveals that a business employs illegal workers, the employer must fire those employees or face criminal charges. For employers in migrant-driven industries, audits significantly and immediately deplete their workforces, making it difficult to conduct business. For dismissed employees, finding work in local or surrounding areas is difficult because potential employers fear being audited themselves.

Though ICE officials contend the audits’ targets are egregious labor and immigration law violators, some contend that the agency is missing its mark by going after employee-friendly businesses. Others, however, contend that the agency’s efforts are insufficient because employees found to be illegal immigrants are being fired instead of being arrested and deported.

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.”

An individual with “hiring authority” is defined as having the “direct authority to
make a decision to hire or to recruit or refer for a fee, an individual for employment.” Should a violation occur, the offender could be subject to the following penalties for each unauthorized alien employed:

Criminal Penalties:

• First offense: A fine of $2,500 and/or imprisonment up to one year.
• Second offense: A fine of $5,000 and/or imprisonment up to two years.
• Third offense: A fine of $10,000 and/or imprisonment up to five years.

Civil Penalties:

• First offense: A fine of between $1,000-$5,000 (currently $250-$1,000).
• Second offense: A fine of between $5,000-$10,000 (currently $2,000-$5,000).
• Third offense: A fine of between $10,000-$20,000 (currently $3,000-$10,000).

The bill has been referred to the House Judiciary Committee.

An audit involves ICE reviewing a company’s Form I-9s to verify employees’ identities and eligibility to work in the country. In 2008, fines increased by 25%, with the result that first-time offenders face penalties of between $375 to $3,200 for each unauthorized employee. In 2009, ICE has ordered companies to pay $800,000 in fines, more than four times the amount imposed in 2008.

Photo credit: Tom Ventura

The law, enacted in 2006, allows private complaints to be filed against companies. Any company found to have “knowingly or intentionally” hired illegal immigrants can have its business license suspended or revoked.

The U.S. Chamber of Commerce, along with other corporate, labor and immigrant groups, is challenging the Arizona law, claiming that it interferes with Congress’s ability to set immigration policy. The Immigration Reform and Control Act explicitly preempts state action on immigration, except for regulations regarding business licensing. Although the Arizona law has yet to be executed, opponents argue that enforcement would violate federal law.

A Supreme Court ruling on the case could have a broad impact on immigration legislation: In the first three months of 2009, state and local governments introduced more than 1,000 immigration-related bills, 150 of which are specifically related to employment.