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NOV

19

Summary of Challenge to Arizona Employers' Sanctions Law

Summary of Chamber of Commerce v. Whiting
Case No. 09-115
U.S. Supreme Court Oral Argument
December 8, 2010

By
David A. Selden
Julie A. Pace
The Cavanagh Law Firm PA

I. QUESTIONS PRESENTED IN PETITION FOR CERTIORARI

On December 8, 2010, the U.S. Supreme Court will hear oral arguments in Chamber of Commerce v. Whiting, the legal challenge to Arizona's Legal Arizona Workers Act (LAWA), which is also commonly known as the Employer Sanctions Immigration Law. The Court will
address three questions, discussed below:

  1. Whether federal law, 8 U.S.C. § 1324a(h)(2) -- which "preempt[s] any State or local law 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" -- expressly preempts the provisions of the Legal Arizona Workers Act, Ariz. Rev. Stat. § 23-211, et seq., that sanction employers for knowingly or intentionally employment unauthorized aliens;
  2. Whether a state or local government may require employers to enroll and participate in the federally created and administered E-Verify program; and.
  3. Whether the Arizona statute is impliedly preempted because it undermines what the Supreme Court has described as a federal "comprehensive scheme" to regulate the employment of unauthorized aliens. Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 147 (2002).
In November 2009, the U.S. Supreme Court requested that the Solicitor General file a brief stating the position of the federal government on whether the Supreme Court should hear
the case and whether the Arizona law is unconstitutional. In May 2010, the Justice Department filed its brief urging the Supreme Court to consider the first of the three questions presented, and asserting that LAWA was expressly preempted by federal immigration law. The Supreme Court decided to hear all three issues, and the Justice Department in September 2010 later filed a brief agreeing with those challenging the law that LAWA is unconstitutional for all three of the issues to be considered by the Supreme Court.

The federal government has gone on record supporting the legal challenge to the constitutionality of the Legal Arizona Workers Act (LAWA), which is commonly known as the Employer Sanctions Immigration Law.

II. SUMMARY

Immigration policy has traditionally been the subject of federal law. The federal government did not address the employment aspects of immigration law in a comprehensive way until 1986, with the passage of the Immigration Reform and Control Act. In recent years, there
has been a growing perception that current employment verification procedures and enforcement are not effective. Whether for policy or political reasons, state and local governments are now rushing in to fill the perceived void created by the failure of Congress to take further action to address immigration policy. Adding state and local immigration laws to federal law creates a host of legal and practical issues, particularly the issue of whether federal immigration law
preempts state and local immigration laws.

A test case on this important national issue will be heard by the U.S. Supreme Court on December 8, 2010. The Court's decision will likely give greatly needed guidance on what state and local governments can and cannot do in the area of immigration legislation. The case before
the U.S. Supreme Court is Chamber of Commerce v. Whiting, No. 09-115 (U.S. filed July 24, 2009), on appeal from a Ninth Circuit Court of Appeals' decision that allowed Arizona to enforce its own Employer Sanctions Immigration Law. Chicanos Por La Causa v. Napolitano, 544 F.3d 976 (9th Cir. 2009). In conflict with the Ninth Circuit decision, the Third Circuit ruled on September 9, 2010 that State and local governments are preempted from enacting employer sanctions immigration laws. Lozano v. City of Hazleton, 620 F.3d 170 (3rd Cir. 2010).

State immigration laws interfere and conflict with the deliberate and delicate balance of federal immigration policy to try to prevent immigration employer sanctions from leading to national origin discrimination against job applicants and to minimize burdens on businesses from government regulations. The Supreme Court's upcoming decision could also shape the pressures on Congress to take action on immigration. If the Supreme Court recognizes federal preemption, Congress will be the only body that can fix the current immigration system and pressure will mount for action. If the Court allows the states to take action, pressure on Congress may lessen
in the near term, as state immigration laws become, by default, the new national immigration policy. That will cause pressure to build on Congress in the future to bring order from what will be the chaos of fragmented and inconsistent state and local policies for immigration enforcement.

Under virtually every potential immigration reform proposal, there will certainly be more extensive regulation of immigration-related hiring procedures.

III. THE LEGAL CHALLENGE TO THE CONSTITUTIONALITY OF THE
ARIZONA LAW.

The Arizona law put state and local governments squarely into the role of regulating the practices of employers in immigration-related screening and hiring employees, which had been a subject only of federal law. The response of both the business community and the civil rights community to Arizona's intrusion into the regulation of workplace immigration practices was swift and predictable. Shortly after the Legal Arizona Workers' Act was signed into law by then Governor Janet Napolitano, a coalition of business groups filed the first lawsuit challenging the constitutionality of LAWA.

The District Court of Arizona declined to enjoin enforcement of the Arizona law, Arizona Contractors Assoc. v. Napolitano, 2534 F. Supp. 2d 1036, 526 F. Supp. 968 (D. Ariz. 2009), and the Ninth Circuit Court of Appeals affirmed, 544 F.3d 976 (9th Cir. 2008). As explained in
Section VII below, the federal government did not take a position on the Arizona Employer Sanctions Law until requested to do so by the United States Supreme Court, when the federal government finally filed a brief and argued that the Arizona law was unconstitutional and
conflicted with and was preempted by federal immigration law. Brief for the United States as Amicus Curiae, supporting Petitioners, Chamber of Commerce v. Whiting, No. 09-115 (U.S. May 28, 2010). The late involvement of the federal government in the Arizona Employer Sanctions Law was in marked contrast to the leading role of the federal government in filing the lawsuit that obtained an injunction to block enforcement of SB 1070 in 2010. United States of America v. Arizona, 703 F. Supp. 2d 980 (D. Ariz. 2010).

The year before the 2007 Arizona Employer Sanctions Law, a town in northeastern Pennsylvania passed an ordinance to suspend or revoke business licenses of businesses found to have knowingly employed undocumented workers and to prohibit landlords from renting houses
to undocumented persons. The ordinance was enjoined by the United States District Court in a long opinion that even included an appendix on the history of immigration laws in this country. Lozano v. City of Hazleton, 496 F. Supp.2d 477 (M.D. Pa. 2007). The ruling was recently
upheld by the U.S. Court of Appeals for the Third Circuit on September 9, 2010, creating a conflict between the law in the Third Circuit and the Ninth Circuit. 620 F.3d 170 (3rd Cir. 2010).

A. Preemption/Supremacy Clause

     1. IRCA Savings Clause

The legal issues involving the challenge to the constitutionality of state and local employer sanctions immigration laws differ somewhat from other types of state and local immigration laws. The Immigration Reform and Control Act of 1986 contains a specific provision that addresses the role of the federal government versus the role of the state and local governments in the area of immigration related employment practices. IRCA expressly provides that federal regulation of immigration-related hiring practices preempts any state and local laws in the area, but with one exception, known as the "Savings Clause." The express preemption provision and the language of the Savings Clause are as follows:

The provisions of this section preempt any State or local law imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ, or recruit for a fee for employment, unauthorized aliens.

8 U.S.C. § 1324a(4)(2). The Savings Clause has created an opening through which Arizona and other states have plunged in order to legislate in the area of immigration-related employment practices.

With the passage of IRCA in 1986, Congress for the first time enlisted, indeed "drafted" private parties – such as employers – to assist in the governmental function of verifying immigration-related employment eligibility. The method for doing so was through what is known as the I-9 process, in which all employers are required within three days of hiring an employee to review certain documents presented by the employee to verify the employee's identity and work authorization. To prevent against discrimination, the employee has the right to chose from one or a combination of more than 20 documents, and the employer is prohibited from requiring the employee to present only certain of the allowable documents and is prohibited from doing more than accepting documents that appear reasonably genuine on their face. The reason for those restrictions is to prevent employers from using more stringent hiring practices for persons who appear that they might not be native-born Americans based on physical characteristics, ethnicity, etc. See H.R. Rep. No. 99-682(I), at 49, reprinted in 1986 U.S.C. C.A.N. 5649, 5653; id. Pt. 2 at 12.

With the passage of IRCA, Congress "forcefully made combating the employment of illegal aliens central to the policy of immigration law." Hoffman Plastic Compounds v. NLRB, 535 U.S. 137, 147 (2002). IRCA was the product of 15 years of Congressional consideration, which President Reagan declared in signing the law was "one of the longest and most difficult legislative undertakings in recent memory." Statement of the President upon signing S.1200, Nov. 10, 1986, reprinted in 1986 U.S.C.C.A.N. 5856-1; H.R. Rep. No. 99-682(I), at 51-56 (1986).

The arguments of the advocates of the statutes are that the federal government has not effectively enforced sanctions against employers who hire undocumented persons, that the states therefore need to act,1 and the federal IRCA's Savings Clause allows the states to act through licensing statutes.

B. State Employer Sanctions Conflict with the Balance and Compromises That Are Key Features of Federal Immigration Policy and Law.

The Congressional goal to prevent the imposition of immigration verification responsibilities on employers from burdening employers was expressed in Congressional Reports declaring that IRCA's objective was to be "least disruptive to the American businessman. . .
[while also] minimiz[ing] the possibility of employment discrimination." H.R. Rep. No. 99-682(I), at 56; S.R. Rep. No. 99-132, at 8-9. IRCA was a major departure from prior law by imposing upon employers, for the first time, legal responsibilities to check immigration status previously a responsibility that private parties did not have, and determining immigration status can be a complex subject.

1 The argument that ineffectiveness of a federal policy confers authority on states to act is a political argument, but not a persuasive legal argument. The limits of state and federal authority are defined by the United States Constitution and depend upon the subject area, not the effectiveness of governmental action. For example, if perceived ineffectiveness by the federal government constitutes grounds for states to act, would the State of Florida assert that it has the authority to declare war on Cuba because 50 years of the federal policy of a trade embargo and travel restrictions have not been successful at removing Fidel Castro from power?

The Congressional objective that immigration verification not cause employers to refrain from hiring persons who appear foreign is an essential part of federal immigration law and policy. If sanctions against employers are too severe, some employers might decide not to take the risk that a person they hire might later be found to be undocumented. To lessen the risk, employers might simply refrain from hiring persons who appear foreign and restrict job opportunities to people who appear native-born. Congress, therefore, included in IRCA prohibitions on discrimination on the basis of nationality or citizenship and 8 U.S.C. § 1324b and Congress carefully calibrated the penalties for immigration-related discrimination so that those
penalties are balanced with the penalties for knowingly employing unauthorized aliens, which are contained in 8 U.S.C. § 1324a(e)(4). See also H.R. Rep. No. 99-682(I), at 69-70.

The Congressional concern that penalties against employers for employing undocumented workers under IRCA could cause employment discrimination is reflected in part by IRCA's requirement that the General Accounting Office submit the subject reports to
Congress on the subject of immigration-related national origin discrimination. 8 U.S.C. § 1324(a)(j)(1). The testimony of the Controller General to the U.S. Senate Committee on the
Judiciary, gave the following blunt conclusion on this key issue:

We found that there has been widespread discrimination. But was
there discrimination as a result of IRCA? That is the key question
Congress directed us to answer. Our answer is yes.

Statement of Charles A. Bowsher, Controller General of the United States, before the Committee on the Judiciary, United States Senate, "Immigration Reform: Employer Sanctions and the Question of Discrimination," March 30, 1990, available at http://archive.jo.gov.d38t12/

In short, the federal statutory scheme presents employers with the challenge of walking a tightrope, with sanctions for immigration-related hiring violations on one side and the sanctions for discrimination on the basis of citizenship or alienage on the other. If employers misstep on either side of the line, the sanctions are equivalent in the federal system. If state-level penalties are added for hiring undocumented persons, however, the careful Congressional balance between discrimination and immigration violations will be upset.

Because of the exception in the Savings Clause for licensing and similar statutes, states such as Arizona have interpreted the Savings Clause to allow States to impose any sanctions they want on employers, as long as the sanctions take the form of a penalty against a license. Consequently, the Arizona Employer Sanctions Law provides a penalty of a 10-day suspension or the permanent revocation of a business's license, including its articles of incorporation. The revoking the articles of incorporation is the functional equivalent of a business "death penalty."

Arizona has violated the careful balance that Congress crafted as an essential part of federal immigration law. The tightrope that employers walk between immigration enforcement and non-discrimination, with balanced federal sanctions if they misstep on either side of that
tightrope, has now been dramatically changed. In Arizona, a misstep on the immigration side of the tightrope results in the business death penalty. A misstep on the side of discrimination yields the modest sanctions that Congress enacted. It is as though a person walking a tightrope is faced with uneven pavement on one side, and a pit of ravenous alligators on the other. In those circumstances, which way will employers lean? They will err on the direction of discrimination
because the risk of license revocation and loss of corporate status is so severe.

The state of Arizona and other advocates of state regulation of immigration-related employment practices contend that the Arizona statute falls within the exception of the Savings Clause, excluding from preemption state laws imposing sanctions for employment of
undocumented workers through "licensing and similar statutes." Their argument is, in essence, that any state or local law imposing penalties on employers for violation of state immigration laws is permitted as long as the penalty is directed at a license. The Arizona statute, the state contends, is merely a "licensing law" because the penalty for violating the Legal Arizona Workers Act is the suspension or revocation of a license.

Upholding the Arizona law leads to the incongruous and illogical result that IRCA prohibits states from levying even a $1.00 fine for employment immigration violations, but allows states to take away a company's license, including articles of incorporation, for immigration infractions. Compounding that illogical result is the fact that the Arizona statute defines "license" in a broad way to include matters that the law typically does not consider to be licenses. Arizona immigration law defines licenses to include a company's articles of incorporation, a partnership's certificates, or articles of reorganization. The law does not define what would be involved in "suspending" a corporation's articles of incorporation for ten days.  Revocation of a license is the equivalent of capital punishment for businesses. Nowhere in the
legislative history of IRCA does it reflect a Congressional intent that state governments are to be prohibited from levying small fines against employers, but are granted the authority to put employers out of business for infractions that in the federal system lead to very carefully
calibrated fines equivalent to the penalties for discrimination.

The meaning of the Savings Clause's exception for licensing statutes should be interpreted based on an interpretation of what are licensing statutes under federal law, not what Arizona has defined as licensing laws in LAWA. Band of Choctaw Indians v. Holyfield, 490 U.S. 30 43 (1989). Articles of incorporation, which LAWA includes as licenses, are not licenses under federal law. The Savings Clause was intended to allow states to make licensing decisions based in part on compliance with federal immigration laws when assessing the fitness of a
company to engage in businesses such as farm labor contracting. H.R. Rep. No. 99-682(I) at 58.  In 1986 when Congress passed IRCA, 12 states had laws requiring licenses or registration for farm labor contracting businesses, and many of those states required the businesses to comply with federal law as a condition of receiving or maintaining their state licenses. The Savings Clause therefore allowed states not to issue or to revoke licenses for businesses that had a record of violating federal immigration law. There is nothing in the language or legislative history to suggest that the Savings Clause should not be interpreted so expansively as to allow states to
make licensing decisions, including decisions affecting the corporate existence of businesses, based on state determinations of compliance with state immigration laws.

The state of Arizona interprets the Savings Clause's exception for licensing statutes to mean that the exception applies to any licensing-related laws, rather than to any licensing laws.  Indeed, the Arizona Employer Sanctions Law is codified in Title XXIII, the Labor Code, not the titles of the Arizona statutes that deal with licensing. LAWA is by its terms a law regulating employment practices, not a licensing law.

C. Mandatory E-Verify Use Conflicts with Federal Law that E-Verify is
Voluntary.

The Arizona law conflicts with federal law because Arizona now mandates that all  employers use the federal E-Verify system, even though that system has been created and maintained under federal law as a voluntary program. E-Verify was authorized by the Illegal
Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA), Pub. L. No. 104-208, 110 Stat. 3009-65. The statutory section authorizing the program is entitled "Voluntary Election to Participate in a Pilot Program." IIRIRA § 402.2

The law specifically prohibits the Department of Homeland Security from "requir[ing] any person or other entity to participate" in the E-Verify program. IIRIRA § 402(a). The State of Arizona argues that the federal statute prohibits the federal government, but not state or local governments, from mandating E-Verify use. Congress obviously did not contemplate that states would enter the field of regulating immigration-related employment practices, and it therefore
did not specify a preemption or prohibition for state mandates of E-Verify use. However, for Congress to allow the states to take greater action and to have more authority to regulate employment hiring practices through mandating E-Verify use than Congress conferred upon the Department of Homeland Security, the federal agency with jurisdiction on immigration. The fact that Congress expressly prohibited the Department of Homeland Security from mandating EVerify use certainly compels the conclusion that Congress did not intend that every state, county, city, town, or village could dictate that employers must use the E-Verify system.

D. The Arizona Law Violates Employer's Due Process Rights.

State immigration laws often raise due process issues. The pending appeal of Chamber of Commerce v. Whiting to the U.S. Supreme Court and the three issues presented to the Supreme Court all involve the issue of federal preemption, and do not place at issue the due process violations of the Arizona law. The due process challenge was rejected by the District Court and the Ninth Circuit the context of the facial challenge to LAWA. Due process challenges are most often raised when a statute is enforced or applied in a particular circumstance in which a defendant is deprived of due process rights by the government's actions.  The current challenge to LAWA is a facial challenge. That means that the court must find that the law is unconstitutional on its face and that it cannot possibly be applied in a manner that satisfies constitutional requirements. Federal preemption issues lend themselves to a facial challenge more readily than do due process issues, however the due process issues involved in LAWA are significant and provide abundant grounds to challenge the law when it is enforced against employers.

2  In 2008, the federal government made E-Verify mandatory for federal government contractors, but that is still a voluntary election of E-Verify because companies may choose whether to be a federal
contractor. Chamber of Commerce v. Napolitano, 648 F. Supp. 2d 726, 736 (D. Md. 2009).

The violations of due process will be more apparent when a factual record is developed in the defense to an actual prosecution of a business for an alleged violation of LAWA. In the first three years that LAWA has been on the books in Arizona, and despite the expenditure of millions of dollars for enforcement and the immigration sweeps and raids conducted with extensive media coverage of Maricopa County Sheriff Joseph Arpaio, there has been only one contested prosecution of an employer under LAWA, and that case is still in its early stages.

3  The due process clause of the United States Constitution provides that "certain substantive rights – life, liberty, and property – cannot be deprived except pursuant to Constitutionally adequate procedures." Cleveland Bd. Of Educ. v. Loudermill, 470 U.S. 532, 541(1985). State immigration laws raise problems under due process problems because they involve state courts making decisions regarding issues that are matters of federal law and that are governed by due process procedures within the federal system, that are absent from state
proceedings. Enforcement of state sanctions creates a tangled web of state determination of federal issues.

For example, the foundation for employer compliance with immigration employment eligibility verification procedures is employer compliance with the I-9 process. Federal law expressly provides, however, that I-9 forms may be used only for purposes of compliance with federal immigration law. 8 U.S.C. § 1324a(b)(5). Using I-9 forms and procedures for determining compliance with other laws such as state employer sanction laws, is inconsistent with the federal restriction upon the use of I-9 forms only for compliance with enumerated
federal law.

Federal law also provides that immigration status and an employer's violation of IRCA can be determined only by a hearing and adjudicative process before a federal administrative law judge with expertise and jurisdiction over immigration matters pursuant to the Administrative
Procedure Act. 8 U.S.C. § 1324a(e)(2)-(3), (7)-(8). In order to avoid state court proceedings dealing with the substance of an individual's immigration status, the Arizona Employer Sanctions Law provides that the "determination" of a person's immigration status under state law shall be the federal government's computer response to a computerized inquiry about a person's immigration status sent by the state or local government to the Department of Homeland Security
pursuant to 8 U.S.C. § 1373(c). That is a statute under which state and local governments may receive information about a person's citizenship status intended for verifying eligibility for public assistance programs, some of which may be denied to non-citizens. A computerized Section 1373(c) response is not, however, a "determination" of employment eligibility under federal law, but it is deemed a "determination" under Arizona law, without due process procedures of a hearing, cross-examination of witnesses, a decision by an impartial judge, or other traditional elements of due process.

The use of E-Verify also does not instill due process protections into state court adjudications because employers do not have the right to contest the substance of E-Verify responses; only employees do. Due process "protect[s] the personal rights of litigants to a full and fair hearing" and an employee's right to seek correction of an erroneous E-Verify response, even if those procedures fulfilled due process, does not confer due process on employers who do not have a role in the E-Verify corrective steps. Miller v. French, 530 U.S. 327, 350 (2000).

IV. ARIZONA'S EMPLOYER SANCTIONS LAW: THE LEGAL ARIZONA
WORKERS ACT (LAWA).

The United States Supreme Court is currently considering a legal challenge to the constitutionality of Arizona's Employer Sanctions Law, entitled the Legal Arizona Workers Act ("LAWA"). The Supreme Court is considering whether the employer sanctions and E-Verify
requirements of the law are preempted by federal law and are, therefore, unconstitutional. 

The Arizona Legislature, in its final hours before adjournment on June 20, 2007, passed the so-called Legal Arizona Workers Act. Then-Governor Janet Napolitano signed the law on July 2, 2007. The need for amendments to LAWA quickly became apparent, and on April 28, 2008 the Arizona Legislature passed HB 2745 to amend LAWA and clarify some of its provisions.

LAWA makes sweeping changes for Arizona employers, including:
  •  Employers who "knowingly" or "intentionally" employ an unauthorized worker could have their business license suspended or revoked.
  • In addition to federal ICE authorities, Arizona employers face investigation and prosecution by County Attorneys, the Arizona Attorney General, County Sheriff’s offices, and other local law enforcement agencies.
  • All Arizona employers must use E-Verify to verify employment eligibility of all newly hired employees after January 1, 2008, the effective date of LAWA.
  • Employers who enroll in a voluntary employer-enhanced compliance program that includes the Social Security Number Verification Service and certain other requirements are provided an additional defense against LAWA violations.
  • There are additional penalties for employers who pay employees cash and fail to withhold taxes, pay unemployment insurance or worker’s compensation premiums.
A. Prohibition against "Knowingly" or "Intentionally" Employing an
Unauthorized Worker.

LAWA prohibits employers from "knowingly" or "intentionally" employing an unauthorized alien. A "knowing" violation is defined to mean the same thing as a knowing violation of federal immigration law, which allows violations to be based on an employer’s constructive knowledge of a person’s lack of legal status, other than the person’s appearance or accent. "Intentionally" employing an unauthorized alien means that the Company has knowledge of the circumstances that make its conduct illegal, even if the Company did not know that its acts
or omissions violated the law. The penalties imposed are more severe for "intentionally" employing an unauthorized alien than for "knowingly" doing so.

B. Investigations by the State Attorney General, County Attorneys, County Sheriffs, and Local Law Enforcement.

LAWA requires the Attorney General and County Attorneys to investigate employers when they receive a complaint that the employer employs an unauthorized worker. The law specifically authorizes County Sheriffs or local law enforcement to assist in the investigations.
The law specifically allows investigations into anonymous complaints.

The Attorney General or County Attorney is required to verify the worker’s status by checking with federal immigration authorities through the use of a computer check under 8U.S.C. § 1373(c), a provision of the federal law that directs the federal government to respond to inquiries from state or local governments requesting verification of a person's immigration status. There are penalties for knowingly filing a false or frivolous complaint against an employer.

C. Complaints Based "Solely" on Race or National Origin May Not Be
Investigated.

The original Act did not include any limitations on race-based or discriminatory complaints. The amendments in HB 2745 prohibit the investigation of complaints based "solely" on race or national origin. It does not, however, prohibit the investigation of complaints based
partially or primarily on race or national origin. The concept of prohibiting discrimination only when government or private parties act "solely" based on race was the approach used by opponents of the Civil Rights Act of 1964 to attempt to dilute the bill through amendments offered by Congressman John Dowdy of Texas and Senator John McClellan of Arkansas.

D. Penalties for Knowingly or Intentionally Employing an Unauthorized
Worker.

The penalties for employing unauthorized workers differ depending on whether the employer "knowingly" employed the unauthorized alien or "intentionally" employed an unauthorized alien.

     1. Penalties for "Knowingly" Employing an Unauthorized Worker.

If a court finds an employer to have "knowingly" employed an unauthorized alien, the court may suspend the employer’s business licenses for 10 days. When deciding whether and for how long to suspend the employer’s business license, the court is to consider factors such as (i) the number and duration of unauthorized aliens employed; (ii) whether the employer made good faith efforts to comply with immigration laws; and (iii) the role of the employer’s directors,
officers, or principals in the violation.

In addition to facing a suspension of business licenses, the employer is subject to a three-year probationary period. If the employer knowingly or intentionally employs an unauthorized worker during the probationary period, the employer’s business license(s) is permanently
revoked. After three years with no additional violations, the employer has a clean slate.

     2. Penalties for "Intentionally" Hiring an Unauthorized Worker.

If an employer is found to have "intentionally" employed an unauthorized alien, the court must suspend the employer’s business license(s) for at least ten days. The court may suspend the employer’s business license(s) for more than ten days, based on the same factors described above for suspending an employer’s license(s) after a "knowing" violation.

In addition to the license suspension, the employer is subject to a five-year probationary period. If the employer knowingly or intentionally employs an unauthorized worker during the probationary period, the employer’s business license(s) is permanently revoked. After five years with no additional violations, the employer has a clean slate.

     3. Licenses Subject to Suspension or Revocation.

The licenses that will be suspended or revoked upon a finding of a knowing or intentional violation include "any agency permit, certificate, approval, registration, charter, or similar form of authorization that is required by law and that is issued by any agency for the purposes of
operating a business" in Arizona, such as articles of incorporation, certificates of partnership, and transaction privilege (sales) tax licenses. Ariz. Rev. Statute § 23-211(9). There are a few
exceptions, such as some environmental licenses and professional licenses.

The licenses at risk are all those “specific to” the business location where the unauthorized worker performed services. If the employer does not hold a license “specific to” that location, all licenses for the employer’s primary place of business are subject to suspension
or revocation.

     4. Requirements During Probationary Period: Affidavits and Quarterly Reports.

Upon finding a violation, the court will order the employer to terminate the employment of all unauthorized aliens employed in the state of Arizona. There is nothing in the law that states how employers are supposed to determine who are all of their unauthorized aliens, and
federal law prohibits employers from submitting existing employees, as distinguished from new employees, through the E-Verify process or subjecting employees to more rigorous scrutiny based on race, national origin, etc. In addition, the company must file a sworn affidavit with the County Attorney within three business days after the date of the order affirming that the employer has done so and will not intentionally or knowingly employ an unauthorized alien in
Arizona. If the employer does not submit the sworn affidavit, the employer’s business license(s) will be suspended until the sworn affidavit is submitted to the County Attorney. Submitting the
affidavit may expose the employer to liability for false swearing if it turns out that the employer did not successfully identify and fire all unauthorized aliens.

During the three or five year probationary period for either a knowing or intentional violation, the employer must file quarterly reports with the County Attorney in the form provided in Ariz. Rev. Statutes § 23-722.01 identifying all new employees hired in the location where the unauthorized alien performed work.

     5. Permanent License Revocation for Second Violations.

If an employer commits a second violation during a probationary period, the employer’s business licenses applicable to that business entity will be permanently revoked. For businesses, this is the equivalent of capital punishment. A violation cannot be considered a second violation unless it occurred while the Company was on probation for a first violation.

     6. Violators Will Be Identified on the Attorney General’s Website.

LAWA requires the Attorney General to post on its website the employers who have violated the law, and copies of the court orders finding a violation. This is the modern Internet equivalent of putting offenders on display in the village stockade in colonial times.

     E. The Defense That Employers Are Not Required to Violate Other Laws.

LAWA specifically states that it shall not be construed to require an employer to take an action that the employer, in good faith, believes would violate federal or state law. For example, theoretically an employer would not be required to refuse to hire a person if it believes that rejecting the person would violate laws prohibiting discrimination based on national origin or citizenship status.

     F. Mandatory Use of the E-Verify Program and Defenses for Employers.

Under LAWA, every employer in Arizona is required to use the federal E-Verify program to verify the employment eligibility of all newly hired employees. If an employer proves that it used E-Verify to verify the employment eligibility of a worker who is later determined to be an unauthorized worker, the employer is entitled to rebuttable presumption but not an absolute "safe harbor" defense, for the individual at issue that the company did not knowingly or intentionally employ an unauthorized worker. In addition, employers also have an
affirmative defense to a violation if they can show that they followed the federal I-9 employment verification process, in good faith, and if they can show a good faith attempt to comply with the I-9 requirements and that the violation was “isolated, sporadic or accidental, technical or procedural failure.”

E-Verify is a federal program jointly operated by the Social Security Administration ("SSA") and the Department of Homeland Security ("DHS").

Computer and Internet access is required to use E-Verify. E-Verify can only be used with new hires, except for federal contractors subject to additional verification requirements. Everify cannot be used with existing employees or as a screening tool prior to hiring an employee.

Employers are still required to complete the Form I-9 within three business days from the date of hire. After hiring the employee and completing the I-9, and if the employee completes the I-9 verification process, then the I-9 information is entered into E-Verify and the company should follow the steps for confirmation or tentative non-confirmation.

Employers can register for E-verify online at https://e-verify.uscis.gov/enroll. Employers are required to sign a Memorandum of Understanding and follow the program requirements.

     G. Voluntary Employer-Enhanced Compliance Program.

If an employer enrolls in the Employer Enhanced Compliance Voluntary Program and follows all of its requirements, the employer will not be found liable for a LAWA violation upon a showing that the employee named in the complaint had been verified through E-Verify or the
Social Security Number Verification Service (“SSNVS”). The voluntary employer enhanced compliance program requires employers (1) to use E-Verify for all newly hired employees, (2) to
verify the employee’s Social Security numbers through the SSNVS for all existing employees not verified through E-Verify and to resolve any discrepancies within 90 days, if possible (more time is permitted as long as the employer can show proof of good faith efforts by the employee to resolve the discrepancy); and (3) to provide documents upon request of Attorney General or County Attorney proving that an employee in question was verified through E-Verify or the
SSNVS. Employers are required to file a sworn affidavit with the Attorney General that they agree to perform all the foregoing actions “in good faith” in order to enroll in the voluntary program.

The SSNVS clearly states that employers should not take adverse employment action against employees based on a Social Security number “no-match” communication. The availability of this defense is dependent on both the employer and employee being able to
document ongoing good-faith efforts to resolve the discrepancy. This provision places the employer’s defense in the hands of the employee, as the employee's actions are needed to try to resolve SSA discrepancies. Further, because of privacy laws, the employer cannot control what occurs between the Social Security Administration and the employee. The SSNVS is not designed for immigration compliance and is not an accurate tool for immigration compliance.

     H. Penalties for Paying Cash and Not Following Other Employment Laws.

The amendments to LAWA provide additional penalties for employers of two or more persons who pay their employees in cash and fail to comply with all of the following: tax withholdings, workers’ compensation coverage, unemployment insurance, and new hire
reporting requirements. Arizona Rev. Statutes § 23-361.01. Violations are a penalty that is triple the amount of all withholdings, payments, contributions or premiums that the employer failed to pay, or $5,000 for each employee, whichever is greater.

     I. Extension of LAWA to Contractors’ Hiring Practices, but Exclusion of Independent Contractor Relationship from Definition of Employee.

The 2008 amendments made several changes to the language of LAWA regarding employment and independent contractor relationships. The new language is both somewhat ambiguous and contradictory. The amendment changes the definition of “employee” in a way that deletes references to an employment relationship and expands it to include persons who provide “services” for “other remuneration.” The language is deliberately broader than those who provide “labor” for “wages.” This new language might be interpreted to expand coverage to independent contractors, not just employees, but the definition of “employ” is changed to state that it “does not include an independent contractor.” Ariz. Rev. Statutes § 23-211(3)(b)

Other portions of the amendments reinforce that the definition of “employer” in LAWA does not include independent contractors. Ariz. Rev. Statutes §§ 23-211(2)(b); 23-211(3) and (5). LAWA also includes a non-exclusive list of seven factors for determining whether persons
are independent contractors or employees. Those seven factors are not the only factors utilized under common law or federal or state statutes. The trend in the law has been to try to make the concepts of employee and independent contractor uniform among the various laws, such as workers compensation, unemployment insurance, income tax withholding, and other employment regulatory laws. The amendments create a potential inconsistency in which a worker might be considered an employee under LAWA but considered an independent contractor under other laws. That, of course would put employers in an untenable position.

Contradicting the exclusion of independent contractors described above, the 2008 amendments also state that employers violate the law and may have their business licenses revoked if the employer “knowingly contracts to obtain the labor of an unauthorized alien or
with a person who employs or contracts with an unauthorized alien to perform the labor.” Ariz. Rev. Statutes § 23-212(A). That is a huge expansion of LAWA and is at odds with the definition of employer that purports to exclude independent contractors.

Under the above provisions, Arizona businesses could lose their licenses based on the hiring practices of the persons or companies with whom they contract i.e., the “first-tier contractors,” and the subcontractors or service providers to the first-tier contractors. For
example, some vendors who might fall under this analysis could include cleaning companies used at a company’s offices, caterers of food, messenger services, temporary or leased employment agencies, subcontractors, etc.

     J. Verification of Immigration Status for Issuance of Licenses.

LAWA includes a provision that state and local governments must determine whether a person is an unauthorized alien before issuing a license. Ariz. Rev. Statutes § 41-1080. That provision closes what the advocates of the law had described as a loophole if persons not
authorized to be employees became licensed independent contractors.

     K. E-Verify Requirement for Government Contractors and Grant Recipients.

After the 2008 amendments, LAWA requires that employers must participate in the EVerify program in order to be eligible to receive any economic development incentive from a state or local government. Ariz. Rev. Statutes § 23-214(B).

     L. Disclosure of Businesses Enrolled in E-Verify.

The law requires the Attorney General to request from the U.S. Department of Homeland Security every three months a list of employers who have registered to use the E-Verify Program. The Attorney General must also post the list on its website. Ariz. Rev. Statutes § 23-214(C). Businesses that are not enrolled in the E-Verify Program may find themselves targeted as a result of the fact that they are not named as enrollees on the Attorney General’s website.

     M. Prohibition Against Knowingly Accepting Identity of Another Person in Hiring Employee.

LAWA amends the State’s identity theft law to make it easier to prosecute individuals using a false identity or false personal information to gain employment. Employers can expect more police inquiries relating to employees who may have used an erroneous social security number or name.

Additionally, LAWA makes it a Class 4 felony for a person to accept the identifying information of another person from an individual knowing that the individual is not the actual person identified by the information and using the information for employment verification procedures. Employer representatives who accept documents knowing that the documents do not properly belong to the individual, if convicted, could be sentenced to 2-1/2 years in prison or a fine of up to $150,000. For purposes of this provision, knowing requires actual knowledge.

     N. "Entrapment" Defense.

Under a provision of LAWA that was added by SB1070 in 2010, an employer may argue as an affirmative defense to charges of violating LAWA that the employer was entrapped.4  To succeed with the entrapment defense, an employer must prove:

1. The idea of committing a violation (knowingly or intentionally hiring an unauthorized worker) began with law enforcement officers or their agents;
2. The law enforcement officers or their agents "urged and induced" the employer to commit the violation; and
3. The employer was not predisposed to commit the violation.

Ariz. Rev. Statutes § 23-212(k). It was not entrapment for law enforcement officers or their agents to use a ruse or conceal their identity. It is not entrapment if the law enforcement agents
merely present the employer with the opportunity to violate LAWA and the employer was already predisposed to act. Ariz. Rev. Statutes § 23-212(L). The employer bears the burden of proving entrapment.

4 This section of SB 1070 was not challenged in any of the numerous legal challenges to SB 1070

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