On May 24, 2011, the Supreme Court handed down a long-awaited decision that allows states to impose immigration-related compliance regulations on businesses. In U.S. Chamber of Commerce v. Whiting , the Court upheld an Arizona law that requires employers to participate in the federal E-Verify online employment eligibility verification program and also permits the state to suspend or revoke the business license of any employer who hires an undocumented worker, ruling that the law was not preempted by federal immigration statutes. While the decision directly applies only to the Arizona employer compliance law (and does not touch Arizona's more recent, and more controversial, immigration enforcement law), it has important implications for the proliferation of immigration laws (couched as licensing laws) that have been passed by other states - and for the employers who do business in those states.
In the first part of a two-prong holding, the Court decided that states can now make participation in E-Verify mandatory. Opponents of the Arizona law had argued that because the E-Verify system is voluntary at the federal level - the federal government is actually prohibited from requiring employers to use it - states could not mandate its use. The Court rejected this argument, noting that not only does federal law fail to expressly prohibit states from making E-Verify mandatory, but also that the federal government has actively encouraged participation in the program. Thus, state laws requiring E-Verify are consistent with the federal objective of boosting use of the system.
In the second part of the holding, the Court determined that states have wide latitude to enforce immigration laws through the regulation of business licenses. Though the Immigration Reform and Control Act of 1986 (IRCA) expressly preempts states from imposing civil or criminal sanctions on employers who hire or knowingly employ undocumented workers, there is a savings clause that permits states to impose penalties through "licensing or other similar laws." The boundaries of this exception had never been tested, but were thought to be narrow. Many observers believed that the Arizona law would be held preempted because its definition of "license" was so broad as to cause the IRCA exception to swallow the overall rule of preemption. The Court disagreed, finding that Arizona's law fell squarely within IRCA's "licensing" savings clause.
The Court's decision has caused significant concern in the business community, as more and more states and also local governments move forward to enact E-Verify requirements and employer sanctions laws. National companies are facing what opponents of state immigration laws have been warning against for some time: the very real possibility of having to comply with fifty or more different immigration-related state laws, in addition to federal requirements.
What should corporate counsel do now to help their clients plan for the continued proliferation of state compliance laws? While the Arizona decision won't have an immediate effect on most employers, it does emphasize the importance of having solid compliance protocols in place. At a minimum, an organization should have one or more individuals designated to take responsibility for the compliance program and should have a checklist of federal and state compliance requirements. Internal systems should include reminders of important compliance deadlines. Regular internal audits and compliance training are also crucial. Corporate counsel should be alert to the possibility that they might face conflicting responsibilities across the states in which they do business and enlist expert immigration counsel to navigate these issues.
Companies should also carefully consider whether to enroll in E-Verify now, a decision that will rest on many factors. Arizona employers must, of course, participate in the system, as must those in other states with mandatory E-Verify requirements: Mississippi and South Carolina now; Alabama and Georgia to take effect down the road. Likewise, an organization may need to enroll in E-Verify if it is or seeks to become a federal contractor, as required by the Federal Acquisition Regulation, or if it seeks to hire certain foreign students engaging in post-graduate training on the basis of a science, technology, engineering or math degree.But apart from these circumstances, employers should not necessarily rush into E-Verify. The system creates an extra commitment for human resources staff and can make the process of hiring longer and more complicated, particularly if a new hire cannot be immediately verified in the system. And, importantly, employers who sign the government's E-Verify Memorandum of Understanding waive Fourth Amendment protections against search and seizure with respect to "any labor matters" - an extremely broad waiver that extends to all of an employer's employment records and could give the government direct access to employees without the need for a warrant or probable cause. On the positive side, nationwide enrollment does solve the problem of assessing state-by-state requirement.
What next for state immigration laws? There is a good chance that Congress will enact legislation to mandate E-Verify at the national level, but it remains to be seen whether the federal legislature will at the same time attempt to reign in the states. Although there is a great deal of support for keeping states out of the realm of immigration regulations, there are also many who believe that state involvement is an important tool in immigration enforcement.In short, state immigration enforcement laws are likely to be here to stay for some time. But employers with sound compliance programs should be able to ride out the storm until a workable solution for combating unauthorized employment - in the form of comprehensive immigration reform - becomes a reality.
Michael D. Patrick is a Partner at Fragomen, Del Rey, Bernsen & Loewy, LLP, resident in its New York office. He may be contacted via email at email@example.com. Amanda Seybold , a Law Clerk, and Nancy Morowitz , Counsel at the firm, assisted in the preparation of this column. To learn more about Fragomen, please visit http://www.fragomen.com.