The Booming Development of State Immigration Laws

Congress failed yet again in 2007 to pass any kind of comprehensive immigration reform bill. Meanwhile, with estimates of 12 to 15 million illegal aliens now living in the United States, the consequences and costs of the country's immigration status quo are mounting at the state and local level.

Many state legislatures have grown tired of waiting for action at the federal level. In fact, the growing discontent among many voters with the federal government's refusal to take stronger action against illegal aliens has also created a convenient political issue for many state lawmakers.

The National Conference of State Legislatures (NCSL), which has been tracking the development of state laws related to immigrants and immigration for several years, reports some astonishing statistics.

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• Of these, more than 240 became law.
• 46 states enacted immigration-related legislation in 2007.
• The number of state immigration-related bills signed into law nearly tripled in number from 2006 to 2007.
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With each passing year, state lawmakers are pulling the issue of immigration law into an increasing number of policy matters. It is now quite common to see immigration law as a subject within state legislative proposals on employment, business licenses, education, public benefits, housing, law enforcement, driver's licenses, health care and public contracts for services.

This trend is expected to continue in 2008.

State employment-related immigration laws withstand legal challenge.

Immigration law has historically been viewed as one area of public policy exclusively within the domain of the federal government. This view was reinforced in 1986, when Congress wrote the employer sanctions laws (whereby the I-9 employment eligibility verification process got its start) as part of the Immigration Reform and Control Act of 1986 (IRCA). In that legislation, Congress stated that all state laws seeking to penalize businesses for employing illegal aliens were expressly preempted by federal law.

State legislatures obeyed that directive, and at least in the area of employment matters, rarely sought to impose state legal authority over immigration matters. But as the number of illegal aliens grew exponentially in the 20 years since passage of the IRCA, and the public saw no ability at the federal level to abate the problem, state lawmakers decided it was time to craft legislation that might steer clear of federal preemption.

The first significant step into legislating employment-related immigration matters at the state level occurred in Colorado in 2006. There were immediate cries of federal preemption and threats of legal challenges after Colorado enacted an assortment of laws on immigration issues (involving eligibility for public benefits, health, education, public contracts, employment and other matters). But no organization stepped forward to file a legal challenge against any of Colorado's immigration laws. Two of the Colorado immigration laws stand out for their impact on employers.

In 2007, Arizona, which has one of the highest percentages of illegal alien residents in the country, joined several other states in passing immigration-related legislation that would impact employers. In fact, Arizona's law includes a sanction that surpasses any other state immigration law initiative—an Arizona employer found to violate the law can have its license to do business in the state revoked.

Business, labor and ethnic groups quickly banded together in Arizona and filed lawsuits to have the state immigration law thrown out (on federal preemption and other grounds). But in December 2007, essentially hours before the law was scheduled to go into effect on January 1, 2008, a federal judge in Phoenix refused to grant the demands for injunctive relief. Although litigation over the law continues, the Arizona immigration law is in effect at this time.

More legal challenges to employment-related state immigration laws are inevitable, but the Arizona case is already considered a watershed decision. The list of states considering their own methods of addressing illegal alien employment grew in the first week of the new year.

National and regional employers must now add immigration to the list of areas that require monitoring for state law compliance.

The NCSL statistics on the boom in state-sponsored immigration laws must be viewed in context. Only 31 of the 244 state immigration laws enacted in 2007 had anything to do with business or employment. And of those 31 new laws, the vast majority have only a nominal or indirect impact on employers. For example, most of this legislative activity resulted in little more than fine-tuning of the eligibility requirements for such things as unemployment benefits, overtime pay, minimum wage, economic development grants and job-related tax credits. Although states are increasingly looking at immigration, most employment-related state immigration laws still have little or no impact on most businesses.

Among the state immigration laws, a few, however, stand out for their potential impact on business. The 2007 legislative cycle proved that Colorado would not stand alone on the issue of states trying to reduce illegal alien employment. But thus far, no two states have passed the same "brand" of immigration legislation.

State immigration laws are forcing thousands of employers to use the federal government's E-Verify system.

For over 20 years, the federal government has offered a variety of Employment Verification Programs (EVPs) as tools for employers to use in checking the employment eligibility of newly hired employees. For several years after the IRCA went into effect, the Immigration and Naturalization Service (INS) obligated many companies to use the EVP then known as the Basic Pilot/Employment Eligibility Verification Program. Over time, the Basic Pilot program was expanded and became available on a voluntary basis to employers nationwide. Although quite commonly used in a handful of industries (such as meat processing), Basic Pilot was used by only a very small percentage of companies prior to 2007. Ironically, despite the fact that the federal government spent years extolling the virtues of its EVP programs, it has taken the actions of a handful of state governments to trigger a dramatic increase in their use.

The Basic Pilot program had long been criticized as cumbersome to use, inaccurate in many of its findings, and inefficient in providing training for employers seeking to sign up. Through the U.S. Department of Homeland Security (DHS) and its sub-agency, the U.S. Citizenship and Immigration Services (USCIS), technology advancements and process improvements were made in 2006 and 2007 to make Basic Pilot a much more user-friendly system. In carrying out the technology advancements, USCIS re-branded the program, changing the name from Basic Pilot to E-Verify. All of the company registration procedures and required training for company users were converted to a more streamlined, on-line process. In fact, most employers are able to complete the registration and have at least a handful of staff complete their training in a single day. E-Verify is an Internet-based system operated by DHS in partnership with the Social Security Administration (SSA). E-Verify allows participating employers to electronically verify the employment eligibility of newly hired employees. Participating companies report that most verifications are processed within a matter of seconds.

The registration, training and use of E-Verify are free and administered through USCIS, which has recently added customer service staff to keep up with growing demands.

The number of employers now using E-Verify across the country has multiplied in just the past few months. Most of this growth can be traced back to state immigration laws. In 2006, for example, Colorado began requiring all companies that have contracts with public entities to use Basic Pilot (now E-Verify) for all newly hired employees. A similar law went into effect in Georgia in 2007. As these laws require companies to sign up for E-Verify based on having any public contract, they have had an impact on hundreds of companies. Any contract with a state agency, state college or university, municipal government, county board, school district or other public entity in Colorado or Georgia will require the company to sign a contract confirming that E-Verify is in use for all employees being hired in the state.

Effective January 1, 2008, Arizona took the E-Verify requirement a major leap further. Although additional challenges to the Arizona law are expected, as things stand now all employers in the state are supposed to be registered users of E-Verify, using the E-Verify employment eligibility verification procedures for all employees hired to work in the state of Arizona. Each state immigration law is crafted a bit differently, but E-Verify registration is becoming a common theme. For example, in early January 2008, the governor of Minnesota issued an executive order implementing E-Verify for any employees being hired by the executive branch of the state government. The same executive order (08-01) will impose E-Verify registration on all companies with public contracts worth over $50,000 in the state of Minnesota.

State immigration laws have different methods of trying to deter and punish employment of illegal aliens.

There are many critics and criticisms of this movement toward the development of state immigration laws. Many argue that immigration law is simply an issue that the federal government alone should address through one comprehensive policy. The U.S. Chamber of Commerce, many labor unions, and a variety of ethnic and community groups have fought the implementation of state immigration laws. These efforts have included litigation (most significantly in Arizona) and arguing that state laws unnecessarily divide communities and stigmatize certain immigrants.

But public opinion in several states has continued to move in the direction of state legislative action in the face of continued failure at the federal level to find any solution to continued high levels of illegal immigration.

Below is a summary of the more significant state immigration law initiatives that have an impact on employers.

Arizona

The Legal Arizona Worker's Act (LAWA) went into effect on January 1, 2008. Business, unions and non-profit organizations filed lawsuits in federal district court in Arizona to block implementation of this law. So far, however, those litigation efforts have failed to stop the state from implementing the law. LAWA requires all employers in the state to use E-Verify for employees hired to work in Arizona on or after January 1, 2008. However, there is no sanction or fine that can be imposed for failure to use E-Verify. Under LAWA, though, an employer will be afforded a much stronger defensive posture against charges of violating that law if E-Verify has been used. For example, if a company is found to be employing an illegal alien but used E-Verify, LAWA gives the employer a legal presumption of having met its legal obligation not to knowingly employ an unauthorized worker.

LAWA is distinct from other state immigration laws in how it proposes to penalize employers found to be employing one or more illegal aliens. Rather than providing a schedule of monetary fines, the state of Arizona chose a much more draconian measure. A finding that a company has employed illegal aliens can lead first to a temporary revocation of the company's license to conduct business in the state, and second or subsequent offenses can lead to a full revocation. The state law delegates prosecuting responsibility under LAWA to county prosecutors, whose offices will investigate complaints. If those investigations indicate illegal employment, county prosecutors will put the company on notice. A first offense notice will require the employer to take action (presumably by terminating the employees) and signing a sworn affidavit confirming that the company does not knowingly employ individuals who are not authorized to work in the United States. Any company receiving a first offense notice will be on probation and will need to file quarterly reports to confirm continued compliance. A finding of a second offense during the probationary period will result in suspension, or possibly permanent revocation of all licenses for that company to conduct business in Arizona.

As a result of the litigation, state and county prosecutors have agreed to suspend any enforcement action under LAWA until at least March 1, 2008. Thus, to date, there have been no active investigations or prosecutions under the Arizona immigration law. Nonetheless, concern over the law has already had a profound impact in the state. Hundreds of Arizona employers have signed up for and are now using E-Verify. There are also numerous reports of companies across the state taking a much closer look at their I-9 records and overall immigration compliance. Many people presumed to be illegal aliens have left Arizona, expecting immigration enforcement to dramatically increase in 2008. Likewise, companies have terminated perhaps thousands of workers in Arizona over the past several months as they have taken a closer look at their I-9 records and acted upon reports of illegal employment.

Arkansas

In February 2007, Arkansas amended its State Procurement Law, requiring all businesses that have contracts worth greater than $25,000 with public entities in Arkansas to certify that all employees have legal authorization to work in the United States. This certification also requires employers to make the same legal commitment about the employees of any subcontractors the company is using on the contract. In this fashion, the Arkansas legislature is forcing companies that contract with the state to take steps to "police" the immigration compliance of subcontractors. The penalty under this law for a contractor found to be employing illegal aliens will be the loss of the right to contract with any public entity within the state of Arkansas.

Colorado

Colorado Immigration Law HB-1343 went into effect in August 2006, requiring all businesses that have contracts with public entities in Colorado to enroll in Basic Pilot/E-Verify. But a tandem piece of legislation signed into law at the same time, which went into effect on January 1, 2007 (HB-1071), had much broader implications for Colorado employers. Under HB-1071, employers in Colorado have 20 days from the point of hiring a new employee to complete an "affirmation" of employment verification. This affirmation requires employers to confirm in writing that they have "examined the legal work status" of every employee hired on or after January 1, 2007. Although the federal I-9 rules do not require employers to retain copies of identity and employment eligibility documents that are presented by employees to complete the I-9, the Colorado law requires employers to retain copies of such documents (again, just for employees hired since January 1, 2007). In this fashion, the Colorado state immigration law added to and essentially changed the I-9 employment eligibility requirements for Colorado employers.

In the affirmation document that must be kept on file, the employer must also affirm under HB-1071 that no one has "altered or falsified" the new hire's identification documents, and that the employer has not "knowingly" ever hired an unauthorized worker.

The Colorado Department of Labor and Employment has authority under HB-1071 to audit company records to confirm that signed affirmation records and copies of work status documents are on file. This agency also has the authority to investigate allegations of the employment of illegal aliens in Colorado.

Although the employment verification procedures of HB-1071 have been in effect for more than a year in Colorado, there are no reported cases of employers being sanctioned for violations under the law. But the severity of the state penalties has led many companies to conduct a more thorough review of their records and terminate many workers across the state due to immigration-related concerns.

The penalties section of the Colorado immigration law was carefully crafted to reduce the chance that the state law would be thrown out by a court on the grounds of federal preemption. The federal I-9 and employer sanctions law specifically states that any and all state laws that attempt to fine employers for knowingly employing illegal aliens will be "preempted" by federal law. Thus, a state law that simply attaches monetary penalties to employing illegal aliens will be far more susceptible to challenge in federal court. To avoid such a result, the Colorado legislature chose to tie the state sanctions for non-compliant employers to the affirmation and paperwork requirements. Specifically, the "penalties" section of the law reads as follows:

An employer who, with reckless disregard, (1) fails to submit the documentation required …, or who, (2) with reckless disregard, submits false or fraudulent documentation, shall be subject to a fine of not more than $5,000 for the first offense and not more than $25,000 for the second and any subsequent offense.

 

With the state immigration law written in this way, any prosecution will invariably focus on employers who are acting in complete "reckless disregard" of immigration compliance laws. And with such employers, the law will allow the state to "piggy-back" first a $5,000 fine, then potentially multiple $25,000 fines based on paperwork violations alone. These fines can be imposed against an employer for simply failing to have the signed affirmations and copies of employee legal work status documents on hand. To date, the Colorado Department of Labor and Employment and state prosecutors have not shown any indication that they will initiate efforts to sanction employers on the basis of mere paperwork violations, even though the state law suggests they have such authority. Instead, it is expected that these state employer sanctions will be exercised only infrequently in Colorado to sanction companies whose reckless disregard for complying with the paperwork requirements is coupled with evidence of knowingly employing illegal aliens.

Georgia

The Georgia Security and Immigration Compliance Act of 2006 went into effect on July 1, 2007. Under this law, all contractors and subcontractors who enter into a contract for public services in Georgia must use Basic Pilot/E-Verify for all employees hired in Georgia. The July 1, 2007, effective date was for companies with 500 or more employees. This requirement will become effective for companies with 100 or more employees as of July 1, 2008, and the law will ultimately require employers of any size to use E-Verify no later than July 1, 2009. Because of this law, companies that have any type of contract with a state or public entity in Georgia must sign a Contractor Affidavit and Agreement as part of any state contract to confirm that both the company and its subcontractors are fully registered and using E-Verify.

Oklahoma

The Oklahoma Taxpayer and Citizenship Protection Act of 2007 went into effect for all Oklahoma employers on November 1, 2007. The Oklahoma law created state felony sanctions for any person who harbors, transports or essentially assists an illegal alien in any way. Although there has long been a federal law providing sanctions for similar conduct, the addition of the state law sanction, which is somewhat broader, raises the potential for personal criminal liability. Knowingly employing or transporting an illegal alien worker could result in an Oklahoma employer, manager, supervisory employee or even coworker facing a state felony charge. The Oklahoma law also adds state penalties for individuals who create fraudulent documents. The law is designed to punish those who enable unauthorized workers to secure employment. One provision, for example, makes it illegal to make a company employment badge under a false identity, and company personnel can be prosecuted if there is evidence that they knew an employee was an illegal alien or was using a false or assumed identity.

Effective July 1, 2008, all contractors and subcontractors to public service contracts in Oklahoma must use E-Verify for newly hired employees in the state.

Tennessee

Tennessee has joined the ranks of states like Colorado and Oklahoma that have passed a set of immigration laws all designed to make life in that particular state less attractive for illegal aliens. For example, in 2007, Tennessee enacted legislation to make it much more difficult for an illegal alien to obtain a Tennessee driver's license or state-issued identification document.

The Tennessee immigration law with employment-related provisions, HB-729, went into effect on January 1, 2008. Under this law, no person or company shall "knowingly employ, recruit or refer for a fee" an illegal alien for any employment purpose in Tennessee. A company that is found to employ illegal aliens in Tennessee can have any and all licenses associated with its business suspended or even revoked. Second or subsequent violations can trigger longer revocations of a company's right to conduct business in the state. In addition, the law makes it unlawful for an employer to accept an individual Tax Identification Number (TIN) as a form of identification. This part of the law was passed as a result of the fact that many illegal aliens obtain TINs from the Internal Revenue Service. A TIN is available to any citizen or non-citizen of the United States, as TINs are often needed by non-resident foreign nationals who nonetheless have obligations to pay certain federal and state taxes. Even people who do not have a proper immigration status to reside or work in the United States can legally obtain a TIN. A TIN also has the same number of digits as a social security number. Accordingly, many illegal aliens have used (or at least have attempted to use) TINs in lieu of social security numbers in the employment context. Although this particular measure is likely to have little impact on unauthorized employment in Tennessee, it provides yet another example of how state legislatures are trying to combat illegal alien employment by imposing different types of legal sanctions on employers.

More states are considering immigration laws that will impact employers in 2008.

Already in January 2008, several governors and state legislators across the country have taken steps to introduce immigration-related laws that are designed to deter the employment of illegal aliens. It is likely that new employment-related immigration laws will be given consideration in Minnesota, Iowa, Michigan, Missouri, Kansas, Nebraska, Indiana, Virginia, Florida and other states this year. As there is no indication that Congress has the resolve to comprehensively address the country's immigration problems, it is all but certain that more state immigration laws will add to the growing patchwork quilt of state immigration laws. In fact, some of the states that already passed employment-related immigration laws are already considering more proposals to expand the reach of state government into the area of immigration enforcement. Legislators in Colorado, Arizona, Oklahoma and Tennessee have already developed plans to introduce further measures. All of these efforts at the state level will require companies that operate on a national or regional level in the United States to be attentive to new developments.

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