Indiana's New Immigration Law Significantly Impacts Businesses

On May 10, 2011, Governor Mitch Daniels signed into law a comprehensive immigration bill, which goes into effect July 1, 2011. Here are highlights of how the law impacts businesses:

• State and local governments may not enter into or renew contracts unless the contractor verifies it (a) does not knowingly employ illegal immigrants, and (b) uses E-Verify. E-Verify is a federal electronic system into which employers enter Form I-9 information, which is checked against the Social Security Administration and Department of Homeland Security databases to determine if the individual is legally authorized to work in the U.S.
• If a contractor uses a subcontractor to perform work under a public contract, the subcontractor must certify to the contractor that it uses E-Verify and does not knowingly employ illegal immigrants.
• For purposes of calculating state income taxes, businesses that employ illegal immigrants may not deduct wages, reimbursements, or other payments associated with those employees. The law contains a safe harbor for E-Verify users; in other words, this provision does not apply to businesses using E-Verify.
• State and local governments may not award grants of more than $1,000 to a business unless the business verifies it uses E-Verify and does not knowingly employ illegal immigrants.
• State and local governments must use E-Verify for all new hires.

The law also contains provisions impacting individuals, such as requiring state agencies to verify the eligibility of persons age 18 or older who apply for federal, state or local public benefits, including postsecondary scholarships, grants and financial aid. The state agency must require the person to verify under penalty of perjury that he or she is a U.S. citizen, national, permanent resident, asylee or refugee.

Employers who contract with the State of Indiana or a local government should consult legal counsel concerning any new obligations they may have or precautions they should take under this new law.