The Supreme Court has held that an Arizona law that imposes sanctions on employers that hire unauthorized workers and requires the mandatory use of E-Verify is not preempted by federal law, and therefore valid. The Arizona law at issue – the Legal Arizona Workers Act – provides for the suspension or revocation of an employer’s business license in that state if that employer knowingly or intentionally hires an unauthorized worker. The statute also mandates the use of the E-Verify electronic verification system to check on an employee’s work eligibility. The Court’s decision in Chamber Of Commerce v. Whiting (pdf) upholding this statute opens the door for other states to enact laws that similarly impose stricter penalties on employers for immigration law violations.

Opponents of the Arizona statute – including the U.S. Chamber of Commerce, various civil rights organizations, and the Obama Administration – argued that the federal Immigration Reform and Control Act (IRCA) expressly and impliedly preempts the state law license suspension and revocation provisions of the Arizona law, and also impliedly preempts the mandatory E-Verify provision. Specifically, the IRCA, which makes it “unlawful for a person or other entity . . . to hire, or to recruit or refer for a fee, for employment in the United States an alien knowing the alien is an unauthorized alien,” includes a provision that expressly preempts “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.”

In its 5-3 ruling upholding the Arizona law, the Supreme Court found that the plain language of the IRCA’s preemption provision did not preempt the Arizona law because it merely imposes licensing conditions on businesses operating within the state. While opponents claimed that Arizona’s law did not constitute a “licensing” law because it served only to revoke or suspend, rather than grant, licenses, the Court disagreed, claiming that “[t]here is no basis in law, fact, or logic for deeming a law that grants licenses a licensing law, but a law that suspends or revokes those very licenses something else altogether.” The Court added: “The simple fact that federal law creates procedures for federal investigations and adjudications culminating in federal civil or criminal sanctions does not indicate that Congress intended to prevent States from establishing their own procedures for imposing their own sanctions through licensing.” The Court similarly dispensed with the argument that the IRCA impliedly preempts Arizona’s law. The opinion describes in great detail how the Arizona law tracks the IRCA “in all material respects,” including prohibited activities and definitions.

The Court rejected the contention expressed in a dissenting opinion that employers would “err on the side of discrimination rather than risk the ‘business death penalty’ by ‘hiring unauthorized workers.’” In response to this fear, Chief Justice Roberts explains:

License termination is not an available sanction simply for “hiring unauthorized workers.” Only far more egregious violations of the law trigger that consequence. The Arizona law covers only knowing or intentional violations. The law’s permanent licensing sanctions do not come into play until a second knowing or intentional violation at the same business location, and only if the second violation occurs while the employer is still on probation for the first. These limits ensure that licensing sanctions are imposed only when an employer’s conduct fully justifies them. An employer acting in good faith need have no fear of the sanctions.

As for the E-Verify provision, the Court agreed with a lower court finding that although the verification program was voluntary at the national level, Congress has expressed no intent to restrict states from imposing more stringent requirements. “Congress’s objective in authorizing the development of E-Verify was to ensure reliability in employment authorization verification, combat counterfeiting of identity documents, and protect employee privacy. Arizona’s requirement that employers operating within its borders use E-Verify in no way obstructs achieving those aims.” Moreover, the Court stated, Arizona’s use of E-Verify does not conflict with the federal scheme: “The Arizona law requires that ‘every employer, after hiring an employee, shall verify the employment eligibility of the employee’ through E-Verify. That requirement is entirely consistent with the federal law.”

In the wake of this decision, employers should be mindful of new state immigration statutes that seek to impose stronger employment verification procedures and potential licensing penalties for knowingly or willingly hiring unauthorized workers.

For more information on this case and its implications for employers, see Littler’s ASAP: U.S. Supreme Court Upholds Arizona Law Mandating Use of E-Verify and Penalizing Employers that Hire Undocumented Workers.