EEOC ISSUES NEW GUIDANCE ON EMPLOYER USE OF CRIMINAL RECORDS

04 Monday Jun 2012

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The Equal Employment Opportunity Commission (“EEOC”) recently issued new enforcement guidance relating to the use of arrest and conviction records by employers in making employment decisions. The link to this guidance is at: http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm

This new guidance updates EEOC guidance on the topic issued over a 20 year period.  According to the EEOC, an update was necessary because “there have been important legal and social changes. In 1991, Congress amended the Civil Rights Act to add Title VII disparate impact analysis, among other things. Since the 1990s, technology has made criminal history information much more accessible to employers. The number of working-aged individuals with criminal records in the population significantly increased during this period, especially in the African American and Hispanic communities.”  The EEOC believes that use of criminal records has resulted in exclusion of minorities, particularly blacks and Hispanics, from employment.

The Need for Background Checks and Information About Criminal Conduct

Employers routinely include questions about criminal history in the employment application process and often conduct background checks on prospective employees. These types of inquiries are necessary for a number of reasons, as employers have legitimate interests to protect.  For example, this type of information may help prevent employee theft, such as where a prospective employee has a prior conviction for a crime or crimes relating to theft of property, embezzlement, or the like. Similarly, information that a prospective employee was convicted of a violent crime in the past, such as armed robbery, rape or assault, may help protect against potential workplace violence, and may also protect the public, customers and others with whom the individual may come in contact as an employee.  Other valid reasons exist for such background checks.

As noted above, the focus of the EEOC’s guidance is on Title VII’s prohibition against discrimination on the basis of race and national origin.  Neither Title VII nor other federal laws provide per se protection to individuals with arrests or conviction records. However, individuals may be subject to discrimination because of race or national origin based upon criminal records under one of two theories. First, an employer may look at two individuals who have the same or similar criminal histories and yet treat the two differently based upon race or national origin. Second, an employer may have a policy or practice that appears to be neutral on its face, yet may have a “disparate impact” on individuals of a particular race or national origin because they are more frequently excluded based upon the policy.

The New Guidance

The new guidance does a number of things. First, it emphasizes that employment should be denied by reason of a criminal record only after an “individualized assessment,”  considering the individual and how his or her history relates to the particular job.  The guidance points to the following factors an employer should consider in evaluating criminal records: (1) the nature and gravity of the offense or conduct, (2) the time that has elapsed since the offense and completion of any sentence or probation, and (3) the nature of the job at issue. As part of this assessment, the guidance indicates that an employer should notify the individual that he or she may be denied employment because of criminal history, provide the individual with an opportunity to show why he or she should not be excluded and to provide any additional information for the employer to consider, and then determine whether exclusion based upon the criminal record is justified as job-related and consistent with business necessity.

The guidance also states that an employer should consider the specific facts and circumstances of the conduct at issue, the number of offenses for which the individual was convicted, the applicant’s age at the time of conviction or release, evidence that the individual performed the same type of work, post conviction, with no known incidents of criminal conduct, the length and consistency of employment history before and after the offense or conduct, rehabilitation efforts, including education or training, employment or character references, and any information regarding fitness for the particular position.  The guidance is lengthy and includes a number of examples of fact scenarios showing when it would and would not be appropriate to exclude individuals from employment based upon past criminal records.

The steps and factors identified by the EEOC could turn “individualized assessments” into complicated processes that could impose significant burdens on employers. In addition, some of the information may be difficult to verify or discover, such as how well the applicant performed at a prior job or why the applicant may have left a prior job (since few former employers give out such detailed information about former employees), or details about the applicant’s incarceration and release.  In many instances, the employer may be asked to rely almost exclusively upon the prospective employee’s account of the facts in making its decision.

The guidance does not identify a minimum standard an employer must meet in conducting this “individualized assessment,” but merely notes that that some assessments will not require as much effort as others.  In some instances, such as where the applicant has a recent conviction for stealing prescription drugs, and is seeking a job at a medical clinic or pharmacy, the process should not be problematic.  However, in other cases, the process may raise more questions than it answers.

The EEOC’s proposed best practices

The guidance identifies a number of “best practices” that the EEOC encourages employers to implement in dealing with criminal records.  Among other things, the guidance advises employers to, “Eliminate policies or practices that exclude people from employment based on any criminal record.”  In other words, the EEOC advises that employers should not have a blanket prohibition against hiring individuals with past criminal records. The guidance also provides that employers should:

  • Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct.

Identify essential job requirements and the actual circumstances under which the jobs are performed.

Determine the specific offenses that may demonstrate unfitness for performing such jobs.

          •     Identify the criminal offenses based on all available evidence.

Determine the duration of exclusions for criminal conduct based on all available evidence.

          •     Include an individualized assessment.

Record the justification for the policy and procedures.

Note and keep a record of consultations and research considered in crafting the policy and procedures.

  • Train managers, hiring officials, and decision-makers on how to implement the policy and procedures consistent with Title VII.
  •  When asking questions about criminal records, limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity.

Some of these “best practices” may be difficult to implement, as it may, for example, be difficult to identify the specific types of criminal offenses that may disqualify an individual from a particular position, and it may also be difficult to limit inquiries concerning criminal records to offenses that may be job related for the position and consistent with business necessity.

State and Local Laws

Employers should also be aware of state and local laws when dealing with the criminal history of applicants. Some states, such as California, prohibit asking about an arrest or considering any charge that did not result in conviction. Massachusetts prohibits asking about criminal history on an initial application. In Hawaii, employers may inquire about criminal history only after making a conditional job offer. Some states, such as Pennsylvania and Wisconsin, allow an employer to consider convictions only to the extent they are job-related.

Takeaways for Employers

Given the EEOC’s obvious interest in this area, employers should take a look at their employment applications, and policies and procedures for screening applicants, to ensure that they take into account the EEOC guidance. Although the EEOC guidance does not have the force of law, and is not legally binding on employers, it may persuasive to courts in deciding claims of discrimination and so employers should make appropriate business judgments about whether and to what extent to implement the EEOC’s proposed practices.   The bottom line is that the EEOC believes a criminal background should not disqualify any individual from employment unless it is “job-related and consistent with a business necessity.”  Even if an employer is generally uncomfortable hiring an individual who has been convicted of a crime-even a serious one-the EEOC position is that the employer needs to conduct a fairly detailed and specific inquiry into the facts before making an employment decision.  Accordingly, employers should be cautious when excluding individuals from employment on such grounds.

Do You Ask Employees For Their Facebook Passwords? Congress May Put An End To This Practice Once And For All

18 Friday May 2012

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In the last decade the use of social media has grown exponentially, and with it, a wide array of legal and ethical issues have emerged that employers must grapple with on a daily basis.  Many of these evolving issues have not been addressed by the Courts or the Legislature, leaving employers to guess what is permissible or create unique solutions to bypass what might be an otherwise trying legal dilemma.

One issue employers are often faced with is what, if anything, can they do to discipline or terminate an employee for what they say or do on social media.  Can you be fired for posting a political rant?  What about racially insensitive commentary?  Or how about just badmouthing your boss?  What if the rant took place when you were at home versus at work?  Does it matter if your name is easily associated with the company?  What if your last name is not listed on your Facebook account at all?  The simple answer for now is that we don’t know the answer to most of the legal questions surrounding social media because the Courts have not caught up to the technology or the legal issues surrounding its use.

Until a more clear backdrop exists, employers will continue to find new ways to “short-circuit” the uncertainty.  Sometimes this strategy works, and sometimes it backfires.  For example, a growing number of employers have sought to bypass potential social media problems by asking for every potential employee’s Facebook and Twitter passwords upfront – often on the job application itself.  Reports have even surfaced of employers asking applicants to log into their accounts during the interview to allow the interviewer to browse the applicant’s profile during the interview.  Such a request surely puts the job applicant in a bind – even if they have nothing to hide, the applicant may not wish to hand over such private information, though failing to do so may cost a qualified applicant a job.

Whether gaining access to an employee’s Facebook page really heads off any legal issues for the employer is anyone’s guess.  There are potential downsides, however.  For example, what if an employer discovers that an applicant is a member of a protected class by gaining access to their social media account?  Even if the employer chooses not to hire the applicant for a valid reason, the employer may have opened themselves up to a discrimination lawsuit just by discovering the information.  Personal information such as race, nationality, religion and age are often displayed on one’s Facebook profile – and all are protected by federal employment law.

The good news is employers may not have to wait on the Courts to answer every question.  In response to the growing trend of asking for Facebook passwords, a bill was introduced in the Senate last week known as the Password Protection Act.  This Act would prevent employers from conditioning employment based on the applicant’s surrendering of access to password protected accounts.  The Act would also prevent employers from discriminating or retaliating against existing employees who refuse to provide the information.

The Password Protection Act is interesting for a couple reasons.  First, the bill itself may put a stop to all employer requests for password-protected information which has become a growing trend, though it may raise more legal concerns than it answers.  Second, and more importantly in the grand scheme of things, this type of legislation is more proactive than we usually see in an area of law that is still developing.  The Legislature can certainly act more swiftly than the Courts to draw explicit lines concerning what is permissible employer conduct.  Will Congress continue to push to the forefront on issues surrounding social media law?  If so, we may have answers to many unresolved legal issues in social media law sooner rather than later.  How this Act is received – and if it ultimately is passed – may help pave the way for further legislation in this budding legal area.  This bill is worth keeping an eye on – both for clarity on asking for employee passwords, and for the larger issue of social media law and how it evolves from here.

Protecting Your Company’s Assets with the Stroke of a Pen

12 Thursday Apr 2012

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NPR reports that “there were 13,000 more first-time claims for jobless benefits last week than the week before…”  (see the full story at http://www.npr.org/blogs/thetwo-way/2012/04/12/150487365/jobless-claims-rose-by-13-000-last-week ).

Employers in this economy are only too aware that unemployment claims can increase an employer’s cost of doing business.  Generally, an employee is entitled to unemployment benefits under Oklahoma law if the individual loses his or her job.  There are some exceptions to this general rule, however.  For example, Oklahoma law provides that an individual is disqualified for unemployment benefits if he or she has been discharged for misconduct connected with his last work, if so found by the Oklahoma Employment Security Commission.  40 Okla. Stat. 2-406. In addition, an individual is disqualified for benefits if the Commission finds that he or she left his or her last work voluntarily without good cause connected to the work.  40 Okla. Stat. 2-404.

Accordingly, it is in an employer’s best interest to document the reasons for termination any time an individual’s employment is terminated, so that employees who quit their jobs or are terminated for misconduct are prevented from collecting unemployment benefits.   Documentation that was created at the time of termination can provide strong evidence that an employee was terminated for cause or that he or she voluntarily resigned.  It is even better if the employee signs an acknowledgment of the reason for termination.  In this regard, providing a space for the employee to respond to any disciplinary charge may encourage the employee to sign, as it provides him or her the opportunity to give his or her side of the story. 

Contemporaneous documentation of termination can also prove invaluable if an employee is terminated and later claims that the termination was due to the employee’s protected status.  If the employee is a member of a legally protected class and an adverse action was taken against him or her, as part of the claim the company will need to show that the adverse employment action was taken for a legitimate reason.  If the employee file does not document a legitimate reason for disciplinary action being taken, the company may be exposed to liability.   Often, an employee will claim that disciplinary actions were unfair or unwarranted, but if a review of the contemporaneous documentation of such actions does not reveal such complaints at the time the action was taken, it would make any post-litigation claim less plausible.

OKLAHOMA SUPREME COURT HOLDS THAT COURT, NOT ARBITRATOR, IS TO DECIDE VALIDITY OF COVENANT NOT TO COMPETE, AND ALSO STRIKES DOWN OVERLY BROAD COVENANT NOT TO COMPETE.

10 Friday Feb 2012

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The Oklahoma Supreme Court recently held that an arbitration clause in an employment contract did not preclude judicial review of the validity and enforceability of a covenant not to compete contained in the contract. In Howard v. Nitro-Lift Technologies, LLC, 2011 OK 98 (Nov. 22, 2011), two employees who had executed employment contracts with the defendant-employer that included a non-compete clause challenged the validity of that clause in court after the employer had served a demand for arbitration of the dispute. The district court granted the employer’s motion to dismiss the suit, finding the arbitration clause enforceable. The employees appealed the decision.

The Court relied upon several of its prior decisions to conclude that Oklahoma’s Uniform Arbitration Act did not prohibit judicial review of a contract that included an arbitration clause where a party asserted that the underlying contract was void and unenforceable.  The Court, quoting from a prior case, found that, “A void provision provides no legal basis for enforcement whether through arbitration or judicial pronouncement.”   The Court distinguished contrary US Supreme Court precedent that holds that an arbitration clause can require arbitration of whether the underlying contract is void, noting that its ruling was based solely upon Oklahoma, and not federal, law.

The Court then went on to hold that the non-compete clause was void and unenforceable, as it went well beyond the permissible scope allowed under 15 Okla. Stat. sec. 219A, which governs covenants not to compete. The Court found that rather than restricting the employees from soliciting goods or services from “the established customers of the former employer,” as allowed under the statute, the covenant at issue could be construed to prohibit the employees from engaging in any competitive employment anywhere in the United States, or even employment with a competitor in a capacity that would not directly relate to the part of the business in which the employees were engaged.  Also, the agreement prohibited the employees from soliciting even past customers of the former employer, which again was beyond the scope permitted by statute.

The Court also refused to modify or reform the covenant to conform to Oklahoma law, despite the existence of a severability clause, finding that to attempt to reform the clause would require that the provision be “substantially excised, leaving only a shell of the original agreement, and would require the addition of at least one additional term.”  Because the Court would be required to practically rewrite the entire agreement, reformation was not an appropriate exercise of judicial power.

Employers should review their employment agreements to determine whether and to what extent they may need to modify any arbitration clauses or non-compete covenants in order to meet these requirements.

Tags: arbitrate arbitration covenant non-compete solicit void unenforceable employment contract agreement reform

 

CLASS ACTION WAIVER IN AN EMPLOYMENT AGREEMENT CONSTITUTES UNFAIR LABOR PRACTICES, NLRB FINDS

10 Friday Feb 2012

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On January 6, 2012, the National Labor Relations Board (NLRB) announced a 2-0 decision  (one member recusing) finding that an employer’s attempt to preclude employees from pursuing joint, collective or class actions as part of an employment agreement violates Section 7 of the National Labor Relations Act (NLRA).

In D.R. Horton, Inc. and Michael Cuda, the employer required all new and current employees to sign a “Mutual Arbitration Agreement” that waived their rights to pursue claims in a judicial forum, and precluded employees from pursuing joint, collective or class claims in the chosen arbitral forum.  The NLRB found that in imposing this requirement, the employer engaged in an unfair labor practice.  The NLRB found, “Clearly, an individual who files a class or collective action regarding wages, hours, or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by Section 7″ of the National Labor Relations Act. “Such conduct is not peripheral but central to the act’s purposes.”

The claim at issue in D.R. Horton was that the employer had misclassified the claimant, Cudo, as exempt rather than non-exempt under the FLSA.  The claimant gave notice of an intent to initiate an arbitration and sought to represent a class of similarly situated employees who also claimed to have been misclassified. The employer rejected the claimant’s notice and claiming that it was ineffective since the agreement did not allow arbitration of collective or class claims. The claimant then filed an unfair labor practice charge.

The Board’s 14 page opinion emphasized that the agreement’s prohibition of collective activity among employees who wished to protest the employer’s workplace conduct through class or collective actions violated the NLRA.  The employer argued that such a finding would conflict with the Federal Arbitration Act (FAA), which favors enforcement of arbitration provisions, by treating arbitration clauses differently than other agreements. The Board stated that its decision was not directed at arbitration agreements, as the provision would be unenforceable even if it was not part of an arbitration clause. This was so because regardless of the forum in which a claim might be brought, the agreement’s preclusion of concerted or collective action would violate the NLRA.

The Board also distinguished the recent Supreme Court decision in AT & T Mobility v. Concepcion, 131 S. Ct. 1740 (2011) which found that a class action waiver included in a cell customer agreement’s arbitration clause was enforceable under the FAA.  The Board found that A T & T Mobility dealt with an agreement that precluded consumer class actions where there was no existing federal statute to the contrary, while in the case before the Board the employer attempted to restrict substantive workplace rights granted to employees under the NLRA. The Board further distinguished A T & T Mobility on the basis that it addressed a conflict between the FAA and state law, and that the state law was preempted by federal law, while the case before it addressed a potential conflict between two federal statutes, one of which granted substantive rights.

After rejecting other arguments offered by the employer, the Board concluded that the employer’s agreement would be enforceable if it left open the judicial forum for class or collective actions, even if it precluded such claims in the arbitral forum and required arbitration of individual employment-related claims.

The NLRB’s decision is reviewable by the United States Court of Appeals, and the case  eventually could make its way to the Supreme Court.

While this issue is by no means settled, in light of D.R. Horton employers would benefit from a review of their employment policies, employee handbooks and employment agreements to determine whether they include class or collective action waivers or similar alleged restrictions on concerted activities that may raise potential concerns under the NLRA and the possibility of unfair labor practices charges.  If so, it may be wise to consider revising the provisions to address the concerns raised by the NLRB.

Reminder to Employers-Amendments to Oklahoma’s Drug and Alcohol Testing Act go into effect November 1

12 Wednesday Oct 2011

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This is a reminder to employers that a number of important changes to the Oklahoma Standards for Workplace Drug and Alcohol Testing Act become effective November 1, 2011, and will provide employers some much needed relief and flexibility in implementing and administering drug and alcohol testing policies.

Among other things, the amendments include the following changes:

  • Employers may test independent contractors and their employees as long as the contractual agreement allows for such testing and other workers at the job site are subject to testing.
  • Employers need not include a list of specific substances to be tested for.
  • Employers may conduct on-site testing more easily, and are allowed more flexibility in handling, storing and shipping samples.
  • Employers are required to give employees only 10 days notice before implementing new or changed policies, as opposed to 30 previously.
  • Testing based upon “reasonable suspicion” has been replaced with “for cause” testing, which gives employers more flexibility in determining whether to test individuals, such as when there are excessive or unexplained absences or negative performance patterns.
  • Employers are no longer required to sponsor Employee Assistance Programs in order to test.
  • Aggrieved individuals must prove the employer had a “specific intent” to violate the law to prevail.
  • The statute of limitations has been reduced from two years to one year.
  • Individuals are disqualified from receiving unemployment compensation based upon “misconduct” if the employer proves the existence of a policy and positive test or the individual’s refusal to undergo a test.
  • Individuals are barred from receiving workers compensation benefits if they refuse post-accident testing or if there is a positive post-accident test.
  • The court may award a prevailing defendant attorneys fees.
  • The provisions allowing for criminal penalties for violations have been repealed.

Employers should review and amend policies accordingly if they haven’t already done so.

Good News for Employers-Amendments to Oklahoma’s Anti-Discrimination Law go into Effect November 1

12 Wednesday Oct 2011

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Amendments to Oklahoma’s Anti-Discrimination Act (OADA), many of which are favorable to employers, are set to go into effect November 1, 2011. The OADA amendments, will, most significantly, abrogate common law tort liability for discrimination claims, allowed by the Oklahoma Supreme Court under the Burk tort theory. This should help reduce exposure and uncertainty on the part of employers in defending discrimination claims. Although some types of employment discrimination claims brought under federal law may still carry the potential for compensatory and punitive damages, the amendments will preclude plaintiffs from engrafting on their claims allegations seeking compensatory and punitive damages under Oklahoma common law.

The amendments will also change the law in a number of other respects, including:

  • The OADA’s statutory remedies are exclusive, and all common law remedies are abrogated and replaced with the specific statutory remedies.
  • Discrimination on the basis of “genetic information” has been added.
  • The definition of “employer” exclude individuals and allows suits only against legal entities, institutions or organizations.
  • The definition of “employee” excludes independent contractors.
  • Applicants for employment who are discriminated against are given a cause of action.
  • Employers of any size are be subject suit.
  • Employers are entitled to raise all defenses available under the applicable federal statutes.
  • Aggrieved parties must file a charge of discrimination within 180 days from the last date of alleged discrimination and exhaust available administrative remedies, and must file suit within 90 days of receiving a notice of right to sue.
  • Remedies are limited to injunctive relief, such as an order of reinstatement of a discharged employee or requiring the hiring of the applicant, back pay, and “an additional amount as liquidated damages”.
  • Interim earnings or “amounts earnable with reasonable diligence” will reduce back pay.
  • If there are “legitimate reasons” other than discrimination for the action taken by the employer, the individual is not entitled to any relief.
  • The court “may” allow either a prevailing plaintiff or defendant a “reasonable attorney” fee.”

As noted, most of the amendments are helpful to employers, particularly the abrogation of common law remedies. The effect may be for aggrieved individuals to go back to exclusively pursuing federal statutory remedies for various types of employment discrimination.

Could Obama’s Jobs Proposal Really Make the Unemployed a Protected Class?

05 Wednesday Oct 2011

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President Obama recently announced a jobs bill he believes will help get the ball rolling to counter rampant unemployment. Employers should know, however, that they face the potential for new lawsuits if the bill is passed. The new jobs bill would allow the 14 million unemployed workers in this country – six million of whom are classified as long-term unemployed, having been without work for 27 weeks – to sue employers who do not hire them because they are unemployed.

Currently, employers with 15 or more employees cannot screen applicants on the basis of race, color, religion, sex or national origin (unless the employer can show that the discriminatory hiring practice is due to the nature of the job and is consistent with business necessity). However, the new bill would make unemployed workers a protected class that could not be discriminated against.

The proposition is simple: employers would not be able to use an applicant’s current employment status as a reason not to hire them, nor could they post job openings that require applicants to be currently employed. If employers limited job openings to currently employed, or if an applicant believed they were not hired because of their unemployment status, the unemployed worker could sue the employer for discrimination.

This designation could be detrimental to employers for two reasons. First there is very little, if any, evidence suggesting that companies regularly discriminate against the unemployed or altogether refuse to hire them. The new jobs bill, however, would permit anyone who applied for a job but was not hired to sue the employer for discrimination. Even if the suit is ultimately baseless, employers may find themselves having to defend such actions. Second, unlike the other protected categories list above, there may be legitimate purposes for screening applicants who are unemployed. If, for example, an employer has two applicants, Applicant A who works at Company X, and Applicant B who was fired from Company X, the employer may wish to hire Applicant A believing he will be the better employee, and basing that reasoning on the evaluation of Company X, who had a much better chance to evaluate both candidates than the employer. Even if this is a legitimate reason, an employer would be subject to a discrimination suit for making such a decision.

The new jobs bill has not yet passed, but the contents of the proposal carry heavy potential implications for employers. Employers should be aware of this bill and keep an eye on it going forward.

New rule requires private employers to display posters

29 Monday Aug 2011

Posted by in Union

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The Associated Press reported on Friday, August 26, 2011 that the National Labor Relations Board has approved a new rule that requires private employers to display posters that inform workers about their right to form a union. Find a link to the full article here.

All private employers who are subject to the National Labor Relations Act, with the exception of the U.S. Postal Service, will need to begin posting the notices by November 14, 2011. Copies of the notices are available at the NLRB website (see more here) and at regional offices. Failure to post the notice could be treated as an unfair labor practice under the National Labor Relations Act.

The Supreme Court Upholds The “Business Death Penalty” For Employers Who Hire Illegal Aliens

09 Tuesday Aug 2011

Posted by in Immigration Compliance

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In May of this year, the Supreme Court, in Chamber of Commerce et al. v. Whiting et al.,563 U.S.___ (2011), upheld an Arizona law that permits the state to punish any company found to have knowingly hired undocumented workers. Traditionally, only the federal government could penalize individuals and companies for immigration offenses. This holding signals that the Supreme Court will give deference to the states as they seek to enforce immigration policies related to the licensing of businesses.

The Arizona law, which is known as the “business death penalty,” permits the state to revoke the business license of any company that is found to have knowingly hired undocumented workers. Additionally, the statute requires all employers to use E-Verify, the voluntary electronic verification system implemented by USCIS for new employees. Both provisions were upheld in the decision. Prior to the decision, serious doubts existed regarding the constitutionality of Arizona’s law (and that of six nearly identical statutes in Colorado, Mississippi, Pennsylvania, Tennessee, Virginia, and West Virginia) because federal immigration laws were previously viewed as occupying the entire field of immigration law, restricting any state enforcement. However, this decision opens the door for state governments to begin enforcing immigration policies of their own.

The Arizona statute uses the same standard as the Immigration Reform and Control Act (“IRCA”) of 1986, which penalizes employers for knowingly hiring undocumented workers. Under IRCA (and the Arizona law), knowledge can be either actual or constructive-if enough information exists that the employer “should” have known an employee was undocumented, the employer will be penalized, even if the employer did not have “actual knowledge” of the employee’s undocumented status.

But what does this decision mean for companies located outside of the seven states with such a policy? For now, there will be no change in the current legal landscape. However, the Arizona statute stands as a roadmap for other states who wish to enforce state sanctions against an offending business in an effort to curb the effects of illegal immigration. This has been a particularly pointed topic as unemployment rates remain high, and many states are likely to follow Arizona’s lead now that the Supreme Court has upheld the law.

In fact, immediately following the Whiting decision, South Carolina rushed to pass a bill that mimicked Arizona’s law prior to the close of its legislative session. South Carolina’s new statute requires businesses to use E-Verify and allows the state’s chamber of commerce to revoke the business license, tax license, or any other license of any offending company if they are found to have employed undocumented workers.

More states are likely to follow suit and adopt similar statutes. The ultimate impact is that the new regulations make businesses more vulnerable to immigration violations discovered through I-9 audits. Before this decision, companies risked civil fines and criminal penalties. Now, in addition to fines and penalties, companies are at risk of being completely shut down by their own state government for hiring undocumented workers.

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