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.