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Free Legal Advice: Obey This Law

Court challenges of Alabama’s new immigration law are looming, but, for now, business owners are advised to strictly comply—or risk a death penalty for their businesses.

Employers might not enjoy the intense microscope Alabama’s new immigration law will focus on them as early as Jan. 1, but legal experts contend straightforward compliance is the best course of action while the courts and Legislature sort out the details.

Alabama became the fifth state in the nation to levy stiff penalties against undocumented workers and residents, on June 9, when Gov. Robert Bentley signed the 72-page Beason-Hammon Alabama Taxpayer and Citizen Protection Act into law.

While some legal experts hope “common sense” will prevail as the courts hash out how to enforce the new law without causing undue hardship for unintentional violators, others contend the law simply dictates—and strengthens—documentation methods that technically already exist.

John Hargrove, a partner in Bradley Arant Boult Cummings LLP’s Birmingham office and chair of the firm’s Labor and Employment Group, says the key to understanding the law’s anticipated impact on employers is setting aside the rhetoric. “Employers typically make decisions based on economics and good business practices, especially knowing full well the downside of sidestepping the law,” Hargrove says.

E-Verify now
“Employers need to learn what the (federal) E-Verify program is and how to use it by next spring—period—because if you use the system correctly, it’s a safe harbor,” Hargrove says.

Although the law takes effect officially on Sept. 1, the sections pertaining specifically to employers will not be enforced until April 2012, except for state contracts that fall under the enforcement clause on Jan. 1. Federal contracts already require contractors to use the E-Verify software that cross-references citizenship documentation for authenticity.

Mike Thompson, an immigration lawyer at Birmingham’s Lehr, Middlebrooks, Vreeland PC, says the law, as he interprets it, should have the following direct impact on employers:
· Employers may not knowingly hire or continue to employ undocumented persons.
· Employers must use E-Verify to screen new hires.
· Expenses paid to an undocumented employee are disallowed as state business tax deductions.
· Any employer who hires or retains an undocumented worker above a “lawful permanent resident or U.S. citizen” will be violating a new state discrimination law.

Michael Jackson, a labor and employment lawyer with Birmingham-based Wallace, Jordan, Ratliff and Brandt LLC, says the law is written broadly and covers “any person or entity that employs anyone to perform work within the state of Alabama”—with an exemption for an individual who hires someone to perform “casual domestic labor” at his or her primary residence.

Jackson says his reading of the law suggests that it does apply to out-of-state-based companies performing work within the state but not to Alabama-based firms hiring employees to work out of state.

Hargrove says the issue is actually a little fuzzy, because it doesn’t clearly spell out whether Alabama employers must E-Verify all employees if they are operating wholly-owned subsidiaries based elsewhere but with work spilling over into Alabama.

“The law certainly doesn’t say that you don’t have to, so, until we get some clarity, I would caution employers about that, and they’ll have to make that decision on their own,” he says.

Lisa Cooper, a partner in Hand Arendall LLC’s labor and employment and litigation practice groups in Mobile, cautions that there are particular provisions of the law expected to “impact certain businesses or industries separate and apart from the provisions governing employers,” such as employers in the housing rental industry found in violation for entering into a rental agreement with an undocumented resident.

“Violations can be either a Class A misdemeanor or even a Class C felony if 10 or more aliens are involved. In addition, the act provides that contracts with an alien unlawfully present are unenforceable, with a few exceptions, if the party to the contract had knowledge or constructive knowledge that the alien was unlawfully present in the United States,” Cooper says.

“Enroll in E-Verify sooner rather than later. That is the best protection for Alabama business owners,” she says.

Meanwhile, Sydney Frazier Jr., a partner with Cabaniss, Johnston, Gardner, Dumas and O’Neal LLP in Birmingham, says although the law absolutely “rises and falls on your compliance,” the E-Verify requirement applies to new hires only. Moreover, the strict documentation guidelines already are addressed via I-9 documentation that is supposed to guard against employers “knowingly” employing illegal aliens or continuing to employ them once they know.

“If you’re in compliance with existing I-9 (requirements), you’re going to have to plug that information into the E-Verify system, and, depending on the size of the payroll, that could create an administrative burden, but the cost factors for business owners is really hard to predict at this point,” he says.

Already “E-Verify” agencies are springing up, Frazier says. For a fee, these firms will handle the administrative task for an employer. But Frazier’s firm had no luck figuring out how big that fee would be.

“They wouldn’t give us a bloody quote unless we filled out an actual application for their services,” Frazier says.

Thompson says the E-Verify software is actually free and quite simple to use, with a number of tutorials, webinars and other employer resources available at uscis.gov/everify.

“The primary issue with mid-sized employers (26—200 employees) is that many of them will have limited attrition, and using E-Verify will require that they re-learn E-Verify with each hire,” Thompson says.

So what exactly do employers need to know to prepare for increased scrutiny of hiring and documentation practices?

Draconian penalties
Bill Daniels, a partner who works in Mobile for Birmingham-based Burr and Forman LLP, says that above all, employers need to understand the act’s “draconian first, second, third strike” penalty structure.

Specifically, if an employer is found to have knowingly employed or hired an unauthorized alien, the penalty for a first violation mandates that a court:
   (1) Require the business to terminate the employment of every unauthorized alien.
   (2) Place the business on a three-year, statewide probationary period.
   (3) Require an affidavit verifying that the business has terminated every unauthorized alien and will not knowingly employ an unauthorized alien going forward.
   (4) Direct that the business’ license and permits be suspended for up to 10 days at the specific location of the violation.

A second violation, Daniels says, results in the permanent revocation of the business’ licenses and permits at the “offending location,” putting a single-location operation out of business.

“Whether a business can re-apply for a license at some point is unclear, but as a practical matter, a second violation can result in a huge financial loss to the business, loss of employees who have moved on to other employment, and an erosion of the business’ customer base for that specific location,” he says. Should the business owner be able to bounce back from a second violation, a third offense results in the permanent revocation of the business’ licenses and permits throughout the entire state.

Meanwhile, those companies executing state contracts are held to even higher standards and face stiffer penalties. At a first offense, the state may terminate the contract, and the attorney general can seek to suspend the contractor’s business license for 60 days, Daniels says. A second violation means mandatory termination of the contract and possible permanent revocation of the contractor’s business license.

“Three strikes and you are out—or two strikes if engaged in a state contract—seems to be the operative message of the act, but it also includes safe harbor protection, stating that if an employer is found to have an unauthorized alien in its employ, if the employer is enrolled in E-Verify and can demonstrate that it verified the unauthorized worker’s employment eligibility through E-Verify, the employer will not be penalized,” Daniels says.

Thompson says strict enforcement of other provisions of the law could have an indirect—but powerful—impact on the business community.

“The law requires that public schools verify the immigration status of the parents of foreign-born students. This has nothing to do with employment, but the impact will be to discourage undocumented persons from sending their children to school, making Alabama a less desirable location to live, which probably takes these parents out of the pool of available employees,” he says.

Unintended danger
Daniels says there is an “unintended danger” in the act because it defines an “unauthorized alien” simply as one who is not “authorized to work in the United States.”

“This applies to not just a random 25-year-old uneducated, illiterate, drug runner from below the Rio Grande working at a peach orchard, but also to a Ph.D.-credentialed engineer from Europe working hard to solve a complex design issue at one of Alabama’s foreign-owned crown jewel manufacturing plants, if he has overstayed his work visa by one day,” he says. “There is no distinction in the eyes of this law, and from a constitutional perspective, there probably cannot be one.”

It becomes a direct deterrent to economic development the state has sought with such fervor for the past 20 years, he says.

“Alabama has invested billions of dollars to entice foreign-owned businesses to locate here, and these businesses have, likewise, invested billions of dollars in Alabama and hired thousands of legal workers. Likewise, these foreign companies tell their contemporaries that Alabama is a good place to develop a manufacturing facility, because most Alabama citizens have a good work ethic, an educated population and a favorable business climate,” Daniels says.

“At the same time, if these entities become concerned that they may jeopardize their investment by innocently falling afoul of this new law because of a minor work-visa violation, then all of the hard work to attract these businesses over the past two decades by business leaders and elected officials, and the billions spent by Alabama citizens to attract these business interests and create new jobs will fall by the wayside,” he says.

At the very least, Jackson says, employers need to be certain to remain nondiscriminatory in their efforts to ensure the employment eligibility of their employees.
“As such, an employer cannot impose more requirements on, do more investigation of, or engage in discrimination against an employee or prospective employee based solely on the employee or prospective employee’s race, color or national origin,” Jackson says.

Although employers have every reason to be concerned by the new regulations and sharper penalties, Frazier says the act “really doesn’t require much more significant activity on their part other than to qualify for e-verification and to not knowingly employ the people they know they shouldn’t. When you boil it down, this is something people can live with.”

Above all, Daniels says it is incumbent upon the business community to demand that some degree of common sense be applied to the enforcement mechanisms set out in the act.

“Corporations do modify their behavior as a result of financial disincentives and fines, and a mechanism that imposes a graduated fine system for violations would be a much more effective tool to modify behavior. The Legislature should be asked to revise those sections that impose the death penalty on businesses on what should be a minor traffic offense,” he says.

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