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October Term, 2010

May 26, 2011

Today the Supreme Court issued one decision, described below, of interest to the business community.

Immigration—Federal Preemption of State Law

Chamber of Commerce of the United States of America v. Whiting, No. 09-115 (previously discussed in the June 28, 2010 docket report)

Addressing an issue relevant to the entire business community—employment eligibility verification—the Supreme Court today examined the interaction between the federal Immigration Reform and Control Act of 1986 (“IRCA”), 8 U.S.C. § 1324a, and Arizona’s Legal Arizona Workers Act (“LAWA”), Ariz. Rev. Stat. §§ 23-211 et seq. In addition to prohibiting knowing or intentional employment of unauthorized aliens and requiring employers to verify work eligibility through the “I-9” process, IRCA preempts state laws “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.” 8 U.S.C. § 1324a(h)(2). In a 5-3 decision today, the Court held that LAWA falls within IRCA’s parenthetical exception for licensing laws and is therefore not preempted.

LAWA prohibits businesses from employing illegal aliens. On a first violation, a court must order the employer to terminate the employment of all unauthorized aliens. The employer is also placed on a 3-year probationary period during which it must file quarterly reports of all new hires. Should a second knowing violation occur during that probationary period, the company’s business license must be revoked. In addition, LAWA requires all Arizona employers to verify employees’ work eligibility using the E-Verify program, a pilot program that federal law makes optional for most employers.

Chief Justice Roberts, writing for the majority, rejected the Chamber of Commerce’s argument that LAWA was not a licensing or similar law. And, although use of the E-Verify system is left optional under federal law, the Court held that this was not sufficient to preempt Arizona’s requirement that employers use the system, because the federal statute establishing E-Verify prohibits only the Secretary of Homeland Security from making its use mandatory.

In a portion of his opinion joined only by Justices Scalia, Kennedy, and Alito, the Chief Justice also rejected the argument that LAWA was impliedly preempted, finding that LAWA closely tracks federal requirements and procedures and finding further that LAWA did not encroach on an area of exclusive federal regulation. Although he did not join in this portion of the Court’s opinion, Justice Thomas concurred in the judgment and the opinion of the Ninth Circuit upholding the law was accordingly affirmed.

In dissent, Justice Breyer, joined by Justice Ginsburg, argued that LAWA conflicted with IRCA’s delicate balancing of sanctions for hiring unauthorized aliens and sanctions for employment discrimination, and that LAWA was expressly preempted because it does not constitute a “licensing” law within the IRCA’s savings clause. Justice Breyer further argued that LAWA’s E-Verify provision was impliedly preempted because, by making use of E-Verify mandatory when federal law sought to make it voluntary, the provision was an obstacle to the accomplishment of Congress’s purposes.

Justice Sotomayor dissented separately. Under her view, LAWA conflicted with federal adjudication of immigration status, permitting Arizona to independently determine a worker’s status based on results of the E-Verify system. Justice Sotomayor would interpret IRCA’s licensing exception to apply only after a federal adjudication of an employee’s work authorization status.
Justice Kagan did not participate in the case.

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