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LABOR & EMPLOYMENT LAW 6/20/08

District court blocks enforcement of Oklahoma immigration law's employment provisions

US District Court Judge Robin J. Cauthron of the Western District Court of Oklahoma issued a preliminary injunction on June 4, 2008, stopping the execution and enforcement of the employment verification provisions (sections 7 and 9) in Oklahoma's comprehensive Taxpayer and Citizen Protection Act of 2007 (H.B. 1804), finding it "substantially likely" that the provisions are preempted by the Immigration Control and Reform Act of 1986 (IRCA). Cauthron held that the law's sanctions to employers, which include increased tax rates, the loss of contracts and exposure to litigation, attempts to regulate the employment of illegal aliens by imposing sanctions barred by IRCA. The decision came as a result of a lawsuit filed by the US Chamber of Commerce, among other business groups, who asserted that electronic verification of new employee's legal status is voluntary under federal law (Chamber of Commerce of the USA v Henry, WDOkla, No 5:08-cv-00109-C. Preliminary injunction granted).

"We applaud the court's decision to delay enforcing these portions of Oklahoma's immigration law. Through harsh civil penalties, the Oklahoma law unfairly shifts the burden of immigration enforcement from government onto the backs of businesses," said Robin Conrad, executive vice president of the National Chamber Litigation Center, which represents the US Chamber in the litigation. "Piecemeal state legislation is not the answer to our nation's immigration problems." Further, "conflicting state and local immigration laws are overwhelming American businesses," Conrad said. "Last year alone, over 240 employer-related immigration bills were introduced by at least 45 states. It's time for Congress to enact comprehensive immigration reform."

Background. On February 1, 2008, the US Chamber of Commerce, among other business groups (plaintiffs), filed suit against Governor Brad Henry (D), Attorney General Drew Edmondson (D) and members of the Oklahoma Human Rights and Tax Commission (defendants) seeking to preclude the employment provisions of Oklahoma's immigration law from becoming enforceable as scheduled on July 1. In particular, Section 7 of the Act requires all public employers to register and participate in a federal employment verification system to verify federal employment authorization of new employees. In addition, public employers are prohibited from contracting for services with contractors who do not participate in a verification system to verify the status of all new employees. Contractors or subcontractors are similarly barred from entering into contracts with public employers unless they participate in a verification system to verify the status of all new employees. The Act also creates a new cause of action for employment discrimination against all Oklahoma employers that discharge a US citizen or legal permanent resident employee while retaining an undocumented worker hired in a comparable position, if the employer reasonably knows that the retained employee was undocumented (a "safe harbor" applies for employers who use a verification system). Section 9 of the Act, which was implemented on November 1, 2007, requires all Oklahoma businesses to verify the work authorization status of each individual independent contractor who contracts within the state in order to avoid tax penalties.

The various federal employment verification options include: (1) E-Verify, an Internet-based system operated by the Department of Homeland Security in partnership with the Social Security Administration (SSA) that allows participating employers to electronically verify the employment eligibility of their newly hired employees; and (2) the Social Security Number Verification Service (SSNVS) or a similar online verification process implemented by the Social Security Administration (SSA), which allows employers to verify Social Security numbers online via the Internet.

Motion to dismiss. The defendants first sought dismissal of the plaintiffs' preliminary injunction motion, arguing that the district court lacked jurisdiction by operation of the Tax Injunction Act, which bars courts from "enjoin[ing] suspend[ing] or restrain[ing] the assessment, levy or collection of any tax under state law where a plain, speedy and efficient remedy may be had in the courts of such state." Though often used as a way to deprive courts of jurisdiction, Cauthron rejected such an argument, finding that the applicable provisions do not make the Taxpayer and Citizen Protection Act of 2007 a tax statute. "First," wrote Cauthron, the Act "does not create a new tax; rather, it alters the manner in which the existing withholding tax rates are applied." In addition, and most importantly he confirmed, it is "undisputed that the underlying purpose of the Act, including [the independent contractor provision], was to prevent the employment of illegal aliens."

Cauthron also rejected the defendants' alternative argument that the plaintiffs lacked standing to challenge the Act, finding that they had alleged potential injury to their membership, which was sufficient to establish organizational standing. The defendants had also asserted that Congress did not act with proper authority when it enacted IRCA's provision (1324a(h)(2)) stating that "states may not impose 'civil or criminal sanctions' upon employers of unauthorized aliens, 'other than through licensing and similar laws.'" Rejecting that assertion, Cauthron confirmed that a long line of Supreme Court cases established without question Congress' power to regulate matters related to immigration.

Preliminary injunction. The plaintiffs' motion asserted that they were entitled to an injunction because the challenged provisions in Oklahoma's immigration law conflicted with, and were preempted by, IRCA's (namely its preemption provision). While issues of taxation are within the right of states to regulate, Cauthron believed that the plaintiffs are likely to prove that the Act is not taxation statute but rather a form of civil sanction. "Without question the state can, within limits, set guidelines controlling the eligibility for contracts. However, the state cannot create or impose guidelines that conflict with the Constitution or federal law." In this case, noted Cauthron the sanctions in Oklahoma's immigration law were fairly considered sanctions preempted by IRCA. Consequently, the plaintiffs established a likelihood of success. Cauthron found potential harm in not granting the plaintiffs' motion by them having to face the choice of either complying with state law, federal law, or both. In addition, wrote Cauthron "[a]ny delay in enforcing the provisions of H.B. 1804 necessitated by determining their validity will have a de minimis impact on Defendants' interests and a final resolution to the issue will play a significant role in defining which government is responsible and authorized to address the immigration issue."

Cauthron wrote that "no court should treat the prospect of overturning state law without grave consideration the Constitution requires that the will of the states must occasionally give way to the need for uniformity among the states and that uniformity can only be accomplished through congressional action." Without deciding the case, Cauthron held, "it appears that plaintiffs are likely to prevail and consequently are entitled to a preliminary injunction."

Cauthron's decision can be found at the following website.

For more information on this and other topics, consult CCH Employment Practices Guide or CCH Labor Relations.

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