Supreme Court rules Arizona law punishing businesses that hire illegal immigrants not preempted by federal immigration law

The Legal Arizona Workers Act, which provides for the revocation or suspension of the business license of employers in the state that knowingly or intentionally employ unauthorized aliens, was not expressly or impliedly preempted by federal immigration law, ruled the Supreme Court in a 5-3 decision (Chamber of Commerce v Whiting, May 26, 2011, Roberts, J). Additionally, the Court ruled that the Act’s provision mandating the use of the E-Verify system was not impliedly preempted by federal law.

Background. A federal district court found that the plain language of the Immigration Reform and Control Act’s preemption clause did not invalidate the Legal Arizona Workers Act because the Arizona law did no more than impose licensing conditions on businesses operating within the state. Further, the district court concluded that the state law was not preempted with respect to E-verify because, while Congress made the program voluntary at the national level, it expressed no intent to prevent states from mandating participation.

The Ninth Circuit upheld the law in September 2008 against a facial challenge from a group of plaintiffs led by the U.S. Chamber of Commerce’s National Chamber Litigation Center, among other business and civil rights groups. The appeals court rejected the Chamber’s claim that the state law was preempted by the IRCA, which expressly preempts any state or local law imposing civil or criminal sanctions upon employers who employ undocumented workers. Arizona’s employer sanctions law was “saved” from preemption because it fit squarely within the IRCA’s saving clause, which exempts “licensing or similar laws,” the appeals court reasoned.

Express preemption. The Supreme Court affirmed prior opinions holding that the plain language of the IRCA’s preemption clause did not invalidate the Arizona law because the law did no more than impose licensing conditions on businesses operating within the state. While the IRCA prohibits states from imposing civil or criminal sanctions on those who employ unauthorized aliens, it preserves state authority to impose sanctions through licensing and similar laws. According to the opinion authored by Chief Justice Roberts, Arizona’s licensing law fell well within the confines of the authority that Congress chose to leave to the states, and therefore it was not expressly preempted. The Court observed that the definition of “license” contained in the Arizona statute largely parroted the definition of “license” that Congress codified in the Administrative Procedure Act. The Arizona law’s definition of license also included documents such as articles of incorporation, certificates of partnership, and grants to transact business in the state.

Even if a law regulating articles of incorporation and the like was not itself a “licensing law,” it was at the very least “similar” to one, and therefore comfortably within the IRCA’s savings clause, concluded Roberts. Consequently, the court rejected the Chamber’s argument that the savings clause should apply only to certain types of licenses or only to a license revocation following an IRCA adjudication. No such limits were remotely discernible in the statutory text of the IRCA, the majority noted.

Implied preemption. The Arizona licensing law also was not impliedly preempted by the IRCA, concluded the majority. Arizona procedures simply implemented the sanctions that Congress expressly allowed the state to pursue through licensing laws. Here, Arizona’s law closely tracked IRCA provisions. For example, it adopts the federal definition of who qualified as an “unauthorized alien,” provides that state investigators must verify the work authorization of an allegedly unauthorized alien with the federal government, and requires a state court to “consider only the federal government’s determination.” The Chamber’s argument that the Arizona law upset the balance that Congress sought to strike in the IRCA was also unavailing. The regulation of in-state businesses through licensing laws did not involve uniquely federal areas of interest, stated the majority. Operation of the Arizona law did not entail direct interference with the operation of a federal program.

An employer acting in good faith need not fear the law’s sanctions, since license termination is not an available sanction for merely hiring unauthorized workers. Because the law covers only knowing and intentional violations, the “business death penalty” sanction is triggered only by more egregious violations. Additionally, federal and state antidiscrimination laws protect against employment discrimination, and employers enjoy a safe harbor from liability when using E-Verify as required by the Arizona law. Consequently, the court rejected the Chamber’s argument that employers will err on the side of discrimination rather than risk sanctions by hiring unauthorized workers.

E-Verify. Nor was the state law preempted with respect to E-Verify, the Court concluded. Although Congress made the program voluntary at the national level, it expressed no intent to prevent the states from mandating participation. Arizona’s use of E-Verify did not conflict with the federal scheme. The state law required only that an employer, after hiring an employee, “verify the employment eligibility of the employee” through E-Verify. Further, the consequences of not using E-Verify were the same under either state or federal law: an employer forfeits an available rebuttable presumption of compliance with the law. Thus, Arizona’s requirement that employers use E-Verify in no way obstructed the aims of the federal program.