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I-9 Compliance And Missouri State-Assisted Housing Construction - A Brave New World Of Regulation

by Anthony E. Weigel

On November 16, 2007, the Missouri Housing Development Commission ("MHDC") adopted an "I-9 Workforce Eligibility Policy" that imposes onerous requirements on Developers, General Contractors and Subcontractors working on its state-assisted projects. [1] These requirements will become a condition to participation in future MHDC loans to developers of affordable, residential housing and financing provided through the sale of MHDC issued tax-exempt notes and bonds.

Description of the Policy

The I-9 Policy places a whole host of additional requirements on Developers, General Contractors and Subcontractors, above, beyond and in conflict with the Federal government's I-9 requirements, detailed in the Immigration and Reform Control Act of 1986 ("IRCA"). The following is a list of requirements on each affected party:

Developers

The Developer of an MHDC-assisted project must:

  • Formally accept MHDC's I-9 Policy;
  • Secure all required information required by the I-9 Policy from the General Contractor (see below);
  • If not done by the General Contractor, obtain and check the daily sign-in sheet for "all employees" working on the construction site;
  • If not done by the General Contractor, compare lists of "employee" lists to the I-9 forms filed in the on-site construction office;
  • Use E-Verify/Basic Pilot (See Attachment A for more information) and certify in writing it uses the system and will use it for all new hires;
  • Provide I-9 forms and evidence each E-Veriy/Basic Pilot verification for all employees to be maintained in the on-site construction office; and
  • Work with the General Contractor to make sure all "independent sole proprietors" provide copies of the prior year's 1099 forms and proof of filing a tax return.
General Contractors

The General Contractor on an MHDC-assisted project must:

  • Maintain a list of all General Contractor's employees working on the construction site;
  • Maintain current lists of all Subcontractors awarded contracts or working on the construction site;
  • Obtain and check a daily sign in sheet for all employees working on the construction site;
  • Collect copies of all Subcontractor I-9 forms and maintain them in the on-site construction office and compare the employee lists to I-9s on-site;
  • Use E-Verify/Basic Pilot and certify in writing it uses the system and will use it for all General Contractor's new hires;
  • Work with "independent sole proprietors" to provide copies of the prior year's 1099 forms and proof of filing a tax return to MHDC;
  • Provide certified payrolls reflecting General Contractor's employee names, addresses, wages paid, benefits and taxes withheld to MHDC on a monthly basis;
  • Obtain and maintain all Subcontractor (to include sole proprietors) certified payrolls reflecting employee names, addresses, wages paid, benefits and taxes withheld, and provide to MHDC on a monthly basis;
  • Obtain and maintain monthly reports from Subcontractors paying for labor on a 1099 basis that includes the amount paid, name, and address or each 1099 contractor, and provide to MHDC on a monthly basis; and
  • Maintain all subcontractor bids (to include substitute subcontractors) and make these records available to MHDC at the following times:
    • At firm submission;
    • Construction loan closing; and
    • Pre-Construction conference (if applicable).
Subcontractors

The Subcontractor on an MHDC-assisted project must:

  • Provide a list of all Subcontractor's employees working on the construction site;
  • Require all of Subcontractor's employees working on the construction site to sign the daily sign in sheet;
  • Provide copies of all Subcontractor's I-9 forms to General Contractor to be maintained in an on-site construction office;
  • Use E-Verify/Basic Pilot and certify in writing it uses the system and will use it for all of Subcontractor's new hires;
  • If an "independent sole proprietor," provide copies of the prior year's 1099 forms and proof of filing a tax return to MHDC;
  • Provide certified payrolls reflecting Subcontractor's employee names, addresses, wages paid, benefits and taxes withheld to the General Contractor on a monthly basis; and
  • Provide monthly payment reports for Subcontractor's labor paid on a 1099 basis that includes the amount paid, name, and address or each 1099 contractor, and to the General Contractor on a monthly basis.
Investigations & Sanctions

Investigations

Under the I-9 Policy, MHDC "I-9 Inspectors" are to conduct suspicionless searches of workers and employment records (I-9 Forms, employee lists and sign-in sheets) maintained on construction sites. Any inconsistencies are to be reported to Senior MHDC Staff within 24 hours. MHDC inspectors are to be on watch for unusual events, incidents, reports that would "suggest" unauthorized workers. Any "suggestions" or other "concerns" that unauthorized workers are on-site must be reported to Senior MHDC Staff. Additionally, in all cases where the spectre of "concerns" of unauthorized workers arises, MHDC Staff is to notify MHDC Commissioners, the Department of Homeland Security, the Attorney General, and local law enforcement.

MHDC will give concurrent notification to the Developer, who will have five (5) business days to prove that the I-9 Policy has not been broken or violated. This is not intended to be a "cure period," but rather an opportunity to plead one's innocence. The Developer must satisfactorily resolve all issues or respond to "concerns" raised by MHDC Staff. If the Developer fails to do so, recommendations for sanctions may be made to the MHDC Commissioners.

Sanctions

Developers, General Contractors, and Subcontractors may be barred from MHDC programs for one (1) year to life. The debarment penalty includes the legal entity, key principals, and any individual who had or should have had knowledge of a violation of the I-9 Policy.

Sanctions may also include fines and penalties set forth by untested, existing state statutes. [2]

In cases involving MHDC tax credits, MHDC expects to collect liquidated damages against the Developer. Additionally, the MHDC will not approve new money for a project subject to sanctions above the amounts initially agreed upon.

The fundamental flaw in the MHDC I-9 Policy is that, although it claims sanctions will be levied for violation of the I-9 Policy, the core violation that really matters is the employment of an unauthorized worker, which is governed by Federal law. The intent and the text of the I-9 Policy itself lends one to believe that projects that the MHDC deems to be "clean" (meaning no suggestion or concern that unauthorized workers are on-site) will not be subject to MHDC inquisition and sanctions.

Questions of Preemption by Federal Law

One of the most hotly contested issues of the day is whether or not state immigration laws relating to employment eligibility verification are preempted by federal law. [3] A Federal District Court struck down laws enacted in Hazelton, Pennsylvania earlier this year and Federal District Courts in Arizona and Illinois are considering very similar legal issues. [4] If challenged, the MHDC's I-9 Policy may be deemed preempted.

Express Preemption

The MHDC's I-9 Policy may be expressly preempted [5] based upon the following:

1) The policy does not require an employer to have been found to have violated the sanctions provisions in IRCA by the federal government in the manner set forth by IRCA before state sanctions are applied;

2) The state's penalties are not limited licensing laws and laws similar to licensing, but instead include a civil penalty (debarment), monetary penalties and potentially criminal penalties; [6]

3) The state will not be a party to the relevant contracts, but even if it were, the punitive measures are not based upon a finding by the federal government of that the employer violated IRCA.

Preemption Based on Scope and Intent of Federal Law

The I-9 Policy's provisions may also be preempted based upon the scope of the Federal law and Congress' intent. In 1986, President Ronald Reagan stated that the employer sanctions program of IRCA was "the keystone and major element of IRCA," which he termed to be "the most comprehensive reform of our immigration laws since 1952." [7] As imperfect as they may be, the Federal I-9 standards were intended to be the national standard.

In addition, Congress clearly set forth detailed requirements within the statutes and the federal immigration authorities have issued associated regulations, which cover prohibited activities, employment eligibility verification and retention requirements, and limitations on use of the I-9 forms and data. See Attachment B for a complete summary of IRCA's requirements and key definitions.

Congress expressed the intent behind IRCA's provisions in the U.S. House of Representatives, Judiciary Committee, House Report No. 99-682(I), which includes extensive comments about the purpose and intent of several of IRCA's key provisions:

Employer's Standard of Document Review

  • "It is not expected that employers ascertain the legitimacy of documents presented during the verification process." [8]
  • "… if the verification procedure is followed, the language is intended to make clear that there is no requirement that an employer request additional documentation." "…the Committee wishes to emphasize that documents that reasonably appear to be genuine should be accepted by employers without requiring further investigation of those documents." [9]
Lack of a Continuing Verification Obligation

  • "The Committee does not intend to impose a continuing verification obligation on employers." [10]
"Good faith" Compliance Provisions
  • IRCA "provides an affirmative defense for employers, referrers or recruiters who show "good faith" compliance with the recordkeeping requirements…" [11]
  • "The Committee intends that the act of establishing "good faith" compliance could be shown by proof of the employer's, referrer's or recruiter's review of the documents specified in the legislation and retention of the verification forms, inclusive of the employee's attestation." [12]
  • "In other words, if the person or entity performs these activities, a rebuttable presumption is established that he or she has acted in "good faith," and the burden is shifted to the government to prove otherwise." [13]
  • "…the burden of proving a violation of the hiring, recruitment or referral prohibition always remains on the government by a preponderance of the evidence in the case of civil penalties and beyond a reasonable doubt in the case of criminal penalties."[14]
Subcontractor provisions
  • The Committee stated: "… the bill specifically provides that an employer "who uses a contract, subcontract, or exchange, entered into, renegotiated, or extended after the date of enactment … to obtain the labor of an alien in the United States knowing that the alien is an unauthorized (undocumented) alien" shall be considered to have hired the alien for employment." [15]
Process for Civil Penalties
  • "In the case of a citation, the offending party may request a hearing on any civil penalty assessed against him or her by the Attorney General. Such hearing shall be conducted before an Administrative Law Judge in accordance with the adjudication requirements set forth in the Administrative Procedures Act (8 U.S.C. § 554).[16]
  • Judicial review of the decision is also available … In other words, if the assessment has been contested, judicial review may be pursued before the circuit courts… [17]
Use of I-9 Documents
  • "These [I-9] forms must be retained and made available for inspection by INS or the Labor Department during such period as the Attorney General shall specify in regulations."[18]
  • "The bill [IRCA] specifically prohibits the use of attestation for purposes unrelated to the enforcement of this legislation or 18 USC 1546 - relating to the fraud and misuse of various immigration documents. Concern has been expressed that verification information could create a "paper trail" resulting in the utilization of this information for the purpose of apprehending undocumented aliens. The bill is designed to insure that this information will not be used by the INS in its alien enforcement activities." [19]
The MHDC's I-9 Policy essentially creates several state-level requirements that ignore the intended scope of Federal law and are inconsistent in many respects with Congress' specific intent. Congress intended employers to comply with a national scheme in a certain, balanced manner. Stated bluntly, Congress intended that employers make good faith efforts to verify work authorization, but did not impose a "zero tolerance" policy on the unknowing, unintentional employment of unauthorized workers or on such actions of independent contractors.

Conflict Preemption

A court may also consider whether the I-9 Policy is preempted based upon conflicts with Federal law. Specifically, a court would examine (1) whether it is possible to comply with both state and Federal law, and (2) whether the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.

The following table highlights some of the most prominent conflicts between the MHDC's I-9 Policy and Federal law.

MHDC's I-9 Policy Requires: Federal Law Conflicts:
Developers, General Contractors and Subcontractors must use E-Verify/Basic Pilot (See Attachment A) and provide written certification of current and future use the system for all new hires. (1) E-Verify/Basic Pilot is an optional system under Federal law and mandating use of the system is a questionable requirement.
(2) Arguably, an employer's use of E-Verify/Basic Pilot restricts the MHDC from imposing any liability under its I-9 Policy. Specifically, Article II, Section C, Paragraph 6 (5), of the E-Verify/Basic Pilot Program's "Memorandum of Understanding" states: no person or entity participating in the E-Verify/Basic Pilot shall be civilly or criminally liable under any law for any action taken in good faith on information provided through the confirmation system.
(3) The system is not fool proof and does not detect the use of false identities. An employer could be sanctioned under MHDC's I-9 Policy if someone is later discovered to be an unauthorized worker, even if the employee cleared the E-Verify/Basic Pilot system.
(4) An employer cannot take any adverse action and must continue to employ workers who do not immediately clear E-Verify/Basic Pilot until the "tentative nonconfirmation" is resolved. [20] MHDC's requirement that an E-Verify/Basic Pilot certification be provided in order to work on-site conflicts with this provision of the law.
MHDC's I-9 Policy requires copies of all I-9 Forms of Developers, General Contractors, and Subcontractors to be maintained on the construction site. Federal law limits the use of I-9 forms, any information contained therein, or appended thereto, to the enforcement of IRCA and for enforcement of other specific sections of federal law. The form and its associated information may not be used for any other purpose. [21] The MHDC's requirement places employers in direct conflict with applicable Federal immigration law.
MHDC's I-9 Policy essentially imposes requirements for Developers to verify the employment eligibility of General Contractors' employees and, in turn, for General Contractors to verify the employment eligibility of Subcontractors' employees. (In addition, MHDC's I-9 policy entangles a party into a whole host of other employment/legal issues [22]) Federal law imposes no duty on a party to verify the employment eligibility of an independent contractor. Rather, Federal law prohibits a party from contracting or otherwise agreeing with another party to obtain the labor of a person knowing that person is not authorized to work in the U.S. These are inconsistent standards that exceed the scope and intent of Federal law.
The MHDC Policy mandates notification of multiple law enforcement entities in cases where "concerns" that unauthorized workers are on a construction site. The Developer is given a short time frame to respond to MHDC concerns and is assigned the burden of proof to show compliance with the I-9 Policy. Federal law provides that a rebuttable presumption is established when any employer has acted in "good faith" (it has satisfied IRCA's basic I-9 requirements). If the Federal government investigates and prosecutes an employer, the government always bears the burden of proof. MHDC's I-9 Policy stands in stark contrast to Federal immigration law and the norms present in the balance of the U.S. legal system.
MHDC's I-9 Policy requires it be provided with Contractors and Subcontractors' I-9 records, payroll, benefits, tax and employee information. The MHDC's expectation is that this information will be used to "red flag" use of unauthorized workers and facilitate investigations. The burden of proving a violation of IRCA always remains on the government by a preponderance of the evidence in the case of civil penalties and beyond a reasonable doubt in the case of criminal penalties. In these prosecutions, the Federal government is required to request documents pursuant to federal statutes and regulations and, in many cases, is required to obtain a subpoena to obtain the documents required by the MHDC I-9 Policy. Again, MHDC's I-9 Policy stands in stark contrast to Federal immigration law and the norms present in the balance of the U.S. legal system.

Conclusion

Developers, General Contractors and Subcontractors working on MHDC state-assisted projects are facing the imposition of the most intrusive and oppressive state-level I-9 enforcement scheme in the country. Once the state's I-9 inspection team is up and running, based upon public statements, there are plans to expand this scheme to projects involving any funding from the Department of Economic Development, which affects an even greater number of parties. [23]

Other states, such as Pennsylvania and Texas, have found more reasonable ways to ensure state aid recipients and contractors comply with the law. Both Texas and Pennsylvania's laws utilize the bright-line test for sanctions of a Federal finding that an employer knowingly violated Federal law. [24] The State of Missouri should withdraw the MHDC's I-9 Policy, take a closer review of the relevant Federal immigration laws, and consider more reasonable measures that are less likely to be challenged on the basis of preemption by Federal law.

Attachment A

E-Verify/Basic Pilot Information

The federal government enacted laws in 1996, which created the optional "Basic Pilot" program, which is now known as "E-Verify" and provides a means for employers to perform a secondary verification of an employee's work authorization. It is a no-cost, Internet-based system and references to either Basic Pilot or E-Verify are to the same system. The system has also added DHS photos to add an extra measure of certainty or uncertainty to the process, depending upon the ability of DHS to accurately match the right photographs with the right record.

An employer must register online and designate a program administrator. The administrator and any other users must go through about 45 minutes of training and testing.

After completing a new hire's I-9 form, an employer makes an electronic verification check of the Social Security Administration and DHS databases, which uses automated systems to verify Social Security account numbers and alien registration numbers. Employers must verify all newly hired employees without exception, and must make verification inquiries within 3 days of the hiring. A copy of the system confirmation must be kept with the completed I-9 form.

If the electronic queries do not result in a confirmation, the system generates a "Tentative Nonconfirmation" response. At this point, employers and affected employees are required to do the following:
  • Employer must print and provide the system-generated referral notice of the Tentative Nonconfirmation to the employee (unless employee opts not to contest)
  • Employer must provide the employee an opportunity to contest the response
  • Employer must input a referral in the system and direct the employee to contact the appropriate agency to resolve information discrepancies
  • Employer then either re-submits the query to receive a final confirmation or the system will generate a notice of final confirmation
  • If the employer receives a final nonconfirmation, it may terminate the employment relationship and shall not be civilly or criminally liable under any law for the termination, as long as the action was taken in good faith reliance on information provided through the confirmation system. If the employer does not terminate an employee after final nonconfirmation, the employer must notify the government. Failure to notify the government of continued employment after receiving final nonconfirmation will be deemed a violation of the law and may result in a civil monetary penalty of between $500 and $1,000.
There are advantages and disadvantages to use of Basic Pilot/E-Verify. Advantages include a potential reduction in the risk of employing unauthorized workers (assuming the accuracy of the DHS databases, which has been called into doubt) and additional legal defenses if the system is used properly.

Disadvantages include taking on additional work and providing additional information to the government it would otherwise have to request, as well as the risk of taking an employment action based on potentially incorrect information in the DHS database. Basic Pilot/E-Verify does not detect use of a false identity by a worker.

Attachment B

Summary of IRCA's I-9 Requirements
An employer cannot hire, recruit or refer for a fee an alien/person [25] knowing the person is not authorized to work in the U.S. [26]
  • Employees and employers must comply with the "I-9" requirements. [27]
  • An employer cannot continue to employ a person in the U.S. knowing that person is (or has become) unauthorized to work. [28]
  • An employer cannot attempt to contract or otherwise agree with another party to obtain the labor of a person knowing that person is not authorized to work in the U.S. [29]
  • An employer must attest, under the penalty of perjury, that it has verified that a person is authorized to work in the U.S. after examining the appropriate documents. [30]
  • An individual must attest, under penalty of perjury, he or she is: (i) a citizen or national of the United States, (ii) a person lawfully admitted for permanent residence, or (iii) a person who is otherwise authorized to work in the U.S. [31]
  • An employer complies with federal law if the document or documents presented reasonably appear to be genuine; and an individual complies if he or she provides a document or combination of documents that reasonably appears on its face to be genuine and meet the I-9 form requirements. [32]
  • Federal law limits the use of I-9 forms, any information contained therein, or appended thereto, to the enforcement of IRCA and for enforcement of other specific sections of federal law. This form and its associated information may not be used for any other purpose. [33]
The associated federal regulations mirror the specific text of the statute. Significant regulations relating to prohibited activities and employment verification procedures are:

Employee means an individual who provides services or labor for an employer for wages or other remuneration but does not mean independent contractors or those engaged in casual domestic employment. [34]

Employer means a person or entity, including an agent or anyone acting directly or indirectly in the interest thereof, who engages the services or labor of an employee to be performed in the United States for wages or other remuneration. In the case of an independent contractor or contract labor or services, the term employer shall mean the independent contractor or contractor and not the person or entity using the contract labor. [35]

Independent contractor includes individuals or entities that carry on independent business, contract to do a piece of work according to their own means and methods, and are subject to control only as to results. Whether an individual or entity is an independent contractor, regardless of what the individual or entity calls itself, will be determined on a case- by-case basis. Factors to be considered in that determination include, but are not limited to, whether the individual or entity: supplies the tools or materials; makes services available to the general public; works for a number of clients at the same time; has an opportunity for profit or loss as a result of labor or services provided; invests in the facilities for work; directs the order or sequence in which the work is to be done and determines the hours during which the work is to be done. [36]

Knowing includes not only actual knowledge but also knowledge which may fairly be inferred through notice of certain facts and circumstances which would lead a person, through the exercise of reasonable care, to know about a certain condition.
  • Constructive knowledge may include, but is not limited to, situations where an employer:
    • Fails to complete or improperly completes the Employment Eligibility Verification Form, I-9;
    • Has information available to it that would indicate that the alien is not authorized to work, such as Labor Certification and/or an Application for Prospective Employer; or
    • Acts with reckless and wanton disregard for the legal consequences of permitting another individual to introduce an unauthorized alien into its work force or to act on its behalf. [37]
Knowledge that an employee is unauthorized may not be inferred from an employee's foreign appearance or accent. An employer may not request more or different documents than are required or to refuse honor documents tendered that on their face reasonably appear to be genuine and to relate to the individual. [38]

Congress also established Anti-Discrimination Provisions in IRCA to serve as a counterbalance to the employment eligibility verification procedures. Congress enacted measures to prevent discriminatory treatment against those who "look or sound foreign." The relevant statutory provisions are:

General rule - It is an unfair immigration-related employment practice for an employer to discriminate against any individual (other than an "unauthorized alien") with respect to the hiring, or recruitment or referral for a fee, of the individual for employment or the discharging of the individual from employment because of: (i) an individual's national origin, or (ii) a protected individual's citizenship status. [39]

Document Abuse - An employer's request, for purposes of satisfying the I-9 requirements, for more or different documents than are required under such section or refusing to honor documents tendered that on their face reasonably appear to be genuine shall be treated as an unfair immigration-related employment practice if made for the purpose or with the intent of discriminating against an individual. [40]


Endnotes

1 See: Item 3.a., pages 18-20 of 132 of The Notice of the Regular Meeting of the MHDC, Nov. 16, 2007, Agenda and Book (http://www.mhdc.com/about/commission_meetings/2007_11_16_Regular_Meeting_Book.pdf), and Matthew Franck, Mo. Panel Demands Builders Act as Immigration Cops, St. Louis Post-Dispatch (Nov. 17, 2007) (http://www.stltoday.com/stltoday/news/stories.nsf/missouristatenews/story/5040F39F66A4FE5A86257396001322B4?OpenDocument).

Please note, the MHDC adopted amendments to three sections of the I-9 Policy: (a) Item 18 was amended to require MHDC staff to notify MHDC Commissioners, the Department of Homeland Security, the Attorney General, and local law enforcement of any "concerns" of the presence of any unauthorized workers, (b) Item 20.c. was amended to change the sanction of "damages" to "liquidated damages," specifically to eliminate the need for the courts to determine damage amounts, and (c) Item 20.e. was added to the list of sanctions and prevents a Developer from asking for additional assistance if it is subjected to I-9 Policy sanctions.

2 Section 285.025.1 RSMo. provides for a civil penalty (bar to state aid for a 5 year period) and Section 285.025.2 RSMo. provides for a criminal penalty, both of which are expressly preempted. Specifically, 8 U.S.C. §1324(a)(h)(2) states: Preemption.-The provisions of this section preempt any state or local law 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.

3 For a general overview of federal preemption of state laws, see: Monica Guizar, Facts About Federal Preemption, National Immigration Law Center (June 2007) (www.nilc.org/immlawpolicy/LocalLaw/federalpreemptionfacts_2007-06-28.pdf).

The federal standards for determining whether a Missouri state measure is preempted by federal law are as follows:

Under the Supremacy Clause, U.S. Const. art. VI, cl. 2, the United States Constitution and federal laws and treaties are the supreme Law of the Land. Thus, Congress, by passing certain legislation, may act to preempt state law. Heart of Am. Grain Inspection Serv. v. Missouri Dept. of Agric., 123 F.3d 1098, 1103 (8th Cir. 1997). The language of an express preemption clause controls. Mizner v. North River Homes, 913 S.W.2d 23, 25 (Mo. Ct. App. 1995) (citing Cipollone v. Liggett Group, Inc., 505 U.S. 504, 120 L. Ed. 2d 407, 112 S. Ct. 2608, 2617 (1992)).

When federal law does not expressly preempt state law, the court must inquire more deeply into the intention of Congress and the scope of the pertinent legislation. Hankins v. Finnel, 964 F.2d 853, 861 (8th Cir. 1992). The intent of Congress is the primary issue in determining the preemptive effect of federal law. Mizner, 913 S.W.2d at 25. Courts must consider Congressional intent, which is usually ascertained by considering the statute's explicit language as well as its purpose and history. Root v. Liberty Emerg. Phys., Inc., 68 F.Supp.2d 1086, 1090 (W.D. Mo. 1999).

Congressional enactments which do not expressly exclude state legislation in the field nevertheless override state laws with which they conflict. Natl. City Lines, Inc. v. LLC Corp., 687 F.2d 1122, 1128 (8th Cir. 1982) (citing U.S. Const. art. VI, cl. 2), Root v. New Liberty Hosp. Dist., 209 F.3d 1068, 1070 (8th Cir. 2000). Preemption will also occur of necessity if compliance with both federal and state regulations is a physical impossibility. Heart of Am. Grain Inspection Serv., 123 F.3d at 1103.

In deciding whether state and federal laws are so inconsistent that state law must give way, a court must also determine whether, under the circumstances of a particular case the state's law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress by carefully comparing the two. Natl. City Lines, Inc., 687 F.2d at 1128, Hankins, 964 F.2d at 861, Heart of Am. Grain Inspection Serv., 123 F.3d at 1103. Federal law preempts state law not only where the two are plainly contradictory but also where the incompatibility between them is discernable only through inference. Hankins, 964 F.2d at 861 (citing Hayfield Northern R.R. Co. v. Chicago & N.W. Transp. Co., 467 U.S. 622, 627, 104 S. Ct. 2610, 81 L. Ed. 2d 527 (1984)).

An example of the 8th Circuit's preemption analysis is embodied in Natl. City Lines, Inc. v. LLC Corp., in which the court held that federal securities law preempted Missouri securities law because of specific substantive provisions of federal law were incompatible with the substantive state law provisions governing the same rights. 687 F.2d at 1128. The 8th Circuit looked at the legislative history of the federal act to discern Congress' intent and identified where Congress established a balance of interests. 687 F.2d at 1128. The court held that Missouri securities law "upset the congressionally designed balance" and was impermissibly inconsistent with the scheme of the federal securities act. 687 F.2d at 1128. Of note, proponents of the state securities law argued that more extensive disclosure requirements were consistent with the federal law's goal of investor protections. Id. at 1131. The 8th Circuit did not uphold Missouri's attempt to second-guess the judgments made by Congress regarding disclosure requirements. Id. at 1132. The 8th Circuit also held that substantive requirements of the state's securities law directly conflicted with applicable federal statutes and regulations. Id. Where complying with both federal and state requirements is impossible and frustrates the operation and purposes of federal law, the state law is unconstitutional. Id.

4 One of the main issues in each of these cases is the extent to which Congress preempted state action. 8 U.S.C. §1324(a)(h)(2) states: Preemption.-The provisions of this section preempt any state or local law 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.

The legislative history, contained in the 1986 report of the U.S. House of Representatives, Judiciary Committee in House Report No. 99-682(I), reads as follows: The penalties contained in this legislation are intended to specifically preempt any state or local laws providing civil fines and/or criminal sanctions on the hiring, recruitment or referral of undocumented aliens. They are not intended to preempt or prevent lawful state or local processes concerning the suspension, revocation or refusal to re-issue a license to any person who has been found to have violated the sanctions provisions in this legislation. Further, the Committee does not intend to preempt the licensing or "fitness to do business laws," such as state farm labor contractor laws or forestry laws, which specifically require such licensee or contractor to refrain from hiring, recruiting or referring undocumented aliens. H.R. Rpt. 99-682(I) at p. 58 (July 16, 1986) (Located 1986 U.S.C.C.A.N. 5649, 5662).

Based upon the author's analysis: a) If an employer has been found to have violated the sanctions provisions in IRCA by the federal government in the manner set forth by IRCA, then b) A state or local government can penalize an employer through its licensing laws and laws similar to licensing, but c) State and local governments can condition contracts on an employer's compliance with IRCA, with penalties subject to a finding by the federal government of such a violation.

5 See Note 4.

6 See Note 2, penalty provision of Section 285.025.2 RSMo.

7 Ronald Reagan, Statement on Signing S. 1200, Immigration Reform and Control Act, 22 Wkly. Comp. Pres. Docs. 1534 (Nov. 10, 1986) (Located in 1986 U.S.C.C.A.N. 5649, 5856-1).

8 H.R. Rpt. 99-682(I) (July 16, 1986) (Located in 1986 U.S.C.C.A.N. 5649, 5665) (All following citations to U.S.C.C.A.N. page numbers) (emphasis added).

9 Id. at 5666 (emphasis added).

10 Id. at 5661 (emphasis added).

11 Id. at 5660.

12 Id. at 5661 (emphasis added).

13 Id. (emphasis added).

14 Id. (emphasis added).

15 Id. at 5666 (emphasis added).

16 Id. at 5662-63 (emphasis added).

17 Id. at 5663 (emphasis added).

18 Id. at 5665.

19 Id. (emphasis added).

20 Specifically, Article II, Section C, Paragraph 9, of the E-Verify/Basic Pilot Program's "Memorandum of Understanding" states: "The Employer agrees not to take any adverse action against an employee based upon the employee's employment eligibility status while SSA or the Department of Homeland Security is processing the verification request unless the Employer obtains knowledge (as defined in 8 C.F.R. § 274a.1(l)) that the employee is not work authorized. The Employer understands that an initial inability of the SSA or Department of Homeland Security automated verification to verify work authorization, or a tentative nonconfirmation, does not mean, and should not be interpreted as, an indication that the employee is not work authorized."

21 INA 274A(b)(5) (emphasis added).

22 See: John A. Pearce II, The Dangerous Intersection of Independent Contractor Law and the Immigration Reform and Control Act: The Impact of the Wal-Mart Settlement, 12 Bender's Immigration Bulletin 9 (Jan. 1, 2007), which concludes with the following statement: "While the enforcement of law in this area is in flux, as it may always be, the best practice for a company engaged with an independent contractor is to be precautions without extending unwarranted control over the contractor. It is essential to the proper balance of liability, however, that employers maintain the professional separation that is characteristic of an employer-independent contractor relationship."

The MHDC I-9 Policy may also create liability for a party using a contractor for violations of the employment verification requirements of IRCA and IRCA's citizenship discrimination requirements on the following authority:
In 1992, the Immigration and Naturalization Service ("INS") issued two opinion letters regarding the definition of an "employee" for I-9 purposes. The first INS opinion letter focused on the company's: (i) control over the type, amount and conduct of the work performed, (ii) control over the hours during which that work is performed, and (iii) the provision of equipment and work space to be used. Legal Opinion from Grover J. Rees, III, INS General Counsel's Office (Aug. 10, 1992). The second INS opinion letter focused on the legal standards from two U.S. Circuit Court cases and states:
The question of whether a person is an "employee" is a legal conclusion to be drawn from the facts. Local 777, Democratic Union Organizing Comm. v. NLRB, 603 F.2d 862, 906 (D.C. Cir. 1978). Inherent in an employer-employee relationship is the right of control. Stone v. Pinkerton Farms, Inc., 741 F.2d 941, 943 (7th Cir. 1984). Where control by an employer exists, such a relationship will be found, whether or not that control is exercised. Legal Opinion form Paul W. Virtue, INS General Counsel's Office (Aug. 17, 1992).
There are two administrative law decisions that discuss the question of whether or not a person was an "employee" for purposes of IRCA. In U.S. v. Jennifer Dittman, D.B.A. Ready Room Restaurant, an administrative law judge referenced analogous case law regarding definitional conclusions of what constitutes an employer-employee relationship in relation to an IRCA, I-9 enforcement matter. U.S. v. Jennifer Dittman, D.B.A. Ready Room Restaurant, 1990 WL 512129 (O.C.A.H.O), 1 OCAHO 195. The Dittman decision states:
For example, it has been held that where one person suffers or permits another to work for him, an employment relationship results, and it is immaterial that the parties have no intention of creating an employment relationship, since the application of the law does not turn upon subjective intent. Forrester v. Roth's I.G.A. Foodliner, Inc., 646 F.2d 413 (5th Cir.1981); Brennan v. Partida, 492 F.2d 707, later app. 613 F.2d 1360 (5th Cir.1974); (interpreting Title 29, United States Code, Section 203(g)). The term "suffer or permit to work" does not require a consciousness and condoning of the employment relationship, because employment is as much determined by circumstances as of consensual agreement. Gulf King Shrimp Co. v. Wirtz, 407 F.2d 508 (5th Cir.1969).
This means that one may be an employer if he or she permits another to work for him or her, even though the employer has not expressly hired or employed him. Walling v. Jacksonville Terminal Co., 148 F.2d 768 (5th Cir.1945). However, the employer must have knowledge or consent to the performance of the work. Fox v. Summit King Mines, Ltd., 143 F.2d 926 (9th Cir.1944).
Dittman, 1990 WL 512129 at *3. The second administrative law decision, In re Investigation of Univ. of South Florida, was rendered in connection with the application IRCA's anti-discrimination provisions, 8 U.S.C. § 1324b. In re Investigation of Univ. of S. Florida, 2000 WL 773107 (O.C.A.H.O), 8 OCAHO 1055. In responding to the university's argument that an individual was not an "employee," the administrative law judge focused on the following factors, among others: ability to control hours and location of work, provision of tools and equipment, and the general exercise of broad authority over the manner and means work is accomplished. In re Univ. of S. Florida, 2000 WL 773107 at *2. Additionally, the decision states that "the employment status of an individual is a factual question, varying with the facts and circumstances of each case." Id. at *3.

23 See: Missouri Chamber of Commerce & Industry, Illegal Immigration stirs debate during special session, Missouri Chamber Direct (Fall 2007) (http://mochamber.com/mx/hm.asp?id=083107immigration) and See: Item 2. Minutes of the MHDC August 17, 2007 Regular Meeting, page 11 of 42 of The Notice of the Regular Meeting of the MHDC, Sept. 21, 2007, Agenda and Book (http://www.mhdc.com/about/commission_meetings/2007_09_21_Regular_Meeting_Book_u1.pdf), when Mr. Ed Martin, Governor Blunt's Chief of Staff stated: "the Department of Economic Development was going to come up with a policy, even if it is legislatively done, that across the board, if illegal workers are used in the state of Missouri you will not receive tax credits."

The State of Missouri has already attempted to "shoot first and ask questions later" in one instance involving immigration enforcement and Department of Economic Development funding. On September 13, 2007, at 7:00 a.m., Missouri Highway Patrolmen arrived at a Missouri business' premises and requested to check the identities of 19 Hispanic employees of a contractor's 180 employees on site. The names were sent to Immigration and Customs Enforcement to verify the status of the workers. The basis for such an inquiry was an anonymous tip from a former employee through a local state legislator. The substance of the complaint was that there are possibly some illegal immigrants working there. According to reports, the business using the contractor received Missouri Department of Economic Development funds to train its own workers, but no state funds are involved with the kiln project. In spite of the attenuated relationship between the state funds and the alleged activities of an independent contractor, the Department immediately began investigating whether or not the training funds could be in jeopardy if unauthorized workers were employed by the contractor for work on the business' premises. On October 29, 2007, it was reported that Immigration and Customs Enforcement did not investigate this matter further because there wasn't enough evidence of wrongdoing. The damage, however, has been done to the reputations of the Missouri business and the subcontractor. If one does an Internet search of either company's name and the word "illegal," dozens of hits surface that repeat the allegations. One has to search and read a little closer to find that neither employer was prosecuted by the Federal government for violations of Federal law. See: Ann Pierceall, Troopers Checking on Status of Contracted Workers at Hannibal Plant, Quincy Herald Whig (Sept. 13, 2007) Link: http://www.whig.com/289818622230489.php; Associated Press, State Investigating Whether Construction Workers are Illegal Immigrants, St. Louis Post-Dispatch (Sept. 13, 2007) Link: http://www.stltoday.com/stltoday/news/stories.nsf/missouristatenews/story/3BA08EC049F5BA8886257355000FFFC9?OpenDocument; Rodney Hart, State Troopers Detain Contracted Workers at Hannibal Plant, Quincy Herald Whig (Sept. 12, 2007) Link: http://www.whig.com/358120106054601.php; Danny Henley, MSHP: One Illegal Immigrant Found Working at Continental Cement, The Hannibal Courier-Post (Sept. 14, 2007); and Christopher Leonard, Immigration Plan Worries Some Businesses, Associated Press (Oct. 29, 2007) (http://biz.yahoo.com/ap/071029/mo_illegal_immigration_business.html?.v=1).

24 Texas statute: H.B. No. 1196 (2007) (http://www.capitol.state.tx.us/BillLookup/Text.aspx?LegSess=80R&Bill=HB1196 );
Pennsylvania statute: H.B. No. 2319 (2005-06) (http://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?syear=2005&sind=0&body=H&type=B&BN=2319).

25 INA 101(a)(3) The term "alien" means any person not a citizen or national of the United States. For purposes of discussion, an alien will be referred to as a person.

26 8 U.S.C. 1324a.

27 8 U.S.C. 1324a(a)(1)(B)(i).

28 8 U.S.C. 1324a(a)(2).

29 8 U.S.C. 1324a(a)(4).

30 8 U.S.C. 1324a(b)(1)(A).

31 8 U.S.C. 1324a(b)(2).

32 8 U.S.C. 1324a(b)(1)(A)(ii).

33 8 U.S.C. 1324a(b)(5) (emphasis added).

34 8 C.F.R. § 274a.1(f) (emphasis added).

35 8 C.F.R. § 274a.1(g) (emphasis added).

36 8 C.F.R. § 274a.1(j).

37 8 C.F.R. § 274a.1(l)(1).

38 8 C.F.R. § 274a.1(l)(2) (emphasis added).

39 8 U.S.C. 1324b(a)(1).

40 8 U.S.C. 1324b(a)(6) (emphasis added).


About The Author

Anthony E. Weigel is an immigration attorney at BlackwellSanders LLP, in Kansas City, MO. His practice focuses on immigration law and employer compliance with immigration laws.


The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.


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