Contributed by the American Subcontractors Association(ASA)

Following Congress’ failure to reach an agreement over comprehensive immigration reform legislation, state legislatures across the country have begun to take matters into their own hands. As this trend emerges, overreaching state laws face more legal challenges.

For example, starting in 2008, employers in Tennessee that knowingly employ or recruit illegal aliens could have their business licenses suspended under a new law signed by Gov. Phil Bredesen (D) June 26, 2007. Effective Jan 1, 2008, the measure (H.B. 729) will apply to all workers for whom a W-2 is filed and require any state or local government agency, officer, employee or entity that has reason to believe a violation has occurred to file a complaint with the department of labor and workforce development, which investigates such complaints. First offenses will result in a suspension of the company’s business license until it can prove it is no longer in violation of the law. Subsequent offenses within a three-year period will result in a one-year suspension. The new law provides a safe harbor for businesses that follow federal I-9 procedures and receive false documents from an employee. Employers that use the Federal Basic Pilot program to verify employment eligibility are also protected from license suspension.

On July 2, Arizona Gov. Janet Napolitano (D) signed into law a measure that will impose harsh penalties on Arizona employers for knowingly or intentionally hiring an illegal alien. The Fair and Legal Employment Act (H.B. 2779) stipulates that any company that knowingly or intentionally hires an illegal alien after Jan. 1, 2008, could face revocation of its business license. Under the terms of the law, employers would be required to use the federal Employment Eligibility Verification Systems (EEVS) -- which is currently a voluntary service for employers – to verify employee eligibility. The state attorney general and county attorneys would be charged with investigating and prosecuting complaints regarding illegal workers. After a complaint was found to have merit, local law enforcement and federal authorities would be notified and a lawsuit would be brought against the employer. The penalties for a first infraction of knowingly or intentionally hiring an illegal worker would include paying a fine, temporary suspension of a company’s business license, and a multi-year probation sentence during which any additional violation would result in having the license permanently revoked.

Less than two weeks later, members of the coalition Arizona Employers for Immigration Reform (AZEIR) and the Arizona Contractors Association (ACA) filed a lawsuit in the U.S. District Court for the District of Arizona challenging the constitutionality of the new law. AZEIR’s complaint contends that the new law violates the U.S. and Arizona Constitutions and is pre-empted by federal law, deprives state businesses of property without due process, and improperly regulates and interferes with state commerce. AZEIR and ACA are seeking “immediate injunctive relief” and a ruling that the law be declared unconstitutional.

In addition, new laws in Colorado and Oklahoma also require employers to use the previously voluntary federal Basic Pilot Program to determine work eligibility. A new Arkansas law prohibits state agencies from working with businesses that employ illegal immigrants and requires contractors to certify their employees’ legality. And a new Georgia law prohibits compensation paid to an illegal alien to be classified as a business expense.

But not all laws are designed to step up employer compliance with or enforcement of immigration laws. On Aug. 13, Illinois Gov. Rod Blagojevich (D) signed a new law (P.A. 095-0138) that prohibits employers from using the federal Basic Pilot Program (except if required by federal law), until the databases of both the U.S. Department of Homeland Security (DHS) and the Social Security Administration (SSA) are able to make a determination on 99 percent of the tentative nonconfirmation notices issued to employers within three days. This law addresses a longstanding concern of employers that use EEVS, namely that they invest resources and weeks of training into employees whose status in the system is indeterminate only to have the final EEVS result require them to terminate the employees. The law also contains several provisions outlining employer requirements for participation in a federal EEVS program should the benchmarks be met or if its use is required by federal law.

In total, more than 1,400 immigration-related bills were introduced in the state legislatures during 2007. Twenty-six of the laws related to employment. Experts predict that the state legislatures will be even more active on the issue in 2008.

In the meantime, in a precedent-setting legal decision that could shape the future of the nation’s immigration debate, a U.S. District Court struck down a Hazelton, Pa., ordinance that sought to penalize businesses that hire undocumented immigrant workers, ruling it unconstitutional. On July 26, U.S. District Judge James Munley of Scranton, Pa., overturned the Illegal Immigration Relief Act, ruling that immigration policy is the purview of the federal government and that Hazelton’s actions preempted federal laws (specifically the federal Immigration Reform and Control Act of 1986) and violated the plaintiff’s due-process rights and those of others in the community. The ordinance sought to impose hard fines on landlords who rent to immigrants and deny business permits to companies that employ them. The ruling, which most likely will be appealed, calls into question the legality of similar laws and ordinances passed around the country.