Balch & Bingham

ALABAMA'S IMMIGRATION=20 ACT

On June=20 9, 2011, Gov. Robert Bentley signed The Beason-Hammon = Alabama=20 Taxpayer and Citizen Protection Act (Act 2011-535) = into law,=20 calling the legislation the toughest illegal = immigration law=20 in the nation. At more than 70 pages, the Act is = lengthy=20 and complex. While various provisions of the = bill will=20 be phased in, most of the requirements were set to = take effect=20 September 1, 2011. However, on September 28, = 2011, U.S.=20 District Judge Sharon Blackburn issued an order = enjoining six=20 provisions but allowing the remaining parts of the law = to=20 become effective September 29, 2011. While some = parts of=20 the law might ultimately be blocked by the courts, = most of the=20 provisions relating directly to employers appear = likely to=20 survive these challenges. A summary of the major = provisions in the Act that will have the most direct = impact on=20 Alabama employers is set forth below following a = status update=20 on litigation filed to challenge the constitutionality = of the=20 Act.

Litigation

Three separate = lawsuits=20 filed in federal court were consolidated into one case = by U.S.=20 District Judge Sharon Blackburn in Birmingham. = The suits=20 were filed by the U.S. Department of Justice, the = Southern=20 Poverty Law Center, the ACLU, and several Alabama=20 churches. Following a hearing on the suits = on August 24, 2011, Judge Blackburn temporarily = blocked=20 enforcement of the entire Act pending further = consideration by=20 her. On June 28, 2011, Judge Blackburn issued an = order=20 indefinitely enjoining six of the Act's provisions but = lifting=20 the stay with regard to all of the other provisions of = the=20 Act. The six limited areas that remain stayed = are:

-- Section=20 8: Education
-- Section = 10: =20 Crime for Failure to Carry Alien Registration=20 Document;
-- Section 11: Unauthorized = Aliens=20 Prohibited From Applying for Work;
-- Section = 13: Transportation of Aliens;
-- = Section=20 16: Tax Treatment for Wages Paid to Unauthorized = Aliens;=20 and
-- Section 17: Employment=20 Discrimination.

The federal case = has been=20 appealed; however, except for the above six parts of = the Act,=20 the Act is in force and effect.

Prohibition on Employing = Unauthorized=20 Aliens

The Act prohibits = any=20 employer doing business in the State of Alabama from = hiring or=20 continuing to employ unauthorized aliens in = Alabama. An=20 employer that has "complied in good faith" with the = I-9=20 requirements found in 8 U.S.C. =A7 1324a(b) will have = an=20 affirmative defense that it did not knowingly hire or = employ=20 an unauthorized alien.

E-Verify=20 Mandate

The Act also = requires that=20 all Alabama employers register and use E-Verify no = later than=20 April 1, 2012. For employers doing business (contract, = grant=20 or incentive) with the State, a municipality, or a=20 State-funded entity, the E-Verify mandate takes effect = January=20 1, 2012. The January 1, 2012 date probably applies to = banks=20 that accept SAFE deposits or have other contracts with = the=20 State, a municipality, or a State-funded entity. = Small=20 businesses with 25 or fewer employees will be able to = register=20 to use E-Verify through the Alabama Department of = Homeland=20 Security (ADHS). It remains unclear, however, what the = process=20 will be for utilizing the ADHS E-Verify program or if = it will=20 require that small employers provide ADHS with copies = of their=20 I-9 forms in order to query employees through the=20 system. For purposes of employment, E-Verify = serves as a=20 limited safe harbor under the Act. There is no = similar=20 safe harbor under Federal law.

Penalties for Violations of = the=20 Employment Provisions of the = Act

Penalties for = hiring=20 unauthorized aliens are severe. The penalties = can range=20 from temporary suspension of business licenses and = permits for=20 the first violation to permanent revocation of the = business=20 licenses statewide for multiple violations. = Furthermore,=20 employers that are found to have violated the law will = have to=20 comply with additional reporting requirements for up = to three=20 years after discovery of a violation. The = enforcement=20 provisions in the employment provisions of the Act are = complex=20 and involve various state agencies including the = Attorney=20 General, local district attorneys, the Alabama = Department of=20 Homeland Security, and ultimately, the state=20 courts.

Independent=20 Contractors

The Act generally = does not=20 impose liability on employers for violations committed = by=20 their independent contractors. However, under = Federal=20 law, an employer may face liability for violations of=20 independent contractors if it has actual or = constructive=20 knowledge that the independent contractor's employees = are=20 unauthorized. The Act also exempts "casual = domestic=20 labor performed in a household" from its=20 provisions.

Disallowance of Tax Deductions = (Stayed=20 by Federal Court)

This provision, = now stayed=20 by Federal court order, provided that employers may = not take=20 deductions for wages, salaries or compensation of any = kind=20 paid to an unauthorized alien. If an employer = knowingly claims=20 a tax deduction that is disallowed under this = provision of the=20 Act, the Act imposes a penalty of up to 10 times the = claimed=20 deduction.

Discrimination and Wrongful = Termination=20 Claims (Stayed by Federal = Court)

This provision, = now stayed=20 by Federal court order, made it "a discriminatory = practice"=20 for an employer to refuse to hire or to discharge a = U.S.=20 citizen or authorized alien while retaining an alien = the=20 employer knows or should know is an unauthorized = alien. =20 The U.S. citizen or authorized worker aggrieved by the = "discriminatory practice" could have collected = compensatory=20 damages, costs, and attorney's fees in a state-court = civil=20 action.

Employers who = terminate=20 unauthorized employees in compliance with the Act are = immune=20 from wrongful termination and retaliation claims = arising under=20 Alabama law. This immunity does not apply, however, to = any=20 claim arising under Federal law, including claims of=20 discrimination based on national origin.

Public=20 Contractors

The Act imposes = on all=20 state contractors the same prohibition against hiring = or=20 continuing to employ unauthorized aliens in Alabama = that it=20 applies against private employers. In = addition,=20 state contractors are required to attest to their = compliance=20 by sworn affidavit signed before a notary. State = contractors also have to provide proof of E-Verify = enrollment=20 before a contract, grant or incentive may be=20 awarded.

These same = requirements are=20 applicable to subcontractors on projects paid for by=20 recipients of contracts, grants or incentives from the = state,=20 any political subdivision thereof, or any=20 state-funded-entity. Further, the Act = requires any=20 recipient of state funds, including contract grantees = and=20 incentive recipients, to require an affidavit of = compliance=20 with the Act and proof of E-Verify enrollment from all = business entities or employers with whom it enters = into=20 contracts. The Act allows state authorities and law=20 enforcement to verify compliance with the requirements = imposed=20 on state contractors at any time.

The penalties for = a=20 contractor or subcontractor failing to comply with are = the Act=20 are significant, including loss of state contracts and = possible suspension of business license.

Contracts = With=20 Unlawfully Present Aliens

The Act declares = most=20 contracts entered into by unlawfully present aliens to = be void=20 and unenforceable in Alabama courts if the other party = to the=20 contract had knowledge that the alien was unlawfully = present=20 in the United States and the contract requires "the = alien to=20 remain unlawfully present in the United States for = more than=20 24 hours after the time the contract was entered into = or=20 performance could not reasonably be expected to occur = without=20 such remaining."

State = Employee's=20 Duty to Report

The Act makes it the = obligation=20 of every person working for the State or a political=20 subdivision of the State to report any violation of = the=20 Act. Any person who willfully fails to report = violations=20 may be found guilty of obstructing governmental = operations as=20 defined in Section 13A-10-2 of the Alabama Code.

State = Officials=20 Obligated to Comply with and Enforce the = Act

Any official or = agency of=20 the State or a political subdivision of the State may = be=20 liable in a civil suit substantial for civil penalties = if the=20 official adopts a policy or practice that limits or = restricts=20 the enforcement of the Act.

Registration of=20 Motor Vehicles, Driver's Licenses, Business Licenses; = Business=20 Transactions with the = State.

Section 30 of the = Act=20 prohibits any alien who is unlawfully present in the = United=20 States from entering into any business transaction = with the=20 State or political subdivision of the State. = This=20 prohibition applies to registration of motor vehicles, = renewing motor vehicles license plates, applying for = or=20 renewing driver's licenses or applying for or renewing = a=20 business license. Complying with these = requirements is=20 expected to create significant additional work for = licensing=20 authorities and significantly slow down the licensing=20 process. The Act does not define "business=20 transactions". It should be anticipated that the = interpretation of "business transactions" will be the = subject=20 of future questions and resolution.

Conclusion

The Act imposes = several new=20 obligations on employers doing business in Alabama and = imposes=20 severe penalties for noncompliance. The primary=20 employment provisions of the Act, including the = E-Verify=20 requirement, become effective on January 1, 2012 or = April 1,=20 2012. The other relevant provisions are = effective=20 now.

While some parts = of the law=20 have drawn legal challenges, most of the provisions = relating=20 directly to employers likely are to survive these=20 challenges. Many other questions arising under = the Act=20 are likely to be litigated in the courts for years to=20 come. Despite these uncertainties, some things = are=20 clear: Alabama employers should promptly take steps to = implement an immigration compliance program. Such a = program,=20 which should include the employment eligibility = verification=20 (I-9 Form) process and E-Verify, among other measures, = can=20 help ensure that the employer remains in compliance = with the=20 Act. It is recommended that all employers engage an = outside=20 experienced person to conduct an audit of the = employer's Form=20 I-9s and immigration = practices.