ARIZONA STATE SENATE
Forty-eighth Legislature, Second Regular Session
FINAL AMENDED
FACT SHEET FOR H.B. 2745/S.B. 1374
employer sanctions
Purpose
An emergency measure that limits the prohibitions against knowingly or intentionally employing an unauthorized alien to employees hired after December 31, 2007, and excludes independent contractors from the definition of employee. Requires the Arizona Attorney General (AG) to establish a Voluntary Employer Enhanced Compliance Program. Establishes requirements pertaining to employers that pay hourly wages or salary by cash. Prohibits, after September 30, 2008, an agency or political subdivision from issuing a license to an individual who does not establish the individual’s legal presence and a government entity from awarding a contract to any contractor or subcontractor that fails to use E-Verify. Establishes the crime of knowingly accepting the identity of another person or entity and expands the definitions of identity theft and trafficking in the identity of another person or entity.
Background
Federal Immigration Reform and Control Act
The federal Immigration Reform and Control Act (IRCA) makes United States (U.S.) employers responsible for verifying the identity and work authorization of all individuals, including U.S. citizens, hired after November 6, 1986. IRCA provides civil penalties for any person who knowingly hires, or recruits or refers for a fee, for employment in the U.S. an individual who is not authorized to work in the U.S. (unauthorized alien), or who knowingly continues to employ an unauthorized alien. A person or entity that establishes that it has complied in good faith with the verification requirements with respect to hiring, recruiting or referral for employment of an alien in the U.S. has established an affirmative defense that the person or entity has not violated the provisions of IRCA relating to knowingly hiring an unauthorized alien. Federal law preempts any state or local law imposing civil or criminal sanctions, other than through licensing and similar laws, upon those who employ unauthorized aliens. (8 U.S.C. 1324a(a)).
Employers are required to complete Employment Eligibility Verification forms (I-9 Forms) for each employee when hired, on which the employer attests under penalty of perjury that it has verified, by examining the required documents, that the individual is not an unauthorized alien. A person or entity complies with the requirement if the document reasonably appears on its face to be genuine. I-9 Forms must be retained for three years after the date the person begins work or one year after the person’s employment is terminated, whichever is later. A person who hires an individual without complying with the I-9 Form requirements is subject to a civil penalty of between $100 and $1,000 for each violation.
Federal Social Security Number Verification Service
The Social Security Number Verification Service (SSNVS) is offered by the Social Security Administration’s (SSA) Business Services Online. It allows employers and certain third-party submitters who are registered users to verify the names and social security numbers (SSNs) of employees against SSA records. An employer can verify up to 10 names and SSNs online to receive immediate results or upload electronic files of up to 250,000 names and SSNs and receive results the next government business day. SSA verifies SSNs and names solely to ensure that the records of current or former employees are correct for tax purposes.
Legal Arizona Workers Act
In 2007, the Legislature passed and Governor Janet Napolitano signed into law the Legal Arizona Workers Act, which prohibits employers from knowingly or intentionally employing unauthorized aliens and establishes penalties for employers in violation beginning January 1, 2008. Penalties include requiring the employer to terminate the employment of all unauthorized aliens, a probationary period during which the employer must file reports with the county attorney regarding new employees, and possible license suspension for a first violation and permanent revocation for a second violation. Additionally, beginning January 1, 2008, all Arizona employers must use E-Verify (formerly the Basic Pilot/Employment Verification Program) to verify the employment eligibility of new hires. Proof of verifying the employment authorization of an employee through E-Verify creates a rebuttable presumption that an employer did not intentionally or knowingly employ an unauthorized alien.
Identity Theft
A person commits taking the identity of another person or entity (identity theft), a class 4 felony, if the person knowingly takes, purchases, manufactures, records, possesses or uses any personal identifying information or entity identifying information of another real or fictitious person or entity, without consent, with the intent to obtain or use the other person’s or entity’s identity for any unlawful purpose or to cause loss to a person or entity (A.R.S. § 13-2008).
A person commits aggravated identity theft, a class 3 felony, if the person knowingly takes, purchases, manufactures, records, possesses or uses any personal identifying information or entity identifying information of either: 1) three or more real or fictitious persons or entities, without consent, with the intent to obtain or use the identities for any unlawful purpose or to cause loss to the persons or entities; 2) another real or fictitious person or entity, without consent, with the intent to obtain or use the identity for any unlawful purpose and causes another person or entity to suffer an economic loss of $3,000 or more; or 3) another real or fictitious person with the intent to obtain employment (A.R.S. § 13-2009).
A person commits trafficking in the identity of another person or entity, a class 2 felony, if the person knowingly sells, transfers or transmits any personal identifying information or entity identifying information of another real or fictitious person or entity, without consent, for any unlawful purpose or to cause loss to the person or entity (A.R.S. § 13-2010).
According to the Joint Legislative Budget Committee, the fiscal impact of this legislation cannot be determined with certainty. The primary direct impact will be the additional workload for state agencies, boards and commissions, and city and county entities, associated with verifying the legal presence of license holders. H.B. 2745/S.B. 1374 may also result in an increase in incarcerations due to a potential increase in ID theft convictions for both traffickers and possessors of false IDs. The number of potential cash paying employers that will be found in violation of this legislation cannot be determined in advance, but any penalties collected as a result of their successful adjudication are equally appropriated to the Department of Education (ADE) and the Department of Health Services (DHS), therefore resulting in an unknown amount of additional revenue to the state. According to the AG, the bill will increase caseloads and the need for additional attorneys, investigators and support staff. With an estimated 10,000 employers participating in the Voluntary Enhanced Employer Compliance Program, the AG estimates its costs to be $296,700; the level of participation, however, cannot be predicted in advance with any certainty.
Provisions
Identity Theft
1. Expands the definition of “identity theft” to include knowingly taking, purchasing, manufacturing, recording, possessing or using any personal identifying information or entity identifying information of another real or fictitious person or entity, without consent, with the intent to obtain or continue employment.
2. Establishes that a person commits knowingly accepting the identity of another person or entity if the person, in hiring an employee, knowingly does both of the following:
a) accepts any personal identifying information or entity identifying information of another person or entity from an individual and knows that the individual is not the actual person or entity identified by that information.
b) uses that identity information to determine whether the individual who presented that identity information has the legal right or authorization under federal law to work in the U.S. as described and determined under IRCA.
3. Classifies knowingly accepting the identity of another person as a class 4 felony and requires a peace officer in any jurisdiction in which an element of an offense is committed or a result of an offense occurs, or the person or entity whose identity is accepted resides or is located, to take a report.
4. Expands the definition of trafficking in the identity of another person to include knowingly selling, transferring or transmitting any personal identifying information or entity identifying information of another real or fictitious person or entity, without consent, to allow another person to obtain or continue employment.
Employer Sanctions
5. Defines “employ” as hiring an employee after December 31, 2007.
6. Modifies the definition of “employee” to mean any person who provides services or labor for an employer in Arizona for wages or other remuneration, not including an independent contractor, as opposed to any person who performs employment services for an employer pursuant to an employment relationship between the employee and employer.
7. Modifies the definition of “employer” to mean any individual or type of organization that transacts business in Arizona, that has a license issued by an agency in Arizona and that employs one or more employees in Arizona, as opposed to any individual or type of organization that transacts business in Arizona, that has a license issued by an agency in Arizona and that employs one or more individuals who perform employment services in Arizona. Stipulates that, in the case of an independent contractor, employer means the independent contractor, not the person or organization that uses the contract labor.
8. Defines “independent contractor” as any individual or entity that carries on an independent business, that contracts to do a piece of work according to the individual’s or entity’s own means and methods and that is subject to control only as to results. Whether an individual or entity is an independent contractor is determined on a case-by-case basis through various factors, including whether the individual or entity:
a) supplies the tools or materials.
b) makes services available to the general public.
c) works or may work for a number of clients at the same time.
d) has an opportunity for profit or loss as a result of labor or service provided.
e) invests in the facilities for work.
f) directs the order or sequence in which the work is completed.
g) determines the hours when work is completed.
9. Stipulates that an individual who performs services and is not an employee according to the provisions of the Internal Revenue Code (IRC) pertaining to the treatment of real estate agents and direct sellers is an independent contractor for the purposes of the laws pertaining to employer sanctions. Section 3508 of the IRC states that in the case of services performed as a qualified real estate agent or as a direct seller, the individual performing such services must not be treated as an employee and the person for whom such services are performed must not be treated as an employer.
10. Defines “Social Security Number Verification Service” as the program administered by the SSA or any of its successor programs.
11. Renames “Basic Pilot Program” as “E-Verify Program” and modifies the definition to mean the employment verification pilot program as jointly administered by the U.S. Department of Homeland Security (DHS) and the SSA or any of its successor programs, as opposed to the basic employment verification pilot program as jointly administered by the U.S. DHS and SSA or its successor program.
12. Separates the provisions regarding intentionally employing an unauthorized alien and knowingly employing an unauthorized alien into two different sections of statute.
13. Stipulates that if, when an employer uses a contract, subcontract or other independent contractor agreement to obtain the labor of an alien in this state, the employer knowingly or intentionally contracts with an unauthorized alien or with a person who employs or contracts with an unauthorized alien to perform the labor, the employer violates the prohibitions against knowingly or intentionally employing an unauthorized alien.
14. Requires the AG to prescribe complaint forms for a person to allege a violation of intentionally or knowingly employing an unauthorized alien. The complainant may not be required to list the complainant’s SSN or to have the complaint form notarized.
15. Requires the AG or county attorney to investigate a complaint that an employer allegedly intentionally or knowingly employs an unauthorized alien if the complaint is submitted on a prescribed complaint form.
16. Permits the AG or county attorney to investigate a complaint that is not submitted on a prescribed complaint form.
17. Permits the filing of anonymous complaints that are not submitted on a prescribed complaint form.
18. Prohibits the AG or county attorney from investigating complaints that are based solely on race, color or national origin.
19. Requires a complaint that is submitted to a county attorney to be submitted to the county attorney in the county in which the alleged unauthorized alien is or was employed.
20. Permits the county sheriff or any other local law enforcement agency to assist in investigating a complaint.
21. Requires the AG or county attorney, after determining by investigation that a complaint is not false and frivolous, as opposed to only frivolous, to:
a) notify the U.S. Immigration and Customs Enforcement and the local law enforcement of the unauthorized alien.
b) notify the appropriate county attorney to bring an action if the complaint was originally filed with the AG.
22. Requires the county attorney in the county where the unauthorized alien employee is or was employed by the employer, as opposed to in the county where the unauthorized alien employee is employed, to bring an action for a violation against an employer.
23. Permits a second violation to be based only on an unauthorized alien employee who is or was employed by the employer after an action has already been brought for a violation, as opposed to an unauthorized alien employee who is employed after an action already has been brought.
24. Requires the probationary period that an employer is ordered to for a first violation of knowingly or intentionally employing an unauthorized alien to be for the business location where the unauthorized alien performed work.
25. Requires the quarterly reports that an employer on probation files to be in the same form as new hire reports to the Department of Economic Security (DES) and related to employees hired by the employer at the business location, as opposed to the specific location, where the unauthorized alien performed work.
26. Specifies that the signed sworn affidavit that an employer files with the county attorney for a first violation must state that the employer has terminated the employment of all unauthorized aliens in Arizona, as opposed to all unauthorized aliens, and that the employer will not intentionally or knowingly employ an unauthorized alien in Arizona, as opposed to any unauthorized alien.
27. Requires the court, for a first intentional violation, to order the appropriate agencies to suspend all subject licenses that are held by the employer for failure to file a signed sworn affidavit with the county attorney within three business days after the order regarding the affidavit is issued, as already required for a first knowing violation. These licenses must remain suspended until the affidavit is filed.
28. Specifies that:
a) the licenses that are subject to suspension or revocation for a violation are all licenses that are held by the employer specific to the business location where the unauthorized alien performed work, as opposed to all licenses that are held by the employer and that are necessary to operate the employer’s business at the employer’s business location where the unauthorized alien performed work.
b) if the employer does not hold a license specific to the business location where the unauthorized alien performed work, as opposed to if a license is not necessary to operate the employer’s business at the specific location where the unauthorized alien performed work, but a license is necessary to operate the employer’s business in general, the licenses subject to suspension are all licenses that are held by the employer at the employer’s primary place of business.
29. Removes the specifications that a first knowing violation occur in a three-year period and a first intentional violation occur during a five-year period and stipulates that a violation is a:
a) first violation by an employer at a business location if the violation did not occur during a probationary period for that employer’s business location.
b) second violation if the violation occurred during a probationary period for that employer’s business location.
30. Requires the AG to include the business locations that have a first violation in the database that contains the information on the employers that have a first violation.
31. Establishes an affirmative defense that an employer did not knowingly or intentionally employ an unauthorized alien if the employer has complied in good faith with the federal requirements pertaining to employment verification through the completion of I-9 forms, as opposed to federal law pertaining to unfair immigration-related employment practices as currently stipulated. An employer is considered to have complied with the federal requirements, despite an isolated, sporadic or accidental technical or procedural failure, if there is a good faith attempt to comply.
Voluntary Employer Enhanced Compliance Program
32. Requires the AG to establish the Voluntary Employer Enhanced Compliance Program (Program).
33. Prohibits an employer that is on probation for a violation of knowingly or intentionally employing an unauthorized alien from enrolling in the Program.
34. Prohibits a court from considering nonenrollment in the Program as a factor when determining whether to suspend or revoke a license for a violation of knowingly or intentionally employing an unauthorized alien.
35. Requires an employer that desires to enroll in the Program to submit to the AG a signed sworn affidavit that states that the employer agrees to perform the following actions in good faith:
a) verify the employment eligibility of an employee through E-Verify after hiring the employee.
b) verify the accuracy of SSNs, through SSNVS, for any employee who is not verified through E-Verify.
c) provide to the AG or county attorney, in response to a written request, the documents indicating that an employee for whom a complaint has been received was verified through E-Verify or that the accuracy of the employee’s wage report was verified through SSNVS.
36. Requires the employer to submit the necessary information to SSNVS, including the full name, SSN, date of birth and gender for each employee, within 30 days after enrolling in the Program.
37. Requires the employer, on receipt of a failed verification result, to notify the employee of the date on which the employer received the failed result and to instruct the employee to resolve the discrepancy with the SSA within 90 days.
38. Requires the employer and employee to resolve any failed result within 90 days after the employer receives the failed result, except that if it is not resolved within 90 days but the employer and employee continue to actively and consistently work toward resolving the failed result with the SSA, the 90-day period does not apply as long as the employer and employee have provided documented proof of these ongoing efforts to the AG.
39. Requires the employer to verify the accuracy of SSNs and resolve any failed verification results in a consistent manner for all employees.
40. Stipulates that an employer that is enrolled in the Program does not commit a violation of knowingly or intentionally employing an unauthorized alien, regarding an employee named in a complaint, if the employer has:
a) in good faith verified the employment eligibility or the accuracy of the SSN of the employee named in the complaint as required.
b) provided the AG or county attorney with the required documents indicating that the employer verified the employee named in the complaint.
41. Requires the AG to maintain and make available on the AG’s website a list of employers enrolled in the Program.
42. Requires the AG to develop a form of recognition that an employer may display to the general public for enrolling in the Program.
43. Requires the AG to terminate an employer’s enrollment in the Program if the employer does not fully comply with the requirements.
44. Permits an employer to voluntarily withdraw from the Program at any time by notifying the AG. Beginning on the date of termination or withdrawal, the employer no longer receives the established protections and must immediately remove any authorized recognition from public display.
45. Terminates the Program on July 1, 2018.
E-Verify
46. Defines “economic development incentive” as any grant, loan or performance-based incentive from any government entity that is awarded after September 30, 2008, not including any tax provision under the titles of statute pertaining to taxation and taxation of income.
47. Defines “government entity” as the State of Arizona and any political subdivision of Arizona that receives and uses tax revenues.
48. Defines “contract” as all types of government entity agreements, regardless of what they may be called, for procurement of services in Arizona.
49. Defines “contractor” as any person who has a contract with a government entity.
50. Defines “services” as the furnishing of labor, time or effort in Arizona by a contractor or subcontractor, including construction or maintenance of any structure, building or transportation facility or improvement of real property.
51. Defines “subcontractor” as a person who contracts to perform work or render service to a contractor or to another subcontractor as a part of a contract with a government entity.
52. Requires an employer to provide proof of registration with and participation in E-Verify in order to receive an economic development incentive from a government entity. A government entity that determines that an employer is not in compliance must notify the employer by certified mail of the determination and of the employer’s right to appeal. On a final determination of noncompliance, the employer must repay all monies received as an economic development incentive to the government entity within 30 days.
53. Prohibits, after September 30, 2008, a government entity from awarding a contract to any contractor or subcontractor that fails to use E-Verify to verify the employment eligibility of new hires as required.
54. Requires every government entity to ensure that each government entity contractor and subcontractor complies with the federal immigration laws and regulations that relate to their employees and uses E-Verify as required.
55. Requires each government entity contract to include:
a) that each contractor and subcontractor warrants its compliance with all federal immigration laws and regulations relating to its employees and the requirements pertaining to the use of E-Verify.
b) that a breach of a warranty is deemed a material breach of the contract subject to penalties up to and including termination of the contract.
c) that the government entity retains the right to inspect the papers of any contractor or subcontractor employee who works on the contract to ensure compliance with the warranty.
56. Requires the AG to request from U.S. DHS every three months and make available on the AG’s website a list of Arizona employers that are registered with E-Verify.
Cash-Paying Employers
57. Requires an employer that has two or more employees and pays hourly wages or salary by cash to any employee to comply with, and permits the AG to bring an action in superior court for a violation of:
a) the income tax withholding laws.
b) the laws requiring employers to report new hires to DES.
c) the employment security laws.
d) the workers’ compensation laws.
58. Requires the court, on the finding of a violation, to order the employer to pay a civil penalty equal to the greater of triple the amount of all withholdings, payments, contributions or premiums that the employer failed to remit or $5,000 for each employee for whom a violation was committed. This civil penalty is in addition to any other penalty permitted by law.
59. Requires the court to transmit the monies collected from civil penalties to the state Treasurer for deposit in the state General Fund. The monies must be equally appropriated to ADE and DHS for the purposes of offsetting increased costs to Arizona by unauthorized aliens.
Licensing Eligibility
60. Defines “agency” as any agency, department, board or commission of this state or any political subdivision of this state that issues a license for the purposes of operating a business in Arizona.
61. Defines “license” as any agency permit, certificate, approval, registration, charter or similar form of authorization that is required by law and that is issued by any agency for the purposes of operating a business in Arizona.
62. Prohibits, after September 30, 2008, an agency or political subdivision from issuing a license to an individual who does not present any of the following documents indicating that the individual’s presence in the U.S. is authorized by federal law:
a) an Arizona driver license issued after 1996 or an Arizona nonoperating identification license.
b) a driver license issued by a state that verifies lawful presence in the U.S.
c) a birth certificate or delayed birth certificate issued in any state, territory or possession of the U.S.
d) a U.S. certificate of birth abroad.
e) a U.S. passport.
f) a foreign passport with a U.S. visa.
g) an I-94 form with a photograph.
h) a U.S. Citizenship and Immigration Services Employment Authorization Document or Refugee Travel Document.
i) a U.S. Certificate of Naturalization.
j) a U.S. Certificate of Citizenship.
k) a tribal Certificate of Indian Blood.
l) a tribal or Bureau of Indian Affairs affidavit of birth.
63. Exempts an individual from the licensing requirements if:
a) the individual is a citizen of a foreign country or, at the time of the application, the individual resides in a foreign country.
b) the benefits that are related to the license do not require the individual to be present in the U.S. in order to receive those benefits.
Miscellaneous
64. Provides for the severability of the provisions.
65. Makes technical and conforming changes.
66. Became effective on May 1, 2008.
Amendments to S.B. 1374 Adopted by the Appropriations Committee
· Adopted the strike everything amendment.
Amendments to S.B. 1374 Adopted by Committee of the Whole
1. Modifies the factors that must be considered when determining if a person is an independent contractor.
2. Replaces the prohibition against the awarding of a contract to a contractor or subcontractor that fails to register with and participate in E-Verify with a prohibition against awarding a contract to a contractor or subcontractor that fails to verify the employment eligibility of any new employee through E-Verify.
3. Requires government entities to ensure that their contractors and subcontractors comply with federal immigration law and use E-Verify and establishes provisions that must be included in each government entity contract.
4. Defines the terms “agency” and “license” for purposes of the provisions relating to the issuance of licenses by governmental agencies.
Senate Action on S.B. 1374 House Action on H.B. 2745
CED 2/21/08 W/D GOV 3/4/08 DPA 6-1-1
JUD 2/18/08 W/D 3rd Read 4/1/08 41-16-3
APPROP 3/25/08 DPA/SE 5-3-3-0
(H.B. 2745 was substituted for S.B. 1374 on 3rd Read)
3rdRead 4/28/08 22-4-4
Signed by the Governor 5/1/08
Chapter 152E
Prepared by Senate Research
May 12, 2008
LB/ac