HB2577 - 472R - Senate Fact Sheet

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

FACT SHEET FOR H.B. 2577

~~illegal aliens; employment; verification~~

(NOW: immigration policy; forgery; employment; licensing)

Purpose

Enacts the Fair and Legal Employment Act, which allows state agencies or political subdivisions of the state to investigate whether a business employs an unauthorized worker. Subjects employers who violate employment practice requirements to civil penalties. Requires the Arizona Department of Administration to verify the U.S. work authorization of every state employee through the Basic Pilot Program. Appropriates $100,000 and one FTE position from the state General Fund in FY 2006-2007 to the Ombudsman-Citizens Aide (OCA) for the purpose of the Immigration OCA and makes various other changes to state law regarding the employment of unauthorized workers.

Background

Federal Immigration Reform and Control Act

I-9 Forms and Penalties

The federal Immigration Reform and Control Act makes all United States employers responsible for verifying the identity and work authorization of all individuals, including United States citizens, hired after November 6, 1986. To implement this law, employers are required to complete Employment Eligibility Verification forms (I-9 Form) for each employee when hired.

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. Employers are required to make the I-9 Form available for inspection to an officer of the Bureau of Immigration and Customs Enforcement, the Department of Labor and/or the Justice Department’s Office of Special Counsel for Unfair Immigration-Related Employment Practices.

The federal Immigration Reform and Control Act provides civil penalties for any person who knowingly hires an individual not authorized to work in the United States (unauthorized alien) or who continues to employ an unauthorized alien. For a first offense, the civil penalty is between $250 and $2,000 for each unauthorized alien. For a second offense, the civil penalty is between $2,000 and $5,000 for each unauthorized alien, and for third or subsequent offenses, the civil penalty is between $3,000 and $10,000 for each unauthorized alien. 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.

Basic Pilot Employment Verification Program

The U.S. Citizenship and Immigration Services office administers the Systematic Alien Verification for Entitlements (SAVE) Program. The SAVE Program is responsible for administering programs involving customer access to information contained in the Verification Information System database. This database is a nationally accessible database of selected immigration status information. The SAVE Program, together with the Social Security Administration, administers the Basic Pilot Employment Verification Program (Basic Pilot Program), which allows employers to confirm the employment eligibility of all newly hired employees. The Basic Pilot Program involves verification checks of Social Security Administration and Department of Homeland Security databases by using an automated system to verify employment authorization. The system uses Social Security Numbers (SSNs), alien registration numbers and I-94 numbers (Arrival/Departure Numbers) to perform the verification checks. As of December 2004, the Basic Pilot Program has been available to all 50 states and it is scheduled to end in November 2008.

Employers must register and complete a Memorandum of Understanding and a web-based tutorial for participation in the Basic Pilot Program. Prior to using the Basic Pilot system, employers are required to post the notice provided by the Department of Homeland Security indicating the employer’s participation in the Basic Pilot Program and the antidiscrimination notice issued by the Office of Special Counsel for Immigration-Related Unfair Employment Practices of the Department of Justice in an area that is clearly visible to prospective employees. An I-9 Form must be completed before the employer initiates a verification inquiry, and the employer is required to make the verification inquiries within three business days of hire. Employers are prohibited from using the system to prescreen applicants for employment.

According to the Joint Legislative Budget Committee fiscal note for H.B. 2577, the bill’s fiscal impact on state government cannot be determined with certainty. The bill includes a $100,000 appropriation from the state General Fund to the OCA for the creation of an Immigration OCA. There is a potential positive fiscal impact to the state General Fund due to the requirement that the Attorney General order a cease and desist order to employers that are employing unauthorized workers and, if the employer fails to comply with the order, the employer is subject to a civil penalty of $5,000. There is a potential positive fiscal impact to the state General Fund due to the assessment of penalties against employers who violate employment practice requirements, of which 50 percent are deposited into the state General Fund.

There is also a potential negative fiscal impact related to increased caseloads for prosecution of employers who knowingly hire unauthorized workers. However, H.B. 2577 could have broader consequences to both state revenues and expenditures due to the effect the bill could have on illegal immigration, which cannot be determined in advance.

Provisions

Employment Eligibility Document Forgery

1. States a person commits forgery if, with intent to defraud, the person falsely makes or alters a written instrument that purports to be a document that fulfills the requirements for establishing identity or eligibility to work in the United States and that is used to obtain employment in Arizona by a person who is not authorized to work in the United States.

2. Makes employment eligibility document forgery a class 3 felony.

3. Includes damages incurred by any employer who relied on a forged instrument in hiring or employing a person who was not authorized to work in the United States in the restitution order, if the court orders restitution for an employment eligibility document forgery violation. Damages include the employer’s costs, attorney fees and expenses.

Social Security Numbers

4. Requires an employer to discharge an employee if the employer discovers that the employee provided an invalid SSN to the employer unless the employee provides an accurate SSN or a legal and valid federal or state identification document to the employer within ten business days of receiving notice that the initial number was invalid.

5. States an employer is not required to discharge an employee for providing an invalid SSN if an error occurred when a valid SSN was processed by the employer.

Investigation of Employment of Unauthorized Workers

Cease and Desist Orders

6. Requires, beginning January 1, 2007, an agency, department, board or commission of Arizona or any political subdivision of Arizona (Agency) to notify the Attorney General that the Agency has determined, after an investigation that is initiated by the Agency or by a private party’s written complaint to the Agency, that a person who operates an Arizona business or enterprise employs an unauthorized worker.

7. Requires the Attorney General after receiving notice from an Agency that a business employs an unauthorized worker to immediately:

a) order the person to cease and desist from employing the unauthorized worker and to discharge for cause other unauthorized workers who are employed by the person in Arizona.

b) notify the U. S. Immigration and Customs Enforcement of the unauthorized worker.

8. Requires the Attorney General to confirm the employer received the cease and desist order through an appropriate method.

9. Requires the person to comply with the cease and desist order within ten business days after the Attorney General confirms that the person received the order, unless the person has good cause to believe that the determination was an error.

10. Allows the Attorney General to assess a civil penalty of $5,000 against any person who fails to comply with a cease and desist order within ten business days.

11. Allows proof of the following circumstances, unless satisfactorily explained, to give rise to the inference that an employer knowingly employed an unauthorized worker:

a) the employer pays the employee with cash rather than by check or automatic deposit.

b) the employer uses the services of a person reasonably known to be violating organized crime, fraud and terrorism statutes or to be acting in concert with others who are violating organized crime, fraud and terrorism statutes.

c) the employer violates the minimum wage provisions of the federal Fair Labor Standards Act.

d) the employer accepts a consular identification card that is issued by a foreign government as a form of identification when determining the employee’s identity.

12. Allows the Agency or the Attorney General to bring a civil cause of action to have a person’s license suspended or revoked if the person fails to comply with a cease and desist order.

13. Requires the court to suspend or revoke a person’s license based on the severity of the offense.

Unlawful Employment Practices

14. Requires all employers, regardless of whether they pay their employees by cash, check or automatic deposit, to make unemployment insurance (UI) compensation contributions, secure workers’ compensation benefits for their employees and make state income tax withholdings, as required by state law.

15. Requires an enforcement agency to coordinate with the Department of Economic Security, the Industrial Commission and the Department of Revenue to investigate employers that fail to make UI contributions, secure workers’ compensation and make state income tax withholdings.

16. Stipulates, if an enforcement agency determines sufficient evidence exists that an employer has knowingly failed to comply with the UI contribution, workers’ compensation and income tax withholding requirements, the following procedure for the first violation during a one-year period applies:

a) requires the enforcement agency to mail a notice by certified mail of the employer’s violation.

b) allows the employer to contest the determination within 30 days of receipt of the notice and requires the employer to provide supporting evidence to the enforcement agency that the employer did not violate the employment practices requirements.

c) requires the enforcement agency to evaluate the evidence and issue a final determination by certified mail to the employer.

d) subjects the employer to a civil penalty of $2,000 per employee for which the employer knowingly failed to comply with the employment practices requirements if the employer does not contest an original determination or the enforcement agency has affirmed the original determination. The civil penalty cannot exceed $10,000.

e) an employer that is assessed a civil penalty is also subject to an additional penalty in an amount equal to the amount of revenue, including interest, that was lost to the state because of the violation of the employment practices requirements that is deposited into the state General Fund.

17. Specifies the following procedure for a second violation of the employment practices requirements during a one-year period:

a) the second violation is a class 1 misdemeanor.

b) on conviction, allows a court to order the employer’s license to be suspended.

c) on conviction, requires the court to order the employer pay an additional assessment of $4,000 for each employee for which the employer knowingly failed to comply with the employment practices requirements.

d) on conviction, the court is required to order the employer to pay an amount equal to two times the amount of revenue, including interest, that was lost to the state because of a violation of the employment practices requirements, which is deposited into the state General Fund.

18. Specifies the following procedure for a third violation of the employment practices requirements during a one-year period:

a) the third violation is a class 1 misdemeanor and requires the court to sentence the employer to serve six months in jail, the maximum as allowed by law.

b) on conviction, the court may order that the employer’s license be suspended or revoked.

c) on conviction, the court is required to order the employer to pay an additional assessment of $6,000 per employee for which the employer knowingly failed to comply with the employment practices requirements.

d) on conviction, requires the court to order the employer to pay an amount that is equal to three times the amount of revenue, including interest, that was lost as a result of the violation of the employment practices requirements, which is deposited into the state General Fund.

e) requires the enforcement agency to record the judgment of the court as a lien against the employer.

19. Prohibits law enforcement authorities from providing any incentives to law enforcement officers for investigating alleged violations of the employment practices requirements.

20. States the penalties for a violation are in addition to any other penalties that may be imposed by law.

21. Requires 50 percent of a civil penalty or an additional assessment collected to be deposited into the state General Fund and the remaining 50 percent to be transmitted to the Attorney General, county attorney or the city or town attorney that was the first enforcement agency that initiated the first investigation that brought forth the action.

I-9 Forms

22. Requires all employers to complete and retain I-9 Forms for all employees as prescribed by federal law.

23. Requires the Attorney General to notify the U.S. Citizenship and Immigration Services if the Attorney General determines an employer has failed to complete and retain I-9 Forms as required by federal law.

Affirmations by Licensees and Licensee Audits

24. Requires an applicant for a license from an agency or political subdivision of the state to provide a signed affirmation that the applicant has complied with all federal and state laws regarding the authorization for employment in the U.S. of every employee who is employed by the applicant.

25. Prohibits an agency or a political subdivision from issuing a license to any applicant who fails to submit a signed affirmation.

26. Requires, beginning January 1, 2007, each agency and political subdivision of the state that issues licenses to annually conduct random audits of up to five percent of all persons who have been issued a license to determine whether the person knowingly employs any unauthorized workers.

27. Requires an audit to be conducted by one agency or political subdivision at a time.

28. Requires the agency or political subdivision to review the following as part of an audit:

a) the person’s signed affirmation.

b) the person’s compliance with federal and state laws regarding lawful employment.

c) the completed I-9 Forms of the employer.

29. Allows an agency or political subdivision to verify the employment authorization of the person’s employees through the Basic Pilot Program as part of an audit.

30. Requires an agency or political subdivision to notify the Attorney General of a determination that a person knowingly employs an unauthorized worker.

31. Requires the Attorney General to immediately order a person to cease and desist from employing the unauthorized worker and to discharge for cause other unauthorized workers after receiving notification from an agency or political subdivision.

32. Requires the Attorney General to confirm the employer received the cease and desist order through an appropriate method.

33. Requires a person to comply with the cease and desist order within ten business days after the Attorney General has confirmed the person has received the order, unless the person has good cause to believe that the determination was an error.

34. Requires the Attorney General to notify the U.S. Immigration and Customs Enforcement of the unauthorized worker.

35. States the following may give rise to the inference that an employer knowingly employed an unauthorized worker:

a) the employer pays the employee with cash rather than by check or automatic deposit.

c) the employer violates the minimum wage provisions of the federal Fair Labor Standards Act.

d) the employer accepts a consular identification card that is issued by a foreign government as a form of identification when determining the employee’s identity.

36. Allows the Attorney General to assess a civil penalty of $5,000 against any person who fails to comply with a cease and desist order.

37. Allows the agency or the Attorney General to bring a civil cause of action to have a person’s license suspended or revoked if a person fails to comply with a cease and desist order.

Immigration Ombudsman-Citizens Aide (OCA)

38. Requires the OCA to appoint an Immigration OCA who will receive complaints and provide immigration information to employers.

39. Requires the Immigration OCA to forward the information contained in a complaint that an employer employs an identifiable unauthorized worker to the Attorney General.

40. Requires the Immigration OCA to provide employers with information that helps employers to properly comply with federal immigration laws and to provide assistance to enroll employers in the Basic Pilot Program.

41. Appropriates $100,000 and one FTE position from the state General Fund in FY 2006-2007 to the OCA for the purpose of the Immigration OCA.

Miscellaneous

42. Exempts an employer from any civil sanction or criminal penalty imposed by the state for employing an unauthorized worker if the employer either:

a) verifies the immigration status of the employer’s employees through the Basic Pilot Program or

b) complies with all federal and state laws regarding lawful employment.

43. Requires the Director of the Arizona Department of Administration to verify the authorization for employment in the U.S. of every state employee through the Basic Pilot Program.

44. Adds the amount of salary or other compensation that is paid to an unauthorized worker and that is deducted as a business expense to the calculation for Arizona gross income.

45. Prescribes definitions.

46. Provides for severability of the provisions.

47. Requires the provisions that are relevant to immigration or the classification of aliens to be construed to conform with federal immigration law.

48. Names the act the “Fair and Legal Employment Act.”

49. Makes technical changes to blend multiple statutes governing additions to Arizona gross income and repeals the second version, which is no longer necessary.

50. Makes technical and conforming changes.

51. Becomes effective on the general effective date.

House Action

FMPR 2/6/06 DPA/SE 3-0-3-0

3^rd Read 3/9/06 35-20-5-0

Prepared by Senate Research

March 20, 2006

BP/jas