Over the past decade, a number of states frustrated with perceived lack of federal enforcement of immigration laws have adopted state statutes aimed at deterring employers from hiring illegal aliens by requiring enhanced employment verification, and establishing penalties for non-compliance.  Several years ago, the Ninth Circuit Court of Appeals upheld Arizona's immigration enforcement law, but last week, the Tenth Circuit Court of Appeals invalidated parts of a similar Oklahoma law.

In Chamber of Commerce of the U.S. v. Edmondson, the Chamber sued the state, challenging a law that (1) requires state contractors to electronically verify employment eligibility; (2) creates a cause of action for employees who allege that they were displaced by an illegal worker; and (3) requires state contractors to verify the immigration status of individual independent contractors or begin withholding payroll taxes from payments made to them.  The Chamber alleged that the Oklahoma law was preempted by federal immigration laws, and that immigration enforcement and regulation are exclusively federal powers.

The Tenth Circuit partially agreed with the Chamber, upholding an injunction preventing implementation of the enforcement provisions of the Oklahoma law.  The court concluded that only the federal government can impose immigration-related sanctions on employers.  By granting displaced employees the right to sue their employers, and by requiring employers to withhold payroll taxes on contractors, Oklahoma exceeded its authority under the Constitution.

By a 2-1 vote, the court upheld portions of the Oklahoma law that require state contractors to use E-Verify in lieu of the standard I-9 procedures.  The Tenth Circuit concluded that this provision does not impose sanctions on the employer based on employment of unauthorized aliens.

Although it reached the same result on the E-Verify question as the Ninth Circuit in the Arizona case, the Tenth Circuit rejected that court's reasoning, adopting a more limited view of states' ability to regulate immigration.  This decision may boost challenges to other state immigration laws, including those in South Carolina and Virginia.  The South Carolina law imposes sanctions and denies business licenses to employers that knowingly employ illegal aliens.  Under the Tenth Circuit's reasoning, these parts of the South Carolina law would be invalid.

It is increasingly likely that the U.S. Supreme Court will be called upon to determine the extent to which states can attempt to regulate employers' practices with regard to immigration verification and enforcement.