The practice of states sanctioning employers in the arena of immigration law advanced toward U.S. Supreme Court review on February 2, 2010, when a decision divided federal appeals courts on the issue.

A three-judge panel of the 10th Circuit Court of Appeals ruled in Chamber of Commerce of the United States v. Edmondson that federal immigration law preempted two key provisions of the Oklahoma sanctions law and unanimously upheld a lower court’s injunction against them. One challenged provision of the law survives.

The 10th Circuit decision clashes with an earlier 9th Circuit opinion that upheld Arizona's sanctions law in a case in which Ballard Spahr represented the business community. That decision has been appealed to the Supreme Court, which has asked the Justice Department to file a brief stating the federal government’s position on the issue. Meanwhile, the 10th Circuit decision bolsters the position that the Supreme Court should decide the issue of federal scope in the area of state employer sanctions.

The 10th Circuit affirmed an injunction blocking enforcement of a provision allowing a worker to sue an employer if the worker was terminated and the employer knowingly employed an undocumented worker. The court found that federal immigration law barring states from "imposing civil or criminal sanctions (other than through licensing and similar laws)" for the employment of unauthorized persons expressly overrode the provision.

Also upheld was an injunction blocking a requirement that businesses verify the work eligibility of independent contractors to withhold taxes from those contractors who do not demonstrate work authorization. The court found that federal law preempted that provision by implication because it does not require employers to verify work eligibility for contractors through the I-9 process, as is the case for employees.

The panel was divided over an injunction against a requirement that businesses entering into contracts with the state government use the E-Verify program, and that provision of the Oklahoma law survives. Therefore, employers conducting business with the Oklahoma state government should use E-Verify. Note that different E-Verify rules apply to federal contractors.

Ballard Spahr’s Labor, Employment and Immigration Group is monitoring the activity in the area of state employer sanctions. Ballard Spahr filed a brief with the 10th Circuit in this case on behalf of a coalition of employment professionals and contractor associations