Arizona employers continue to grapple with the changing legal landscape resulting from the Legal Arizona Workers Act, which requires the prosecution of employers that knowingly or intentionally hire unauthorized workers and requires employers to verify employment eligibility through the federal government’s E-Verify program. On May 1, governor Napolitano signed a bill amending this Act and making it clear that the Act does not apply to workers hired prior to this year. Some other key amendments include:

  • Identity Theft: It is now a felony for a person to knowingly accept a false identity in hiring an employee.
  • Contracted Workers: The Act applies to independent contractors as well as employees.
  • Specific Business Location Affected: An employer in violation of the Act is subject to probation and to revocation of its business license only at the specific business location where the unauthorized worker performed work unless the employer does not hold a license specific to that business location.
  • “Second Violation” Clarified: A violation of knowingly or intentionally hiring an unauthorized worker will be deemed a “second violation,” which can lead to revocation of a business license, only if it occurs during a court-ordered probationary period following a first violation at the same business location.
  • Voluntary Compliance Program: Employers may participate in a “Voluntary Employer Enhanced Compliance Program,” which (1) provides a defense against an alleged violation of the Act based on good-faith verification and (2) allows the employer to display to the public a “form of recognition” for participation. To enroll, an employer must agree to perform certain actions including verifying social security numbers through the Social Security Number Verification Service for all employees who have not been verified through E-Verify. This program therefore can be used to verify employees hired after December 31, 2007 who should have been verified through E-Verify but were not.
  • Cash Employees: Employers that pay two or more employees by cash are now subject to a civil penalty if they violate income tax withholding laws, certain reporting and employment security laws, and workers’ compensation laws.

The legal landscape may continue to change as voters in November will consider a ballot initiative that would make the Act more business-friendly. Also, the Ninth Circuit recently heard oral argument in the appeal of a decision upholding the constitutionality of the Act. In addition, recognizing a need for immigrant workers, some Arizona lawmakers have pushed for a temporary guest worker program. Currently, employers should continue to use E-Verify for new hires, conduct an audit of I-9 files and practices if they have not already done so, and educate human resource employees on appropriate hiring practices. Employers also should consider whether to participate in the Voluntary Compliance Program and, if they pay two or more employees by cash, confirm that they are complying with all requisite withholding, reporting, security and workers’ compensation laws.