Oklahoma Restaurant Association

(Here for Spanish version)

Now that Congress has failed to act on immigration reform, we have been faced with several questions from our members about Oklahoma's immigration reform law that was passed recently. The information provided below is courtesy of the State Chamber and the Crowe and Dunlevy law firm.

On May 8, 2007, Governor Brad Henry signed into law a bill intended to address a number of issues related to illegal immigration in Oklahoma. House Bill 1804 contains several provisions affecting both public and private employers. While the bill does not take effect until November 1 (July 1, 2008 for private employers), employers from both sectors would be wise to examine it closely and begin making preparations to comply with its provisions.

The heart of the bill from an employer's standpoint is found in Section 7, which will be codified as Section 1313 of Title 25 of the Oklahoma Statutes. Section 7 requires every public entity to register with and use a status verification system for the purpose of verifying the employment eligibility status of all new employees. Public entity includes every department, agency or instrumentality of the state or of a political subdivision of the state. Under Section 6 of HB 1804, entities can chose from several status verification systems. These include:

The Basic Pilot Program operated by the United States Department of Homeland Security or any equivalent program designated by the federal government. The Basic Pilot Program is an internet based, free program that employers can use to see if a new hire is legally in the country and is authorized to work here. Information about the program can be found at www.uscis.gov.
The Social Security Number Verification Service or a similar online verification process implement by the Social Security Administration, and
An independent, third-party system of equal reliability as the federal programs.

Public entities who are not already using a status verification system may wish to register soon so they can familiarize themselves with its procedures before the effective date of the bill.

In addition to requiring public entities to use a status verification system, HB 1804 prohibits public entities from employing contractors or subcontractors who are not registered with and using such a system to verify the eligibility of their new employees. Similarly, the bill prohibits contractors and subcontractors from entering into contracts with the state's public entities unless the contractor or subcontractor uses a verification system to check the status of new employees. The provisions concerning contractors and subcontractors who provide services to public entities do not take effect until July 1, 2008. Nor do the provisions apply to contracts entered into before July 1, 2008, even when services are to be provided after that date.

As July 1, 2008 approaches, public entities would be wise to seek confirmation that contractors and prospective contractors are using one of the approved verification systems to screen out illegal workers.

Under Section 9 of HB 1804, when an individual independent contractor does not provide the contracting entity with documentation of employment authorization, the contracting entity will be required to withhold state income tax from the independent contractor’s compensation at the top marginal income tax rate. This penalty will apply to any compensation that exceeds the minimum amount the contracting entity is required to report on IRS Form 1099. If the contracting entity fails to withhold the state income tax, it will be required to pay to the state the taxes not withheld. Contracting entities that are exempt from federal withholding with respect to independent contractors will not be held liable. Section 9 also contains explicit language stating that it is not intended to create an employer-employee relationship between the contracting entity and the independent contractor.

Probably the most worrisome aspect of HB 1804 for employers is that it creates a right of action for discrimination for any U.S. citizen or permanent resident alien who is discharged from employment if the employer retains an unauthorized alien. There are some limitations on this provision of the bill, however. First, the bill requires that the employer knows, or reasonably should have known, that the retained employee is an unauthorized alien. Second, the unauthorized alien must have been hired after July 1, 2008. Third, the unauthorized alien must be working in a job category requiring equal skill, effort and responsibility as the job category held by the discharged employee. Whether the employer knew or should have known of the status of the unauthorized alien and whether the unauthorized alien works in a job category similar to the discharged employee are almost certain to be fact questions decided on a case-by-case basis.

Perhaps most importantly, HB 1804 provides a "safe harbor" for employers who were enrolled in and using a verification system on the date the citizen or permanent resident alien was discharged. All employers who use a verification system to check the status of employees hired after July 1, 2008 are exempt from any liability, suit or investigation arising under Section 7 of HB 1804. Presumably, the safe harbor would apply even if the information obtained by the employer from verification system later turns out to be incorrect. Furthermore, under HB 1804, a discharged employee may not bring a suit for violation of Section 7 under any other Oklahoma law. Thus, participation in a verification program provides a fail-safe mechanism for employers against claims arising out the right of action created by HB 1804.

As a practical matter, HB 1804 requires all Oklahoma employers to eventually enroll in and use a verification system, as they are currently required to do under federal law. Public employers must begin using such systems beginning in November. Contractors and subcontractors who provide services to the state's public employers will find themselves barred from those activities after July 1, 2008 if they do not use a verification system to check on the status of new hires. And all private employers risk exposure to discrimination claims brought by citizens or permanent resident aliens if they fail to use a system to confirm the eligibility of employees hired after July 1, 2008. Given the relative ease with which the approved verification systems can be used, employers of all kinds should consider enrolling in a system soon and putting it to use to screen out unauthorized workers.

Contact Jim Hopper at the ORA office, 405-942-8181, if you have questions or need additional information.