Author: Melissa A. Silver, XpertHR Legal Editor
On December 19, 2012, a challenge to portions of the Oklahoma Taxpayer and Citizen Protection Act of 2007 (HB 1804) was finally settled. As a result, Oklahoma public employers must continue to use E-Verify to verify the employment authorization status of new hires. Further, public employers cannot contract with a contractor for work done in the state unless the contractor is registered with and participates in the status verification system to verify information regarding the contractor's new hires.
In the case of Chamber of Commerce, et al. v. Henry, et al., Civ-08-109-C (W.D. Okla.), the following three provisions of the Act were challenged as being pre-empted by federal law:
- HB 1804 § 7(B), +Okla. Stat. tit. 25, § 1313 (a) and (b), which provides that no contractor or subcontractor may contract or subcontract with a public employer unless it utilizes E-Verify to verify the work eligibility for all new employees;
- HB 1804 § 7(C), +Okla. Stat. tit. 25, § 1313(c), which provides that it is a discriminatory practice for employers to discharge an employee working in Oklahoma who is a United States citizen or permanent resident alien while retaining an employee who the employer knows, or reasonably should have known, is an unauthorized alien; and
- HB 1804 § 9, +Okla. Stat. tit. 68, §2385.32, which provides that if an individual contractor contracting for the physical performance of services in Oklahoma does not provide the contracting entity with documentation verifying his or her employment authorization, the contracting entity is required to withhold from that contractor's compensation income tax at Oklahoma's top marginal rate in excess of the minimum amount the contracting entity must report as income on the Form 1099 with the Internal Revenue Service (IRS). A contracting entity that does not withhold is liable for the taxes required to be withheld, provided that the contracting entity is not exempt from federal withholding of the individual contractor's compensation because Form 8233 or its equivalent was properly filed with the IRS.
In June 2008, the United States District Court for the Western District of Oklahoma entered a preliminary junction preventing the enforcement of these sections. On appeal, the 10th Circuit Court of Appeals affirmed the preliminary injunction against enforcement of HB 1804 §§ 7(C) and 9, but vacated the injunction against § 7(B).
On December 19, 2012, the parties reached an agreement, which follows the 10th Circuit's decision. As such, the Oklahoma officials agreed to be permanently enjoined from enforcing HB 1804 §§ 7(C) and 9, and the Chamber of Commerce agreed to a judgment in favor of the Oklahoma officials regarding § 7(B). In their joint motion to the court, the parties recognized the landmark US Supreme Court decision in Chamber of Commerce of the United States of America v. Whiting, +131 S.Ct. 1968 (2011), which held that Arizona's state law that requires employers to use E-Verify was not pre-empted by federal law. United States District Court Judge Robin J. Cauthron signed the parties' joint order concluding the matter.