On September 28, 2011, the District Court for the Northern District of Alabama (Judge Sharon Blackburn) issued a ruling (pdf) on a motion for preliminary injunction in the lawsuit filed by the U.S. Department of Justice against the State of Alabama challenging its recently enacted immigration law, House Bill 56 (HB 56).

The court has granted a preliminary injunction enjoining the enforcement of two provisions of HB 56 which are of direct concern for employers. The first is Section 16, which prohibits employers from deducting as business expenses wages or compensation paid to an unauthorized alien and imposes a penalty of 10 times the claimed deduction. The second is Section 17, which creates a new cause of action making it a discriminatory practice for employers to knowingly fail to hire a job applicant or discharge an employee who is either a U.S. citizen or authorized alien while retaining or hiring an individual the employer knows, or reasonably should know, is an unauthorized alien. Employers violating this provision can be subject to a civil suit, and the prevailing party may recover compensatory damages and reasonable attorneys’ fees.

The court held that Sections 16 and 17 are both likely preempted by the Immigration Reform and Control Act of 1986, 8 U.S.C. § 1324a(h)(2), which states: “The provisions of this section preempt any state or local law imposing civil or criminal sanctions (other than through licensing or similar laws) upon those who employee, or recruit or refer for a fee for employment, unauthorized aliens.” In reaching this conclusion, the court stated that Sections 16 and 17 contain “sanctions” within the meaning of the federal statute.

The ruling does not address the E-Verify provisions of HB 56 previously addressed in this blog, and those provisions will go into effect as scheduled. Employers should continue to make preparations to ensure that they comply with the E-Verify provisions on a timely basis. Failure to comply may result in an employer being debarred from state contracts, having its state government grants or incentives cancelled, and its business license suspended or revoked for up to 60 days. For a second offense, an employer may have its business license revoked permanently, so serious consequences for non-compliance are still intact following the September 28 ruling. The preliminary injunction will remain in effect until final judgment is entered on the lawsuit, which likely will not occur for several months. In the meantime, Alabama employers should continue to monitor this case and consider seeking the advice of experienced employment and/or immigration law counsel to determine the best strategies and practice following this ruling.