immigration, Tennessee, law, economy, labor

Rose Paxtor, Linda Rose

English

Research Papers in Economics

“A person shall not knowingly employ, recruit, or
refer for a fee for employment, an illegal alien.”
1
ith more than an estimated
100,000 undocumented work-
ers supporting the Tennessee
workforce, one wonders pre-
cisely what the Tennessee General Assembly
intended when it enacted a law incorporating the
above language. The law, which we refer to as
the “business license revocation law,” took
effect January 1, 2008, and threatens to snatch
the licenses of Tennessee businesses that
employ undocumented workers.  
There is no doubt the face of the Tennessee
workforce is changing as more foreign workers
2
make their way to our state. A 2003 study using
U.S. Census figures estimated the number of
undocumented workers supporting the Ten-
nessee economy grew from 9,000 in 1990 to
46,000 in 2000.
3 On one hand, anti-immigrant
voices have grown correspondingly louder and
demand harsher penalties in response to the
increased foreign presence. But on the other
hand, a recent MTSU study reveals the majority
of Tennesseans have grown more lenient about,
sympathetic toward, and accustomed to the
influx of our foreign workforce, favoring a path
to citizenship.
4 No doubt some of those polled
must have been business owners with trusted
and valued foreign employees.  
Is business license revocation an appropri-
ate response to the undocumented workforce?
And is this what the Tennessee economy needs?
Let’s start by taking a close look at the law itself.
The basic command of the law is that
employers knowingly using undocumented
16
continued on page 18
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by Linda Rose and Rose Paxtor 
Rather than attempting to
frustrate local businesses, state
legislators should welcome the
influx of foreign workers who
contribute to our rich culture. 17
NNESSEE ECONOMY NEEDS?
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sworkers shall be, on the first offense, issued a
warning; on the second offense, subjected to a
hearing; and if found in violation, penalized
with business license revocation for up to one
year. This law expands greatly on the federal
law on hiring practices, which has been in place
since 1986 and imposes civil fines and criminal
penalties for knowingly hiring undocumented
workers.
5 The Tennessee legislature takes the
punishment of employers further, however, by
threatening their very ability to exist.  
The Tennessee license revocation law does
requires state and local government agencies to
report hiring violations. Reports of violations set
in motion a hearing process with the workforce
agency of the state Department of Labor that can
result in the revocation of the state business
license.
6 The provisions of the law are summa-
rized below. We include some policy comments
to aid employers in determining how to manage
their business affairs in the face of this law.
Employment of “illegal aliens” forbidden.
Employers are forbidden from employing illegal
aliens. The Tennessee legislature defines the
term “illegal alien” as including anyone who is
not a Lawful Permanent Resident or otherwise
authorized to work.
7Among those labeled illegal
are spouses of professional workers residing
lawfully in the United States but not authorized
to work. It would also include someone who is
completely legal in the United States but await-
ing official work authorization. The reality, how-
ever, is that undocumented workers (also known
as illegal aliens) make up a significant part of the
Tennessee workforce. And in the face of labor
shortages and uncompromising immigration
laws, employers are left with no option other
than to draw from the undocumented workforce.
What the Tennessee legislators could do is work
with federal legislators to promote laws that will
allow employers to legalize their workers rather
than punish employers for their efforts to survive
and sustain their businesses.
“Knowingly.” Violations of the law hinge on
whether an employer knows the worker is
undocumented.  “Knowingly” is defined as hav-
ing “actual knowledge” and failing to determine
an employee’s immigration status.
8 The onus of
having to determine an employee’s immigration
status is great, to say the least. Local employers
indeed are not immigration specialists and can-
not and should not be vested with the responsi-
bility to determine immigration status.  
Safe hiring practices. Employers are required,
as under existing federal law, to verify the
employment authorization of all new hires using
the document lists found on immigration form I-
9. The verification requirement is met even if
documents presented to satisfy the I-9 are later
found to be fraudulent,
9 as long as the employer
has acted in good faith. But the federal govern-
ment already has put this system in place with
enforcement efforts widespread across the coun-
try. It seems redundant, and overly burdensome
to employers, for the Tennessee legislature to
create yet another layer that hinders employers
from operating their businesses. 
The Tennessee law rewards employers that
act fast. Employers who check work authoriza-
tion documents as required, within 14 days of
hire, are not in violation.
10 Again, however, this
simply repeats a system the federal government
has already put in place.  
An employer can avoid an allegation of vio-
lating the law by using the federal database
known as E-Verify. This system allows employ-
ers to check the immigration status of a prospec-
tive worker, and if the system confirms a name
and Social Security number, the employer can
hire the prospective worker without fear of
penalty. The database is fraught with error, how-
ever, and could potentially prevent an employer
from hiring a U.S. citizen.  Only two states in the
nation require employers to use E-Verify: Ari-
zona and Mississippi.
11 At least one state actu-
ally prohibits it: Illinois.
12 All other states,
including Tennessee, are neutral or silent on the
use of E-Verify for most employers. Given the
great potential for error in hiring, neutrality is
probably the safest and best approach. The State
of Tennessee should not endorse or require an
employment verification system that is not 100
percent accurate. Otherwise, innocent parties—
employers and employees alike—will be
injured. But under the Tennessee business
license revocation law, employers using E-Ver-
ify to determine work authorization of new hires
will not be found to have hired in violation of the
law.
13 This position implicitly endorses a system
that is far from perfect.
Reports of violations. The investigation of a
violation originates with the employee of any
state or local government agency. If an
employee of one of those agencies has any rea-
son to believe an employer is employing “ille-
gal aliens,” the agency employee is required to
file a complaint with the state workforce
agency.
14 This vests the government employee
with an unwieldy scope of discretion. And those
with anti-immigration sentiments could take
this grant of authority beyond what is reason-
able. The law should impose a reasonableness
standard and not grant untrained, uninitiated
government workers such wide latitude of
18
continued from page 17 In the face of labor
shortages and
uncompromising
immigration laws,
employers are left
with no option
other than to draw
from the
undocumented
workforce.power.  Once the workforce agency receives a
report, it is required to investigate. 
Right to a hearing before a business license
can be revoked. If the workforce agency inves-
tigation yields substantial evidence of a hiring
violation, the employer is scheduled for a con-
tested case hearing.
15
The employer must be mailed a notice of the
hearing providing the reasons for the hearing.
The employer has the right to present evidence of
good faith compliance with the law by having
checked authorization documents.
16 At this point
the employer should seriously consider retaining
immigration or employment law counsel. There
may be viable defenses or explanations for the
hiring that only a lawyer skilled in these matters
can unravel in a contested hearing.
This type of hearing can be held only if the
business has some license issued by the state and
a violation is established by clear and convincing
evidence. Again, “clear and convincing evi-
dence” is a legal term the employer might want
to turn over to the lawyer to dispute with the
hearing board. If the board determines a knowing
violation has occurred, the workforce agency
must order the relevant government agency to
suspend the employer’s license to do business.
Violation #1. The first time an employer is
found in violation of the state law, that license
will be revoked until the employer shows the
violation has been corrected. Here, the employer
needs to take some action. The employer must
either require the employee to correct the dis-
crepancy or take the drastic step of terminating
employment. Either way, the license can be rein-
stated if the employer submits a sworn statement
attesting it is no longer employing an “illegal
alien.”
17 If the employer opts not to take any
action, a finding of a second violation, with a
more drastic result, will likely take place.
Violation #2 and beyond. A finding of any
subsequent violations by an employer will
result in a much more serious penalty. The busi-
ness license of an employer whose license was
suspended for hiring undocumented workers
within the past three years must be revoked for
one year.
18 Ouch!
Despite the fact that the undocumented
workforce is undeniably entrenched in the Amer-
ican way of life (and Tennessee economy), Con-
gress has failed to provide a remedy for this
unfortunate circumstance. With a worker short-
age, there are virtually no laws that allow
employers to legally hire essential skills employ-
ees, such as service industry workers, construc-
tion workers, and the like. The federal
government, constitutionally vested with the
authority to control and govern immigration, is
struggling to put the proper system in place.
States that meddle in the immigration debate
only add to the fervor.  
Rather than attempting to frustrate local
businesses, Tennessee state legislators should
look to laws that will help alleviate the worker
shortage problem, create systems so that the
workers can contribute to the economy and pay
taxes as needed,
19 and welcome the influx of for-
eign workers who contribute to our rich culture.
We are, after all, a nation born of immigrants. 
Linda Rose is a Vanderbilt University adjunct
law professor and the owner and managing
member of Rose Immigration Law Firm PLC,
emphasizing business immigration in the music
and entertainment industries, manufacturing,
and higher education and representing busi-
nesses with I-9 compliance and immigration
worksite enforcement. Rose Paxtor is an associ-
ate attorney at the firm.
Notes
1. Tennessee Code Annotated (T.C.A.) § 50-1-103(b)
(2007).
2. Legally, the term “immigrant” indicates that an
individual is legally residing in the U.S. as a Lawful Per-
manent Resident, known as a “green card” holder. The
media, however, has misused the term immigrant to such an
extent that it now popularly refers to any foreigner. For the
sake of correctness, we shall use the term “foreign worker”
or “foreigner” throughout this article and refer to “immi-
grant” only when we mean a Lawful Permanent Resident.
3. A Profile of the Foreign-born in the Nashville Eco-
nomic Market, published in October 2003 by the Urban
Institute for the Nashville New American Coalition.
4. Janell Ross, “Tennesseans Get Softer on Illegal
Immigration, MTSU Poll Finds,” The Tennessean, March
14, 2008, A1.
5. Immigration Reform and Control Act of 1986, Pub.
L. No. 99-603, 100 Stat 3359. Federal law on employing
undocumented workers is codified at 8 U.S.C. § 1324a.  
6. T.C.A. § 50-1-103(e).  
7. T.C.A. § 50-1-103(a)(4).
8. T.C.A. § 50-1-103(a)(5).
9. T.C.A. § 50-1-103(a)(7).
10. Legal Ariz. Workers Act, H.B. 2779, 48th Leg., 1st
Reg. Sess. (Ariz. 2007) (effective January 1, 2008); Miss.
Employment Prot. Act, S.B. 2988, 2008 Reg. Sess. (Miss.
2008) (effective July 1, 2008). 
11. Ill. Right to Privacy in the Workplace Act § 12(a),
Pub. Act 95-0138, H.B. 1744, 95th Gen. Assem. (Ill. 2007).
Litigation has delayed enforcement. See Press Release,
Dept. of Homeland Security, Notice for Illinois Employers
about E-Verify (December 31, 2007) (www.uscis.gov/files/
pressrelease/Illinois_Everify_31dec07.pdf). 
12. T.C.A. § 50-1-103(c).
13. T.C.A. § 50-1-103(e).
14. Id.
15. Id.
16. T.C.A. § 4-5-320 (2005).
17. T.C.A. § 50-1-103(e)(1).
18. T.C.A. § 50-1-103(e)(2).
19. Even undocumented workers pay taxes simply by
way of living in the U.S.: purchasing goods and using serv-
ices. Many wish to pay their proper income taxes as well but
are prevented from doing so because the Social Security
Administration will not issue them a number to pay taxes.
19
There are virtually
no laws that allow
employers to
legally hire
essential skills
employees, such as
service industry
workers,
construction
workers, and the
like.

Business License Revocation: Is This What the Tennessee Economy Needs?

http://www.mtsu.edu/~berc/tnbiz/immigration/rose.pdf

Business License Revocation: Is This What the Tennessee Economy Needs?

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