United States: Complying With U.S. Export Control And Immigration And Anti-Discrimination Laws

The intersection of immigration, anti-discrimination, and U.S. export control laws can be confusing for employers. But recent, recent settlement agreements between the U.S. Department of Justice (“DOJ”), multinational corporations, and large international law firms demonstrate that the DOJ will not tolerate employers discriminating against non-U.S. persons. This article will provide an overview of the intersection, and friction between, U.S. immigration, anti-discrimination, and export control laws and regulations.  

Export Control Laws

The International Traffic of Arms Regulations the (“ITAR”) (administered by the U.S. Department of State, Directorate of Defense Trade Controls (“DDTC”)) and the Export Administration Regulations (“EAR”) (administered by the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”)) are the primary export control regimes in the United States.

Both the ITAR and EAR may require that an export license be obtained from DDTC or BIS, respectively, before the release of export-controlled technical data or technology to a “foreign person.” ¹ A release of technical data or technology (whether oral/visual disclosure or provision of physical document or materials) may include virtually any exchange of information – including in person discussion, telephone conversations, technical proposals, fax communications, e-mails and other electronic communications, the sharing of computer databases, briefings, or training sessions.

 The release of technical data or technology to a foreign person that occurs within the United States is “deemed” to be an export to the foreign person’s “home country,” and whether an export license is required for a particular release may depend on both the nature of export controls applicable to the technology or technical data (including whether it is subject to the ITAR or EAR) as well as the citizenship of the foreign person.

When a foreign person is a national of more than one country, BIS will only consider the last country of citizenship or permanent residence in determining nationality under the EAR. However, for ITAR compliance purposes, DDTC will consider all countries of citizenship and permanent residence.

Under the export control regulations, a “U.S. person”² is someone who is: 1) a U.S. citizen (whether born or naturalized); 2) a lawful permanent resident of the United States (e.g., “green card” holders); or 3) a protected individual as defined by 8 U.S.C. § 1324b(a)(3) (e.g., foreign persons such as refugees and asylees who are protected persons and considered U.S. persons for export control purposes). Corporations incorporated in the United States are U.S. persons for purposes of the ITAR and EAR. Moreover, the export control regulations define “foreign person”³ to mean any person who is not a “U.S. person” as defined above. Generally, this means any foreign person in a foreign country, or any foreign person in the United States on a temporary work visa (e.g., H-1B, L-1, TN, etc.) who does not have lawful permanent resident status (e.g., a green card) or who has not been admitted to the United States as a refugee or asylee. “Foreign person” also includes foreign corporations (including foreign corporations not incorporated or organized to do business in the United States), international organizations, and foreign governments.

U.S. Immigration and Anti-Discrimination Laws

The U.S. Immigration and Nationality Act (“INA”)⁴ and Title VII of the Civil Rights Act 1964 (“Title VII”) prohibit discrimination based on protected characteristics. The INA prohibits discrimination based on, among other characteristics, national origin or citizenship.⁵  Additionally, Title VII prohibits discrimination based on race and national origin, which typically includes discrimination based on citizenship or immigration status. Notably, the definition of “U.S. person” under the ITAR and EAR, includes the definition of “protected individuals” under the INA. These “protected individuals” are U.S. citizens, U.S. nationals, lawful permanent residents, and asylees and refugees as defined by 8 U.S.C. § 1324b(a)(3). Therefore, these individuals are not subject to the licensing requirements under the ITAR and EAR.

Furthermore, the INA prohibits “unfair documentary practices,” which are identified as instances where employers request more or different documents than/from those necessary to verify employment eligibility or request such documents with the intent to discriminate based on national origin or citizenship.

The Intersection of Export Control Laws and U.S. Immigration and Anti-Discrimination Laws

The U.S. government has implemented immigration processes that recognize that export controls laws and immigration laws and policy may impact one another. For instance, U.S. employers seeking to hire a non-U.S. citizen under certain work authorization (visa) programs must complete an “I-129 – Petition for a Non-Immigrant Worker Form.” For certain types of visas (e.g., H-1B), such form requires a certification by the U.S. employer as to whether an export license is required to release any technical data or technology to the foreign person. But aside from the certification, most companies may not be aware that U.S. export control laws apply to them or their employment of non-U.S. persons.

Using the work authorization example above, assume a company is fully compliant with U.S. immigration laws and has obtained a work visa for a foreign person employee; however, this company is also a manufacturer/exporter of export-controlled items and did not verify or put in place compliance controls to ensure this individual does not have access to controlled information without the required licenses. If the foreign person employee’s co-workers discuss with the foreign person employee work-related matters regarding export-controlled technical data/technology, then the corporation will be in violation of the export control laws.

Given such a scenario, companies may initially believe that a simple solution is to have a U.S. person-only hiring policy. However, as described above, such a policy would likely constitute discrimination against individuals based on their national origin or citizenship status in violation of Title VII, the INA and other federal, state, and local anti-discrimination laws.

As recent cases indicate, the DOJ is concerned about companies applying simple, overly broad solutions such as a U.S. person-only hiring policy, and instead expects companies to develop and implement hiring policies and processes that are non-discriminatory while also containing appropriate controls for compliance with the U.S. export control laws.

DOJ Cases

Most recently, the DOJ reached a settlement with private aircraft manufacturer and seller, Honda Aircraft Company, LLC (“Honda Aircraft”)–a subsidiary of American Honda Motor Co.⁶ Inc. The DOJ determined that Honda Aircraft violated the INA by requiring applicants for at least 25 job postings to be “lawful permanent residents and/or U.S. citizens” without any valid justification for such citizenship status requirements.⁷ The company’s misunderstanding of its requirements under ITAR and EAR resulted in a monetary penalty. The DOJ imposed not only a $44,626 civil penalty but also the requirement that the DOJ will monitor the company for the next two years.

Similarly, over the course of 2018, the DOJ settled several additional cases involving employers violating immigration anti-discrimination laws simply because they attempted to comply with the requirements of the export control regulations. For example, Clifford Chance US, LLP (“Clifford Chance”), a large international law firm, settled with the DOJ, after the DOJ determined that Clifford Chance violated the INA by unlawfully limiting its staffing for 36 positions on an ITAR-related document review project. The law firm refused to consider otherwise qualified non-U.S. citizens and U.S. citizens with dual citizenship.⁸ The law firm was ostensibly trying to avoid ITAR violations related to “deemed exports” by employing the overly restrictive hiring requirements. By requiring U.S. citizenship status, it effectively excluded otherwise qualified “U.S. nationals, lawful permanent residents, asylees, and refugees.”⁹

Employers that limit their hiring to U.S. persons without a proper legal basis may violate the INA’s anti-discrimination provision, which prohibits hiring discrimination based on citizenship and national origin.”¹⁰ As a result, DOJ imposed a $132,000 civil penalty and a requirement that the DOJ will oversee the firm’s actions for a two-year period.

Similarly, the DOJ settled a claim with the United States’ second largest egg producer, Rose Acre Farms Inc. (“Rose Acre”).¹¹ The DOJ determined that Rose Acre violated the INA by discriminating against non-U.S. citizens in possession of valid work authorizations. Rose Acre “routinely required work-authorized, non-U.S. citizens to present a Permanent Resident Card or Employment Authorization Document to prove their work authorization,”¹² but U.S. citizen employees were not required to provide such documentation. As a result, DOJ imposed a $70,000 civil penalty, and DOJ monitoring for a two-year period. Notably, although the Rose Acre settlement did not explicitly address the interaction between compliance with export control laws and anti-discrimination law, it highlights the principle that employers cannot engage in discriminatory practices when they attempt to verify work authorization status.

Lastly, another 2018 DOJ settlement makes it clear that companies cannot refuse to consider qualified non-U.S. citizens. In the Setpoint Systems Inc. (“Setpoint Systems”) case,¹³ the DOJ highlighted that Setpoint Systems, a Utah engineering company, refused to consider qualified non-U.S. citizens for positions involving export-controlled items, including defense articles and defense services. Instead, Setpoint Systems should have hired the qualified non-U.S. citizens and obtained export licenses for the non-U.S. citizens to be able to access export-controlled items. In fact, the company employed a policy of hiring only U.S. citizens for certain positions within the company. As Setpoint Systems learned, a company should not adopt a blanket policy of considering only U.S. citizens. The DOJ imposed a $17,475 civil penalty along with continued monitoring for three years following the settlement.

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Collectively, these recent DOJ cases demonstrate that employers cannot seek to comply with U.S. export control laws by instituting a U.S. person- or U.S. citizen-only hiring policy when a position involves working with export-controlled items/information and, more generally, may not discriminate in their application of citizenship verification processes. Companies are expected to implement policies and procedures reasonably tailored to address export control compliance requirements while not engaging in unnecessary discrimination on the basis of citizenship or national origin.

Considering the DOJ’s trend of investigating unlawful employment practices involving the misunderstanding of the export control laws, companies would be well advised to invest in resources to review their compliance practices regarding U.S. export control, immigration, and anti-discrimination laws. Best practices in this area may include, but are not limited to:

• Adopt policies ensuring that both qualified U.S. persons and non-U.S. persons may be considered for all positions;
• Avoid using language such as “U.S. citizens only,” in hiring notices; instead use “U.S. work authorized applicants only”;
• Use questions during the hiring process consistent with advice from the DOJ Immigration and Employee Rights Section (“IER”), providing questions related to work authorization that employers can ask applicants during the hiring process without fear of violating Title VIII or the INA, including:
  • Are you legally authorized to work in the United States?
  • Will you now or in the future require employment visa sponsorship?
• Avoid including verification of “U.S. person” status when determining employment eligibility; and
• Avoid applying export control screening procedures to positions which are not reasonably likely to be impacted by export control laws.

Footnotes

1. See 22 C.F.R. § 120.17(2) (2019); 15 C.F.R. § 734.13 (2019).

2. 22 C.F.R. § 120.15 (2019); 15 C.F.R. § 772.1 (2019).

3. 22 C.F.R. § 120.16 (2019); 15 C.F.R. § 772.1 (2019).

4.  8 U.S.C. § 1324b (2019).

5. 28 C.F.R. pt. 44 (2019).