Universal Contracting v. Utah Department of Commerce et al

Filing 65

MEMORANDUM DECISION AND ORDER: denying 43 Motion for Declaratory Judgment; denying 43 Motion for Summary Judgment. Pursuant to Plaintiffs stipulations at oral argument on its Motion, Plaintiffs remaining claims are also DISMISSED. The Clerk of Court is hereby directed to enter judgment in Defendants favor on all of Plaintiffs claims and to close this case. Signed by Judge Robert J. Shelby on 11/17/2014. (las)

IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF UTAH, CENTRAL DIVISION

UNIVERSAL CONTRACTING, LLC, a Utah limited
liability company,

MEMORANDUM DECISION AND
ORDER

Plaintiff,

Case No. 2:12-cv-00910-RJS

v.

Judge Robert J. Shelby

UTAH DEPARTMENT OF COMMERCE;
FRANCINE GIANI, Executive Director of the Utah
Department of Commerce; DIVISION OF
OCCUPATIONAL & PROFESSIONAL
LICENSING; and MARK SHURTLEFF, Attorney
General of the State of Utah, in his official capacity,
Defendants.

Plaintiff Universal Contracting, LLC moves the court to grant summary judgment in its
favor and declare preempted by federal law certain immigration-related amendments to Utah’s
Construction Trades Licensing Act, Utah Code Section 58-55-101, et seq. Those amendments
make it unlawful for an unincorporated entity like the Plaintiff to have owners engaged in the
construction trade in Utah while not lawfully present in the United States and for such an entity
to provide its owners as laborers to others. Criminal and civil penalties are triggered when an
unincorporated entity engages in this conduct. Plaintiff argues that these amendments are
preempted by the federal Immigration Reform and Control Act of 1986 (IRCA), under that law’s
express preemption provision, and because IRCA provisions conflict with the amendments.
Plaintiff stakes its case on this preemption claim. Although Plaintiff asserts in its
Complaint additional causes of action for Due Process and Substantive Due Process violations
(Dkt. 2 at 15-8), its counsel stipulated at oral argument on August 13, 2104 to withdraw those

1

other causes of action and also agreed that if the court denied its Motion, judgment in favor of
Defendants would be appropriate.
Having carefully considered the parties’ briefing, the evidence submitted, and the
arguments of counsel, the court concludes that Plaintiff has failed to show that the amendments
to Utah’s Construction Trades Licensing Act are preempted by federal immigration law.
Accordingly, the court DENIES Plaintiff’s Motion for Summary Judgment and Declaratory
Judgment. (Dkt. 43.) Pursuant to Plaintiff’s stipulation, the court GRANTS judgment in
Defendants’ favor on Plaintiff’s Preemption Cause of Action, DISMISSES Plaintiff’s other
causes of action, and DISMISSES this case.
BACKGROUND
I.

The Parties
Plaintiff is a Utah limited liability company based in American Fork, Utah County.

(Atkinson Aff. at ¶ 3, Exh. B to Dkt. 44.) It has a unique business model. It is comprised of
more than 900 members who work in Utah’s construction trade. Id. at ¶ 4. Each member is also
a company owner and holds an equity position with the company, enjoying various ownership
rights and receiving annually an IRS Form K-1 from the company for tax purposes. Id. at ¶ 6.
Member-owners are not Plaintiff’s employees. Id. at ¶¶ 12, 26. They are responsible for finding
their own construction jobs, determining which jobs they will accept, negotiating their pay, and
deciding their work schedule. Id. at ¶ 11. Plaintiff provides administrative services for its
member-owners such as payroll, bookkeeping, and contract management. It also maintains
workers compensation insurance, pays unemployment insurance premiums, and holds
commercial general liability insurance for all member-owners who engage in construction work.
Id. at ¶¶ 16-18.

2

Plaintiff’s Managing Member, Cory Atkinson, explains that Plaintiff is not in the
“employee leasing or labor staffing business.” (Second Atkinson Aff. at ¶ 5, Dkt. 45-1.)
[Plaintiff] is engaged in the business of providing specialized construction related
services on construction projects to independent contractors entirely and
exclusively through individuals who comprise the members of that limited
liability company. These services are furnished in much the same way as legal
services by partners in a law firm or certified public accountants in an accounting
firm. No such work or services are or were performed by any employees of any
defendant limited liability company.
Id. Plaintiff does not bid on construction projects. Id. at ¶ 6. “Rather, through [its] members it
simply offers a contingent pool of independent tradesmen from which contractors who have
successfully bid on such projects may draw to increase production on any given job as the need
arises.” Id.
The vast majority of Plaintiff’s member-owners are Latino, including many who were
born in countries other than the United States. Atkinson Aff. at ¶ 25. Plaintiff requires its
member-owners to complete Forms I-9 and to provide documentation supporting their
authorization to work in the United States. Id. at ¶ 26. Plaintiff keeps on file the completed
Forms I-9 and copies of the supporting documents. Id. Plaintiff also requires its memberowners to sign an Operating Agreement providing that membership is conditioned on the signer
being either a United States citizen, permanent resident, or otherwise authorized to lawfully work
in the United States and be paid for such work under the Immigration and Naturalization Act,
U.S.C. § 1101, et seq. Id. at ¶¶ 28. If Plaintiff determines that the member-owner does not meet
at least one of those conditions, it disassociates that member-owner and redeems the memberowner’s ownership rights. Id. at ¶ 29. Plaintiff does not use the federal government’s online “EVerify” system to check the work authorization status of its member-owners. Id. at ¶ 27.
Plaintiff refrains from doing so because its member-owners are not employees, and E-Verify is

3

purportedly reserved for employers who wish to check employees’ work authorization or for
those who wish to “self-check” their own authorization.
Plaintiff has two managers: 1) Grove Creek, LLC, an entity which provides contracting
and all administrative functions for Plaintiff; and 2) Ren Bell, a person who oversees Plaintiff’s
safety and quality programs. Id. at ¶¶ 7-13. Bell is not a member of Plaintiff’s company. Id. at
¶ 12. He is Plaintiff’s lone W-2 employee. Id. Bell also holds a Utah contractor’s license and
acts as a “qualifier” for Plaintiff. Id. at ¶ 13. This means that he is the person through whom
Plaintiff qualifies for a contractor’s license. Id. Plaintiff holds a contractor’s license issued by
Defendant Division of Occupational and Professional Licensing (DOPL). Id. at ¶ 14.
DOPL is a division within Co-Defendant Utah Department of Commerce, an executive
branch agency of the State of Utah charged with licensing and regulating Utah’s professional and
business community. Defendant Francine Giani is the Executive Director of the Department of
Commerce.
II.

2011 Amendments to Utah’s Construction Trade Licensing Act
The Utah Legislature in its 2011 general session enacted Senate Bill 35 (S.B. 35), entitled

“Construction Licensees Related Amendments.” S.B. 35 was subsequently signed into law.
Sections 10, 11, and 12 of S.B. 35 include immigration-related provisions amending Utah’s
Construction Trades Licensing Act, Utah Code Section 58-55-101, et seq. (Licensing Act). Put
simply, the amendments make it unlawful for unincorporated entities holding Utah construction
licenses or providing labor to others with such licenses, to have owners unlawfully present in the
United States.

4

A. S.B. 35 Sections 10 and 12, Amending Utah Code Sections 58-55-501 and 58-55-503
Portions of S.B. 35 Sections 10 and 12 amended Utah Code Section 58-55-501(24),
Unlawful conduct, and Section 58-55-503, Penalty for unlawful conduct—Citations. These
Sections of the Licensing Act define unlawful conduct for construction license holders and set
forth the penalties for engaging in such conduct. On their face, these provisions impose strict
liability for the defined unlawful conduct.
S.B. 35 Section 10 amended Utah Code Section 58-55-501, Unlawful conduct, to add
Subsections (24)(a) and (b), providing that “unlawful conduct” is now defined to include:
(a) an unincorporated entity licensed under this chapter having an individual who
owns an interest in the unincorporated entity engage in a construction trade in
Utah while not lawfully present in the United States; or
(b) an unincorporated entity providing labor to an entity licensed under this
chapter by providing an individual who owns an interest in the unincorporated
entity to engage in a construction trade in Utah while not lawfully present in
the United States.
S.B. 35 Section 12 amended Utah Code Section 58-55-503, Penalty for unlawful
conduct—Citations, to reflect that unincorporated entities engaged in immigration-related
unlawful conduct are subject to civil and criminal penalties, but may also take advantage of a
“safe harbor” if they are able to show verification of an owner’s working status. Specifically,
these subsections provide for:


A finding that an entity violating that subsection or failing to comply with a citation
issued after it is final is guilty of a class A misdemeanor. UTAH CODE ANN. § 58-55503(1)(a)(i).



Possible citations. DOPL may also “attempt to negotiate a stipulated settlement, or notify
the [entity] to appear before an adjudicative proceeding conducted under Title 63G,
Chapter 4, Administrative Procedures Act.” Id. at § 58-55-503(4)(a).



A fine assessed to an entity in violation of the subsection “as evidenced by an
uncontested citation,” and “in addition to or in lieu of [the fine],” a cease and desist order.
Id. at § 58-55-503(4)(a)(i).
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

In addition to any other penalty, DOPL “shall” revoke the license of an entity violating
the subsection “two or more times within a 12-month period, unless. . . the licensee can
demonstrate that the licensee successfully verified the federal legal working status of the
individual who was the subject of the violation using a status verification system, as
defined in § 13-47-102.” Id. at § 58-55-503(4)(j).
The final subsection provides a safe harbor to entities who check an owner’s status using

an acceptable “status verification system.” Utah Code Section 13-47-102(4)(a) defines “status
verification system” as an “electronic system operated by the federal government, through which
an employer may inquire to verify the federal legal working status of an individual who is a
newly hired employee.” Utah Code Section 13-47-102(4)(b) identifies the following acceptable
status verification systems, including the federal government’s E-Verify system:
(i) the electronic verification of the work authorization program of the Illegal
Immigration Reform and Immigrant Responsibility Act of 1996, 8 U.S.C. Sec.
1324a [E-Verify];
(ii) a federal program equivalent to the program described in Subsection (4)(b)(i)
that is designated by the United States Department of Homeland Security or other
federal agency authorized to verify the employment eligibility status of a newly
hired employee pursuant to the Immigration Reform and Control Act of 1986;
(iii) the Social Security Number Verification Service or similar online verification
process implemented by the United States Social Security Administration; or
(iv) an independent third-party system with an equal or higher degree of reliability
as the programs, systems, or processes described in Subsection (4)(b)(i), (ii), or

6

(iii).1
B. S.B. 35 Section 11, amending Utah Code Section 58-55-502
Section 11 of S.B. 35 amended Utah Code Section 58-55-502(8), Unprofessional
conduct. That Section’s definition of “unprofessional conduct” by a construction licensee now
includes:
(8) an unincorporated entity licensed under this chapter having an individual who
owns an interest in the unincorporated entity engage in a construction trade in
Utah while not lawfully present in the United States;
Subsection 502(8) (unprofessional conduct) is identical to Subsection 501(24)(a) (unlawful
conduct), except that it does not give rise to criminal sanctions. An unincorporated entity found
to have engaged in unprofessional conduct “as described in Section 58-55-502” is subject to
public reprimand and having their license revoked, suspended, restricted, placed on probation, or

1

A prior version of the statute referred to status verification systems “as defined in Section 1347-201.” That Section has been contingently repealed. In any event, both Section 13-47-201
and Section 13-47-102 include the federal government’s E-Verify system as an acceptable status
verification system. The repealed Section 13-47-201, Verification required for new hires,
provided:
A private employer who employs 15 or more employees as of July 1, 2010, may
not hire a new employee on or after July 1, 2010, unless the private employer:
(a) is registered with a status verification system to verify the federal legal
working status of any new employee; and
(b) uses the status verification system to verify the federal legal working status
of the new employee in accordance with the requirements of the status
verification system.
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not renewed. UTAH CODE ANN. § 58-55-401(2), Grounds for denial of license and disciplinary
proceedings.2
III.

Plaintiff’s Citations
In June 2012, Defendant DOPL issued to Plaintiff six citations alleging violations of Utah

Code Section 58-55-501(24)(a) because six of Plaintiff’s member-owners were not lawfully
present in the United States. Atkinson Aff. at ¶ 30. There were no citations issued under Utah
Code Section 58-55-501(24)(b).
Plaintiff had in its possession completed Forms I-9 and copies of supporting documents
for each of the six member-owners at issue. Id. at ¶ 34. Plaintiff defended itself at a subsequent
administrative hearing conducted by DOPL, arguing that it had complied with federal laws and
that it had no knowledge that the six member-owners were in the United States illegally. Id. at
¶¶ 33-34. The DOPL hearing’s presiding officer concluded that although Plaintiff had
“complied with I-9” (Dkt. 44 at 82), it nonetheless violated the state law because the six
member-owners were not lawfully in the United States. Id. and Atkinson Aff. at ¶ 35. Plaintiff
received a reduced fine of $250 for each of the six violations, and was issued a cease and desist
order to prevent future unlawful conduct. Id. at ¶ 37. Plaintiff appealed these citations. Id. at ¶
38. The Department of Commerce upheld on appeal the fines and the order. That appeal is
stayed pending resolution of this suit. Id.

2

Plaintiff claims S.B. 35’s immigration-related provisions were enacted with the purpose of
putting Plaintiff out of business, as the provisions apply to any “unincorporated entity” holding a
state-issued contractor’s license. (Dkt. 43 at 23.) Plaintiff claims it is the only such entity in the
State of Utah. Id. at 24. Defendants do not dispute that Plaintiff is the only such entity. But
Plaintiff’s argument is not grounded in any legal citation and is not sufficiently developed for the
court to understand or address. Notably, Plaintiff advances no special legislation arguments.
8

DISCUSSION
Plaintiff seeks summary judgment on its claim that the Licensing Act amendments are
preempted by federal immigration law provisions in IRCA. The preemption analysis requires the
court to evaluate Utah’s Licensing Act amendments in light of IRCA. But before reaching the
merits of Plaintiff’s preemption arguments, the court first addresses Plaintiff’s standing to assert
its claim.
I.

Standing
Article III of the United States Constitution restricts the jurisdiction of this court to the

adjudication of “Cases” or “Controversies.” U.S. Const. art. III, § 2, cl. 1; Bronson v. Swensen,
500 F.3d 1099, 1106 (10th Cir. 2007). To proceed here, Plaintiff must establish that a case or
controversy exists and that it has standing to sue by showing that three elements are satisfied.
Bronson, 500 F.3d at 1106. First, Plaintiff “must have suffered an injury in fact—an invasion of
a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent,
not conjectural or hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)
(citations omitted). Second, Plaintiff must show “a causal connection between the injury and the
conduct complained of”—meaning that the injury is “fairly traceable to the challenged action of
the defendant, and not the result of the independent action of some third party not before the
court.” Id. (citations omitted). Third, “it must be likely, as opposed to merely speculative,” that
Plaintiff’s alleged injury “will be redressed by a favorable decision.” Id. at 561 (citations
omitted).
The parties in their briefing agree that Plaintiff satisfies these three elements. The court
nevertheless has an independent obligation to ensure this is correct. Citizens Concerned for
Separation of Church & State v. City & Cnty. of Denver, 628 F.2d 1289, 1296 (10th Cir. 1980)
(parties may not “by stipulation” invoke a court’s jurisdiction “in litigation which does not
9

present an actual case or controversy”) (citations omitted). The court concludes that Plaintiff has
standing to challenge the Licensing Act amendments here at issue.
Plaintiff has suffered an injury in fact traceable to the actions of the Defendants. Plaintiff
received six citations from Defendant DOPL and has been ordered to pay related fines under
Utah Code Section 58-55-501(24)(a), one of the amended immigration-related provisions of the
Licensing Act.3 Plaintiff was also issued a “cease and desist” order prohibiting it from engaging
in “unlawful conduct.” It has appealed those fines pending the resolution of this case. Thus far,
Defendant Department of Commerce has affirmed the fines and the order. A favorable decision
from this court granting summary judgment and declaring the Licensing Act amendments
preempted would remove the bases for Plaintiff’s citations and redress Plaintiff’s alleged injury.
The court thus concludes that Plaintiff has established standing to challenge the
amendments to the Licensing Act. Having determined this, the court turns to the merits of
Plaintiff’s Motion for Summary Judgment. The court begins with the legal standards guiding its
analysis of Plaintiff’s Motion.
II.

Applicable Standards

A. Summary Judgment
Plaintiff seeks summary judgment on its claim that the Licensing Act amendments are
preempted by IRCA. Under Rule 56(a), Federal Rules of Civil Procedure, the court may grant
Plaintiff’s Motion for Summary Judgment only if Plaintiff meets its burden to show that there is
no genuine dispute as to any material fact and that Plaintiff is entitled to judgment as a matter of
law. In conducting this analysis, the court views the facts and evidence in the light most

3

As previously noted, Subsection 501-(24)(a) reaches the same conduct as Subsection 502(8) but
violations of Subsection 24(a) give rise to criminal sanctions.
10

favorable to the Defendants opposing summary judgment. Morris v. City of Colorado Springs,
666 F.3d 654, 660 (10th Cir. 2012) (citations omitted).
B. Preemption Principles
The Supremacy Clause provides that “federal law ‘shall be the supreme Law of the Land;
and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of
any State to the Contrary notwithstanding.’” Arizona v. United States, 132 S.Ct. 2492, 2500
(2012) (quoting Art. VI, § 1, cl. 2). This principle allows Congress to preempt state laws that are
contrary to federal laws. Id. (citations omitted).
Preemption may occur expressly through the enactment of a federal law containing a
preemption provision. Id. at 2500-01. “When a federal law contains an express preemption
clause, [courts] focus on the plain wording of the clause, which necessarily contains the best
evidence of Congress’ preemptive intent.” Chamber of Commerce of the United States v.
Whiting, 131 S.Ct. 1968, 1977 (2011) (citations omitted).
Preemption may also occur impliedly in two ways. First, Congress may intend that it
alone will regulate a particular field. Arizona v. United States, 132 S.Ct. at 2501 (citations
omitted). This “field preemption” occurs when an “intent to displace state law altogether can be
inferred from a framework of regulation so pervasive that Congress left no room for States to
supplement it or where there is a federal interest so dominant that the federal system will be
assumed to preclude enforcement of state laws on the same subject.” Id. (citations omitted).
Second, “state laws are preempted when they conflict with federal law.” Arizona v.
United States, 132 S.Ct. at 2501 (citations omitted). This “conflict preemption” can include both
instances where “compliance with both federal and state regulations is a physical impossibility,”

11

and those where the “state law stands as an obstacle to the accomplishment and execution of the
full purpose and objectives of Congress.” Id. (citations omitted).
A court conducting a conflict preemption analysis exercises its “judgment to determine
what constitutes an unconstitutional impediment to federal law, and that judgment is informed by
examining the federal statute as a whole and identifying its purpose and intended effects.”
Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363, 373 (2000). But this analysis must begin
with the assumption that “the historic police powers of the States are not superseded unless that
was the clear and manifest purpose of Congress.” Arizona v. United States, 132 S.Ct. at 2501
(citations omitted). A “freewheeling judicial inquiry” here is not justified because it is
“Congress rather than the courts that preempts state law.” Whiting, 131 S.Ct. at 1985 (citations
omitted). Thus, a “high threshold must be met if a state law is to be preempted for conflicting
with the purposes of a federal act.” Id. (citations omitted). The state law in question must “be a
material impediment to the federal action or thwart the federal policy in a material way.” Mount
Olivet Cemetery Ass’n v. Salt Lake City, 164 F.3d 480, 489 (10th Cir. 1998) (citations omitted).
C. Background on Federal Immigration Law
In the area of immigration and the status of aliens, the United States government has
“broad, undoubted power.” Id. at 2498 (citations omitted). This power is rooted in part in the
federal government’s need to establish uniform rules of naturalization and its role as the
sovereign conducting the nation’s foreign relations. Id. (citations omitted). Exercising this
broad power, Congress in 1952 enacted the Immigration and Nationality Act (INA), 8 U.S.C. §
1101, et seq., to establish a “comprehensive federal statutory scheme for regulation of
immigration and naturalization” and to specify “the terms and conditions of admission to the

12

country and the subsequent treatment of aliens lawfully in the country.” Whiting, 131 S.Ct. at
1973 (citing DeCanas v. Bica, 424 U.S. 351, 353 (1976)).
Over three decades later, Congress in 1986 enacted the Immigration Reform and Control
Act (IRCA) as a “comprehensive framework for ‘combating the employment of illegal aliens.’”
Arizona v. United States, 132 S.Ct. at 2504; Pub. L. 99-603. The law imposes civil and criminal
sanctions, including fines, criminal prosecution and imprisonment upon employers who violate
its provisions. It does not impose sanctions “on the employee side (i.e., penalties on aliens who
seek or engage in unauthorized work).” Arizona v. United States, 132 S.Ct. at 2504.
First, IRCA makes it unlawful for a person or entity “to hire, recruit4 or refer for a fee,5
for employment in the United States an alien knowing the alien is an unauthorized alien with
respect to such employment . . . .” 8 U.S.C. § 1324a(a)(1)(A).6 As a means of complying with
this overarching provision, employers are allowed (but not required) to use the federal

4

“Recruit for a fee” means “the act of soliciting a person, directly or indirectly, and referring
that person to another with the intent of obtaining employment for that person, for remuneration
whether on a retainer or contingency basis . . . .” 8 C.F.R. § 274a.1(e).
5

“Refer for a fee” means “sending or directing a person or transmitting documentation or
information to another, directly or indirectly, with the intent of obtaining employment in the
United States for such person, for remuneration . . . .” 8 C.F.R. § 274a.1(d).
6

“Employee” means “an individual who provides services or labor for an employer for wages or
other remuneration but does not mean independent contractors . . . or those engaged in casual
domestic employment . . . .” 8 C.F.R. § 274a.1(f). “Employer” means “a person or entity . . .
who engages the services or labor of an employee to be performed in the United States for wages
or other remuneration.” Id. at § 274a.1(g). “Employment” means “any service or labor
performed by an employee for an employer within the United States . . . .” Id. at § 274a.1(g)
(emphasis added). Section 1324a(4) provides that one is considered to have hired the alien for
employment in the United States if the person or entity “uses a contract . . . to obtain the labor of
an alien in the United States knowing that the alien is an unauthorized alien . . . .”
13

government’s “E-Verify” electronic eligibility verification system7 to check an employee’s
authorization to work. An employer who uses “E-Verify” and obtains “confirmation of identity
and employment eligibility” establishes a rebuttable presumption that it has not violated IRCA’s
prohibition on hiring unauthorized aliens.
Second, IRCA requires some categories of employers to whom it generally applies to
comply with “Form I-9 requirements” by requesting and reviewing documents establishing an
employee’s eligibility for employment. These categories of employers are those who: 1) “hire
for employment” or 2) “hire, recruit or refer for a fee, for employment” in an agricultural
business. These employers must review passports, resident alien cards, or other documents
approved by the Attorney General; or a combination of other documents such as driver’s licenses
and social security cards. Id. at § 1324a(b)(1)(B)-(D). They must then attest on a Form I-9 to
having reviewed such documentation and “verif[ying] that the individual is not an unauthorized
alien.” Id. at § 1324a(b)(1)(A).
Third, IRCA bars employers from engaging in unfair immigration-related employment
practices, such as discriminating on the basis of national origin or lawful alien status. Id. at §
1324b(a)(1). But an employer who complies “in good faith with the [Form I-9 document review
requirements] has established an affirmative defense” to charges of § 1324a(a)(1)(A) violations.
Id. at § 1324a(a)(3).

7

E-Verify is an Internet-based system that allows an employer to verify an employee’s workauthorization status. Whiting, 131 S.Ct. at 1975 (citations omitted). An employer submits via EVerify a request with information provided by the employee. The employer later receives a
response either confirming or tentatively non-confirming an employee’s authorization to work.
Id. An employee may challenge a tentative non-confirming report. If an employee fails to
challenge such a report or does so unsuccessfully, her employment may end and the federal
government must be informed. Id.
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Critical to the issues in this case, IRCA includes a provision stating that it preempts “any
State or local law imposing civil or criminal sanctions (other than through licensing or similar
laws) upon those who employ, or recruit or refer for a fee for employment, unauthorized aliens.”
Id. at § 1324a(h)(2); see also Whiting, 131 S.Ct. at 1973 (noting Congress’ express preemption).
The parenthetical exception to IRCA’s preemption provision for “licensing or similar laws” is
sometimes referred to as IRCA’s “savings clause.”
Plaintiff argues that IRCA and the Supreme Court’s decision in Chamber of Commerce of
the United States v. Whiting govern the outcome in this case. The court observes that in contrast
to the Utah Licensing Act amendments at issue here, the Arizona law in Whiting directly
governed the employer-employee relationship. Still, an examination of the Whiting decision is
helpful to address Plaintiff’s arguments.
In Whiting, the Supreme Court considered whether federal immigration law preempted an
Arizona law concerning the employment of unauthorized aliens. The Arizona law: 1) allowed
state courts “to suspend or revoke the licenses necessary to do business in the State if an
employer knowingly or intentionally employs an unauthorized alien”; and 2) required every
employer to verify the employment eligibility of every employee by using “E-Verify.” 131 S.Ct.
at 1976-77 (citing ARIZ. REV. STAT. ANN. §§ 23-211, 212, 212.01, and 23-214(A)) (other
citations omitted). An employer’s use of E-Verify created a rebuttable presumption that the
employer did not knowingly employ an unauthorized alien, and good faith compliance with the
Form I-9 process was a defense to a charge under the statute. Id. (citing ARIZ. REV. STAT. ANN.
§ 23-212).
The Whiting Plaintiffs argued that federal immigration law 1) expressly and impliedly
preempted Arizona’s law allowing for the revocation of business licenses for employers who

15

hired unauthorized aliens, and 2) that the provision mandating employers to use E-Verify was
impliedly preempted. The Supreme Court disagreed.
The Court first held that Arizona’s business license revocation provision was not
expressly preempted by IRCA. Evaluating the plain language of IRCA’s preemption provision,
the Court explained that IRCA “expressly preempts the States from imposing ‘civil or criminal
sanctions’ on those who employ unauthorized aliens, ‘other than through licensing and similar
laws.’” Whiting, 131 S.Ct. at 1977 (quoting 8 U.S.C. § 1324a(h)(2)). The Arizona law on its
face imposed sanctions through licensing laws. Its definition of “license” included various state
permits issued “for the purposes of operating a business in the State,” as well as “articles of
incorporation, certificates of partnership, and grants of authority to foreign companies to transact
business in the State.” Id. at 1978, n.5 (quoting ARIZ. REV. STAT. ANN. § 23-211(9)(a)).
Although broad in its application, the Court concluded that the law was plainly a “licensing” or
at least a “similar” law falling “well within the confines of the authority Congress chose to leave
to the States and therefore is not expressly preempted.” 131 S.Ct. at 1981.8 Because the Arizona
law fell within its savings clause, IRCA did not expressly preempt the license revocation
provision.
A plurality of the Court also concluded that IRCA did not impermissibly conflict with,
and thus impliedly preempt, the license revocation provision where Arizona had “simply
implement[ed] the sanctions that Congress expressly allowed [it] to pursue through licensing

8

The Court noted that even if the law’s regulation of “articles of incorporation, partnership
certificates and the like is not itself a ‘licensing law,’ it is at the very least ‘similar’ to a licensing
law, and therefore comfortably within the savings clause.” Whiting, 131 S.Ct. at 1978 (citations
omitted).
16

laws.” Id. at 1981. Congress “specifically preserved such authority for the States” and could not
have intended “to prevent the States from using appropriate tools to exercise that authority.” Id.9
The Court additionally noted that the harshness of the license revocation penalties
available under the Arizona law neither upset any “balance that Congress sought to strike when
enacting IRCA” nor created “interference with the federal program in this case . . . .” Id. at
1983. “Regulating in-state businesses through licensing laws has never been considered . . . an
area of dominant federal concern.” Id. at 1983. While license suspension and revocation are
significant sanctions, “they are typical attributes of a licensing regime” and the immigrationrelated provision were not the only Arizona licensing laws providing for such sanctions. Id. at
1983-84. The Court rejected the notion that IRCA precluded states from imposing harsh
sanctions. IRCA preserved state authority not over “only small sanctions,” but over an entire
“category of sanctions—those imposed through ‘licensing and similar laws.’” Id. at 1984.
The Court likewise concluded that Arizona’s requirement that employers use E-Verify
was not impliedly preempted as conflicting with the federal law. The federal law at issue
provides that the federal government cannot require non-federal employers to use E-Verify. But
Arizona’s law did not involve the federal government mandating use of E-Verify. Id. at 1985. It
thus did not conflict. The Court further noted that the consequences under both the federal and

9

A plurality of the Court further noted that Arizona had gone “the extra mile” to ensure its
enforcement used “appropriate tools” by “closely tracking the IRCA” in: 1) adopting the federal
government’s definition of “unauthorized alien;” 2) barring, like the federal law, “knowingly”
employing an unauthorized alien and defining that phrase with reference to federal law; and 3)
providing affirmative defenses based on good faith compliance with Form I-9 procedures and
rebuttable presumptions of compliance with the laws by using E-Verify—like the federal
immigration laws. Id. at 1982-83 (citations omitted).
17

state laws of not using E-Verify were the same—the loss of the rebuttable presumption of
compliance with the laws. Id. at 1985-86.10
With that background in mind, the court turns to Plaintiff’s arguments in favor of
summary judgment.
III.

Plaintiff’s Motion for Summary Judgment
Plaintiff argues in its briefing that: 1) the criminal sanctions in the Licensing Act

amendments are both expressly and field preempted by IRCA; and 2) the Licensing Act
amendments “directly and irreconcilably” conflict with and are therefore impliedly preempted by
IRCA. Defendants respond in their briefing that: 1) Plaintiff has not shown it is regulated by
IRCA at all; and 2) even if it were governed by IRCA, the Licensing Act amendments are simply
“licensing laws” expressly excepted from IRCA preemption under the federal statute’s savings
clause. Defendants’ argument on conflict preemption is fleeting. Defendants argue that IRCA
concerns employer-employee relations while the Licensing Act amendments are licensing laws
directed toward terms and conditions of ownership of unincorporated entities.
For the reasons that follow, the court concludes the Licensing Act amendments are not
preempted by IRCA.
A. Express Preemption
The court must first determine if IRCA expressly preempts the Licensing Act
amendments. IRCA makes it unlawful to “hire, or to recruit or refer for a fee,” aliens
unauthorized for employment in the United States. 8 U.S.C. § 1324(a)(1)(A). It further
10

A plurality also concluded that Arizona’s mandated use of E-Verify did not conflict with the
federal government’s goals in developing E-Verify—to “ensure reliability in employment
authorization verification, combat counterfeiting of identify documents, and protect employee
privacy.” Whiting, 131 S.Ct. at 1986 (quoting 8 U.S.C. § 1324a(d)(2)). The federal government
has for some time been encouraging increased use of the system and disputes criticisms of its
reliability. Id.
18

expressly preempts “any State or local law imposing civil or criminal sanctions (other than
through licensing and similar laws) upon those who employ, or recruit or refer for a fee for
employment, unauthorized aliens.” 8 U.S.C. § 1324a(h)(2).
In light of these provisions, the court must evaluate whether Utah’s Licensing Act
amendments initially fall within IRCA’s preemption provision as laws “imposing civil or
criminal sanctions . . . upon those who employ, or recruit or refer for a fee for employment,
unauthorized aliens.” If so, the court must then determine whether the savings clause in the
preemption provision applies to the Licensing Act amendments.
As explained in greater detail above, the amended Licensing Act penalizes
unincorporated entities under two circumstances. First, Subsections 501(24)(a) and 502(8)
subject unincorporated entities with construction licenses to possible penalties if their owners are
engaged in a construction trade in Utah while not lawfully present in the United States. These
Subsections define this conduct as both “unlawful” and “unprofessional.” UTAH CODE ANN. §§
58-55-501(24)(a) and -502(8). These Subsections are unrelated to employing, recruiting, or
referring for a fee unauthorized aliens. Rather, they concern whether entities licensed by the
State of Utah and engaged in the construction trade are owned by persons lawfully present in the
United States. They are not expressly preempted by IRCA.
But another Subsection of the amended Licensing Act defines “unlawful conduct” to
include instances when an unincorporated entity “provid[es] labor to an entity licensed under this
chapter by providing an individual who owns an interest in the unincorporated entity to engage
in a construction trade in Utah while not lawfully present in the United States.” UTAH CODE
ANN. § 58-55-501(24)(b). This Subsection addresses the provision of (presumably paid) labor to
another, not simply the terms and conditions of an unincorporated entity’s ownership. For this

19

reason, it may—at least in some circumstances—fall within IRCA’s general preemption of state
laws imposing sanctions on those who “refer for a fee for employment, unauthorized aliens.”
Under IRCA, “refer for a fee” means “sending or directing a person or transmitting
documentation or information to another, directly or indirectly, with the intent of obtaining
employment in the United States for such person, for remuneration . . . .” 8 C.F.R. § 274a.1(d).
An unincorporated entity likely would act within the ambit of both Utah Code Subsection
501(24)(b) and IRCA’s express preemption provision if it provided labor (as broadly defined in
IRCA) to another in a construction trade in Utah for remuneration.11
But even if Subsection 501(24)(b) is initially preempted by IRCA, the court must still
evaluate whether it is a “licensing or similar law[]” within the preemption provision’s savings
clause. The court concludes that it is.12
The Licensing Act amendments, including Subsection 501(24)(b), “on their face,
purport[] to impose sanctions through licensing laws.” Whiting, 131 S.Ct. at 1977. The
amendments are all directed to and contained in Utah’s Construction Trades Licensing Act.
They define unprofessional and unlawful conduct for those the State of Utah has licensed in the
construction trade. Penalties for engaging in the proscribed unprofessional or unlawful conduct
are included in the same statutes as the penalties for other types of construction-related unlawful

11

The court’s analysis in this section is focused express preemption, and therefore only on a
comparison of the statutory language of IRCA and the Utah Construction Trades Licensing Act.
The court does not evaluate here whether Plaintiff has established with competent evidence that
it actually receives payment in exchange for providing those in the construction trade in Utah
with information about its members with the intent that they will obtain employment. That
analysis is set forth below in the court’s discussion of conflict preemption.
12

Indeed, even if Subsections 501(24)(a) and 502(8) initially fell within IRCA’s express
preemption provision, the court concludes that those Subsections would likewise fall within the
savings clause for the same reasons Subsection 501(24)(b) does.
20

and unprofessional conduct, including citations, fines, refusal to renew a license, reprimands,
cease and desist orders, license revocation, and possible misdemeanor criminal charges. See
UTAH CODE. ANN. §§ 58-55-503 and 58-55-401. Thus, assuming at least some portion of
Subsection 501(24)(b) falls within IRCA’s ambit, it also falls within the savings clause to
IRCA’s preemption provision—“well within the confines of the authority Congress chose to
leave to the States.” Id. at 1981.
Plaintiff agrees in its briefing and conceded at oral argument that under Whiting, most of
the Licensing Act amendments are “licensing laws” within IRCA’s savings clause, and thus not
expressly preempted. (Dkt. 43 at 31.) But Plaintiff argues that the criminal penalty that may be
triggered for violations of Subsections 24(a) and (b) in amended Utah Code Section 58-55503(1)(a)(i) renders these laws “criminal statutes” rather than “licensing laws” because any
misdemeanor charges “must be prosecuted in Utah district courts.” (Dkt. 43 at 30-31.)
Plaintiff’s argument is unpersuasive.
IRCA expressly preempts “any State or local law imposing civil or criminal sanctions
(other than through licensing and similar laws) upon those who employ . . . unauthorized aliens.”
The plain language of this provision indicates that states may impose criminal or civil sanctions
for employing unauthorized aliens “through licensing and similar laws.” The express
preemption determination hinges on the categorical nature of the state law and not the penalty
imposed for violations. The language employed by Congress compels the conclusion that
criminal sanctions were anticipated among possibly penalties state might impose through their
licensing laws.
And it is not a new development in the Licensing Act to impose criminal sanctions for
licensing-related violations. Even before passage of S.B. 35, Section 58-55-503 made it a Class

21

A misdemeanor for a construction trade licensee to engage in “unlawful conduct” as it was then
defined, or to fail to comply with a citation issued after it became final. S.B. 35 simply
broadened the definition of that “unlawful conduct” to include the immigration-related conduct
set forth in Subsections 501(24)(a) and (b).
It cannot be that imposing severe sanctions or having a Utah court involved in the penalty
process renders the amended Licensing Act something other than a “licensing or similar law.” 8
U.S.C. § 1324a(h)(2). Notably, severe sanctions (in the form of license revocation) and judicial
review were both present in the Whiting case. The Court nevertheless concluded that the license
revocation law at issue there clearly fell within IRCA’s saving clause as either a “licensing or
similar law.” The criminal penalty set forth in Section 58-55-503 likewise does not alter the fact
that the amended Licensing Act is a licensing or similar law within the saving clause in IRCA’s
preemption provision.
The court concludes based upon the foregoing that IRCA does not expressly preempt the
amended provisions of the Licensing Act. The court next turns to Plaintiff’s argument that IRCA
impliedly preempts the Licensing Act amendments.
B. Implied Preemption
Plaintiff also argues that the immigration-related amendments to the Licensing Act are
impliedly preempted. Implied preemption may occur through field preemption or conflict
preemption. The court evaluates each category in turn.
1. Field Preemption
Plaintiff briefly suggests in its Motion that Congress has preempted the field of “criminal
prosecution related to employment of unauthorized aliens,” reserving this authority “solely to the
federal government.” (Dkt. 43 at 26.) Plaintiff conceded at oral argument, however, that field
preemption is inapplicable to Utah’s licensing laws at issue in this case, including the challenged
22

criminal sanction. The court agrees. An “intent to displace state law altogether can be inferred
from a framework of regulation so pervasive that Congress left no room for States to supplement
it or where there is a federal interest so dominant that the federal system will be assumed to
preclude enforcement of state laws on the same subject.” Arizona v. United States, 132 S.Ct. at
2501 (citations omitted). The savings clause in IRCA’s preemption provision indicates that
Congress intended to preserve for the states the ability to impose civil or criminal sanctions
relating to the employment of unauthorized aliens so long as the sanctions are imposed through
“licensing or similar laws.” Further, as a plurality of the Whiting Court noted, in enacting IRCA,
Congress “allocate[d] authority between the Federal Government and the States,” and in so doing
“preserved state authority over a particular category of sanctions—those imposed ‘through
licensing and similar laws.’” 131 S.Ct. at 1984. The court concludes there is no field
preemption.
2. Conflict Preemption
Plaintiff nevertheless maintains that IRCA impliedly preempts the Licensing Act
amendments because the laws conflict. Plaintiff contends it is subject to both laws, that
compliance with both laws is impossible, and that the Licensing Act amendments create
impermissible obstacles to the accomplishment of Congress’s full purposes and objectives in
enacting IRCA. As discussed below, the court finds these arguments unpersuasive.
At the outset, the court notes that its determinations that Subsections 501(24)(a) and
502(8) are not expressly preempted by IRCA, and that those Subsections and Subsection
501(24)(b) fall within that law’s savings clause, do not foreclose Plaintiff’s argument that these
Subsections are nonetheless impliedly conflict preempted. Arizona v. United States, 132 S.Ct. at
2504-05 (“the existence of an ‘express pre-emption provision does not bar the ordinary working

23

of conflict pre-emption principles’ or impose a ‘special burden’ that would make it more difficult
to establish the preemption of laws falling outside the clause”) (quoting Geier v. American
Honda Motor Co., Inc., 529 U.S. 861, 869 (2000) (savings clause did not bar “ordinary working
of conflict pre-emption principles” regarding state law tort claims) (citations omitted)). A
plurality of the Whiting Court conducted a conflict preemption analysis of the Arizona license
revocation law at issue in that case after concluding it fell within IRCA’s express savings clause.
131 S.Ct. at 1981-85. The plurality noted that the state law at issue “simply implement[ed] the
sanctions that Congress expressly allowed Arizona to pursue through licensing laws. Given that
Congress specifically preserved such authority for the States, it stands to reason that Congress
did not intend to prevent the States from using appropriate tools to exercise that authority.” Id. at
1981.13
The court therefore evaluates whether the amendments to the Licensing Act
impermissibly conflict with IRCA and are thus preempted because they render compliance with
IRCA impossible or because they materially impede IRCA’s purposes.
a. Impossibility
Plaintiff argues both IRCA and Utah’s Licensing Act amendments apply to its business
structure but that its compliance with both the federal and state legislative schemes is impossible.

13

The court views it as sensible to proceed with caution when conducting a conflict preemption
analysis in light of IRCA’s express savings clause reserving to states the ability to sanction
through licensing or similar laws those who employ unauthorized aliens and the fact that
“[r]egulating in-state businesses through licensing laws has never been considered . . . an area of
dominant federal concern.” Whiting, 131 S.Ct. at 1983 (plurality opinion). But the Arizona,
Geier, and Whiting decisions do not instruct this court to apply a more stringent burden on the
Plaintiff to establish conflict preemption even under these circumstances, and the court will not
impose a heightened burden. Still, the Whiting plurality’s discussion of IRCA’s savings clause
and traditional state governance of in-state businesses and licensing is relevant to the court’s
analysis of the intended scope and purposes of IRCA.
24

At oral argument, Plaintiff seemed to hinge its conflict preemption argument on this point,
claiming that federal law makes it unlawful and thus impossible for unincorporated entities like
the Plaintiff—with owners whose immigration status must be verified—to use the federal EVerify system to ascertain whether owners are lawfully present in the United States. In contrast,
Utah’s Licensing Act amendments anticipate the use of E-Verify as a critical tool for ensuring
compliance with the Licensing Act’s provisions, and further provide safe harbor from severe
penalties for “unlawful conduct” if an entity shows it has used a status verification system like EVerify.
Plaintiff claims it cannot use E-Verify, and thus can neither comply with the Licensing
Act nor take advantage of the safe harbor provision for two reasons: 1) unidentified Homeland
Security officials have informed Plaintiff that it is prohibited from directly using E-Verify to
check the status of member-owners because they are not Plaintiff’s employees; and 2) IRCAgoverned entities which are also required to complete Forms I-9 cannot avoid this prohibition on
using E-Verify by requiring member-owners to “self-check” their status because IRCA bars the
entities from demanding documents from employees beyond those specifically identified in
IRCA, and any entity imposing such a requirement risks unfair employment practice claims.
The court concludes that neither of Plaintiff’s proffered reasons prevent it from utilizing
E-Verify. Plaintiff has thus failed to show an impossible conflict in complying with federal law
and Utah’s Licensing Act.
1. Plaintiff has Not Shown that Homeland Security Officials Barred it from Using
E-Verify or Requiring Member-Owners to Self-Check
Plaintiff first argues that it cannot use E-Verify because the federal government bars
Plaintiff from using that system directly to check the status of member-owners. Plaintiff
supports this argument by stating that an official from the United States Department of
25

Homeland Security “has told [its] management that [it] may not check its members’ names with
E-Verify because those members are not employees of the company.” (Dkt. 43 at 41-42, 11-12.)
But Plaintiff has offered the court no authority to support the contention that hearsay
from an unnamed government official alone establishes that the federal government has
prohibited entities using Plaintiff’s business model to check the status of its member-owners with
E-Verify. The court declines to entertain the notion of striking down a state law on this basis.
But even if entities like Plaintiff’s cannot use E-Verify to ascertain the status of member-owners,
this does not render it impossible to comply with both federal law and the Licensing Act
amendments.
As Defendants suggested in their briefing and at oral argument, unincorporated entities
using Plaintiff’s business model may require prospective member-owners to self-check their
employment status using E-Verify and provide results to the entity as a condition of ownership.
Plaintiff already requires potential member-owners to sign written agreements stating that
membership is conditioned on the signer being a U.S. citizen, permanent resident, or otherwise
authorized to lawfully work in the U.S. and be paid for such work under the Immigration and
Naturalization Act, U.S.C. § 1101, et seq. Entities in Plaintiff’s position could further require
those it brings on as prospective member-owners to provide proof of an E-Verify self-check as
an additional condition of membership and ownership in the entity, and thereby avoid using EVerify in a way Plaintiff claims is impermissible.
Plaintiff nevertheless insists that unincorporated entities like it cannot require potential
owners to provide evidence of an E-Verify self-check. Plaintiff argues that IRCA applies to its
relationship with its member-owners and requires it to complete Forms I-9 for its member-

26

owners, but bars it from requiring documents different from or in addition to those listed in the
statute or risk being accused of engaging in an unfair employment practice:
(6) Treatment of certain documentary practices as employment practices
A person's or other entity's request, for purposes of satisfying the requirements of
section 1324a(b) of this title [concerning Forms I-9], for more or different
documents than are required under such section or refusing to honor documents
tendered that on their face reasonably appear to be genuine shall be treated as an
unfair immigration-related employment practice if made for the purpose or with
the intent of discriminating against an individual in violation of paragraph (1).
8 U.S.C. § 1324b(6). This argument is unpersuasive. As the court discusses below, IRCA may
apply to Plaintiff in some instances, but Plaintiff has neither shown that IRCA applies
specifically to its relationship with its member-owners nor that it requires Plaintiff to complete
Forms I-9 with regard to its prospective member-owners at all. Thus, IRCA’s provisions relating
to unfair employment practices cannot operate to create an impossible conflict for Plaintiff in
complying with both IRCA and the Licensing Act amendments.
2. Plaintiff has Not Shown that IRCA Applies to its Relationship with its MemberOwners
The court begins its analysis of whether the Licensing Act amendments impossibly
conflict with IRCA’s unfair employment practice provisions by evaluating whether both IRCA
and the Licensing Act amendments may apply to regulate the same entity—one like the Plaintiff.
If these laws do not apply to regulate the same entity, then there can be no conflict rendering it
impossible for an entity to comply with both.
The court concludes IRCA and the Licensing Act may apply in some instances to
regulate the same entity. The Licensing Act amendments apply to unincorporated entities with
owners either licensed by the State of Utah to engage in the construction trade or providing an
owner to engage in construction labor to an entity so licensed. UTAH CODE ANN. §§ 58-55-

27

501(24)(a), (b) and 58-55-502(8). IRCA applies to those who “hire, recruit or refer for a fee”
persons for employment in the United States. 8 U.S.C. § 1324a(a)(1)(A). There is no IRCA
exception for unincorporated entities. A Utah-based unincorporated entity with owners and a
construction license, or one which provides its owners as labor for others with a construction
license plainly might hire an employee or recruit or refer for a fee persons to do work. The
Licensing Act and IRCA could both apply to govern the same entity.
And, in fact, Plaintiff must comply with both the Licensing Act amendments and IRCA.
It is undisputed that Plaintiff is an unincorporated Utah entity holding a construction license
which has hundreds of owners. It is thus governed by the Licensing Act amendments. It is
further undisputed that Plaintiff has at least one W-2 employee, Ren Bell. Plaintiff’s
employment of Mr. Bell is subject to IRCA. Accordingly, Plaintiff is subject to IRCA’s
requirements—at least in some instances.
But the critical next step in the analysis is whether it is impossible for Plaintiff to comply
with both laws. The challenge Plaintiff identifies in complying with both laws does not concern
its relationship with its lone employee, Mr. Bell. It concerns Plaintiff’s relationship with its
member-owners and compliance with both IRCA’s Form I-9 and unfair employment practice
provisions on the one hand, and on the other hand, the Licensing Act’s verification requirements
essentially mandating at least that member-owners self-check via E-Verify.
Both sides devote much of their briefing to addressing whether IRCA applies to govern
Plaintiff’s relationship with its member-owners—the relationship Utah’s Licensing Act
amendments target. Defendants dispute that it does. Plaintiff argues that although it admittedly
“is not an employer of its members under Utah law—and under traditional employer-employee
legal concepts,” IRCA nevertheless governs its relationship with its member-owners because it is

28

“effectively treated as an ‘employer’ for purposes of verifying the employment eligibility of its
members under IRCA.” (Dkt. 43 at 38.) The court finds on the record before it, however, that
Plaintiff has not established as a matter of law with competent evidence that its relationship with
its member-owners falls under IRCA’s ambit. Thus, Plaintiff faces no impossible conflict in
complying with both laws.
The court first observes that Plaintiff offers no evidence that it has ever formally or
officially been treated as an employer of its member-owners under IRCA. In fact, as discussed
above, Plaintiff argues that it has been told by Homeland Security officials that it cannot use the
federal government’s E-Verify system to check the status of its member-owners because they are
not Plaintiff’s employees. If true, this suggests that at least some government officials do not
view Plaintiff’s member-owners as employees for purposes of application of IRCA.
Plaintiff unconvincingly contends that its treatment as an employer of its member-owners
under IRCA is established under 8 U.S.C. § 1324a(4), Unlawful employment of aliens—Use of
labor through contract:
For purposes of this section, a person or other entity who uses a contract,
subcontract, or exchange . . . to obtain the labor of an alien in the United States
knowing that the alien is an unauthorized alien (as defined in subsection (h)(3) of
this section) with respect to performing such labor, shall be considered to have
hired the alien for employment in the United States in violation of paragraph
(1)(A).
This provision brings within IRCA those who contract to obtain labor. Plaintiff argues that this
provision applies to its relationship with its member-owners because “it enters into contracts
with its members for the provision of construction services by its members.” (Dkt. 48 at 6, 11.)
As evidence of this, Plaintiff refers to the Operating Agreement its member-owners sign when
they join Plaintiff’s limited liability company.

29

There are two problems with Plaintiff’s contention. First, Plaintiff does not provide a
copy of the Operating Agreement between it and its member-owners or explain with any
specificity the terms of any contract with its members concerning the nature of construction
services they will provide. Second, the court concludes that Plaintiff has not established that it is
contracting “to obtain” labor performed on Plaintiff’s own behalf. Rather, as its manager, Mr.
Atkinson, explains, Plaintiff’s member-owners are responsible for finding their own work and
negotiating their own rate of pay. At most, “through [its] members [Plaintiff] simply offers a
contingent pool of independent tradesmen from which contractors who have successfully bid on
such projects may draw to increase production on any given job as the need arises.” Second
Atkinson Aff. at ¶ 6.
Plaintiff also argues that its relationship with its member-owners might fall under an
IRCA provision making it unlawful for entities “to hire, or recruit or refer for a fee, for
employment in the United States” one known to be an unauthorized alien. See 8 U.S.C. §
1324a(a)(1)(A). (Dkt. 48 at 6-7.) But Plaintiff admits it does not “hire” its member-owners “for
employment” as a traditional employer might. Plaintiff also directs the court to no competent
evidence upon which it can conclude that Plaintiff actually either “recruits” or “refers” its
member-owners for employment and receives a fee for doing so.14 The facts before the court are
that Plaintiff provides administrative services, training and insurance to its member-owners. It
also maintains its member-owners in a pool of contingent labor from which others can hire. Its

14

Plaintiff attaches to its Reply Memorandum documents filed by the Department of Labor in a
separate case brought against Plaintiff. In its briefing, the Department of Labor argues that
Plaintiff does collect a fee from companies who use Plaintiff’s members for construction labor.
(Dkt. 49 at Exhibit I, pp. 3-4; Exhibit J at 14.) Plaintiff does not in its briefing adopt those
arguments or provide to the court admissible evidence supporting those arguments.
30

member-owners, and not Plaintiff, determine which job to take, what hours to work, and what
compensation they will receive.
Finally, Plaintiff emphasizes that it carefully completes Forms I-9 for all its memberowners. IRCA requires completion of Forms I-9 from some categories of employers: 1) those
who “hire for employment”; and 2) those who refer or recruit for fees—if they are also “an
agricultural association, agricultural employer, or farm labor contractor.” 8 U.S.C. §
1324a(1)(B); U.S. Citizenship and Immigration Services Frequently Asked Questions: Who
Needs to Complete Form I-9, http://www.uscis.gov/faq-page/i-9-central-who-needs-completeform-i-9#t17071n46932 (recruiters or referrers for fees generally do not have to fill out Forms I9 on individuals who are recruited or referred unless involving agricultural work). Plaintiff
suggests that because it completes Forms I-9 for member-owners, its relationship with its
member-owners is governed by IRCA.
But Plaintiff’s decision to complete Forms I-9 for its member-owners does not mean this
relationship actually falls within a category for which such documentation is required by IRCA.
To the contrary, the court concludes that Plaintiff has failed to show that it is required by IRCA
to complete Forms I-9 for member-owners. First, Plaintiff does not “hire” its member-owners
“for employment.” Second, as noted above, Plaintiff presented no evidence showing it is an
entity referring labor for a fee. Even if it had, there is no evidence or argument before the court
that Plaintiff is an agricultural employer—the only recruiters or referrers required by IRCA to
complete Forms I-9.
But even if Plaintiff were required to complete Forms I-9 for its would-be owners, in
such instances they would not run afoul of IRCA by requiring proof of E-Verify self-checks,
because they would not be requiring further documents for the purpose of satisfying Form I-9

31

requirements. The further documents would instead be required to satisfy the Utah Licensing
Act amendments relating to ownership of an unincorporated entity.15
Thus, even if IRCA and the Licensing Act amendments apply to the same entity,
Plaintiff has failed to identify any conflict between the two laws which renders compliance with
both impossible. The court concludes that the Licensing Act amendments are not subject to
conflict preemption on this basis.
b. Obstacle to IRCA’s Purposes
Plaintiff finally argues that the Licensing Act amendments pose an impermissible
obstacle to the accomplishment of IRCA’s purposes and are thus conflict preempted. Plaintiff
here cites some of the differences between IRCA and the Licensing Act. For instance, the
Licensing Act creates strict liability for immigration-related “unlawful” and “unprofessional”
conduct—including an unincorporated entity having an owner engaged in the construction trade
in Utah and not lawfully in the United States. Plaintiff contends that this strict liability runs
afoul of IRCA’s scheme because an unincorporated entity subject to the Licensing Act can fully
satisfy all Form I-9 requirements of IRCA but still be subject to severe penalties under the
amended Licensing Act. (Dkt. 43 at 35-36.)
It may be true that an entity could comply with IRCA and still violate the Licensing Act
amendments—or any number of other Utah Licensing Act provisions. Plaintiff fails to carry its
burden to establish how this shows that the Licensing Act amendments are “a material
impediment to [IRCA] or thwart the federal policy in a material way.” Mount Olivet Cemetery

15

If requiring proof of an E-Verify self-check constitutes an unfair employment practice, it
seems that Plaintiff’s requirement that its would-be owners sign an Operating Agreement further
attesting they are lawfully present in the United States might also amount to the same.
32

Ass’n, 164 F.3d at 489 (citations omitted). On the record before it, the court can make no such
finding.
In contrast to the Arizona law at issue in Whiting, Utah’s Licensing Act amendments
regulate a different sphere than IRCA. The Licensing Act amendments require Utah
unincorporated entities engaged in the construction trade to ensure those allowed to become
company owners are lawfully in the United States, or face possible licensing sanctions. IRCA
penalizes employers who hire unauthorized aliens. Plaintiff has not identified any policy of
IRCA that is impeded by regulating who is allowed to become an owner of an entity licensed to
engage in the construction trade in Utah. There is no evidence before the court, for example, that
Congress made a reasoned determination in enacting IRCA to refrain from requiring in-state
entities to ensure that their owners are lawfully present in the United States. See Chamber of
Commerce v. Edmonson, 594 F.3d 742, 770 (10th Cir. 2010) (finding at preliminary injunction
stage that Oklahoma law requiring employers to verify status of independent contractors likely
was conflict preempted where Congress in enacting IRCA “intentionally excluded independent
contractors from verification obligations.”)
For these reasons, the court concludes that Plaintiff has failed to show that the Licensing
Act amendments stand as a material obstacle to IRCA’s policies and are conflict preempted.
CONCLUSION
Based upon the foregoing, the court concludes that federal law does not preempt the
Licensing Act amendments enacted as a result of S.B. 35. Plaintiff’s Motion for Summary
Judgment and Declaratory Relief on its preemption claim is DENIED.
Pursuant to Plaintiff’s stipulations at oral argument on its Motion, Plaintiff’s remaining
claims are also DISMISSED.

33

The Clerk of Court is hereby directed to enter judgment in Defendants’ favor on all of
Plaintiff’s claims and to close this case.
SO ORDERED this 17th day of November, 2014.
BY THE COURT:

Judge Robert J. Shelby
U.S. District Court

34