Where Employment and Trade Compliance Intersect—Protecting Your Company in a World of Dueling Enforcement Risks for Export Controls and Anti-Discrimination

The agreement with the DOJ requires the company to pay $365,000 in civil penalties, train its personnel on the INA’s requirements, revise its employment policies, and be subject to DOJ monitoring and reporting requirements. This is only the most recent instance in which the DOJ has investigated and settled charges of INA violations against companies that had instituted hiring procedures designed to support compliance with the company’s export control compliance policies. 

Concurrently with announcing the settlement agreement, the DOJ issued updated guidance titled “How to Avoid Immigration-Related Discrimination when Complying with U.S. Export Control Laws” (“April 2023 Guidance”). The April 2023 Guidance offers detailed expectations and “best practices,” which may be helpful to company compliance professionals. The enforcement action and April 2023 Guidance reaffirm the importance of seeking to reconcile export control and INA obligations in company compliance policies and procedures. 

INA Protections Limit Steps Employers Can Take in Hiring Decisions Aimed at Export Control Compliance
U.S. export control laws, specifically the International Traffic in Arms Regulations (ITAR), Export Administration Regulations (EAR), and civil nuclear export controls, restrict a company’s ability to export certain goods, software, technology or technical data to other countries or to non-U.S. persons (sometimes referred to as “foreign persons” for U.S. export control purposes). “U.S. persons” include U.S. citizens (born or naturalized), lawful permanent residents, and certain categories of refugees, and asylees. Foreign persons include those on visas that authorize work in the United States (e.g., H‑1B, L-1, TN, etc.) without lawful permanent resident status.

Releasing software or technical data/technology to a foreign person in the United States, including an employee, is considered a “deemed export” to that foreign person’s country of citizenship (and, in the case of the EAR, that person’s most recent country of permanent residence if different than citizenship). In the case of ITAR control, prior license approval from the State Department generally is required. In the case of the EAR, a license may or may not be required. For civil nuclear export controls, foreign nationals who are citizens of countries that are not on the Department of Energy’s general authorization list are not permitted to work in facilities housing export-controlled material under 10 CFR Part 810 (“Part 810-controlled information”) unless the Department of Energy issues an export control license to the company to permit that individual to have access to that information. Thus, not all foreign persons in the United States are categorically banned from accessing or receiving export-controlled material. Export compliance programs are expected by U.S. regulators to identify ITAR-, EAR-, and Part 810-controlled information and ensure that controlled software and information is not exported or released to foreign persons where a prior license requirement applies, unless such foreign persons have authorization from the appropriate federal agency (an “export license”).

An export license, if granted, will enable the employer to assign a non-U.S. person to receive export-controlled material. However, attaining an export control license for export-controlled technologies or software may not be possible under U.S. policy, or may require a prolonged and uncertain process.

Some jobs that involve ITAR or sensitive EAR-controlled information or Part 810-controlled information cannot be filled lawfully by certain foreign persons, and, depending on the foreign person’s country of origin and the nature of the export-controlled materials, export licenses may be subject to a policy of denial, or the practical likelihood of a federal agency granting an export license may be vanishingly small. Other jobs that require access to export-controlled software or technology potentially could be filled by foreign persons with work visas after receiving a license from the appropriate agency. However, in some circumstances, the company may determine that (a) the success of such a license is uncertain, and/or (b) the timeline for obtaining such a license would be four-to-six months or up to a year, while the need for an employee to fill the role is immediate.

The INA is a separate statute enforced by the DOJ and protects persons in the United States from hiring discrimination based on their citizenship, immigration or national origin status. (Title VII of the Civil Rights Act of 1964 also prohibits national origin discrimination by employers.) Companies engaging in restrictive hiring practices in violation of the INA may be subject to the civil penalties, liability for compensatory damages (e.g., back pay and/or front pay), a court order requiring hiring of the individual found to have faced discrimination, and/or other injunctive relief.

The April 2023 Guidance clarifies that companies may not limit hiring or recruiting based on citizenship or immigration status “unless required by a law, regulation, government contract, or executive order.” Further, it states that the “ITAR and EAR don’t contain employment or hiring requirements” and “do not require employers or recruiters … to limit jobs or recruitment to U.S. citizens, or workers with other citizenship or immigration statuses.” The April 2023 Guidance goes on to say that a best practice to avoid discrimination is not to “use the ITAR or the EAR as a reason to limit jobs to candidates with certain citizenships, immigration statuses, or national origins (for example, don’t limit jobs to U.S. citizens because the job involved accessing export-controlled items).”

Reconciling Export Control and Anti-Discrimination Compliance
The GM enforcement action and April 2023 Guidance offer practical steps that employers can take to reconcile several export control and INA obligations. In-house counsel and professionals responsible for export controls and employment compliance can support each other in these areas. Best practices include:

• Properly apply the export control definition of “U.S. person” in employment and recruiting. The definition of U.S. person goes beyond U.S. citizens and covers U.S. permanent residents and certain categories of refugees and asylees. The GM enforcement action and multiple other past precedents occurred in whole or in part because companies effectively treated permanent residents and refugees/asylees as foreign persons for export control purposes, did not allow for the possibility that they are U.S. persons in employment procedures, or unlawfully restricted the categories of documents employees could provide in completing the Form I-9.
• Do not explicitly limit jobs to U.S. citizens, unless that is a legal requirement. The DOJ Civil Rights Division has for many years stated that the INA does not allow jobs to be limited to U.S. citizens (except in limited cases where that is legally required, such as if the employee must hold a security clearance). Employers should avoid stating in job advertisements that export control regulations require applicants to have a certain national origin, citizenship, or immigration status, unless they have specifically determined that is the case. In other words, limiting jobs to certain nationalities in order to “play it safe” under the export control laws may actually increase the risk of violating anti-discrimination law.
• Do not limit options to demonstrate immigration status. As part of its export control compliance procedures, GM had required as a condition of employment that new hires who were not U.S. citizens provide an unexpired non-U.S. passport. The Form I-9 process allows for a wide range of acceptable documents for employees to establish their identity and authorization to work in the United States. Employees may choose which valid, legally acceptable documentation to present. It violates the INA for an employer to ask for more documents than necessary or insist on specific documents.
• Separate the I-9 and E-Verify Processes from the Export Compliance Assessment. The company had combined its I-9 process to verify authorization to work in the United States and its export compliance assessment to determine immigration status. The enforcement action and April 2023 Guidance describe why these are different processes with different purposes, and INA compliance generally requires that they be separated.

Assess whether licenses may be possible, but avoid assuming that a non-U.S. person will not be able to qualify for an export license. The April 2023 Guidance notes that non-U.S. persons may be authorized to receive exports of software, technology or technical data by the State Department (ITAR) or Commerce Department (EAR). This is also the case under Department of Energy regulations for Part 810-controlled information. Thus, employers can seek to address INA concerns by including assessment of license availability and timeline issues in their hiring processes. As noted above, in some cases U.S. policy prohibits a license. In other cases, a license may be theoretically available, but an employer may not know if the license will in fact be granted, or how long the issuance will take. The DOJ Civil Rights Division, however, takes the position that employers cannot substitute their judgment for that of the government in denying employment opportunities to candidates based on the candidate’s national origin, even if an export control license is needed for the position. Where a non-U.S. person applies for a position that requires access to software or technology for which a license is required under U.S. export control law, in-house or outside counsel can provide assessments of licensing feasibility and timing for company files. If a company has an immediate or imminent need for that new hire to perform export control restricted work, the employer can inform the candidate that the job is conditioned on obtaining an export license by a specific date and share the employer’s experience of how long the process usually takes. Employers also can note in job advertisements that successful candidates must be available and legally authorized to perform the job duties by a specific date (if that is in fact the case). By focusing on availability rather than national origin or citizenship, the hiring decision will be based on a neutral factor.

• Explain the reason that the employer is asking about immigration status. When employers ask applicants about their immigration status or citizenship in order to comply with export control assessments, the employer should clearly explain the purpose of the questions, the export control assessment and authorization process, and how the applicant’s responses will be used. Candidates otherwise may not understand the lawful reason for such inquiries, and candidates denied employment may be more likely to bring a discrimination suit.

It is important to note that INA compliance does not permit companies to fail to comply with U.S. export control rules. Companies also should be mindful of economic sanctions administered by the Treasury Department’s Office of Foreign Assets Control (OFAC), particularly when a prospective employee is a citizen of a comprehensively-sanctioned country, or is moving from such a country to begin employment. The GM enforcement action and April 2023 Guidance provide a reminder for companies to check with legal counsel who can advise on both export controls/sanctions and anti-discrimination compliance before implementing export control assessment procedures.