Developing Legal Theory Allows DACA Recipients to Sue Under Section 1981

by Miles & Stockbridge P.C.
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It has long been thought that an employer may refuse to hire a foreign worker who: (1) is not currently authorized to work or (2) will require future visa sponsorship to work for the employer.  A new legal theory has developed challenging this traditional thinking. 

So far, the proponents of this developing legal theory have been beneficiaries of the Deferred Action for Childhood Arrivals (“DACA”) program. DACA beneficiaries (also known as “Dreamers”) have been granted temporary authorization to work, but their right to remain in the U.S. and work beyond the end of their temporary work authorization is uncertain, especially in light of the Administration’s recently announced termination of the DACA program. 

Lawsuits By DACA Beneficiaries Advancing This Theory

In at least two recent lawsuits, DACA beneficiaries who claim that they were not hired for internships with major U.S. employers due to their immigration status have alleged alienage discrimination in violation of 42 U.S.C. Section 1981 of the Civil Rights Act of 1866 (“Section 1981”).  Section 1981 is a civil-rights era statute that makes it illegal for employers to discriminate on the basis of race or alienage in the making and enforcement of contracts, including contracts for employment.  The plaintiffs in both of these cases have alleged that when they disclosed their status as DACA beneficiaries during the hiring process, they were eliminated from further consideration.  The employers have countered that they are within their rights to decline to hire anyone who may require future immigration sponsorship in order to be able to continue to work for the employer. 

In a similar context, several DACA beneficiaries recently sued a major bank, claiming that their applications for student loans and credit cards were denied because they are DACA beneficiaries.  The bank’s practice of denying loans and credit cards is being challenged as alienage discrimination under Section 1981 (as well as on other legal grounds).  The bank has countered that it is excessively risky for the bank to loan money to individuals who may not be able to remain in the U.S. long enough to pay it back. 

Important Lessons for Employers

While this is an evolving legal theory, it is important for employers to be aware of its existence and to recognize that DACA recipients (and possibly other foreign workers with time-limited employment authorization) may claim to have some protection from hiring discrimination under Section 1981.  Section 1981 has certain advantages for plaintiffs (including a longer statute of limitations and no cap on monetary damages) that may make it an attractive option for some plaintiffs and their attorneys.  We continue to believe that there is a strong legal argument to support an employer’s decision to refuse to hire an applicant for employment who will require future visa sponsorship, but we will be keeping an eye on this legal theory as it develops.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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