Export Control HR Pitfalls To Avoid When Hiring
Hiring employees does not usually call to mind international trade compliance obligations. However, together U.S. export controls and anti-discrimination laws create a web that is overlooked or misunderstood by many types of employers of all sizes across many industries. Anti-discrimination laws prohibit unlawful citizenship status restrictions when hiring, and U.S. export controls prohibit disclosing controlled information to foreign nationals without authorization. Together, these law limit acceptable job descriptions and hiring practices.
The Most Recent Penalties
Failing to adhere to these limitations can result in enforcement actions, civil penalties, and reputational harm. For example, in the end of July, a large law firm and a legal staffing company settled with the Department of Justice (DOJ) for implementing a policy of excluding dual citizens and work-authorized non-U.S. citizens when recruiting and hiring temporary employees to staff a document review project. In short, the DOJ found the firm failed to interpret the requirements of the U.S. export controls found in the International Traffic in Arms Regulations (ITAR). The firm and company had to pay civil penalties and back-pay. The firm was also publicly rebuked by DOJ.
Get Ready for More Hiring
The need to adhere to these hiring limitations is more pertinent than ever. The labor market continues to become increasingly global, which means companies’ workforces include more foreign nationals. Moreover, many U.S. companies will likely need to rehire large numbers of their workforce when the pandemic resolves and workers previously laid off are needed again.
What Not to Put in a Job Description
In preparation for any hiring, we provide this brief job description guidance. An employer CANNOT include any of the following restrictions in a job posting, even when a job requires export control authorization:
Only U.S. Citizens
Only U.S. Citizens or Green Card Holders
Must present U.S. birth certificate
H-1Bs or OPT Candidates Preferred
Further, a job posting like the following is also likely to earn you unwanted attention from the DOJ:
To ensure compliance with U.S. export controls, please indicate your U.S. citizenship status in your cover letter.
You might be safer to include something to the effect of, but remember the acceptable posting also depends on other job and company factors:
To conform to U.S. export control regulations, applicant should be eligible for any required authorizations from the U.S. Government.
Candidate has capacity to comply with the federally mandated requirements of U.S. export control laws.
A Hiring Checklist
Because of the nuances in this area of law, we recommend a careful approach. Companies should ensure that personnel involved in recruiting, hiring, and staffing are up-to-date on the complex web of the U.S. export controls and anti-discrimination laws. The following checklist may assist in complying with these laws, and for specific guidance we recommend contacting counsel.
Does the position involve technology or technical data subject to ITAR or Export Administration Regulations (EAR)?
Does the position involve classified information?
If so, can the applicant be properly walled off from sensitive data until a license can be obtained? Or would it be feasible to wall off the person permanently?
Has the employment offer been conditioned on obtaining a license?
How long will it take to get a license? Can the company accommodate the length of time required to obtain the license (often a matter of many months)?
Additional Background Information
For fuller details on the terms of art and other legal concepts used in this blog, please see the below additional background information, which we had first provided in this blog.
Export Controls Restrictions
The State Department’s International Traffic in Arms Regulations (ITAR) and the Commerce Department’s Export Administration Regulations (EAR) prohibit disclosing controlled technical information* to a foreign person without proper export authorization. Disclosure includes any simple verbal or visual access to that information. A foreign person is defined as anyone who is not a U.S. citizen, a U.S. lawful permanent resident, or a refugee or asylee protected under U.S. law. For that reason, an employer is required to obtain proper export control authorization for foreign persons to access controlled technical information.
Depending on the nature of the technical information, obtaining the right export control authorization can be expensive and time-consuming. Moreover, the State and Commerce Departments might not grant the required authorization. The State Department has a presumption of denial for export licenses to countries listed under 22 C.F.R. §126.1(d)(1). In addition, once the foreign person is onboarded, and before the appropriate export authorization is obtained, the company must implement internal controls to protect against unauthorized electronic or visual disclosure of controlled information to that foreign person. Those controls could include passwords on file sharing sites and employee badge coding to limit access to certain areas of a factory. Those pressures lead some companies to seek out U.S. citizens for positions involving export controls and potentially violate anti-discrimination laws.
*A complete summary of the ITAR and EAR controls on technical information is beyond the scope of this article. ITAR Technical Data is defined in22 C.F.R. §120.10; EAR Technology is defined in 15 C.F.R. §772.1. As with many export control topics, the application of the regulations to the facts is complex, and the export control on any given piece of information varies case-by-case.
Under the Immigration and Nationality Act (INA) and Title VII of the Civil Rights Act of 1964, employers generally cannot make hiring, firing, recruitment, or referral decisions based on an employee’s national origin. One exception is that employers are not required to hire foreign nationals who require visa sponsorship (e.g., H-1B, etc.). Outside of that exception, employers can only request documents for the sole purpose of determining that the new employee’s status complies with export control laws to determine whether a license will be needed. That verification process must be separate from the decision to hire the employee.
An I-9 verification form can only be given to an applicant after a job offer has been made. Typically an employer will only see work authorization documents on the first day of employment.
An Exception No More
The interplay between export controls and anti-discrimination laws was often thought to be addressed by the bona fide occupational qualification (BFOQ) exception under Title VII. That exception permits certain national origin discrimination when necessary for specific, legally-imposed job requirements, such as in the performance of classified government contracts. Moreover, Title VII’s national security exception permits an employer to not hire an individual if the job is subject to any requirements imposed in the interest of the national security of the United States and the individual does not fulfill that requirement. The BFOQ exception, coupled with the national security exception, might lead an employer to believe it could decline to hire foreign national applicants based on the ITAR and EAR. Many companies have understood these exceptions to permit hiring “U.S.-only” to comply with export controls for decades.
Nevertheless, recent DOJ enforcement actions and guidance indicate that DOJ does not share that interpretation. Rather, the Department has rejected the application of the BFOQ and national security exceptions in cases where employers refuse to hire foreign nationals merely to comply with the ITAR and the EAR. In one case, DOJ investigated an employer’s decision to consider only U.S. citizens or permanent residents for positions requiring access to ITAR- or EAR-controlled information. The Department concluded that the company’s practice violated the INA’s anti-discrimination provisions. The employer paid a $44,000 civil penalty to settle the matter. In a statement accompanying the settlement, DOJ stated that the nationality restrictions were based on the employer’s “misunderstanding of the requirements” under the ITAR and the EAR.