Refresher: How to Comply With U.S. Export Controls and Anti-Discrimination Laws When Recruiting and Hiring Foreign Nationals
The scenario happens all the time:
Your engineering department has identified a need for more personnel who will work with export-controlled information. Management has approved the hiring, and your Human Resources manager has drafted the job posting.
What could go wrong? Export controls and anti-discrimination laws require employers to navigate an often-overlooked fine line when recruiting and hiring foreign nationals for positions involving export controlled information.
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.
Under somewhat similar facts, a 2016 DOJ guidance letter informed a U.S. law firm that it is not permissible to discriminate against foreign persons merely because a job may require compliance with the EAR or ITAR. The Department stated that, although the ITAR and EAR distinguish between U.S. and foreign persons, they do not impose requirements on hiring and employment. Instead, if the foreign person’s job requires access to ITAR-controlled technical data, “ITAR requires that employers obtain export licenses” for such persons.
And in a 2018 settlement with a major international law firm, DOJ found that the firm “unlawfully restricted its staffing” based on citizenship status, in violation of the INA. The firm had excluded otherwise-qualified non-U.S. citizens and dual U.S. citizens from positions involving the review of documents containing ITAR-controlled technical data. In announcing the settlement, the Department stated that the unlawful restrictions were based on the law firm’s misunderstanding of the requirements of the ITAR. The firm paid a $132,000 civil penalty to settle the case.
The Fine Line
These recent cases clearly indicate how DOJ interprets the fine line between anti-discrimination laws and export controls: employers must consider all work-qualified applicants for an ITAR-or EAR- related position. And if the employee is a foreign national, the company must obtain the appropriate export control authorization. Additionally, employers are not required to sponsor foreign nationals for visas.
But what happens in the case where the appropriate authorization or clearance cannot be obtained? Each case is fact-specific, but a solution might be to clearly condition a job offer on obtaining the appropriate work authorization from the applicable agency (and also passing of a background check or any other prerequisites). Regarding the State Department’s presumption of denial for persons from the so-called “126.1” countries, the employer could consider explaining that the position is subject to policies and procedures set forth by the State Department and applicants who do not meet such requirements will not be eligible for the position.
Since ITAR and EAR restrictions are not considered to be a BFOQ requiring U.S. persons only, it is not permissible to restrict hiring based on citizenship or national origin merely because the job requires export authorizations. Nor is it permissible to use the candidate’s immigration documents to make hiring decisions based on citizenship or national origin in such situations. Thus, even when the job requires export control authorization to disclose ITAR or EAR information to foreign nationals, the INA does not allow an employer to include any of the following restrictions in a job posting for a position involving ITAR or EAR data access:
Only U.S. Citizens
Only U.S. Citizens or Green Card Holders
Must present U.S. birth certificate
H-1Bs or OPT Candidates Preferred
In fact, posting a job with these types of restrictions risks getting you into all sorts of trouble. First, DOJ’s Immigrant and Employee Rights Section (IER), which enforces the INA, is actively conducting investigations of employers who do so. Moreover, an enforcement action can carry additional organizational risk, such as reputational risk. DOJ is not shy about publicly shaming companies as part of their enforcement actions.
Similarly, if an employer rejects an application (or even restricts the scope of potential assignments based on that individual’s answers on citizenship or national origin), the employer may be engaging in citizenship status discrimination. Even asking questions on citizenship or nationality can lead a disappointed applicant to allege discrimination, even where the applicant was rejected for permissible reasons. Those circumstances can also prompt IER investigations, and cause reputational harm.
Compliance and Risk Management
In summary, we recommend ensuring that personnel involved in recruiting, hiring, and staffing are up to date on the current state of the complex intersection of the U.S. export controls and anti-discrimination laws.
The following checklist may assist your company in ensuring it complies with anti-discrimination laws while hiring for positions involving U.S. controlled exports:
Does the position involve technology or technical data subject to ITAR or EAR?
Does the position involve classified information?
Can the applicant be properly walled off from sensitive data until a license can be obtained?
Has the employment offer been conditioned on obtaining a license?
How long will it take to get a license?
Exporters of technology requiring ITAR and EAR licenses are encouraged to contact counsel when trying to navigate these tricky situations.