Employers Must Balance ITAR Compliance with Anti-Discrimination Laws
We’ve blogged before about national origin discrimination in the workplace and the consequences employers may face for violating anti-discrimination laws. Employers involved in the manufacturing or distribution of products involving the defense of the United States must also comply with certain federal regulations such as The International Traffic and Arms Regulations (ITAR), which restricts employment to U.S. persons on ITAR sensitive matters. As discussed below, complying with ITAR while avoiding discrimination can be challenging for some employers, particularly when the protected material involves digital data.
What is ITAR?
ITAR restricts the import and export of items and services related to the defense of the United States. The U.S. government requires all manufacturers, exporters, brokers of defense articles, and IT data to comply with the provisions of ITAR or face strict penalties. Examples of the types of articles falling under the extensive purview of ITAR include weapons, military hardware, explosives, rocket launches, combat vehicles, and technical data, to name a few. The Export Administration Regulations (EAR) involves the regulation of goods and services produced for commercial use that can also have a military purpose. EAR-regulated items include GPS, weather radars, and high-performance computers. In order to be ITAR compliant, an employer/manufacturer must register with the U.S. State Department’s Directorate of Defense Trade Controls. Once approved, the onus is on the employer/manufacturer to ensure and certify continued compliance with ITAR.
What is a “U.S. Person” As Defined Under ITAR?
U.S. Employers must be careful not to assume that only U.S. citizens are allowed to work on ITAR-sensitive matters. According to ITAR 120.15 and EAR Part 772, a “U.S. Person” is defined as the following:
• Any individual granted U.S. Citizenship
• Any individual granted U.S. permanent resident
• Any individual who is granted status as a “protected person”
• Any corporation, business organization, or group incorporated in the U.S. under U.S. law
• Any employee of the United States government
If an employer wants to hire an employee who does not fall into one of the above categories, there are several different options to explore. One such avenue is to have the employee or prospective employee become a U.S. citizen. If that is not a viable option, an employer can apply for an export license. With an export license, the employee would then be able to handle ITAR-sensitive material.
Obtaining an export license will take some work on the part of the employer, however, and could be time-consuming. A considerable amount of paperwork will need to be completed, and the employer should allow time for the government to approve or deny the application. Employees from any of the countries on ITAR’s “prohibited countries” list below are unlikely to be granted an export license.
What Countries are “Prohibited” by ITAR?
The U.S. Department of State maintains a list of “prohibited” countries under ITAR, which is amended from time to time. The current list of prohibited countries includes: Afghanistan, Belarus, China, the Central African Republic, Cuba, Cyprus, the Democratic Republic of Congo, Eritrea, Haiti, Iran, Iraq, Lebanon, Libya, North Korea, Somalia, Syria, Venezuela and Zimbabwe, Sudan, and South Sudan. There are certain exceptions, however, and export licenses may still be allowed for certain activity such as peacekeeping support operations, humanitarian efforts, and conventional weapons destruction.
What are the Penalties for Violating ITAR?
The consequences of violating ITAR are significant and potentially devastating to employers. ITAR violations can result in civil and/or criminal penalties. Civil penalties include fines of over $1 million per violation and debarment, which involves being prohibited from engaging in any future transactions subject to ITAR. Criminal penalties can include fines of $1 million or up to 20 years’ imprisonment as well as disbarment. Other consequences include being subject to further compliance oversight, the denial of certain licenses, and lost business opportunities.
ITAR Compliance Does Not Require Discrimination
While U.S Employers must comply with ITAR, they should be careful not to violate discrimination law in the process. ITAR does not excuse- and is not a justification for-employment discrimination. In 2018, the website “Law360” reported that the Justice Department had settled an employment discrimination suit filed by an individual alleging workplace discrimination at Clifford Chance US LLP, a multinational law firm.
The article reported the following in part:
Clifford Chance US LLP has agreed to pay a $132,000 penalty to resolve a claim that it unlawfully discriminated against non-U.S. citizens and dual citizens by refusing to staff them for a client project, the U.S. Department of Justice announced on Wednesday.
The department said there was evidence indicating that from March to July 2017, the U.S. arm of the London-based global giant had violated anti-discrimination provisions of the Immigration and Nationality Act, or INA, by terminating three employees and refusing to consider eligible job candidates for 36 document-review roles because of their citizenship status.
According to the article, the employer told investigators that it believed it was required to restrict a particular document-review project to U.S. citizens in order to avoid violating ITAR. The Justice Department, however, determined that the firm misunderstood its obligations under ITAR that the “the regulations did not excuse discrimination on the basis of immigration status or nationality,” according to the announcement. The law firm’s misstep, as it turns out, was due (at least in part) to its incorrect belief that it was limited to staffing U.S. “citizens” on the project when in fact the ITAR restrictions refer to “U.S. persons,” which by law includes not only citizens but, as discussed above, lawful permanent resident aliens, such as green card holders.
Other ITAR Considerations for Overseas Employers
U.S. based employers aren’t the only ones who must be certain to comply with ITAR. International corporations with overseas employees must also take steps to ensure compliance. This can be challenging in the internet age. In U.S. v. Microsemi Corporation, 140 F.Supp.3d 885 (D. Az. 2015), the plaintiff filed suit in the name of the U.S. government against his former employer, a manufacturer of microelectronic and display components for products used in military and commercial markets. The plaintiff initiated the lawsuit after his employer voluntarily reported that three foreign national IT employees located outside of the United States had access to servers located in California that contained ITAR-controlled information. The defendant had previously admitted to a “gap in IT systems that may have enabled their foreign national employees from Ireland, Israel and the United Kingdom to gain access to servers that contain ITAR–controlled information without authorization.” The plaintiff alleged that the defendant had violated the False Claims Act by causing its subsidiary to make false claims for payment for shipments of ITAR and EAR protected components. Although the court found that the plaintiff had failed to state a valid claim for relief and ultimately dismissed the case, an employer’s ITAR compliance can become a basis for litigation, which can be costly to employers even if they ultimately prevail in court.
Contact All Language Alliance, Inc. to translate technical and employment-related documents from any foreign language, including Chinese, Arabic, Korean, German, Japanese, French, Dutch, Farsi, Portuguese, Russian, Spanish to English to comply with ITAR requirements during cross-border e-Discovery.
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