Can Small Business Survive the Immigration Debate?

Over the last 4 years leading up to the 2008 presidential election, the "immigration debate" has been increasing in volume almost exponentially. The attempts by congress to pass comprehensive immigration reform have failed despite fervent bipartisan efforts to address this very controversial yet important issue. However, under tremendous political pressure, the Department of Homeland Security (DHS) has announced new efforts to enforce existing immigration laws and state and local governments are passing new legislation that goes far beyond existing federal legislation. These new developments are putting intense and unprecedented pressure on employers whose livelihood depends on immigrant labor.

DHS intensifies workplace enforcement

Last August, The bureau of Immigration and Customs Enforcement (ICE), which is the enforcement agency, of the DHS published a new mandate requiring employers receiving "No-Match" letters from the Social Security Administration (SSA) to audit their I-9 records to confirm Social Security Number mismatches or note any discrepancies, and report back to the agency. The new rule also requires the employer to terminate employees who have been unable to resolve SSN mismatches within 90 days of receipt of the letter.

Though immediate implementation of these new directives has been delayed in the district courts due to questions surrounding "safe harbor" provisions for employers, the ICE remains resilient. According to Mary E. Previc, an attorney with the Keller and Heckman law firm in Washington D.C., The ICE is embarking on a "new campaign" of I-9 Inspections nationwide. Employers suspected of hiring undocumented workers are being issued a subpoena to produce an unprecedented amount of information including: entire payroll records, certified lists of employees and their employment records, and names of all I-9 preparers.

In addition to these new measures, DHS has increased its civil penalties an average of 25%. Effective March 27th Minimum penalties for non-compliance start at $375 per infraction. If convicted of knowingly or intentionally hiring undocumented aliens, employers on their first offence can be fined up to $3,200 dollars per illegal worker. For repeated violations, as much as $16,000 per incident can be assessed along with a 10-year prison sentence.

States filling the void on immigration reform

Because of the federal government's inability to pass comprehensive immigration reform, several states have recently passed legislation that requires employers to verity an employee's work eligibility electronically, through a federally administered computer program called E-verify. In a landmark case, a federal judge upheld a new law in Arizona which not only makes electronic verification mandatory for all employers, it also gives the state the authority to revoke a company's business license if found to have knowingly hired an illegal immigrant.

Under current federal law, employers are responsible for manually examining documents that prove both work eligibility and identity and document that information accurately on an I-9 form. However, participation in E-verify program is not mandatory. According to a recent report commissioned by the U.S. Customs and Immigration Service, "the data base used for verification is still not sufficiently up to date to meet the requirement for accurate verification, especially for naturalized citizens."

Despite of the inadequacy of this system, the judge's decision in the Arizona case has now set a precedent which will significantly embolden other states to pass similar legislation. Bonnie Gibson, an attorney with Littler Global, a law firm based in Phoenix remarked that, "it is likely that up to half of the states will follow Arizona's lead and will do it in this legislative session."

Employers find themselves in a difficult position

Employers in industries such as construction, facilities management, and agriculture who depend greatly on the availability of the immigrant workforce find themselves "caught between a rock and a hard place". Many small businesses just can't afford to turn away immigrants, who are often the only ones able and willing to fill manual labor positions.

I participated in the E-verify program when I was a hiring manager in the Poultry industry. Despite paying prevailing wages, offering excellent benefits, and intensive recruiting efforts extending to a 60-mile radius, we would only seem attract Mexican and Guatemalan immigrants. I found very few US citizens who were willing to work in poultry processing.

About 90% of the workers I hired and processed through the verification system received a "tentative non-confirmation" notification which states that the system was unable to verify their work authorization or their SSN. By law I had to hold their position for 10 days to allow them time to correct any discrepancy. While most individuals receiving these letters never returned, about 15% appeared to have legitimate authorization but their name differed slightly on the "list A" and "list B" documents they presented. I have seen several cases were an issuing authority such as SSA had juxtaposed Hispanic surnames which triggered the non-confirmation. In other cases I have seen eligible employees adversely affected by this program because their information had not been updated in the database.

To keep the plant from grinding to a halt had to rely on two different temp agencies and bus workers participating in welfare-to-work programs in from a city 60 miles away.

As part of a large corporation, we participated in the E-Verify system out of "good faith" but the administrative burdens that resulted were excessive. If we had been an independent small business and were required by law to participate in the system in its present form, we would not have survived.

If more states continue to pass legislation requiring employers to participate in the federal E-verify program, a program which the government admits is inadequate, it will make it virtually to impossible for small business in key sectors of the economy to survive. Tighter enforcement in the workplace will backfire unless it is counterbalanced by an increase in the supply of legal workers to meet the demand. Since only the Federal government has the power to "increase" the supply, local governments, no matter how well-intentioned, could do irreparable harm to an economy that is already facing recession.