Firms Brace for Crackdown on Illegal Labor
By MIRIAM JORDAN
As a crucial hearing looms on a planned government crackdown on illegal immigrants in the workplace, many businesses are scrambling to figure out how they will cope with an expected loss of illegal labor.
A U.S. district court in San Francisco could decide as early as today whether the Social Security Administration can send out thousands of "no match" letters to employers whose workers' names don't jibe with their Social Security numbers. The notices would be accompanied by letters from the Department of Homeland Security outlining new penalties for hiring undocumented workers.
The program, if put into effect, is expected to pose tough choices for many business owners, particularly in industries such as agriculture, construction and food service, which rely heavily on illegal workers. Employers would be required to fire such workers once their status was exposed, or risk fines.
The Bush administration prepared the crackdown after Congress failed to pass an immigration bill that would have legalized the nation's estimated 12 million illegal immigrants. At least eight million illegal laborers are believed to work in U.S. jobs.
The work-site program was supposed to roll out in September with the mailing of 140,000 no-match letters to employers. But the AFL-CIO filed a lawsuit alleging the new policy could lead to discrimination against or firing of native-born U.S. workers and legal immigrant workers. The program was delayed when a federal judge in August blocked the new policy until questions about its legality had been addressed. The hearing that opens today is aimed at clarifying this.
The new program puts employers on notice that they can no longer look the other way regarding illegal workers. If an employer receives a no-match letter on a particular worker, the company has 90 days to certify that worker's legal status; otherwise, the worker's employment must be terminated. Companies that violate the policy would face what Secretary of Homeland Security Michael Chertoff has called "stiff penalties or sanctions" higher than the fines of up to $2,200 a worker in place today.
Already, many companies are bracing for a hit -- particularly small businesses that say their survival could be at stake. Those businesses say the new enforcement places a disproportionate burden on them, subjecting them to costly and time-consuming record keeping by reducing productivity even if only a handful of workers are affected. Some businesses in industries such as agriculture and construction are talking about shutting down or moving their operations abroad.
"The typical small company is not equipped to be the nation's immigration police," says Todd McCracken, president of the National Small Business Association, which represents about 65,000 small companies. "A small-business owner can't just give no-match letters to human resources to sort out."
In early September, the U.S. Chamber of Commerce and several trade groups representing small businesses that employ low-skilled immigrants joined the lawsuit. Among others, the United Fresh Produce Association, the National Roofing Contractors Association and the Association of Nursery and Landscapers allege the Department of Homeland Security failed to perform a financial-impact assessment, as required under the Regulatory Flexibility Act, to measure the impact of the new rule on small businesses.
"This is a hollow argument coming from businesses who want to avoid liability for employing unauthorized workers," said a Department of Homeland Security spokesman. "The rule does not impose an expense for employers."
In the $1.2 trillion construction industry, at least one-third of the work force is undocumented, according to an estimate by the Bureau of Labor Statistics. Industry experts believe the actual figure is much higher: Last year alone, nearly half of new construction workers were Hispanics who had arrived in the U.S. since 2000.
The impending crackdown generates everything "from concern to utter panic among roofing contractors," says Craig Silvertooth, director of federal affairs for the National Roofing Association, based in Chicago, representing 4,300 businesses. "There is no way to run your business if this goes forward."
In agriculture, about 70% of all workers are illegal immigrants, according to independent estimates, and an existing guest-worker program supplies less than 2% of the work force required each year.
Most illegal immigrants work for bona fide businesses and are hired and paid like other workers on the payroll. To get work, the immigrants normally obtain a fake Social Security card with a made-up nine-digit number. The fake cards are peddled in immigrant neighborhoods.
When the illegal immigrants are hired, their employers don't know whether the documents are authentic. A company thus hires workers, puts them on the payroll and withholds necessary taxes. The unauthorized workers, who receive a paycheck regularly, pay into Social Security but can't draw benefits.
Social Security has been mailing no-match letters for decades, but employers haven't been held accountable for workers who failed to address discrepancies. In fact, employers have been advised not to take any adverse action against an employee based exclusively on the letter. "There has been no definitive legal obligation to take action," says Angelo Paparelli, an immigration lawyer with offices in New York and Irvine, Calif., who is advising several concerned businesses.
"Employers have to be held accountable if they are given clear notice of the fact that they may be hiring illegal aliens," Mr. Chertoff said in announcing the new crackdown. Mr. Chertoff added that about 4% of the 250 million wage reports received by Social Security each year show no matches.
Maureen Torrey, former chairwoman of United Fresh Produce and a farmer in upstate New York, says she provides W-2 forms for all her employees and withholds taxes on their earnings. She has received no-match letters in the past: 375 of her 400 workers are Hispanics, and she figures some are in the U.S. illegally.
The new rule is pushing many farmers to consider extreme options. "You've got to comply," says Mrs. Torrey, who runs Torrey Farms in Elba, N.Y. "We move our farm operations to another country or just sell out." Some U.S. farmers have already been investing or subcontracting in other countries such as Mexico.
The owner of a small California manufacturer that has 120 employees and subcontracts for the U.S. government foresees having to fire about 15% of her work force. "Because of the role they play and the tight labor market, it is probable that we would go out of business," said the woman, who spoke on condition that neither her name nor that of her company be cited.
Some observers hope the legal challenge to the administration's latest enforcement efforts will revive congressional action on immigration. In the meantime, the policy could drive more immigrants to seek jobs in the off-the-books economy, where they have fewer legal protections from employment abuses.
Write to Miriam Jordan at miriam.jordan@wsj.com
Disponible en Wall Street Journal
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