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1006 HR Magazine: Trouble on the Hiring Front

By Susan Ladika   10/1/2006

HR Magazine, October 2006

Vol. 51, No. 10

A compliance battle over illegal workers is turning up the heat on all employers, even those who try to comply with the law.


Strawberry and tomato grower Tommy Brock can barely hide his amazement. For decades his family has been hiring Mexican workers, relying on the Social Security cards and other documentation they present as proof that they are eligible to work at his Plant City, Fla., farm. Brock says government agencies have used those same documents to issue workers everything from driver's licenses to food stamps.

But now, with illegal immigration becoming the subject of massive government debate and with foreign workers coming under increasing scrutiny, the onus may be falling on employers across all sectors to ensure that the documents their workers present are legitimate.

Each year, Brock hires up to 130 workers, which requires collecting and copying their Social Security cards, work visas and green cards, then filling out I-9 forms to verify each person's eligibility for employment. "I haven't hired anybody without doing all the proper paperwork for over 15 years," says Brock, president of the Florida Strawberry Growers Association.

But there's currently no widespread, reliable system in place that Brockor countless other employerscan use to see if the documents they receive are legitimate.

"People running a business aren't in the business of trying to figure out if a document is real or fabricated," says Marlene Colucci, executive vice president for public policy at the American Hotel & Lodging Association in Washington, D.C.

Rejecting a would-be worker because his documents don't seem in order could expose the employer to a discrimination investigation or a lawsuit if the worker's paperwork is indeed valid, Colucci says. "We have to do the best we can with the tools we're given."

Yet some complain that those tools aren't up to the job and that the government's system for handling the hiring of foreign workers is sometimes so slow and cumbersome that it makes compliance difficultwhile at the same time the Department of Homeland Security (DHS) is imposing stiffer penalties and generally cracking down on businesses that hire illegal workers.

New Scrutiny

Previously, if a company was caught employing illegal immigrants, civil penalties were imposed, and some employers shrugged them off as the cost of doing business, says attorney David Whitlock, who heads the immigration business practice at Fisher & Phillips LLP in Atlanta.

But all that changed when the DHS recently began imposing criminal charges on suspected violators, Whitlock says. "The change in the Department of Homeland Security enforcement strategy sent shock waves through the employer community."

One case that grabbed national attention was the arrest in April of seven managers working in the United States for

IFCO Systems, a logistics company based in the Netherlands. The managers were arrested on charges of conspiracy to transport, harbor and employ illegal immigrants for private gain. Nearly 1,200 illegal workers were rounded up in raids on IFCO's U.S. facilities.

Following the arrests, DHS Secretary Michael Chertoff said the company had repeatedly ignored letters sent from the Social Security Administration stating that Social Security numbers provided by employees didn't match up with the agency's records. More than half of IFCO's employees showed up on the mismatch list.

Until the arrests, Whitlock told clients to ignore mismatch letters because the laws on employment of illegal immigrants were rarely enforced. To comply, employers had only to show that the documents they received from applicants "reasonably appeared genuine on their face," Whitlock says, which simply created "a tremendous cottage industry for counterfeiters."

But now the prospect of criminal charges is upping the ante for all employers and creating new challenges, says Charles Kuck, managing partner of Kuck Casablanca LLC in Atlanta and vice president of the American Immigration Lawyers Association. "No employer in America has I-9s that are 100 percent correct," he says.

A Crop of Illegal Workers

While some employers insist they never knowingly hire illegals, others admit they try their best to avoid doing so but are never quite sure whose paperwork is real. Still others say they have no choice but to hire illegal immigrants because government bureaucracy makes it too cumbersome to try to obtain visas. And all admit that in nearly all industries there are a few employers who intentionally flout the law and exploit workers in an effort to save money.

Brock, a third-generation Florida farmer, says finding U.S.-born workers willing to toil in the hot midday sun has been a challenge for many years. Mexican laborers have filled the void; some have worked for him for 15 or 20 years, yet he still has no way of knowing if their documentation is legitimate. He does know that they provide reliable, much-needed hands to get the crops in on time.

And other labor options are difficult to stomach. For example, while the H-2A labor certification programthe certifications are often called H-2A visasexists to bring in farm workers, "in reality there are almost no employers who use the program. It's just too complicated," says John Young, retired executive director of the New England Apple Council, which represents 220 fruit and vegetable farmers in New England.

Those who use the program must first prove that there are no domestic workers available to perform the work, and that employing foreigners won't adversely affect wages and work conditions.

With farming, time is of the essence, yet H-2A applications can face serious delays. Young says farmers typically submit visa applications 50 days before they are needed; he cites one case in which an H-2A request was submitted in February for jobs that began in March, but the farmer didn't receive a response until July.

The only way to expedite the decision is to pay an extra $1,000 "premium processing fee" to the U.S. Citizenship and Immigration Services (USCIS), which will then accept or reject the visa application within 15 days. In any other country, says Young, "they would call it corruption and graft."

Employers who go the guest-worker route (via the H-2A program) not only have to pay the current wage of $9.16 an hour but also have to pay transportation costs from the workers' home countries and provide free housing, Young says, adding $2 to $3 an hour to employment costs.

Yet cutting labor costs is not generally the reason that many farmers hire workers whose paperwork may or may not be legitimate, Young says. In fact, employers pay into the Social Security system for all workerseven if their documentation is false. The reason farmers go outside the H-2A program, he says, is "to get away from the bureaucracy."

The Hospitality Industry

It's by no means just agriculture that struggles with visa concerns. Cindy Clark, director of human resources at The Broadmoor, a resort in Colorado Springs, Colo., says each year the resort hires seasonal workers under the H-2B visa programwhich is designed to bring in nonagricultural, nonimmigrant workers for temporary employment.

Beforehand, resort personnel recruit intensely among high school and college students, at job fairs, among former military personnel, and via the Internet and television. Yet the efforts "don't produce enough employees for our seasonal needs," Clark says.

One attempt to fill 300 positions resulted in two responses from U.S. workers. The resort now brings in workers from Jamaica, but "I've been at The Broadmoor 11 years, and we've never been fully staffed," says Clark, who was among a small group that met with President Bush and top White House officials in March to discuss immigration reform.

Staffing challenges like those at The Broadmoor are likely to increase in the future. The hotel industry employs 1.8 million people, according to the U.S. Bureau of Labor Statistics, and will need 300,000 more by 2014.

But it has already become harder to fill entry-level positions like servers, housekeepers and groundskeepers for Tonda Tan, director of human resources at Amelia Island Plantation in Amelia Island, Fla. To meet its needs, the resort tries to bring in about 300 seasonal workers each year using the H-2B program.

The first year the resort tried to hire foreigners, it was unable to because the H-2B visas for the year had already been used up. The government issues 33,000 visas for workers from Oct. 1 to March 30, and 33,000 more from April 1 to Sept. 30. (Returning workers aren't counted against the caps.) This year, the summer visas were used up by April 5.

The resort starts filing its paperwork on the first available datewhich is 120 days before the workers startto bring in employees from Barbados. The organization works with that country's Ministry of Labor and Social Security. "This is not necessarily a low-cost alternative," Tan says.

Finding a workable labor solution also is a major concern for the National Restaurant Association, based in Washington, D.C. The restaurant and food services industry employs 12.5 million people, making it the nation's largest private-sector employer, says spokeswoman Chrissy Shott. According to the Department of Labor (DOL), 1.6 million immigrants work in the industryalthough there is no differentiation between legal and illegal immigrants. By 2016, the DOL projects the industry will grow by 15 percent, while the workforce will increase by only 10 percent.

Despite the current talk of cracking down on illegal immigration, "it's not an option just to send everyone home," Shott says. (For more information, see " The Economic Impact of Illegal Aliens".)

Documentation Delays

In addition to facing sometimes severe shortages of workers that constitute a serious business issue, some employers also face a dilemma regarding documentation.

Employers must accept an applicant's documentation if it appears valid, but it could be a month before the Social Security Administration looks at the paperwork and determines if there are discrepancies.

The agency needs "to determine more quickly if people are who they say they are," Shott says.

Even the Basic Pilot Programa system that allows registered employers to verify workers' employment eligibility online and is run by the DHS, the Social Security Administration and the USCIShas come under fire for being cumbersome and fraught with delays.

In 2005, the Government Accountability Office (GAO) cited the system for its inability to detect identity fraud and for a lack of employer compliance with program rules. The GAO also noted delays caused by DHS employees in entering information into the database.

At the same time that government delays in document confirmation are making legal compliance more difficult, federal agencies are ramping up enforcement. For example, in June the DHS proposed toughening regulations surrounding mismatch letters, giving employers a narrow window of time to correct the concerns raised, or run the risk of being penalized.

Risks Don't Outweigh Rewards

No one denies that there are some employers who have no intention of complying with employment rules. How many such employers exist is hard to determine. Whitlock estimates they account for about one-third of the illegal workforce.

For some unscrupulous employers, the potential financial rewards may appear to outweigh the risks. Seth Borden, an attorney with Kreitzman, Mortensen & Borden in New York, says some employers believe they can hold immigrants' illegal status over their heads, paying them under the table at less than minimum wage, paying no taxes and ignoring other employment laws.

But such a tactic can be a legal and financial time bomb. Agencies such as the DOL's Wage and Hour Division and the Equal Employment Opportunity Commission hold that illegal immigrants still are afforded protections under the law. So if an employer pays someone $3 an hour for 50-hour workweeks and it comes to light, the employee would be due back pay at minimum wage, plus overtime, Borden says. "Employers who do it are accruing huge exposure."

That fear keeps many employers on the straight and narrow, says Brock, the Florida farmer. "There's nobody I know who would think about taking that chance." He says migrant organizations ride around the fields, informing workers of their rights. Information on minimum wage, workers' compensation and the health risks of working with chemicals are posted on bulletin boards. The Wage and Hour Division usually checks Brock's books each year.

For employers looking to demonstrate their compliance, Kuck suggests doing a self-audit of I-9 forms, which can indicate a good-faith attempt to abide by the law. But the check should be done for everyone, not just for those of a particular ethnic group. He also advises clients to make copies of whatever documentation they accepted for an individual's employment, such as a Social Security card or work visa.

Whitlock suggests that companies get rid of any individuals who appear on the mismatch list and are unable to rectify the situation within a reasonable time frame, which could be as little as a week. Employers should start preparing now for a DHS crackdown and stricter rules, he says, "even if it means having to pay more. Competition for legal workers is going to be fierce."

Susan Ladika has been a journalist for more than 20 years, working in both the United States and Europe. Now based in Tampa, Fla., her freelance work has appeared in such publications as The Wall Street Journal-Europe and The Economist .
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The Economic Impact of Illegal Aliens

Although the economic impact of illegal immigrants is the subject of heated debate, experts on both sides of the issue agree that sending the estimated 11 million to 12 million individuals packing would have serious repercussions on the economy.

If illegal immigrants in the United States were deported, "we would face an economic crisis," says Daniel Griswold, director of the Cato Institute's Center for Trade Policy Studies in Washington, D.C. "A large swath of the U.S. economy would have a difficult time finding labor."

The reasons are manifold. In part, the country must contend with an aging workforce, while experiencing declines in the percentage of those in the 16-to-24 age bracket. At the same time, America's population is becoming better educated, so many turn their backs on low-paid, low-skilled jobs.

Illegal immigrants typically compete for jobs against Americans who lack a high school diploma. Griswold says half of U.S. workers in the 1960s had no diploma, while today it's 10 percent. "This is great news, but it means 90 percent of Americans are qualified for higher forms, more skilled forms, of work."

Research by the Pew Hispanic Center found that illegal immigrants accounted for nearly 5 percent of the U.S. labor force in March 2005. They represented nearly one-quarter of all farm workers, 20 percent of construction workers, and 17 percent of leisure and hospitality employees.

Professor Barry Chiswick, head of the economics department at the University of Illinois at Chicago, who testified on the topic of illegal immigrants in the workforce this past spring before the Senate Judiciary Committee, says these lower-skilled illegal immigrants drive down wages. If they no longer had a presence, wages would rise, drawing back those who have dropped out of the workforce, such as students and those with less education.

Employers could make adjustments. For example, farmers could rely more on mechanization and less on manual labor for harvesting crops. Although wages and product prices likely would rise, the economy would adjust, Chiswick says. "It's not that the economy would fall apart."

Chiswick also says low-skilled illegal immigrants pay less in taxes than the fiscal burden they impose on resources such as medical care, education and government transfers.

But Griswold maintains that illegal workers pay between $7 billion and $10 billion annually into Social Securitymoney they never collect. "This is just gravy for the Social Security Administration."

Michele Waslin, director of immigration policy research at the National Council of La Raza, a Latino advocacy group in Washington, D.C., says illegal immigrants also pay sales taxes and possibly property taxes. And she predicts that legalizing their status would have a huge impact on the economy. Once people are able to come out from "the shadows," she says, they could spend more money on houses, cars and education.

A 2004 study by the National Association of Hispanic Realtor Real Estate Professionals found that nearly 175,000 households of undocumented workers had the wherewithal to buy homes but lacked access to mortgages that could make home ownership possible.

The study estimated that these individuals could purchase $44 billion in homes. Frances Martinez Myers, chairman of the realtors association, estimates that figure would be $60 billion today.

Some financial institutions have begun opening their doors to undocumented workers. Immigrants from Mexico and several other Latin American countries can sign up for an identification card, known as a matricula consular, at their consulates. Dozens of financial institutions accept them, allowing the holders to set up bank accounts and apply for credit cards and car loans. With an individual tax identification number from the Internal Revenue Service, holders also can apply for a mortgage.

Bank of America began accepting matricula consulars in 2002, says spokeswoman Diane Wagner. By 2004, the bank had opened more than 1 million accounts for holders of such cards.

Myers says such products are essential because illegal immigrants aren't going away. "The reality is they're here, and we're not sending 12 million people back home."

Susan Ladika