KIPLINGER’S BUSINESS FORECAST

October 18, 2007

Employers Face More Confusion on Immigrant Labor

It's back to square one for companies -- with a long wait before any fix on immigration.

By Mark Willen

It will be at least 2009 -- when a new president and a new Congress are installed -- before there's a serious attempt to tackle the nation's illegal immigration mess. The recent court decision throwing out the Bush administration's plan to crack down on illegal immigrants just highlighted the problems and the divisions facing the U.S. The system is broken, but it'll take a genuine compromise, not hastily imposed rules, to fix the problem.

U.S. District Court Judge Charles Breyer imposed a temporary injunction on the Bush plan in large part because government records are simply inadequate to let employers do what was asked of them. The plan required employers to match employee names and Social Security numbers with those in federal government databases, but those databases contain a lot of errors. While the injunction is good news in the short run for businesses that employ migrant laborers, there's little prospect of finding a longer-term solution until after the 2008 election.

In the absence of new rules, the administration will keep the pressure on employers by raiding companies suspected of knowingly hiring illegals. It may also try to rewrite the rules to pass legal muster, but that would take time and may be more trouble than it's worth.

Meanwhile, employers must struggle with a maze of state laws that go in all different directions. In the first half of this year, 43 states passed a total of 182 laws. More than a thousand other bills await action when state legislatures meet, starting in January. Some new state laws crack down on employers and force them to rely on federal databases; others prohibit using federal databases because of their spotty record for accuracy. Some laws deny benefits to illegal immigrants; others bar officials from even asking about legal status. And some require local law enforcement to look for illegals, and others specifically bar them from doing so.

Some communities that headed in one direction are already having second thoughts. When towns in New Jersey and Texas and some states banned landlords from renting to illegal immigrants, they saw so many immigrants flee that revenues at local businesses plummeted, causing some to close. That prompted town lawmakers in Valley Park, Mo., for example, to repeal its tough rental ordinance. In other cases, such tough anti-immigrant rental laws have been struck down by judges, usually on the grounds that landlords can't be held responsible for deciding who is in the U.S. legally and who isn't.

Many communities are deeply divided, and hard feelings are starting to run high. Numerous Hispanic groups are fighting back against local ordinances, arguing that legal immigrants are being subjected to unfair discrimination based on their looks. That's unlikely to stop the proliferation of local and state laws, though. Many communities insist that the lack of federal action gives them no choice.

While the administration's plan isn't dead, it's on life support. The intention had been to send letters to any employer with 10 mismatches -- workers whose names and Social Security numbers on W-2 forms don't mirror those in the Social Security database. Employers would have had 90 days to straighten out the discrepancy or fire the worker. Those that didn't do either would have faced stiff fines and even criminal penalties if the government could have shown a pattern of abuse.

Responding to a lawsuit from an unusual coalition of business groups, labor unions, Hispanic groups and civil rights advocates, Breyer declared that the administration had failed to consider the cost to employers, especially small businesses, as current law requires. He also declared that the regulatory burden would be huge, that the government doesn't have a good enough database to ensure accuracy and that many legal immigrants would lose their jobs unfairly.