Industry Sits in Crossfire Over Immigration Reform Issue

Mon August 07, 2006 - National Edition
Giles Lambertson

Alan White sits squarely in the middle of the immigration reform issue, which has sparked debate in Congress for two years and is expected to result in a new law by the end of this year or the beginning of the new congressional session.

The debate has raised hopes in the construction industry that a better delivery system for immigrant help is in the offing. It also has highlighted how responsibly — or irresponsibly — contractors and companies are dealing with aliens.

White is president of Mid-Tex of Midland, a construction and retail company that has numerous Hispanic employees, as do nearly all the regional construction firms in this border state. Midland sits a short drive up Interstate 20 and just 150 mi. from the Mexican border that is crossed illegally each year by more than a million people.

White also is president of the West Texas Chapter of Associated General Contractors (AGC), so his view of the immigration issue is as broad as the region he calls home.

“There has to be a better way to document who’s doing what,” White said in late July from his office during a lull in debate on Capitol Hill in faraway Washington. “Some type of reform should make it illegal for anyone wanting a job to present himself as someone else, and make it easier for an employer to verify who he is.”

White thus summarizes in two sentences the heart of the immigration workplace conundrum: how to create a documentation process that (1) effectively and without bias weeds out “illegals” who apply to work for a construction company and (2) gives contractors confidence in the identity and status of legal immigrants they do hire. The existing hiring process does neither.

The national immigration debate ranges wide and has several focuses, including border and national security, a guest worker program, immigrant rights, English as the national tongue and a practical naturalization policy, as well as workplace integrity.

The construction industry’s general contractors and subcontractors are near the center of the conversation because their field of labor particularly attracts immigrants. Risky hiring decisions are made every day in the industry’s employment offices.

Approximately 7 million people work in construction, according to AGC data, and another 180,000 are expected to enter the industry each year over the next decade. American-born labor can’t meet that projected need. Hence, the industry is vitally interested in a thorough overhaul of the country’s outdated immigration policy to ensure a workforce will be there in the future.

An unpopular solution advanced early in the debate in Washington was a general amnesty for the 7 to 11 million undocumented aliens already in the country. The uproar that followed condemned any legislative moves to reward illegality with a free pass. A systematic legal re-entry procedure is now proposed as well as a new guest worker program.

Most construction industry associations favor such reforms as a way to let illegals enter the American workforce. A well-organized guest worker program appeals to contractors because it lets an immigrant work legally for an extended period, thereby giving his employer a better shot at getting some return on his training investment. Key to any hiring system acceptable to contractors is that the process must let off the hook without egregious penalty any employers who unwittingly hire illegal immigrants.

“The problem is that it is too easy for immigrants to get a [fraudulent] Social Security number,” White said. “We should blame the employer for that? That’s not right.”

Guest workers are not the most urgent issue; the immediate dilemma for employers is hiring short term workers from a pool of immigrants who are awash in tainted documents, such as bogus drivers licenses, Social Security numbers that belong to someone other than the person presenting them and forged immigrant cards and papers.

The dilemma is made worse for honest employers who comply with hiring rules and find themselves undercut by employers who don’t comply. Knowingly hiring an illegal immigrant is a simple cost-cutting move for an unethical employer because an illegal worker will work for less just to have a job. Thus, the competitive advantage goes to those who don’t play by the rules.

Paid quietly in cash, these undocumented workers subsequently pay no taxes and contribute only to an underground economy. That also drives up costs of public services — for employers and everyone else — because the illegal workers don’t contribute anything.

“I would love to see it changed,” White said of the furtive element he sees operating in the industry. “I would love to see everyone paying taxes. It will raise job costs, but also help the economy.”

The Texas builder believes a more accountable system of hiring might increase some project costs by 10 to 15 percent, perhaps as much as 25 percent when Federal Insurance Contributions Act (FICA) and taxes are counted. But so long as the cost is the same for everyone, it doesn’t matter. It follows that contractors employing undocumented workers and taking unfair advantage of their industry rivals do matter.

White questions whether it is inadvertent when, for example, an employer is found with 20 laborers and then pleads ignorant after government investigators come calling. “He didn’t know? That’s pretty blatant.”

Homebuilder Compliance Questioned

Mid-Tex contracts both residential and commercial construction jobs, so White competes with contractors in both fields. He has come to believe illegal hiring is more rampant in residential building.

“On the commercial side, compliance is very high,” he said.

White will not say the same for the other building segment. He believes most of the noncompliance there is willful.

“You can’t be stupid and a house builder at the same time,” he said. “They know what’s going on. They want to keep costs low and sell that house to Mr. and Mrs. Jones and they use whatever means to keep the price down. It’s pretty flagrant.”

Dave England, a general contractor in the Philadelphia, PA, area, said he believes that home builders in his region of the country generally comply with immigration laws. England is president of Rouse/Chamberlin Homes. The Exton firm has built approximately 2,000 homes in the area since 1978.

England said his firm subcontracts construction of houses to a variety of local builders; therefore, he is fairly distant from actual hiring of labor for individual projects. However, England said he assumes the presence of a sizeable immigrant pool in the area “does have an impact on their labor decisions.”

“The majority of them are going to try to be compliant,” he said.

England added that Rouse/Chamberlin has worked with a relatively small number of subcontractors for years and that the close working relationship with them “might color my assessment of the situation. But I think they have figured out how to do it legally.”

England didn’t volunteer the names of the subcontracting builders. “I suspect they are not interested in talking about this,” he said.

However, Associated Builders and Contractors (ABC) Communications Director Wade Newton said homebuilders who knowingly hire illegal immigrants are in the minority.

“The overwhelming majority of the industry is law-abiding. And it should be noted what a vocal role the ABC has had in calling for reform,” he said.

Agents with the Immigration and Customs Enforcement (ICE) are cracking down on unethical employers as the immigration issue comes to a head nationally. This year, ICE already has arrested approximately twice as many employers of illegal immigrants as it arrested in 2005. Among those caught up in recent sweeps were a framing company in Arkansas with 27 suspected illegal aliens on the payroll and a Kentucky homebuilder and its subcontractors. Several people already have pleaded guilty in the latter case.

Good Faith

The 1996 Illegal Immigration Reform and Immigrant Responsibility Act introduced a “good faith” defense for employers to protect them in any inadvertent hiring of an illegal immigrant. Some of the legislation now being considered also contains the “good faith” clause, which is insisted upon by employer associations, including AGC and ABC.

Yet what constitutes “good faith” on the part of an employer is not easily stipulated. The 1996 bill said “good faith” is an acceptable defense for an employer only if a violation is not found to be part of a wider pattern or practice of noncompliance. In other words, good faith is a judgment call by a government investigator.

“There is no concrete definition of ’good faith,’” said David C. Whitlock, an attorney of Fisher & Phillips LLP, an Atlanta firm. Whitlock specializes in immigration issues and travels the country dissecting the issue. He is the featured speaker in an audio conference sponsored by AGC on Aug. 23, a conference on “Immigration Compliance: How to Stay out of Hot Water.”

“There is some tension here, even for the well-meaning employer, because of the nebulous standard of truth” in the law, Whitlock said.

Whitlock added that some of the tension is apt to remain after reform, regardless of the form it takes, because he doesn’t see the hiring process being substantially altered.

“The paperwork end is not going to change much at all,” he said. “Nothing I see suggests to me that we will scrap the system we have.”

That means the Employment Eligibility Verification — the I-9 form — is still going to be a central part of the hiring process. More of the verification might be done online, but the routine will not vary appreciably.

Hiring of an immigrant typically means a sit-down meeting between an employer and the job applicant to fill out the various sections of the I-9 form. Whitlock suggested some guidelines:

• The entire form is supposed to be completed on the “day of hire” but Whitlock specifically recommends that it be filled out before any work commences.

• An employer should scrutinize documents offered by the immigrant, always letting the prospective employee choose which documents to submit.

• Section 2 should be completely filled out in the first meeting. The law allows three days, but Whitlock counsels against delay.

• Sign, date and file the completed form before the new employee has his first workday.

• An employer should subsequently self-audit the entire job application to catch and correct any deficiencies.

Some employers have run into trouble because they photocopied documents submitted by an applicant for identification. When the copied documents later were examined by immigration officials and determined to be fraudulent, the employers suffered legal ramifications for unwittingly keeping around the evidence of fraud, which increases the risk of government fines and penalties.

Whitlock said I-9 form photocopy rules are ambiguous and he suggested a middle road for employers: “Save and use the photocopies for a self-audit but then toss the copies before a government agent audits the file.” He observed that immigration officials have more expertise in identifying bogus documents and can detect what an employer normally cannot, thus putting at risk an employer who indeed hired in good faith.

The immigration attorney said he doesn’t have a good feel for how many construction contractors and subcontractors are playing by the rules and how many aren’t. He suspects, however, that it is a function of size.

“I hate to give a waffling answer,” he said, “but it depends upon how big you are.” Whitlock said the small contractor who most mornings drives to a convenience store parking lot to pick up a few day-job workers “doesn’t care about complying at all. He is flying under the radar.”

“But the major construction companies are going to try to comply because they will be bidding on major projects including government contracts,” he said, noting that big contracts are a huge incentive to comply. “Large general contractors will want their subcontractors to comply, too.”

Compliance Blues

William J. Olmo III knows something about the rigors and hazards of compliance. Olmo is general manager of Fedco Construction of Santa Rosa, CA, and a board member of the American Subcontractors Association (ASA).

A dozen years ago, Olmo was with another company that got caught up in the government’s compliance bureaucracy. That firm had been diligent in trying to hire only documented aliens, Olmo said, but one day company officials received an invoice of complaints from the former Immigration and Naturalization Service (INS).

In the resulting communication, Olmo found little actual interest on the part of the government to locate the employees who were of deficient legal status. Rather, he said the government’s focus seemed to be on collecting a sizeable financial penalty from the company because of overlooked unchecked boxes in the routine paperwork. Olmo said the company eventually gave up trying to prove its good faith efforts and settled out of court, paying a substantial fine.

“I took away a healthy fear of the process from that experience,” Olmo said of his earlier run-in with INS investigators. Since then, immigration offices have been repositioned and renamed and their procedures retooled, but Olmo said he’s not yet convinced much has changed in the attitude the agencies have toward employers.

“It is the fairness factor: Do we want to stop the illegal hiring, or just punish employers? I was told a kinder, gentler enforcement process had started,” he said, “but it sounds like maybe they’re moving back to the good old days.”

It might be a little of both. Jay Ruby is another immigration attorney in a firm with an Atlanta headquarters — Ogletree, Deakins, Nash, Smoak & Stewart, PLC. He also is creator of a Web site, Ruby suggested that a combination of new regulatory agency procedures and congressional law will alter the oversight and routine of hiring immigrants, yet probably not make it much easier for employers.

“We’re going to get some kind of reform and it’s not going to be enforcement only,” he said, alluding to the House of Representative’s bill that concentrates on deporting illegal aliens and sealing the U.S.-Mexico border. “The government just doesn’t have the resources for a mass deportation, and you’re talking about a shutdown of construction in a lot of cities.”

One of the likely changes will be creation of a new category of immigrant labor visa, the H-2C, Ruby said. The existing H-2A is for agriculture labor and the H-2B for skilled and unskilled non-agricultural laborers. But the latter type of visa is limited to 66,000 a year, half in the spring, half in the fall, which is an insufficient quota to fill existing and future jobs keyed to immigrants.

The quota for the new H-2C visa will be 200,000, Ruby said, and the visa will be valid for three years. While that should help, he said, the visa will be reserved for “persons not in the United States,” meaning that immigrants already in the country who want to qualify must leave and return with the help of an employer sponsor.

Ruby noted that immigrants who have been in the United States at least since April 2001 — an estimated 3 to 4 million — are eligible to apply for permanent residency and the “green card” that goes along with it. However, any of those immigrants who leave to take advantage of the H-2C visa opportunity would move to the back of the green card line.

“I have a feeling that to make this work, they’ll have to increase the number of green cards issued each year,” Ruby said.

Another probable change involves temporary workers, the attorney said. Temporary workers are a separate category and technically are not employees at all. They fall under the Internal Revenue Service (IRS) Code 1099 and are supposed to pay taxes directly to the IRS. To discourage tax abuse, new rules would require that the electronic verification process for completing form I-9s be applied to 1099s, too.

All of this becomes pretty arcane, but to human relations directors and contractors, the devil is in those details. Ruby said that he believes any employer who conscientiously follows a written policy in hiring immigrants as employees or temporary workers “goes a long way to mitigate sanctions or fines levied by ICE” in the event a problem develops.

Ruby said “the core of the whole issue” for each employer is how he weighs two competing values: lower cost of production using illegal immigrants versus higher cost of penalties if caught with them.

Helping the Little Guy

ABC is as interested as any organization in cleaning up the illegal immigrant workplace — its members are particularly at risk of being victimized by the system. That’s because most of the 23,000 ABC members are contractors with insufficient resources to painstakingly examine every job applicant.

“Most of our members are small companies, typically defined as employing 100 people or less,” said Carin Nersesian, ABC director of legislative affairs. “When you are a small businessman, you don’t have a human resources department.”

Consequently, ABC agrees wholeheartedly with other industry leaders who argue that employers not be the principal gatekeeper for keeping out illegal workers. The association summarizes the entire industry’s position in its published position statement: “ABC is strongly opposed to any policy that shifts the burden of policing citizenship documentation, such as Social Security cards and drivers licenses, to employers. … ABC believes that employers should be required to act in good faith, exercising due diligence in reviewing an applicant’s personal documentation. However, construction firms should not be enlisted to police documentation, or be faced with exorbitant fines from the federal government.”

Asked how compliant ABC members are with existing immigrant-hiring law, Nersesian indicated she has confidence that small builders are trying to do the right thing.

“Our immigration system in this country is broken — and we know that,” she said. “Does that mean our members are not complying with the law? Absolutely not.”

Nersesian said the priorities of reform from the ABC standpoint are three-fold: border security and internal enforcement of immigration law, a viable employee verification system and a guest worker program. “We look at the issue in a completely comprehensive way.”

She said the association’s top concern is “a guest worker program that is workable for everyone involved.”

But neither Nersesian nor hardly anyone else talking about reform looks for a congressional resolution of the debate until after the November election. How much after the election is pure speculation. “It really is hard to say,” Nersesian said. “It really is up in the air.” CEG

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