Every year, Michael Rhodes's $2 million business, Commercial Landscapers in Kansas City, Kan., butts heads with the nation's scrambled immigration system.
Rhodes's 18 employees are mostly foreign nationals with H2B visas that allow them to work in the U.S. for just 12 months. So each year, Rhodes tackles the paperwork to try to keep them on for another year -- and starts shelling out cash to his immigration lawyer. It costs about $5,000 to renew his workers' visas or, if that fails, file applications to hire new employees. "It's not guaranteed you'll get your workers, and you still have to pay," says Rhodes. Some years he winds up understaffed.
That's because H2B visas -- those for temporary unskilled employees -- are capped at 66,000 annually. So are H1B visas for temporary skilled professional workers. Those caps are often reached in the first months of the year. Although they have been temporarily boosted several times, the caps haven't changed since 1990.
Filing for a single H1B will run about $3,000 this year not including legal fees. That's a 168% increase over 2004, says Susan Storch, an immigration lawyer at Reed Smith in Newark, N.J. Run afoul of the system, and you could be hit with fines as high as $11,000.
NO YANKS APPLY
The situation may soon become more complex. A Labor Dept. regulation and two pending bills increase the administrative burden of hiring immigrants and could put more responsibility for making sure workers are legal on the shoulders of small business owners. Entrepreneurs who hire illegal workers could even face jail time. That's worrisome for entrepreneurs like Rhodes, who says he has no choice but to hire immigrants. "No American workers are willing to do this type of work," he says. "I didn't receive one application this year."
A new regulation known as Program Electronic Review Management (PERM) is designed to shorten the time it takes immigrant workers to attain permanent status, primarily by automating the green-card approval process. Over time, that should exempt more foreign workers -- and their employers -- from the annual application exercise. After as little as two months, workers whose employers have successfully negotiated PERM can get green-card status.
But for small business owners, the side effects of the bill include more direct wage competition with big companies plus a wave of new paperwork. PERM, which went into effect in March, requires employers to use an online filing system to submit worker documents. CEOs must also prove they tried to hire American workers by running Sunday newspaper ads, posting notices in-house, and recruiting from job fairs, Web sites, or private employment agencies.
PERM also requires businesses to offer a prevailing wage, pitting small companies against big ones that pay more. "Basically it is so cumbersome that employers are shying away from considering this," says Storch. She says once she explains to entrepreneurs how PERM works, they often give up on trying to get permanent status for workers with temporary visas.
Shirish Phatak, chief technology officer of Tacit Networks, a $10 million computer-networking company in South Plainfield, N.J., is plowing ahead with PERM nonetheless. Fourteen of his 100 employees are foreign nationals, mostly engineers from India. Phatak registers his company with the Labor Dept. and keeps records of job postings and recruitment efforts. That has meant about 15 hours of extra work each week for the past three months. "The time I have to spend on it has at least doubled," says Phatak.
RED TAPE -- AND JAIL
More changes could be in the works. This fall, Congress is expected to debate two bills, one of which would create a new visa allowing more foreigners to work in the U.S. But both bills carry harsher penalties for those who hire illegals.
The Secure America & Orderly Immigration Act, introduced in the Senate in May by John McCain (R-Ariz.) and Edward M. Kennedy (D-Mass.), would create a new visa, the H5A. Each year, 400,000 visas -- good for three years -- would be granted to "essential workers" who are nonagricultural or highly skilled employees. The bill, which has already won some bipartisan support, would allow aliens already working in the U.S. to pay a fine and back taxes to attain legal status. The bill would also require employers to certify an employee's status through a central database. Entrepreneurs who hire illegal workers will face fines up to $20,000 and, most startling, up to six months in prison.
A second proposed bill, the Comprehensive Enforcement & Immigration Reform Act of 2005, is even more punitive, with prison terms of up to three years. The bill, sponsored by Senators John Cornyn (R-Tex.) and Jon Kyl (R-Ariz.), requires, among other things, collection of fingerprints or other biological data on workers.
The U.S. Chamber of Commerce supports the Secure America bill because of its higher cap and because it allows employed immigrants to become legal without having to return home first. (Neither the National Federation of Independent Business nor the American Small Business Assn. has taken a stand on either proposal.) The Secure America bill, says Angelo Amador, director of immigration policy for the Chamber, "will stabilize the current system and allow small businesses to build a legal workforce. Businesses that rely on these workers can stay open, and everyone will benefit."
But Dale Wood, owner of the $2 million, 66-employee Italia Ristorante in San Antonio, says he's already doing the best he can to make sure his employees are here legally. "I am not a good immigration officer, and I wasn't planning on being one when I got into the business," he says.
For now, small businesses can protect themselves by making sure to complete all I-9 employment-verification forms. Bill Reilly, unit chief for the office of investigations at the Immigration & Customs Enforcement (ICE), suggests that entrepreneurs join Basic Pilot, an employment-verification system run by the ICE that determines eligibility by searching Social Security Administration and Homeland Security Dept. databases. (You can find out more about the system at uscis.gov/graphics/index.htm or www.ice.gov.) But for the time being, most entrepreneurs, like Rhodes, will be paying their immigration lawyers plenty to navigate the mess for them.
By Jeremy Quittner