Arizona Squeeze on Immigration Angers Business

Arizona businesses are firing Hispanic immigrants, moving operations to Mexico and freezing expansion plans ahead of a new law that cracks down on employers who hire undocumented workers.

The law, set to take effect on Jan. 1, thrusts Arizona into the heart of the national debate on illegal immigration, which has become a hot topic on the presidential campaign trail. Republican candidates, in particular, have been battling to show how tough they are on the issue.

Arizona’s law, believed to be the strictest in the nation, is shaping up as a test of how employers will react when faced with real sanctions for hiring undocumented labor. It is being closely watched by businesses across the country. While proponents say the crackdown will save the state money on services for illegal immigrants, some businesspeople fear Arizona’s economic growth may be at risk.

Under the law, people will be encouraged to contact a county sheriff’s or county attorney’s office to report businesses they suspect of employing an illegal immigrant. After the sheriff investigates, the county attorney can then seek to suspend and ultimately revoke the business license of an employer who knowingly hires an illegal immigrant. The measure would also require all Arizona businesses to use E-Verify, a federal online database, to confirm that new hires have valid Social Security numbers and are eligible for employment.

The law still faces a court challenge from the Arizona Chamber of Commerce and other business groups. Yesterday, a federal judge set a hearing for next Tuesday on a temporary restraining order that would freeze the law’s implementation. Earlier, the judge tossed out a separate lawsuit challenging the law, saying the plaintiffs had sued the wrong parties.

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Businesses are pushing back against the law, even as they scramble to comply with it. “It’s crystal-clear that the employer sanctions law will harm the state economy,” says Glenn Hamer, president of the Arizona Chamber of Commerce and Industry. “It’s simply a question of degree.”

About 500,000 undocumented immigrants live in Arizona, according to the Pew Hispanic Center, and independent estimates suggest about 350,000 of them are working. Immigrants, both legal and illegal, account for 14% of the work force. The state enjoys one of the fastest-growing economies in the nation, and its unemployment rate last year was just 3.3%.

A University of Arizona study released earlier this year concluded that economic output would drop 8.2% annually if noncitizen foreign-born workers were removed from the labor force. Researchers estimate about two-thirds of the workers in that category are in the state illegally.

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Sheridan Bailey, president of steel-beam manufacturer Ironco, said he has fired several Hispanic employees in anticipation of the sanctions law. “This law has the potential of sinking a business,” he said. Mr. Bailey, who has formed a business group to address the issue, said Congress’s inaction has allowed “policies to be generated on the fringe.”

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Jason Levecke, the grandson of the founder of the Carl’s Jr. fast-food empire and the state’s biggest franchisee, has put on hold plans to open 20 more outlets statewide. “That’s $30 million that could blow up in my face,” he said. “The risk is too great.”

Rep. Kavanagh, the bill co-sponsor, disputed claims that the law will hurt Arizona’s economy. “The illegals are a drain on the economy,” he said, referring to education and other government benefits that some undocumented immigrants receive.

In one sense, the bill is having its desired impact: Employers are rushing to ensure they don’t have undocumented workers. Mr. Levecke says he has hired outside auditors three times to ensure his 1,200 employees are clear, and he let several of them go after the checks. Earlier this week, 300 human-resources managers packed a ballroom at a Scottsdale resort to learn how to cope with the law and possible raids on their premises.

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Maricopa County Sheriff Joe Arpaio, an elected official who has made illegal immigration his focus, has deployed deputies to arrest undocumented day laborers as well as fruit and corn vendors in recent months. If the law goes into effect as scheduled, Sheriff Arpaio will be in charge of investigating complaints against employers in the county, home to two-thirds of all Arizonans.

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