Ariz.: Business and Immigration

Eighteen years ago, when John Eisenhower opened his Scottsdale, Ariz., tree care business, he vowed to honor a 1986 federal law that prohibited hiring undocumented immigrants. The former Christian missionary named his company Integrity Tree Service Inc., but his decision not to hire undocumented workers quickly put him at a financial disadvantage. He chose to abide by the law, but his competitors hired undocumented immigrants for substandard wages and "made big money riding the backs of illegals," says Eisenhower, now 53. He survived by building a devoted clientele. Today his six to eight Latino and Anglo employees enjoy benefits and paid vacations, and his manual laborers earn up to three times the hourly rate that some companies pay their illegal workforce.

Now a controversial state law—with national implications—is slated to take effect Jan. 1 and promises to level the playing field for Eisenhower's company and thousands of other law-abiding Arizona businesses. The employer sanctions law imposes tough penalties on businesses that knowingly employ undocumented immigrants. First offenders may have their business licenses suspended for up to 10 days and must sign an affidavit promising not to hire undocumented workers in the future. Fail to comply, and companies could lose their licenses to operate altogether. What's more, the law requires all of Arizona's 150,000 companies to run new hires through a free online federal database that checks immigration status.

Foes of the law include immigrant rights activists and representatives of the construction, agriculture, hospitality and manufacturing industries, which employ large numbers of unskilled immigrant laborers. The law's opponents questioned its constitutionality in federal court, but that case was dismissed on Dec. 7. Then, on Dec. 21, Judge Neil Wake of the U.S. District Court in Phoenix cleared the way for the law to take effect on New Year's Day. Critics of the law received another blow recently, when the U.S. Court of Appeals in San Francisco refused to grant an injunction aimed at preventing the law from taking effect.

Gov. Janet Napolitano, a moderate Democrat, became a target of criticism after she signed the law last July, after Congress had failed to reform federal immigration policy. Arizona is particularly hard-hit by illegal immigration woes, because its nearly 400-mile border with Mexico is the preferred gateway for most immigrants traveling north. An estimated 500,000 to 600,000 undocumented people live in Arizona, Napolitano says, and sanctioning employers who hire them is part of an overall strategy to fix a problem the feds have long ignored. "Without the federal government taking action, the states must move ahead," she tells NEWSWEEK. "If Arizona is a laboratory for democracy, then so be it."

The Arizona law has divided the state's business community. Some are already finding the law easy to live with. The Salt River Project, a Phoenix-based utility with about 4,300 employees, says it has run about 900 new hires through the database in the last 18 months without a major problem. Jolynn Clarke, the utility's manger of staffing, says the database check mandated by the new law is a quick and easy way to ensure that employees "really are who they say they are."

Other employers, particularly those that rely on low-skilled labor, are taking a different view. Critics say undocumented workers provide an essential workforce in a state with a relatively low unemployment rate of between 3 and 4 percent. "We are literally shutting down immigration, and as we shut down immigration, we shut down the economy," says Joe Sigg, director of government relations for the Arizona Farm Bureau, a statewide coalition of farmers and ranchers.

"This is law by hysteria," says John Augustine, whose family has farmed and ranched in Arizona since 1950 and employs about 150 workers. Augustine and other business owners have prepared for the law by retaining lawyers and auditors to review hiring and record-keeping procedures. He says his cotton and alfalfa farm doesn't hire illegal immigrants, but that doesn't mean the law won't affect his businesses. "I have a hard time finding labor now," he says. "Because there will be fewer people in the workforce, it will be even harder to find labor, and you'll pay more for it."

The law has already had a negative effect on some businesses, says Maria Arredondo, owner of Meubeleria Central, a Phoenix furniture store that caters to Latino immigrants—both legal and illegal. Customers started dwindling when news of the law first broke in the summer, and now Arredondo wonders how long she can survive. Prospective customers tell her they like her furniture and they like her prices, but they're saving their money in case they get deported. With little business income to make her home mortgage payments, Arredondo rented her house and moved with her three young children into the furniture store. "I am an American citizen," she says, "and I don't know how much longer I can hold on."

It's proving to be a difficult time for Latinos in Arizona. It didn't help that Phoenix Mayor Phil Gordon recently shocked the Latino community by appointing a panel to explore whether the Phoenix police should regularly check for immigration status. Maricopa County Sheriff Joe Arpaio has arrested nearly 1,400 undocumented immigrants, with the blessing of County Attorney Andrew Thomas. Arpaio relies on state laws that outlaw human smuggling and federal laws that allow officers to check citizenship or residency status in the course of their duties, for instance a routine traffic stop. "We don't arrest randomly," says Lisa Allen, a spokeswoman for the sheriff's office. But immigrants fear they may be deported if they have even one traffic violation. And now the employer sanctions law looms.

"What you have is a slow-growing panic," says Alfredo Gutierrez, who was a state senator for 14 years and now owns a Phoenix-based lobbying firm and hosts a Spanish-language radio talk show. "You have a community feeling besieged," he says. "People are saving their money and waiting. They talk about leaving, but few have. The great and overwhelming majority of people are just going to stay here. They have very few resources to go check out jobs in places like Ohio."

In the near future, safe havens in other states may be hard to find. Arizona's law is viewed as a test case by other states, "trying to create order inside of chaos" caused by federal inaction, says Sheri Steisel, director of the immigration task force for the National Conference of State Legislatures. Steisel says state legislatures passed at least 244 laws related to immigrants and immigration in 2007, a three-fold increase over 2006. Although Arizona's new law imposes the toughest sanctions on employers, 19 other states passed measures related to employment of undocumented immigrants. Oklahoma now makes it a felony to harbor, transport or shelter illegal immigrants and, like Arizona, requires employers to verify immigration status through online databases.

Opponents of Arizona's law vow they'll continue to try block the law's debut on Jan. 1. Time, however, is not on their side.