Business on the Border

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.