Who’s Working in Your Kitchen?

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Chipotle, Krispy Kreme, McDonald's, Pei Wei, Popeyes, Sizzler, Legal, In the Store

Recent government crackdowns on Chipotle and Pei Wei that forced both concepts to at least temporarily close locations have reminded restaurant operators that the government is taking illegal immigration very seriously.

The two incidents, in which illegal immigrants were found to be in each quick serve’s employ, came almost two years after the Obama administration decided to rein in the employers who hired illegal immigrants rather than go after the employees themselves, which had been the primary strategy up to that point.

In April of 2009, Secretary of Homeland Security Janet Napolitano announced that the Immigration and Customs Enforcement agency (ICE) would reduce the need for large-scale immigration enforcement actions where employees were arrested. The focus instead turned to finding evidence to criminally charge employers.

ICE now uses tools like I-9 audits, fines, and debarment to combat the hiring of illegal immigrants, which might account for more than 700,000 of the industry’s 12.8 million employees, according to the Pew Hispanic Center.

Early this year, Chipotle fired 450 employees in various Minnesota locations stemming from an ICE audit. The Denver-based burrito chain later received Notices of Inspection for about 60 restaurants in Virginia and Washington, D.C., as well. The company is cooperating with ICE, “but we have not received any final determination,” says spokesman Chris Arnold.

In 2010, ICE criminally charged a “record-breaking” 180 business owners, employers, and managers/supervisors—up from 135 in fiscal year 2008 and 114 in fiscal year 2009, says agency spokesman Ivan Ortiz-Delgado.

Since January 2009, ICE has imposed about $50 million in financial sanctions. In fiscal year 2010, the agency debarred 97 businesses and 49 individuals, up from 30 businesses and 53 individuals in fiscal year 2009. In the same year, it conducted more than 2,200 I-9 audits, up from more than 1,400 in the year before.

Chipotle is not the only restaurant concept to come under scrutiny for hiring undocumented immigrants. In the last two years, McDonald’s, Sizzler, and Krispy Kreme have all made similar headlines.

In March, Maricopa County Sherriff’s Office deputies raided Pei Wei Asian Diner locations in metro Phoenix to arrest employees working with stolen IDs. While not a federal action, the raids show a general shift toward less tolerance for hiring undocumented workers across the country.

“Restaurant owners should understand that they are a target for this sort of challenge,” says Michael Wildes, an immigration lawyer at Wildes & Weinberg P.C. in New York.

Wildes says the Obama administration’s new employer-focused policy is a mere “Band-Aid” on the larger problem of illegal immigration in the U.S. and places a disproportionate burden on restaurants.

“They are scapegoats in an economy where people have less disposable funds to go out,” he says.

In response to the increase in federal investigations, the National Restaurant Association (NRA) has been lobbying the government for leniency on what it calls “paperwork violations” on I-9 forms, the one-page, proof-of-eligibility document every employer must file within three days of hiring an employee.

ICE does not track how many fines it gives out for technical mistakes on I-9 forms, but NRA vice president of labor policy Angelo Amador says they are common, expensive, and all but unavoidable, especially in an industry with high turnover.

“Some of the mistakes are as basic as you forget to write the maiden name of an individual,” he says. “Anyone with more than a few employees is going to have errors.”

The NRA has asked Congress for a 30-day grace period for employers to fix technical errors.

“We’re not talking about fraud,” Amador says. “We’re talking about good-faith errors.”

The association also wants restaurant operators to be able to verify employee eligibility through the phone in addition to the existing E-Verify system, which allows them to check employee documents against a federal database.

There is a “high probability” Congress will enact these reforms, Amador says, but it depends a lot on how the U.S. Supreme Court rules on a case involving an Arizona law that requires employers to use E-Verify to check employee eligibility.

The U.S. Chamber of Commerce and the Obama administration both oppose the requirement. The NRA “could probably be able to support” a federal law requiring E-Verify if it meant a nationwide standard instead of different requirements in different states, Amador says. He expects the Supreme Court to decide the Arizona case by June.

In the mean time, restaurant operators are still adjusting to the Obama administration’s policy shift one year later amid a stubbornly slow economy.

“Just when the government should be getting out of the way of entrepreneurs, they are instead sharply increasing the cost of regulatory compliance for small businesses,” says Detroit-based Popeyes Louisiana Kitchen franchisee John Brodersen.

Brodersen says he has gone through three recent government audits and incurred expensive fines.

But not everyone in the industry is upset with the government’s actions. Jim Oberweis, CEO of Oberweis Dairy, said in an e-mail to QSR that his business has never incurred a fine for hiring illegal immigrants, adding that companies can use E-Verify to avoid hiring illegal immigrants “if they really wanted to.”

“For way too long, our government refused to take action against those companies hiring [illegal immigrants],” Oberweis said. “It is high time that the government take reasonable action, and I am quite pleased at the initial steps they have taken.”