Discussion Case: Unauthorized Immigrant Workers at Chipotle Mexican Grill Restaurants

In 2015, Chipotle Mexican Grill acknowledged that it was still under investigation by the Securities and Exchange Commission and the U.S. attorney for the District of Columbia for possible failure to comply with laws on employee work eligibility. “It is not possible to know at this time,” the company stated in its annual report to shareholders, “whether the company will incur, or to reasonably estimate the amount of, any fines, penalties or further liabilities in connection with these matters.”

Chipotle’s troubles with immigration had begun four years earlier, when federal agents had descended on dozens of Chipotle Mexican Grill restaurants around the country, from Los Angeles to Atlanta, interviewing employees and managers. Their purpose was to determine whether—and to what extent—the fast-food chain was hiring unauthorized immigrant workers in violation of U.S. law.

Chipotle was a fast-growing chain of restaurants specializing in burritos, tacos, and salads made on premises from fresh ingredients. Founded in Colorado in 1993 by chef Steve Ells, at the time of the immigration raids the company owned more than 1,200 restaurants in 41 states, Ontario, London, and Paris. Chipotle employed 31,000 people, 92 percent of whom were hourly employees. Operating under the slogan “Food with Integrity,” the chain reported $2.27 billion in revenue and 11 percent sales growth in 2011, despite the struggling economy. Some analysts believed that one of the reasons for Chipotle’s strong performance was, as the news service Reuters put it, its “uncanny ability to hold down labor costs.”

Under government rules, foreign-born individuals are permitted to work legally in the United States under some conditions. They can obtain a green card, a work permit issued to permanent residents (most of whom are close relatives of U.S. citizens). Highly skilled workers in short supply can apply for an H-1 visa. Low-skilled workers can apply for an H-2 visa for temporary, seasonal work; however, these are available to only about 1 percent of the unauthorized population. When hiring, employers are required to fill out and keep on file an I-9 form, documenting a person’s eligibility to work, and present it to government investigators if asked.

About half a million undocumented immigrants entered the United States every year during the past decade, two-thirds by crossing the Mexican–U.S. border and the rest by overstaying temporary visas. The Pew Research Center estimates there are 8.1 undocumented immigrants in the U.S. workforce, about 5 percent of the total. Three-quarters of them are Hispanic, mostly from Mexico but also from Central and South America. The main reason they immigrate is for economic opportunity; studies show, for example, that a Mexican man with a high school education can make two and a half times as much in the United States as in his home country, even after taking into account differences in the cost of living.

Most take low-skilled jobs in a small number of occupations and industries. Fully a quarter of farmworkers in the United States—and about a fifth of building and grounds maintenance workers—are undocumented immigrants. In the restaurant industry, they make up 12 percent of food-preparation workers and servers nationally—and much more in some regions, such as southern California. A study by the Food Chain Workers’ Alliance found that undocumented workers earned a median hourly wage of $7.60 (compared with about $10 for other workers in the food industry) and were more than twice as likely to experience some kind of wage theft, such as unpaid hours. Forty-four percent of undocumented workers in the food industry were actually earning less than minimum wage.

Over the past decade, government policy toward people working in the United States illegally has undergone a sharp about-face. Under President George W. Bush, Immigration and Customs Enforcement (ICE), a division of the Department of Homeland Security, conducted a series of high-profile raids of factories, targeting foreign workers who were unable to produce authentic work papers. For example, in 2008, ICE agents arrested and deported hundreds of workers at a meatpacking plant in Iowa.

The Obama administration took a different approach, focusing its enforcement efforts on employers. ICE began conducting I-9 audits, checking businesses to make sure their employees’ papers were in order. The Social Security Administration also began investigating situations where Social Security numbers provided by employees did not match their records (in the case of illegal workers, these numbers were often fictitious). If the agents found evidence of problems, they ordered that employers comply with the law—and in some cases imposed fines or even brought criminal charges against managers.

Chipotle was not the only employer targeted by these investigations. For example, American Apparel, a garment company based in Los Angeles, terminated 1,800 undocumented workers after an ICE audit found widespread irregularities. At L.E. Cooke Company, a family-owned nursery in California’s Central Valley, the owner was forced to fire 26 of his 99 employees who had entered the country illegally. Many had worked for the nursery for many years and had specialized skills. “Telling them was probably the worst day of my life,” the owner said. “I don’t just sit at a desk here, I’m actually out in the fields harvesting with them.”

As it awaited resolution of the government investigations, Chipotle’s management took steps to tighten up its employment procedures. In addition to terminating workers it found to be undocumented, Chipotle ordered all its restaurants to use the federal E-Verify system, even in states where this was not required. (E-Verify is an online system that compares information from a new employee’s Form I-9 to social security and homeland security data to confirm work eligibility.) It also adopted an electronic Form I-9 to reduce errors. But the company’s CEO acknowledged that its systems were not foolproof. “Whatever systems you have for anything really, there are always going to be people who try to game the system,” he said. “But I think that we are going above and beyond . . . to ensure that we are complying with the immigration [laws].”

Discussion questions

1. What are the benefits and risks to employers, such as Chipotle and others mentioned in this case, of hiring unauthorized immigrants—whether or not they do so knowingly?

2. Do you agree with the public policies and enforcement strategies described in this case? If not, what changes in both would you recommend?