Jabil Inc., a major manufacturer of electronics components for the tech industry, made a startling discovery in the spring of 2021: It had been relying on dozens of undocumented workers, contracted from a staffing agency, to power its manufacturing sites near Silicon Valley.
Jabil insisted they be fired, setting off what it called a “mass exodus” from its work force that required expensive and “herculean efforts” to find replacements, including hosting job fairs and borrowing workers from a client.
The upheaval caused the company to fall behind on both existing orders and bids for new business, costing it up to $50 million, according to interviews and allegations in an ongoing lawsuit against the staffing agency.
How Jabil navigated the sudden loss of undocumented workers — years before Donald J. Trump won re-election on a pledge of mass deportations of illegal immigrants — foreshadows the possible road ahead for companies that rely on staffing agencies to fill jobs at factories, warehouses and distribution centers.
The New York Times reported in November that staffing firms were among the top employers of unauthorized workers at work sites inspected for immigration violations over the past decade. Now with Trump’s victory, some firms are fearing the worst.
Toby Malara, vice president for government relations at the American Staffing Association, a trade group, said in an interview that the “business community at large” has been urging the incoming Trump administration “not to go forward with the mass deportations.”
On a podcast that caters to the staffing industry, he said that business leaders want to avoid a scenario where the new administration would “round up a bunch of people who shouldn’t be here and deport them to Mexico.”
He added, “It could be catastrophic for the economy.”
Chris Thomas, a Denver lawyer who advises employers on immigration compliance, recently warned clients that the new administration was likely to discourage employers from using staffing agencies “to obscure the employment of undocumented workers.” In its November investigation, The Times found that staffing agencies often shielded partner companies from responsibility for hiring undocumented workers.
“We recognize an enforcement storm is coming, the likes of which has never come before,” Thomas, from the firm Holland & Hart, said in an interview.
The workers dispatched in California to Jabil, a Fortune 500 company with locations in 25 countries, apparently did not catch the attention of immigration authorities. Still, the company took the unusual step of filing a lawsuit against the staffing agency, Human Bees, accusing it of fraud, unlawful business practices and interfering with a contract, saying the agency had offered assurances that it would verify the eligibility of its workers.
The Times reviewed court records and interviewed people familiar with the dispute, most of whom requested anonymity because the matter is still being litigated.
In the court filings, Human Bees disputed the claim that it had knowingly supplied unauthorized workers to Jabil, contending that it had followed their agreement and the law.
But the judge overseeing the case found that the number of undocumented workers provided by Human Bees suggested that the hirings were not an “isolated incident” or a mistake. An audit of the work authorization status of the 159 workers dispatched by Human Bees showed that nearly half were “not eligible currently.”
Within the staffing industry, Human Bees had been a rising star. The firm was named in 2021 as Inc. magazine’s fastest-growing private U.S. company, with a client list that included notable names like Tesla, FedEx and Google.
In an interview, Geetesh Goyal, chief executive and co-owner of Human Bees, said he was “not incredibly surprised” the audit found that some of the firm’s temporary employees were unauthorized, though the percentage was higher than he had expected. He attributed it to the high volume of undocumented workers in California, which he described as “an open-border state.” He added, “The whole state is open, right, so, like where are these people going?”
He said Human Bees performed the legally required diligence. Typically, he said, that meant checking two forms of documents, such as a state-issued identification and a social security card. Aggressively scrutinizing the paperwork, he said, could be considered discriminatory and prompt lawsuits. Unlike some other clients, he said, Jabil had not specified that workers needed to be screened using the government’s electronic verification program, known as E-Verify, which is optional in California.
“California has set up a real, real, real big problem,” Goyal said, “and I’m not sure how they’re going to deal with the illegal worker thing.” He predicted that industries such as agriculture would “shut down overnight” without undocumented workers.
Human Bees’ fast rise — Inc. pegged its three-year revenue growth rate at nearly 50,000 percent when it singled out the firm in 2021 — came in part because of its ability to swiftly procure workers for companies like Jabil, a Florida-based global manufacturer with more than 140,000 employees.
In 2019, according to interviews and court records, one of Jabil’s largest customers — Lam Research, a giant equipment manufacturer for the semiconductor industry — had increased its demand for Jabil’s products. To keep up, Jabil needed more operators, assemblers and material handlers.
A Lam spokeswoman declined to comment, citing the “active litigation between third parties.”
The staffing agencies already employed by Jabil could not supply workers fast enough, so in early 2020, the company turned to Human Bees, which at the time was called Avitek Recruit. The temporary workers sent by Human Bees spent more than three weeks being trained and shadowing other employees before they were placed on the job.
About a year later, when Jabil moved to convert some of the temporary workers to full-time staff, some of them disclosed that they did not have “proper documentation,” according to interviews and the lawsuit.
That revelation and the subsequent audit led to the unauthorized workers’ firing.
Jabil claimed that the loss of the workers strained its ties with its customer, harming a long-term relationship that had quadrupled in value in recent years. Jabil said it was placed on a new business hold by that customer, and a potential expansion into Taiwan fell apart.
Jabil’s suit called it “remarkable” that Human Bees had prospered amid a “dire labor shortage.”
“To continue its stratospheric growth, Human Bees actively recruits unauthorized aliens for work in the United States and throughout California,” it said.
When Jabil filed the suit early last year, Goyal said, Human Bees was “blown away.” He expressed skepticism about the fallout for Jabil’s business and the company’s professed surprise at the workers’ immigration status.
“Every other client in California” understands the realities, he said, adding: “They know what’s up.”
Goyal said the situation underscored a frustrating business environment for staffing agencies in California, where “opportunistic shark lawyers” constantly threaten to sue on behalf of temporary workers.
All of that, he said, has the company planning to eventually shift to higher-paid health care staffing and away from blue-collar jobs. “We’re sick of it,” he said.
Steve Eder is a reporter with The New York Times. Copyright 2024, The New York Times.
This post was originally published on here
