Immigration Quandary: Too Few, Too Many Questions

Steve Ells, CEO of Chipotle Mexican Grill (NYSE:CMG), is slated to deliver a commencement address while his company remains under criminal investigation for allegedly hiring illegal immigrants.

Ells, a 1988 University of Colorado graduate, will help confer 5,897 degrees at CU's graduation ceremony at Folsom Field in Boulder, Colo., on Friday.

It can't be easy for Ells to write a speech while Immigration and Customs Enforcement officers rifle through several of Chipotle's 1,095 restaurants.

Chipotle, in many ways, has been an honorable company, and Ells, its founder, has never been under such fire.

Chipotle has so far had to terminate about 500 employees--mostly in Minnesota--for not being able to produce documents showing they are authorized to work in the U.S.

The chain has said it doesn't knowingly hire illegals and has followed all applicable laws. But its problems could get bigger. ICE this week has been visiting several Chipotle locations in other states.

Some news stories have taken aim at one of Chipotle's slogans, "Food with Integrity."

The company even warns in its annual report, "If any of our workers are found to be unauthorized we could experience adverse publicity that negatively impacts our brand."

But Chipotle has always used "integrity" to mean natural ingredients, respect for the land and fairness for farmers. It never claimed "kitchen help with integrity." No restaurant chain advertises that. Not these days.

For all the hemming and hawing about immigration, it's no secret restaurants rely heavily on immigrant labor to manage costs, particularly as energy and food prices soar. But increasingly, they must take care to be sure those immigrants are legal.

The Obama administration has shifted immigration policy to penalize employers who hire illegal immigrants, as opposed to rounding up and deporting the undocumented. The hope is that if they can't find jobs, they'll just go home.

It doesn't appear any of the employees Chipotle fired were arrested or deported. Some of them may be legal but unable to produce paperwork. Others may indeed be illegal and end up working at a Chipotle competitor.

Chipotle hires thousands of employees who don't speak English and teaches them English. It also promotes from within, cultivating the American dream for its workers. And ICE sends them scrambling for a job somewhere else?

If Chipotle doesn't ask applicants enough questions, it gets ICE-ed. If it asks too many, it risks getting sued for discrimination.

Chipotle has been opening restaurants at an amazing clip and needs kitchen help. It has nearly 1,100 stores and plans to open as many as 145 more this year.

It can't be fun firing hundreds of employees while trying to hire hundreds of employees. Could immigration issues spell the end of Chipotle's amazing run?

So far, the market doesn't seem to think so. Chipotle's stock bottomed out at about $39 in the fall of 2008. It now trades for more than $264, having pulled back from a high of more than $289.

Amid a nasty recession, a slogging recovery and ridiculously high unemployment, Chipotle's revenue grew 20.9% last year to $1.84 billion. Comparable-restaurant sales increased 9.4%, earnings soared 41% to $179 million, and the company is on track to post better results this year.

Ells has built quite an empire selling burritos that are "bigger than your head." What can he tell all those young skulls full of mush on graduation day at the end of one of the most challenging weeks in his career?

Well, for one thing, it looks like he's going to have some job openings.

(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. Contact Al at al.lewis@dowjones.com or tellittoal.com)