Where Work Is Illegal, the Rules Confusing, the Fix Unsure : Law: Reform proposals for home-care employees range from less paperwork for their employers to indentured servitude.

Some good may yet come from the spectacle of government in complete disarray over the question of illegal domestic employees. It may eventually lead to some reform, although proposals--ranging from new laws on home-care workers to the age-old idea of indentured servitude--are in the preliminary stage.

First, the prime candidates for attorney general collapsed. Then came a great melee of announcements from high officials, including Cabinet secretaries and legislators. Some claimed they had no domestic employees, that they, or their wives, or both together, cleaned their own bathrooms. Others admitted skirting immigration law or tax law.

Some did both. The attorney general of Arizona was just fined $1,400 for employing an illegal immigrant as a nanny, and admitted paying no employer taxes on her either.

Grant Woods knew that immigration law forbad his hiring an illegal worker, a spokesman says, but assumed that someone provided by an agency was legal. As for the tax obligations, his accountant assured him that his split custody arrangement with his ex-wife, and the sharing of the nanny made the woman an independent contractor, with no taxes due from him.

This much is plain: Many of today’s in-home domestic workers are illegal or unreported, the process of legalizing them or paying taxes is confusing, and almost everyone does it wrong at some point. And “if more than 50% of the population is doing it,” says New York immigration lawyer Sandra Levitt, “that’s an indication the law is wrong.”

Everyone agrees on the weak spots. For some time, illegal domestic workers have gone through the process of getting their “green card” while working, sponsored by their employer, even after 1986 law made employers subject to fines or jail for knowingly hiring an illegal worker. The paperwork went unchallenged--through the Labor Department, the INS, the IRS and Social Security Administration, and the U.S. consulate in the worker’s country--although the situation was obvious. After all, says L.A. immigration lawyer Carl Shusterman, “Who in their right mind would apply for a housekeeper who wasn’t here?”

Then came the Immigration Act of 1990, which cut the number of green cards available for unskilled workers to 10,000. This category includes domestic employees, who had previously accounted for half the 54,000 employer-sponsored green cards granted annually.

As a result, a process that once took three or four years could now take 10 or 12, and the INS is only now processing people who first applied in November 1987, moving forward just one week every month. There’s also some danger in starting the process: The INS in some areas is taking the green card application as a signal to go out to the home and investigate.

Small wonder that people who have already filed are giving up, and people who would like to file don’t even bother.

Taxes are a separate issue, though they do complicate the situation. Anyone who works in a home on a regular basis, on salary, is an employee, not an independent contractor; an employer who pays $50 or more in a calendar quarter must also pay Social Security and unemployment and other taxes. And grapple with paperwork, state and federal, quarterly and annual, just like General Motors.

Of course, it’s hard to find home care workers who want their wages reported, particularly legal workers. Illegal workers fear tax filings because they want to stay hidden. A U.S. citizen may view the possibility of unreported cash payments as the most appealing aspect of domestic work, and many refuse jobs that include reporting.

Immigration policy is suddenly the hot topic in Washington. Not everyone was prepared. At the INS, says Washington spokesman Rick Kenney, “Congress felt there were too many unskilled workers, and placed a limit on the number. . . . It doesn’t affect INS one way or another.”

The IRS just wants its share of wages, illegal or not. To encourage illegal workers to file, it offers them special taxpayer numbers--because they can’t get Social Security numbers--and promises it won’t turn them over to the INS. (The IRS keeps no record of the number handed out.)

Congress, for its part, established a Commission on Immigration Reform in its 1990 Immigration Act, but asked no report until late 1994 and no conclusions until late 1997. The nine men appointed as commissioners were just sworn in last December, and hastily scheduled a first meeting on Jan. 5.

But some suggestions are starting to make the rounds.

At the very least, “Congress could revisit the question of the number of visas available to people they regard as unskilled,” says Washington attorney Priscilla Labovitz. An increase in the number would shorten the legalization process, and lessen the current backlog of applicants.

Furthermore, authorities “either have to have some amnesty for employers who now have illegal workers,” says Shusterman, “or they have to get rid of the policy where they come and jump on you when you file the papers.”

Under a plan proposed by the American Immigration Lawyers Assn. (AILA), once a household has been approved for a foreign worker, the sponsored worker should be granted a temporary permit to work there. After three years, he or she would be designated as “skilled”--a category with a shorter waiting time. During this period, the employer would have to comply with prescribed work conditions and tax requirements, and the employee would have to remain a home care worker, though he or she could change employers.

There could also be “a separate, temporary worker category,” adds Levitt, “so someone could come in for three years, work as a domestic, and then go home.”

Some ideas are less generous--the “nanny visa,” for example, proposed by IMMLAW, a consortium of 14 law firms across the country. Foreign workers could have a temporary 5-year work permit, renewable “for as long as it takes” to get permanent papers, says Los Angeles lawyer Mark Ivener, and as long as sponsoring families complied with tax requirements. But the 10-to-12 year waiting period would be unchanged, as would the employee’s status as unskilled. What’s more, the worker would have to stay at that job--the equivalent of a decade’s indentured servitude--or start all over again.

As for the tax questions, some urge amnesty for past miscreants. Others suggest easing both the requirements and paperwork--an approach espoused by Rep. Dan Rostenkowski (D-Ill.), who has introduced a bill to simplify employer filings and raise the wages that require reporting to $75 a calendar quarter.

“You should increase the threshold amount--$50 a quarter goes back to the 1954 revenue code--to something reasonable, maybe the present value in 1993 dollars,” says Rob Giannangeli, IRS spokesman in Los Angeles. “And you could let household employers file it annually with their own 1040s.”

At least it would be filed. “If the immigration situation is solved in the right way,” says Shusterman, “the other (problems) fall into place, because under plans like AILA’s, the IRS and Social Security would have to be signed off on. And everything is open and aboveboard, and nobody has to violate the law.”