FORTUNE Small Business:

Can I sue rivals for hiring illegal immigrants?

A contractor suspects he's losing jobs to competitors that undercut pricing by relying on illicit labor.

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(FORTUNE Small Business) -- Dear FSB: I recently read one of your stories that hit home ("Blowing the Whistle on Illegal Immigrants," January 2007 ). I'm a contractor who loses half of all residential jobs to firms that hire illegal laborers. They pay them less than I pay my workers and save on taxes plus all the types of insurance I must maintain as a law-abiding business owner. How can I pursue a lawsuit against my competition?

-Name Withheld

Dear reader: Right now, you've got a suspicion - which may be well founded - that you're losing business because of your competitors' shady hiring practices. But to clear the first hurdles in a lawsuit, you'll need to show a link between your losses and a rival's employment of illegal labor, says David Klehm, a Santa Ana, Calif., lawyer who specializes in this area of the law.

"You can't just sue someone because they hire illegals," he says.

The best way to prove damages is to demonstrate that you and your scofflaw competitor bid on the same job, and that you lost out because your estimate was higher. As a residential contractor, you'll have a tougher time showing that. When you're dealing with homeowners, there's less likely to be a paper trail of bids. So you'll need to get the homeowners involved - ask why they chose the other guy.

"Very few attorneys have handled this type of case," says Klehm. "The book is still being written on how to prosecute these claims using state unfair-competition and tort statutes."

Your best bet is to find a good business attorney. Possible places to find referrals: your city, county, and state bar associations. You might also visit illegalemployers.org, a network of law firms (including Klehm's) and other organizations tackling this problem.

Have a business law question for Adriana Gardella, a lawyer and FSB editor? Drop us a line and ask.  To top of page

Have you struggled with immigration issues in your business? Join the discussion.

From the archives:

My competitors keep hiring illegals!
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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.