A bill in the statehouse that would come down hard on employers of illegal immigrants has Elkhart business owners worried.

The bill's already passed the senate, and came out of a house committee Monday.

The bill would set up a three-tiered system to punish businesses that knowingly hire illegals.

On the third offense in a 5-year period, the business could lose its state license!

And while some legislators say it's an important step, business owners in an area with a growing Hispanic population, say it's a step in the wrong direction.

“I’m in favor of immigration law that makes sense,” said Carol McDowell, President of McDowell Enterprises, Inc. in Elkhart.

McDowell says she has accidentally hired illegal workers in her Elkhart factory in the past… and says when she found out, it was a simple process.

“At that point, our policy is, as I’m sure many companies' policies are, that we let that person go,” McDowell said.

And she's worried the new legislation will put businesses in jeopardy.

“The layer of protection that's in there for employers is as long as they're putting in that name and social security number in the e-verify system, produced by the federal government, then that employer has immunity from whatever happens to that employee as it pertains to the issue of illegal immigration,” said state Representative Jackie Walorski.

But McDowell says that verification system didn't put up flags on the 7 illegals she hired in the last 5 years.

And it's not just a problem for her.

“It's really hard to figure out who's legal and who's not sometimes. The federal help that they have, e-verify system is notoriously wrong, it really doesn’t help anyone,” said Kyle Hannon with the Elkhart Chamber of Commerce.

And Hannon worries about the implications of a law like this one.

“Realistically, a thousand people could lose their jobs because employees in human resources misbehaved,” Hannon said.

Legislators say it's part of a larger cause.

“It's not just the issue that employers are hiring illegal workers, its the fact that there are people coming into the county illegally,” Walorski said.

And Hannon agrees it is a problem; that he says should be fixed a different way.

“This senate bill does not solve illegal immigration, it can cause bigger problems. This is a federal issue that really has to be solved by the federal government,” Hannon said.

Walorski says using the e-verification system would protect businesses from legal trouble.

She says while some businesses already use it, they're not forced to, and she says requiring it would crack down on a lot of problems.

It's still being discussed, and Republicans say changes the house committee made Monday make the bill weaker than they'd like.

Walorski says she thinks democrats are trying to kill the bill.