After Tuesday, American businesses, from the loftiest Fortune 500 company to the smallest corner grocery, won't get just a warning the first time they're caught employing illegal immigrants.

Companies tempted to look the other way when illegal aliens apply could face stiff fines, the real teeth in the landmark 1986 immigration reform bill that enters a new phase June 1.The Immigration and Naturalization Service will target key industries, looking for violators.

It is a system that has worked in Europe, and many feel it offers the best hope to curb illegal immigration and to transfer jobs from aliens to U.S. citizens.

But others worry about possible exploitation of illegal workers, discrimination against foreign-appearing workers, the impact on the labor force and the dangers of turning employers into immigration police.

Doris Meissner, a former acting INS commissioner, questions whether employer sanctions might "put into our employment practices a bias toward looking at people's foreignness that never existed before."

It may be too early to gauge whether that is true, but the monetary impact will certainly be felt right away.

After Wednesday, the INS need no longer issue an initial warning citation to employers who hire undocumented workers. The law now requires employers to obtain documents from workers showing they are legally in this country.

Employers face fines of up to $1,000 for improper documentation, up to $2,000 per alien for a first offense of knowingly hiring an illegal alien, up to $5,000 per alien for the second offense, $10,000 for subsequent offenses, and $3,000 or six months in jail for a "pattern or practice" of violation.

Over the past year, INS fined 80 businesses $350,000 and gave 2,000 citations. The agency thus views the new phase not as a dramatic crackdown, but as a nudge to employers. The fines went to companies that got warnings but continued ignoring the law.

"Our intent is not to indiscriminately run around fining employers. The intent is to encourage employers to validate their work force," says INS spokesman Duke Austin. "It'll be a deliberate implementation of the law."