Mi Pueblo, a Latino supermarket chain with humble roots, faces the prospect of a mass layoff, a boycott and a federal investigation -- all because of questions about its employees’ legal status and right to work in the U.S.

The Northern California grocery chain imports and produces a full spectrum of foods from Mexico. Its 21 stores, and counting, pop up in urban food deserts that stores like Safeway don’t touch.

Mi Pueblo took some heat recently when the company voluntarily joined E-Verify, a federal program that screens job applicants’ immigration status against a federal database.

Turns out it wasn’t so voluntary. The company revealed this month that U.S. Immigrations and Customs Enforcement, or ICE, has launched an employee immigration audit. ICE will comb the company’s records to uncover fraudulent information like fake Social Security numbers. It may press criminal charges as well. Joining E-Verify was just a matter of course.

News of the audit hit hard among Mi Pueblo’s rank-and-file. Rosa Gomez, an immigration attorney based in East Palo Alto, says Mi Pueblo employees are quitting their jobs before they get fired.

“People who have worked there for five years are leaving in fear and not getting any sort of compensation or anything like that,” says Gomez.

ICE has done 9,000 audits since President Obama took office. Although immigrants whose work papers don’t add up won’t be deported, they will be fired so Mi Pueblo can protect itself from liability.

How many employees? As much as 90 percent of Mi Pueblo’s workforce could go, according to Julie Pace, a workplace attorney Mi Pueblo hired earlier this month.

“The company has no knowledge of anyone being undocumented, but you really don’t know until you get the list,” says Pace.

All of Mi Pueblo’s employees are bilingual, and the vast majority are Latino. But Pace cautions against making judgments based on that.

“The government tells us over and over again, don’t think you know who’s undocumented, because you’re usually wrong,” she says.

ICE wouldn’t confirm that it is indeed auditing Mi Pueblo, based on its policy not to discuss a case until it announces fines or some other legal action. But a spokeswoman says ICE does not target stores or companies, but only investigates when it receives a tip or complaint from the public -- or another agency.

It’s ironic for Mi Pueblo to defend itself from charges of betraying employees and siding with the federal government. The company was founded by Juvenal Chavez, a former janitor who came to the U.S. from Mexico without legal documents.

Now the grocery chain faces a boycott from the United Food and Commercial Workers Local 5. The union has tried to organize workers at Mi Pueblo for more than a decade.

“Our interest as a labor union is to represent workers -- we don’t really care whether they’re documented or not,” says Mike Henneberry, communications director with United Food and Commercial Workers Local 5.

The union has won at least two court decisions against Mi Pueblo for violations of the National Labor Relations Act.

Henneberry says Mi Pueblo hasn’t done enough to try to stop the audit, citing an MOU between the Departments of Homeland Security and Labor that restricts enforcement of labor and immigration laws under certain circumstances, including labor disputes. ICE says the MOU doesn’t apply.

“The company needs to know that people are not happy with what’s going on out there, and employees are not happy either,” says Henneberry. “We’re asking people to make a statement with their wallets and stop shopping at the stores until the company gets its act together.”

The boycott had no evident effect on Mi Pueblo’s East Palo Alto store after the audit was announced. Customer Laura Tovar says she’s troubled by what she heard about the company, but won’t stop shopping there.

“The store is pretty close by, and it’s convenient, and it has everything that I need,” she says.

Ultimately, this is more than a PR challenge for the grocery chain -- it’s a challenge to their business model. The 8 million undocumented workers in this country aren’t just the ones staffing local stores like Mi Pueblo -- they’re also reliable customers, driving the bottom line.