Of course the biz can be held liable for damages resulting form the biz' conscious failure to verify employee records.
Course, they can (and sometimes are). Govt is GREAT about foisting to others that which 1) it has NO authority 2) which it itself should.
Makes it quite convenient when they shrug their shoulders in feigned surprise and indignation.
Free men are NOT required for permission to work (enter into a contract). And, the question of, ‘By what authority?’ is never (rarely) asked.