Immigration officers arrested five men on suspicion of working in the UK illegally when they raided a Teignmouth restaurant.
The arrests were made at Naz in Somerset Place.
No arrests were made in a separate raid on Naz in Newton Abbot.
The Teignmouth business could now face a fine of up to £100,000 unless the owners can prove appropriate checks were carried out.
A Home Office spokesman said: "Acting on intelligence, officers visited Naz in Somerset Place on Thursday, October 23. Staff were questioned to find out whether they had the right to live and work in the UK.
"Checks revealed that five Bangladeshi men, two aged 30 and the others aged 29, 31 and 41 had overstayed their visas and were working illegally.
"All of the men were arrested and taken to Torquay police station for further questioning. Steps will now be taken to remove them from the UK.
"The business was served with a notice warning that a penalty of up to £20,000 per illegal worker found will be imposed unless the employer can demonstrate that appropriate pre-employment checks were carried out, such as seeing a passport or Home Office document. If proof is not provided, this is a potential total of up to £100,000."
Kenny Chapman, head of the South West Home Office Immigration Enforcement team, added: "Employers who are caught using illegal labour face significant financial penalties.
"Illegal working is not victimless. It defrauds the taxpayer, undercuts honest employers and cheats legitimate job seekers out of employment opportunities.
"I would urge people with specific and detailed information about suspected illegal working to contact us."
Information about suspected immigration abuse can be reported at www.gov.uk/report-immigration-crime or by calling Crimestoppers on 0800 555 111.
