Millions of contract employees to be vetted for legal employment status

Federal contractors will be required to vet nearly 4 million current and future employees through an online government database to verify their legal working status, under a proposed rule published last week in the Federal Register.

The Federal Acquisition Regulation notice, however, does not resolve questions about how the government will oversee the system or punish companies that fail to fire illegal immigrants.

President Bush issued an executive order on June 9 requiring that, as a condition of all future federal contracts, companies must agree to use E-Verify, an electronic employment eligibility verification system. The program currently is voluntary for private sector companies but mandatory for federal agencies.

The rule would apply to all future contract employees and existing employees once they begin working on new contracts. Current indefinite-delivery, indefinite-quantity contracts would be amended so the rule applies to all future task orders.

The rule also applies to federal subcontractors.

In its initial year, the government expects nearly 170,000 contractors and subcontractors will enroll in the system, verifying the status of roughly 3.8 million employees. The program is expected to cost contractors more than $100 million in the first year and between $550 million and nearly $670 million during the next 10 years. The cost to the government would be significantly less, an estimated $8.2 million during the next decade.

The rule exempts employees working on contracts performed outside of the United States, those hired before Nov. 6, 1986, contracts valued at less than $3,000, and subcontracts for materials only for commercially available products.

"E-Verify, working with these other agencies, is going to give these contractors the tools they need to make sure that workers who were hired to work on federal contracts are legal workers," said Michael Chertoff, secretary of the Homeland Security Department, which administers the system, at a press conference last week. "It is always embarrassing, frankly, when we have these periodic operations in which we discover illegal workers working on federal projects paid for by federal money that is ultimately paid for by the taxpayer."

The proposed rule inserts a clause into all future government contracts requiring companies to verify the status of their new and existing hires through E-Verify within 30 days of the contract award.

"Contractors that use E-Verify to confirm the employment eligibility of their workforce are much less likely to face immigration enforcement actions, and are generally more efficient and dependable procurement sources than contractors that do not use that system to verify the work eligibility of their workforce," the notice stated.

In an attempt to reduce potential identity theft, workers will be required to supply their employers with both a Social Security number and photo identification. The contractor will put that information into the E-Verify system, which will tell the employer immediately if the worker is legally allowed to work in the country.

If the database is unable to confirm the employee's status, the worker will receive a "tentative nonconfirmation" notice and have eight days to settle the issue at a Social Security Administration office. If the worker fails to contest the finding or is unable to furnish proof of legal status, the employee must be fired, the rule states.

About 6 percent of employees vetted through E-Verify receive a tentative nonconfirmation letter requiring further action, said DHS spokeswoman Amy Kudwa. The majority choose not to contest the findings.

Companies that do not terminate the employment of nonverified workers face a fine of $500 to $1,000, the rule states. Contractors that break the rule, however, would not necessarily lose their contracts or face suspension or debarment.

"Suspension and debarment are really serious matters," Kudwa said. "These sanctions will occur only when it's in the public's interest."

The Federal Acquisition Regulation already provides federal officials with the authority to terminate a contract or to recommend suspension or debarment proceedings for companies that knowingly hire illegal workers.

And while contractors must agree to participate in E-Verify, there does not appear to be a system in place to confirm after the fact that they have done so.

Alan Chvotkin, vice-president of the Professional Services Council, a contractor trade group, suspects that federal watchdogs will conduct spot checks and perform periodic system reviews to verify that companies are complying with the rule. But he admits that it would be virtually impossible to audit every company's compliance.

"There's an element of truthfulness to it," Chvotkin said. "But we don't audit contractors' tax compliance. We don't presume that they have violated the rules."

Critics also have raised concerns about the reliability of E-Verify data. In December 2006, SSA's inspector general found that the database had an error rate of 4.1 percent.

Chertoff indicated last week that glitches in the system had been fixed, noting that the current error rate was down to 0.5 percent.

More than 69,000 companies currently use E-Verify, and the number of registered employers is growing by an average of more than 1,000 per week, DHS officials said.