ITAA: E-Verify not ready for prime time

The final rule published today requiring federal contractors and subcontractors to screen workers and new hires through the E-Verify system each year will put significant new burdens on those employers at least in the short term, an industry representative said today.

E-Verify is the automated system for allowing employers to verify employees' and job applicants' eligibility to work in the United States. When an employer submits an individual's name and personal information, E-Verify checks the data against Social Security Administration and Homeland Security Department databases to confirm legal residency.

President Bush signed an executive order on June 6 authorizing a change to the Federal Acquisition Regulation to require federal contractors and subcontractors to participate in E-Verify. The final rule specifies the conditions of participation.

Under the new rule, which goes into effect Jan. 15, the government estimates that 168,000 employers will have to screen 3.8 million employees in 2009. That is a large increase from the 70,000 employers using the system this year.

Contractors are worried that E-Verify is not ready to handle a huge volume of activity yet and may result in people being laid off or contracts being delayed until the system can manage the larger volumes, said Trey Hodgkins, vice president of federal government programs for the Information Technology Association of America.

"Our concern is that the system is not adequately scaled yet, and the delays that would be caused would prevent companies from starting on contracts and may force them to lay off or fire employees because they cannot obtain verification in a timely fashion," Hodgkins said. "These are the unintended consequences and appear to be possibilities."

The final E-Verify rule inserts a clause into federal contracts that requires government contractors and subcontractors to use the E-Verify system to ensure employment eligibility of all new hires, as well as all existing and new employees directly performing work under federal contracts. It also orders prime contractors to apply the requirements to subcontractors.

Its application to subcontractors may be "too broad," Hodgkins said. The ITAA had recommended that prime contractors would notify subcontractors of the requirement, but the primes would not bear responsibility for the subcontractors' compliance, he said.

"The enforcement responsibility is unclear," Hodgkins said. "It would be burdensome for a company to have to do this for one or two subcontractors, but for a major defense system, with thousands of subcontractors, the prime contractor would have a major responsibility."

The ITAA also is examining the definition of covered employees, including whether it includes any administrative personnel, and is looking into the final rule's handling of commercial items, which appear to be described using terms that had been rejected in other federal contracting documents, Hodgkins said.

The government estimates that in 2009, under the new rule, the cost of implementing the rule next year will total $254 million. Over 10 years, the cost of the final rule is estimated at $1.1 billion.

The final rule raises the threshold for covered contracts to $100,000, up from $3,000.
It allows a contractor 90 calendar days, rather than 30 days as previously proposed, from enrollment to using the system. It sets a deadline of 30 calendar days, rather than three days, for employers to begin verifying existing employees.

The final rule also exempts contracts for commercial off-the-shelf items.

E-Verify has been operating on a small scale for more than a decade.The program has been controversial due to the error rates in the federal databases used to verify eligibility.

According to a June 2008 report from the Government Accountability Office, about 7 percent of the queries to E-Verify cannot be verified immediately by the Social Security Administration, and about 1 percent cannot be immediately confirmed as work-authorized by U.S. Citizen and Immigration Services. Critics say those non-verification rates are the result of errors in the databases and may result in loss of jobs among legitimate workers.

Furthermore, the E-Verify system cannot protect against workers using stolen identity information and stolen Social Security numbers, according to the GAO report.