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< Back to current issue of Immigration Daily < Back to current issue of Immigrant's Weekly

[Federal Register: November 14, 2008 (Volume 73, Number 221)]
[Rules and Regulations]               
[Page 67651-67705]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14no08-30]                         


[[Page 67651]]

-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 22, and 52

[FAC 2005-29; FAR Case 2007-013; Docket 2008-0001; Sequence 1]
RIN 9000-AK91

 
Federal Acquisition Regulation; FAR Case 2007-013, Employment 
Eligibility Verification

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to require certain 
contractors and subcontractors to use the E-Verify system administered 
by the Department of Homeland Security, U.S. Citizenship and 
Immigration Services, as the means of verifying that certain of their 
employees are eligible to work in the United States.

DATES: Effective Date: January 15, 2009.
    Applicability Date: Contracting Officers should modify, on a 
bilateral basis, existing indefinite-delivery/ indefinite-quantity 
contracts in accordance with FAR 1.108(d)(3) to include the clause for 
future orders if the remaining period of performance extends at least 
six months after the final rule effective date, and the amount of work 
or number of orders expected under the remaining performance period is 
substantial.

FOR FURTHER INFORMATION CONTACT: Ms. Meredith Murphy, Procurement 
Analyst, at (202) 208-6925 for clarification of content. For 
information pertaining to status or publication schedules, contact the 
FAR Secretariat at (202) 501-4755. Please cite FAC 2005-29, FAR case 
2007-013.

SUPPLEMENTARY INFORMATION:

A. Background and Purpose

Employment Eligibility Verification Requirements

    As explained more fully in the proposed rule, the Federal Property 
and Administrative Services Act of 1949 (FPASA), authorizes the 
President to ``prescribe policies and directives'' governing 
procurement policy ``that the President considers necessary to carry 
out'' that Act and that are ``consistent'' with the Act's purpose of 
``provid[ing] the Federal Government with an economical and efficient'' 
procurement system. 40 U.S.C. 101, 121. On June 6, 2008, the President 
exercised this authority and the authority vested in him under section 
301 of Title 3 of the United States Code in issuing Executive Order 
13465 ``Economy and Efficiency in Government Procurement through 
Compliance with Certain Immigration and Nationality Act Provisions and 
the Use of an Electronic Employment Eligibility Verification System.'' 
73 FR 33285, Jun. 11, 2008, amending Executive Order 12989 (signed 
February 13, 1996, published February 15, 1996 at 61 FR 6091), 
previously amended by Executive Order 13286 (signed February 28, 2003, 
published March 5, 2003 at 68 FR 10619). As amended, Executive Order 
12989 now provides, at Section 5.(a), that ``Executive departments and 
agencies that enter into contracts shall require, as a condition of 
each contract, that the contractor agree to use an electronic 
employment eligibility verification system designated by the Secretary 
of Homeland Security to verify the employment of: (i) All persons hired 
during the contract term by the contractor to perform employment duties 
within the United States; and (ii) all persons assigned by the 
contractor to perform work within the United States on the Federal 
contract.'' The Executive Order also requires, at Section 5.(c), that 
the Secretary of Defense, the Administrator of General Services and the 
Administrator of the National Aeronautics and Space Administration 
``amend the Federal Acquisition Regulation to the extent necessary and 
appropriate to implement the * * * employment eligibility verification 
responsibility * * * assigned to heads of departments and agencies 
under this order.''
    On June 9, 2008, the Secretary of Homeland Security designated the 
``E-Verify system, modified as necessary and appropriate to accommodate 
the policy set forth in the Executive Order * * * as the electronic 
employment eligibility verification system to be used by Federal 
contractors.'' (See 73 FR 33837, Jun. 13, 2008.)
    This final rule responds to these requirements, and the Secretary's 
designation, by amending the FAR to require certain Federal contractors 
and subcontractors to use the E-Verify system (E-Verify) administered 
by the Department of Homeland Security (DHS), U.S. Citizenship and 
Immigration Services (USCIS) as the means of verifying that certain of 
their employees are authorized to work in the United States.

E-Verify Program

    The E-Verify system, formerly known as the Basic Pilot/Employment 
Eligibility Verification Program, is an Internet-based system operated 
by DHS USCIS, in partnership with the Social Security Administration 
(SSA) that allows participating employers to electronically verify the 
employment eligibility of their newly hired employees. E-Verify 
represents the best means currently available for employers to verify 
the work authorization of their employees.
    Before an employer can use the E-Verify system, the employer must 
enroll in the program and agree to the E-Verify Memorandum of 
Understanding (MOU) required for program participants. The terms of the 
MOU are established by USCIS and are not negotiated with each 
participant. In consenting to the MOU, employers agree to abide by 
current legal hiring procedures and to ensure that no employee will be 
unfairly discriminated against in the use of the E-Verify program. 
Violation of the terms of the MOU by the employer is grounds for 
termination of the employer's participation in the E-Verify program.
    Current law (8 U.S.C. 1324a(b)) requires all employers in the 
United States to complete an Employment Eligibility Verification Form 
(Form I-9) for each newly hired employee to verify each employee's 
identity and employment eligibility. Under this final rule, Federal 
contractors will additionally enter the worker's identity and 
employment eligibility information into the E-Verify system, which 
checks that information against information contained in SSA, USCIS and 
other Government databases.
    SSA first verifies that the name, social security number (SSN), and 
date of birth are correct and, if the employee has stated that he or 
she is a U.S. citizen, confirms U.S. citizen status through its 
databases. If the system confirms identity and U.S. citizenship, and 
there are no other indicators that the information is not correct, SSA 
confirms employment-eligibility. USCIS also verifies through database 
checks that any non-U.S. citizen employee is in an employment-
authorized immigration status.
    If the information provided by the worker matches the information 
in the SSA and USCIS records, no further action will be required. E-
Verify procedures require only that the employer record on the Form I-9 
the

[[Page 67652]]

verification identification number and the result obtained from the E-
Verify query or print a copy of the transaction record and retain it 
with the Form I-9.
    If SSA is unable to verify information presented by the worker, the 
employer will receive an ``SSA Tentative Nonconfirmation'' notice. 
Similarly, if USCIS is unable to verify information presented by the 
worker, the employer will receive a ``DHS Tentative Nonconfirmation'' 
notice. Employers can receive a tentative nonconfirmation notice for a 
variety of reasons, including inaccurate entry of information by the 
employer into the E-Verify Web site, and changes in the worker's name 
or immigration status that the worker has not updated in the SSA 
database searched by the E-Verify system. If the individual's 
information does not match the SSA or USCIS records, the employer must 
provide the worker with a written notice generated by the E-Verify 
system, called a ``Notice to Employee of Tentative Nonconfirmation''. 
The worker must then indicate on the notice whether he or she contests 
or does not contest the finding reflected in the tentative 
nonconfirmation that he or she appears unauthorized to work, and both 
the worker and the employer must sign the notice.
    If the worker chooses to contest the tentative nonconfirmation, the 
employer must print a second notice generated by the E-Verify system, 
called a ``Referral Letter,'' which contains information about 
resolving the tentative nonconfirmation, as well as the contact 
information for SSA or USCIS, depending on which agency was the source 
of the tentative nonconfirmation. The worker then has eight Federal 
Government workdays to visit an SSA office or call USCIS to try to 
resolve the discrepancy. Under the E-Verify MOU, if the worker contests 
the tentative nonconfirmation, the employer is prohibited from 
terminating or otherwise taking adverse action against the worker while 
he or she awaits a final resolution from the Federal Government agency. 
If the worker fails to contest the tentative nonconfirmation, or if SSA 
or USCIS is unable to resolve the discrepancy, the employer will 
receive a notice of final nonconfirmation and the worker's employment 
may be terminated.
    Participation in E-Verify does not exempt the employer from the 
responsibility to complete, retain, and make available for inspection 
Forms I-9 that relate to its employees, or from other requirements of 
applicable regulations or laws. However, the following modified 
requirements apply by reason of the employer's participation in E-
Verify: (1) Identity documents used for verification purposes must have 
photos (except as discussed below with respect to accommodations); (2) 
if an employer obtains confirmation of the identity and employment 
eligibility of an individual in compliance with the terms and 
conditions of E-Verify, a rebuttable presumption is established that 
the employer has not violated section 274A(a)(1)(A) of the Immigration 
and Nationality Act (INA) with respect to the hiring of the individual; 
(3) the employer must notify DHS if it continues to employ any employee 
for whom the employer has received a final nonconfirmation, and the 
employer is subject to a civil money penalty between $500 and $1,000 
for each failure to notify DHS of continued employment following a 
final nonconfirmation; (4) if an employer continues to employ an 
employee after receiving a final nonconfirmation and that employee is 
subsequently found to be an unauthorized alien, the employer is subject 
to a rebuttable presumption that it has knowingly employed an 
unauthorized alien in violation of Immigration and Nationality Act 
(INA) section 274A(a); and (5) no person or entity participating in E-
Verify is civilly or criminally liable under any law for any action 
taken in good faith reliance on information provided through the 
confirmation system.
    Further information on registration for and use of E-Verify can be 
obtained via the Internet at http://www.dhs.gov/E-Verify.

E-Verify Basis and Development

1. Legislative History
    Laws pertaining to the control of illegal immigration have received 
serious attention from Congress and the Executive Branch since at least 
the early 1950s. Chief among the legislative approaches to these 
problems has been the proposed establishment of penalties for the 
employment of undocumented aliens and related laws requiring the 
verification of employment authorization. See INA Section 274(a), 
codified at 8 U.S.C. 1324(a). The House of Representatives Report filed 
with the Immigration Reform and Control Act of 1986 (IRCA), found at 
1986 U.S. Code Cong. and Adm. News, p. 5649, clearly describes the 
basis for that legislation:

    This legislation seeks to close the back door on illegal 
immigration so that the front door on legal immigration may remain 
open. The principal means of closing the back door, or curtailing 
future illegal immigration, is through employer sanctions. The bill 
would prohibit the employment of aliens who are unauthorized to work 
in the United States because they either entered the country 
illegally, or are in an immigration status which does not permit 
employment. U.S. employers who violate this prohibition would be 
subject to civil and criminal penalties. Employment is the magnet 
that attracts aliens here illegally or, in the case of 
nonimmigrants, leads them to accept employment in violation of their 
status. Employers will be deterred by the penalties in this 
legislation from hiring unauthorized aliens and this, in turn, will 
deter aliens from entering illegally or violating their status in 
search of employment. The logic of this approach has been recognized 
and backed by the past four administrations * * *. Now, as in the 
past, the Committee remains convinced that legislation containing 
employer sanctions is the most humane, credible and effective way to 
respond to the large-scale influx of undocumented aliens. While 
there is no doubt that many who enter illegally do so for the best 
of motives--to seek a better life for themselves and their 
families--immigration must proceed in a legal, orderly and regulated 
fashion. As a sovereign nation, we must secure our borders.

    H.R. Rep. No. 99-682(I), 99th Cong., 1st Sess. 46 (1986), 1986 U.S. 
Code Cong. & Admin. News, p. 5649. INA Section 274A, as established by 
IRCA, thus prohibits any ``person or other entity'' from knowingly 
hiring, or knowingly continuing to employ, any unauthorized alien. INA 
section 274A(b) provides for an ``Employment Verification System,'' 
which requires that employers attest, after examination of 
documentation presented by the employee, that the person being hired, 
recruited or referred for employment is not an unauthorized alien. INA 
section 274A also provides for the assessment of civil monetary 
penalties and cease and desist orders against any employer that has 
knowingly hired or continued to employ an unauthorized alien, or that 
has failed to comply with the employment verification system mandated 
by INA section 274A(b). 8 U.S.C. 1324a(e)(4)-(e)(5).
    Employers who engage in a ``pattern or practice'' of violating the 
prohibition against illegal employment of unauthorized workers may face 
criminal sanctions. INA section 274A(f), 8 U.S.C. 1324a(f). DHS U.S. 
Immigration and Customs Enforcement (ICE) investigates complaints of 
potential violations of INA section 274A by inspecting employment 
eligibility verification forms maintained by employers with respect to 
their current and former employees, and compelling the production of 
evidence or the attendance of witnesses by subpoena. 8 U.S.C. 
1324a(e)(2); 8 CFR 274a.2(b)(2).

[[Page 67653]]

Development of E-Verify

    E-Verify provides a modern means of verifying employment 
authorization information in addition to the traditional I-9 process. 
When Congress established the paper-based employment verification 
system in 8 U.S.C. 1324a(b), it directed the President to evaluate that 
system's security and efficacy and implement necessary changes, subject 
to congressional oversight. 8 U.S.C. 1324a(d). Congress also authorized 
the President to establish demonstration projects designed to 
strengthen the employment verification system. 8 U.S.C. 1324a(d)(4).
    The first demonstration project, in 1992, included the Telephone 
Verification System (TVS) pilot program--a predecessor to the E-Verify 
system. 69 Interpreter Releases 702 (June 8, 1992); 515 (Apr. 27, 
1992). In 1996, Congress established the Basic Pilot program--now 
called E-Verify--as part of the Illegal Immigration Reform and 
Immigrant Responsibility Act (IIRIRA). Public Law 104-208, Sections 
401-405, 110 Stat. 3009-655-3009-666 (1996) (8 U.S.C. 1324a note).
    On August 10, 2007, the Acting Director of the Office of Management 
and Budget instructed agencies to encourage their existing and future 
contractors to use E-Verify and attached a letter that DHS had sent to 
its major contractors encouraging their use of E-Verify and emphasizing 
E-Verify's ability to help contractors comply with immigration law. See 
``Memorandum for the Heads of Departments and Agencies M-07-21,'' 
Stephen S. McMillin, Acting Director, Office of Management and Budget 
(August 10, 2007) (http://www.whitehouse.gov/omb/memoranda/fy2007/m07-
21.pdf) attaching ``Letter from Paul A. Schneider, Under Secretary for 
Management'' (Aug. 10, 2007). The OMB Memorandum also announced that 
the Federal Acquisition Regulatory Council was developing appropriate 
Governmentwide regulatory coverage to apply E-Verify to Federal 
contractors. It also indicated that by October 1, 2007, all Federal 
departments and agencies should begin verifying their new hires through 
E-Verify.

Compliance Requirements for Federal Contractors

    The Executive branch has long recognized that the instability and 
lack of dependability that afflicts contractors that employ 
unauthorized workers undermines overall efficiency and economy in 
Government contracting. The first formal expression of this policy is 
found in Executive Order 12989, signed by President Clinton in February 
1996. (See 61 FR 6091, Feb. 15, 1996.) That Order, which pre-dated 
Congress's enactment of IIRIRA authorizing what is now the E-Verify 
program, found that the presence of unauthorized aliens on a 
contractor's workforce rendered that contractor's workforce less stable 
and reliable than the workforces of contractors who do not employ 
unauthorized aliens:

    Stability and dependability are important elements of economy 
and efficiency. A contractor whose work force is less stable will be 
less likely to produce goods and services economically and 
efficiently than a contractor whose work force is more stable. It 
remains the policy of this Administration to enforce the immigration 
laws to the fullest extent, including the detection and deportation 
of illegal aliens. In these circumstances, contractors cannot rely 
on the continuing availability and service of illegal aliens, and 
contractors that choose to employ unauthorized aliens inevitably 
will have a less stable and less dependable work force than 
contractors that do not employ such persons. Because of this 
Administration's vigorous enforcement policy, contractors that 
employ unauthorized alien workers are necessarily less stable and 
dependable procurement sources than contractors that do not hire 
such persons. I find, therefore, that adherence to the general 
policy of not contracting with providers that knowingly employ 
unauthorized alien workers will promote economy and efficiency in 
Federal procurement.

    Executive Order 12989 (preamble), 61 FR 6091. This finding is as 
applicable today as it was in 1996. The Government is aware, in 
particular, of recent instances where Federal Government contracts have 
been disrupted when the contractor's employees were identified as 
unauthorized workers. See, e.g., Tami Abdollah, ``2 Sentenced for 
Hiring Illegal Migrants; Golden State Fence Executives Get Probation 
and Fines, and the Company is Ordered to Forfeit $4.7 Million in 
Profits,'' Los Angeles Times, March 29, 2007, (detailing the criminal 
prosecution of two Federal Contractor company executives for hiring 
illegal workers that resulted in a guilty plea; judgment of probation 
and combined $300,000 in fines for the two individuals in addition to 
the forfeiture of $4.7 million in company profits the company reaped by 
employing unauthorized immigrant workers); Karen Lee Ziner, ``3 at 
Bianco Plant Indicted on Immigration Charges,'' Providence Journal 
Bulletin, August 4, 2007, at A3 (reporting the indictment of company 
president along with two managers for ``conspiring to harbor and hire 
illegal immigrants'' to work on Government contracts valued over $200 
million); Mark Bowes, ``U.S. Immigration Agents Arrest 33: Workers at 
Richmond Site of New Federal Courthouse Alleged to be Here Illegally,'' 
Richmond Times Dispatch, May 8, 2008, at B3 (reporting the arrest of 33 
alleged illegal immigrant workers employed by a Federal contractor 
during a raid by immigration authorities at the construction site of a 
future Federal courthouse in Richmond, Virginia); Giovanna Dell'Orto, 
``Illegal Immigrants Arrested at Military Bases,'' Press-Register, 
January 20, 2007, at B12 (publishing an article on the arrest of 
roughly 40 illegal immigrant workers over a three day period that were 
hired by Federal contractors to work at three different military bases 
including Fort Benning in Georgia and the Marine Corp Base Quantico in 
Virginia); Rob Bell, ``Mills Manufacturing Corporation Raided by ICE,'' 
Western Carolina Business Journal, August 15, 2008 (reporting that 
immigration officials raided a Federal defense contractor and arrested 
57 illegal immigrant workers).
    Consistent with the President's authority under FPASA, and to 
``ensure the economical and efficient administration and completion of 
Federal Government contracts,'' Executive Order 12989 instructed the 
Attorney General of the Department of Justice to investigate to 
determine whether a contractor or an organizational unit thereof is not 
in compliance with the INA employment provisions, transmit that 
determination to the contracting agency and have the head of the 
contracting agency pursue debarment or other such action as may be 
appropriate under the FAR. (See Executive Order 12989, Sections 3 and 
4.) With the establishment of the DHS, the Attorney General's 
investigative authority transferred to the Secretary of Homeland 
Security. See Executive Order 13286, Sec. 19, (Feb. 28, 2003), 68 FR 
10623. Thus, as early as 1996, agencies were instructed to use 
provisions within the FAR to support economical and efficient Federal 
Government contracting by avoiding doing business with contractors that 
employ unauthorized workers.
    On June 6, 2008, President Bush issued Executive Order 13465, 
amending Executive Order 12989 by adding an electronic employment 
eligibility verification requirement to strengthen the long-standing 
Executive branch policy of furthering economical and efficient 
contracting through only contracting with Federal contractors who 
employ persons in the United States who are authorized to work in the 
United States. Executive Order 13465 echoes the findings and 
conclusions stated in Executive Order 12989 and

[[Page 67654]]

builds upon the ``economy and efficiency'' justifications for the 1996 
Executive Order in light of the significant advances in the technology 
for employment eligibility verification that have been made since the 
issuance of Executive Order 12989. As amended, Executive Order 12989 
now states:

    It is the policy of the Executive branch to use an electronic 
employment verification system because, among other reasons, it 
provides the best available means to confirm the identity and work 
eligibility of all employees that join the Federal workforce. * * * 
I find, therefore, that adherence to the general policy of 
contracting only with providers that do not knowingly employ 
unauthorized alien workers and that have agreed to utilize an 
electronic employment verification system designated by the 
Secretary of Homeland Security to confirm employment eligibility of 
their workforce will promote economy and efficiency in Federal 
procurement.

    Executive Order 12989, as amended by Executive Order 13465, 73 FR 
33285.
    Executive Order 12989, as amended, further specifically directs the 
agency heads of DoD, GSA and NASA to implement this policy through 
amendments to the FAR. Executive Order 13465 at Section 3, 73 FR 33286. 
Accordingly, the Councils amend the FAR in this final rule in 
accordance with the President's direction, pursuant to his authority 
under FPASA to ``prescribe policies and directives'' governing Federal 
procurement that are consistent with the Act's aim of providing the 
Federal Government with an economical and efficient procurement system. 
40 U.S.C. 101, 121.

B. Final Rule

Summary of the Elements of the Proposed Rule That Are Retained in the 
Final Rule

    This final rule inserts a clause into Federal contracts committing 
Government contractors to use the USCIS E-Verify System to verify that 
all of the contractors' new hires, and all employees (existing and new) 
directly performing work under Federal contracts, are authorized to 
work in the United States. Consistent with the requirements first set 
forth in the proposed rule, the final rule--
    1. Exempts contracts that are for--
     Commercially available off-the-shelf (COTS) items; and
     Items that would be COTS items but for minor 
modifications.
    2. Requires inclusion of the clause in subcontracts over $3,000 for 
services or for construction.
    3. Requires contractors and subcontractors to use E-Verify to 
confirm the employment eligibility of all existing employees who are 
directly performing work under the covered contract.
    4. Applies to solicitations issued and contracts awarded after the 
effective date of the final rule in accordance with FAR 1.108(d). Under 
the final rule, Departments and agencies should, in accordance with FAR 
1.108(d)(3), amend--on a bilateral basis--existing indefinite-delivery/
indefinite-quantity contracts to include the clause for future orders 
if the remaining period of performance extends at least six months 
after the effective date of the final rule.
    5. In exceptional circumstances, allows a head of the contracting 
activity to waive the requirement to include the clause. This authority 
is not delegable.
    The rule is written to apply the above requirements in a manner 
that will ensure effective compliance by the contractor community, and 
is reasonably limited in certain circumstances to minimize the burden 
on participants in the Federal procurement process.

Changes Adopted in the Final Rule

    Below is a summary of changes made to the final rule:
    1. Significantly Extended Timelines--The final rule amends the 
proposed rule to permit Federal contractors participating in the E-
Verify program for the first time a longer period--90 calendar days 
from enrollment instead of 30 days as initially proposed--to begin 
using the system for new and existing employees. The final rule also 
provides a longer period after this initial enrollment period--30 
calendar days instead of 3 business days--for contractors to initiate 
verification of existing employees who have not previously gone through 
the E-Verify system when they are newly assigned to a covered Federal 
contract. Contractors already enrolled and using the program as Federal 
contractors will have the same extended timeframe to initiate 
verification of employees assigned to the contract, but the time limits 
will be measured from contract award date instead of from the 
contractor's E-Verify enrollment date. With regard to verification of 
new hires, a contractor that has already been enrolled as a Federal 
contractor for 90 calendar days or more will have the standard 3 
business days from the date of hire to initiate verification of new 
hires. Those contractors that have been enrolled in the program for 
less than 90 calendar days will have 90 calendar days from the date of 
enrollment as a Federal contractor to initiate verification of new 
hires.
    2. Covered Prime Contract Value Threshold--The final rule requires 
the insertion of the E-Verify clause for prime contracts above the 
simplified acquisition threshold ($100,000) instead of the micro-
purchase threshold ($3,000).
    3. Contract Term--The final rule clarifies that the E-Verify clause 
need not be inserted into prime contracts with performance terms of 
less than 120 days.
    4. Institutions of Higher Education--The final rule modifies the 
contract clause so that institutions of higher education need only 
verify employees assigned to a covered Federal contract.
    5. State and Local Governments and Federally Recognized Indian 
Tribes--Similarly, under the final rule, State and local governments 
and Federally recognized Indian tribes need only verify employees 
assigned to a covered Federal contract.
    6. Sureties--Under the final rule, sureties performing under a 
takeover agreement entered into with a Federal agency pursuant to a 
performance bond need only verify employees assigned to the covered 
Federal contract.
    7. Security Clearances and HSPD-12 credentials--The final rule 
exempts employees who hold an active security clearance of 
confidential, secret or top secret from verification requirements. The 
rule also exempts employees for which background investigations have 
been completed and credentials issued pursuant to the Homeland Security 
Presidential Directive (HSPD)-12, ``Policy for a Common Identification 
Standard for Federal Employees and Contractors,'' which the President 
issued on August 27, 2004.
    8. All Existing Employees Option--The final rule provides 
contractors the option of verifying all employees of the contractor, 
including any existing employees not currently assigned to a Government 
contract. A contractor that chooses to exercise this option must notify 
DHS and must initiate verifications for the contractor's entire 
workforce within 180 days of such notice to DHS.
    9. Expanded COTS-related exemptions for:
     Bulk cargo--The rule will not apply to prime contracts for 
agricultural products shipped as bulk cargo that would otherwise have 
been categorized as COTS; and
     Certain services associated with the provision of COTS 
items or items that would be COTS items but for minor modifications.
    10. Allows the Head of the Contracting Activity to waive E-Verify 
requirements after contract award,

[[Page 67655]]

either temporarily or for the period of performance.
    11. Definitions:
     Employee assigned to the contract--The final rule 
clarifies that employees who normally perform support work, such as 
general company administration or indirect or overhead functions, and 
that do not perform any substantial duties applicable to an individual 
contract, are not considered to be directly performing work under the 
contract.
     Subcontract and subcontractor--Adds definitions derived 
from FAR 44.101.

B. Response to Comments Received on the Notice of Proposed Rulemaking 
Docket

    The Department of Defense (DoD), General Services Administration 
(GSA) and National Aeronautics and Space Administration (NASA) 
published a notice of proposed rulemaking (NPRM) in this action on June 
12, 2008. (See 73 FR 33374.) The NPRM directed the submission of 
comments to the Federal eRulemaking portal, http://www.regulations.gov, 
as well as by facsimile and by mail to the FAR Secretariat, with 
reference to FAR Case 2007-013, Docket 2008-0001; Sequence 1, on or 
before August 11, 2008. The agencies received more than 1,600 public 
comments on the proposed rulemaking from individuals, organizations, 
corporations, trade associations, chambers of commerce and Government 
entities.
    Comments submitted to the docket for this rulemaking were 
distributed relatively evenly among various issues, with concerns about 
the Government's authority to promulgate the rule and questions about 
the DHS's and SSA's collective ability to administer the rule receiving 
the greatest number of comments. Eleven commenters stated that the 60-
day public comment period was inadequate to evaluate, research, and 
prepare responses to a complex proposed rule. Those commenters asked 
the Councils to extend the comment period to allow more time to 
research and respond to the proposed rule.
    The Councils declined to extend the public comment period after 
concluding that the period was adequate. The current web-based E-Verify 
system, which has been active and available to employers since 2004, 
has been the subject of significant public scrutiny, including in 
public hearings before Congress. This has, over time, disseminated 
considerable information about the program to the public. As a result, 
most commenters did not request additional time to gather information 
and submit comments, and those that did request additional time failed 
to raise novel or difficult issues that could have justified an 
extension. Moreover, the comments received more than adequately 
provided substantial information on which the Councils could make a 
final decision. Accordingly, the Councils do not believe that there is 
a basis for extending the comment period related to this rule.

Support for the Rule

    Comment: More than 600 commenters wrote in support of the proposed 
rule and strongly urged its adoption. One commenter noted that it has 
been illegal for more than 20 years, i.e., since 1986, to hire an 
individual who is not authorized to work in the United States. Another 
commenter, who identified himself as a 30-year Human Resources 
professional, stated that this E-Verify system is not too burdensome 
for employers. A third commenter said that the ``E-Verify program 
WORKS!'' and that he has found it to work accurately 100 percent of the 
time.
    The majority of these commenters expressed overall support for the 
Executive Order's instruction for Federal agencies to contract with 
employers that use E-Verify to check the employment eligibility of all 
persons performing work on Federal contracts and of all persons hired 
by the contractor. Some commenters applauded E-Verify because it will 
establish a level playing field and prevent some employers from 
obtaining a competitive advantage by exploiting unauthorized workers 
for lower pay. Many commenters noted that--for 22 years--it has been 
against the law to hire workers who are not authorized to work in the 
U.S. This is not a new requirement, they say; it merely puts some teeth 
into the existing law. Other commenters observed that E-Verify will 
help stem the problem of identity theft by requiring employers to check 
photo identification.
    Response: The Councils appreciate these supportive comments for use 
of E-Verify in the Federal Government procurement system, but note that 
application of the system in this context is not meant to regulate 
immigration, but to provide the Federal Government with stable and 
dependable contractors which, ultimately, results in a more economical 
and efficient procurement system.

Requests for a More Comprehensive Solution

    Comment: A number of commenters suggested that merely requiring the 
use of the E-Verify system by Federal contractors was not a 
comprehensive solution. They strongly advocate ``fixing'' the 
``broken'' immigration system. Some commenters see the solution as 
giving people a path to legal status, others see it as providing 
``tangible solutions for the over 7 million undocumented workers in our 
economy,'' some see it as enabling swifter and earlier access to work 
permits, and still other commenters advocate improved ICE auditing 
teams. One commenter claims that, ``[w]hile employer sanctions and a 
mandatory employment document verification system may be an appropriate 
part of an effective immigration reform package, standing alone they 
only exacerbate the problems they are ostensibly designed to address.''
    Response: Comprehensive immigration reform is beyond the scope of 
this rulemaking and was not the purpose of Executive Order 12989, as 
amended. The mandate given to the FAR Councils was to implement the 
President's Executive Order of June 6, 2008, as a means of creating a 
more economical and efficient Federal Government procurement system. 
The employment of persons unauthorized to work in the U.S. has been 
against the law for 22 years. Completion of the Form I-9 is still 
required of all employers and this rule does not change that 
requirement. This rule merely provides a more convenient, faster, and 
more consistent means of determining whether an individual is, or is 
not, authorized to work in the U.S. to establish greater stability and 
dependability among the Federal contractor workforce.

Authority

1. Immigration Statutes
a. Voluntary Participation in E-Verify
    1. Comment. Many commenters challenge the Councils' authority to 
promulgate the Rule, arguing that the insertion of a clause into 
Federal contracts that commits Federal contractors to use E-Verify 
conflicts with the congressional intent expressed in the IIRIRA that 
participation in E-Verify be ``voluntary.'' Some commenters further 
argue that the E-Verify program is de facto mandatory because 
contractors who elect not to enter into Federal contracts on account of 
E-Verify will go out of business.
    Response: The Councils disagree. Section 402(a) of IIRIRA states, 
in relevant part, that ``the Secretary of Homeland Security may not 
require any person or other entity to participate in a pilot program.'' 
8 U.S.C. 1324a note,

[[Page 67656]]

Section 402(a). On its face, this statutory limitation applies only to 
the Secretary of Homeland Security and does not apply to the President 
or the Councils. Because the requirement to insert the contract clause 
set forth in this rule comes from a presidential action, Executive 
Order 12989, as amended, and from this rulemaking undertaken by the 
Councils, it is not a requirement imposed by the Secretary of Homeland 
Security and therefore does not run afoul of section 402(a) of IIRIRA.
    Moreover, acceptance of a Federal procurement contract is, by 
definition, a voluntary act. The rule sets forth a performance 
requirement to be included as a contract clause in contracts entered 
into or negotiated anew after the effective date of the rule. In AFL-
CIO v. Kahn, the D.C. Circuit Court of Appeals, sitting en banc, 
rejected the claim that the Carter Administration's insistence that 
Federal contractors agree to comply with wage and price controls 
rendered those controls ``mandatory'' in violation of the Council on 
Wage and Price Stability Act (COWPSA). 618 F.2d 784 (D.C. Cir. 1979). 
The Kahn Court analogized the procurement requirement at issue to 
``those Federal programs that offer funds to State and local 
governments on certain conditions. The Supreme Court has upheld such 
conditional grants, observing on one occasion through Justice Cardozo 
that `to hold that motive or temptation is equivalent to coercion is to 
plunge the law in endless difficulties.' '' AFL-CIO v. Kahn, 618 F.2d 
at 794 (quoting Steward Machine Co. v. Davis, 301 U.S. 548, 589-590 
(1937)). According to the D.C. Circuit:

    Any alleged mandatory character of the procurement program is 
belied by the principle that no one has a right to a Government 
contract. As the Supreme Court ruled in Perkins v. Lukens Steel Co., 
``[The] Government enjoys the unrestricted power * * * to determine 
those with whom it will deal, and to fix the terms and conditions 
upon which it will make needed purchases.'' Those wishing to do 
business with the Government must meet the Government's terms; 
others need not.

AFL-CIO v. Kahn, 618 F.2d at 794. If a contractor chooses to do 
business with the Federal Government, then the Federal Government can, 
and routinely does, impose contract performance requirements. Where, as 
with this rule, such requirements are imposed through contract terms 
included in contracts, a contractor's agreement to abide by those terms 
of the agreement is not ``involuntary.''
    2. Comment: Many commenters suggested that IIRIRA and the INA limit 
the types of employers which can be required to participate in the 
Basic Pilot Program. These commenters asserted that the proposed rule's 
promulgation of a contract clause committing Federal contractors to use 
E-Verify violates the congressional intent behind IIRIRA, because 
Federal contractors are not one of the classes of employers which can 
be required to participate in Basic Pilot. Some commenters suggested 
that Congress consciously chose to exclude Government contractors from 
the subset of employers for which participation in Basic Pilot would be 
mandatory. Many commenters also asserted that, because of this alleged 
violation of congressional intent, the Administration lacks the 
constitutional authority to promulgate this policy through Executive 
Order or through this rulemaking.
    Response: The Councils disagree. IIRIRA requires participation in 
E-Verify by certain employers, including Executive departments and the 
legislative branch, as well as employers found to have violated INA 
section 274A. There is nothing in the text of IIRIRA that prohibits the 
President, acting pursuant to separate statutory authority, from 
requiring additional classes of employers to participate in E-Verify as 
a condition of contracting with the Federal Government. Nor is there 
any indication in the legislative history to suggest that Congress ever 
specifically considered and rejected a proposal to include Federal 
contractors in the E-Verify program. Here, the President has acted 
within his authority under FPASA and 3 U.S.C. 301 and issued an 
Executive Order to improve the dependability and stability of the 
Federal contractor workforce by requiring Federal agencies to contract 
with businesses that electronically verify the employment eligibility 
of their employees. In his Executive Order, the President tasked the 
Secretary of Homeland Security with designating an appropriate 
electronic verification tool and charged the FAR Councils with the 
responsibility to promulgate a rule to implement the requirements of 
the Executive Order. The Secretary of Homeland Security and the FAR 
Councils have acted in accordance with the President's directive, 
issued as an exercise of his authority under FPASA, and in so doing, 
neither the Secretary nor the Councils have taken any action in 
conflict with IIRIRA. Congress merely prohibited the Secretary of 
Homeland Security from requiring participation in E-Verify by other 
persons or entities, and this rule does not violate that prohibition, 
as described above.
b. Existing Employees
    Comment: Many commenters asserted that because IIRIRA created the 
Basic Pilot program as a tool to confirm employment eligibility of 
newly hired employees, the contractual requirement--announced by 
Executive Order and implemented through this rulemaking--that existing 
employees assigned to Government contracts be verified (or re-verified) 
through E-Verify is contrary to law.
    Response: The Councils disagree. Executive Order 12989, as amended, 
instructs executive departments and agencies to require, as a condition 
of contracting, that the contractor agree to use an electronic 
employment eligibility verification system ``to verify the employment 
of * * * all persons assigned by the contractor to perform work within 
the United States on the Federal contract.'' This Executive Order is 
based on the President's exercise of his authority under FPASA to 
prescribe policies that promote economy and efficiency in federal 
contracting. 40 U.S.C. 101, 121.
    The Basic Pilot statute does not prohibit the verification of 
existing employees' work eligibility called for by this presidential 
directive. The Basic Pilot statute lays out a set of procedures that 
employers using the system must follow ``in the case of the hiring (or 
recruitment or referral) for employment in the United States. * * *'' 
IIRIRA section 403(a). The statute also sets out the parameters for the 
``employment eligibility confirmation system'' that the Secretary of 
Homeland Security must establish. IIRIRA section 404. Nothing in either 
of these sections, however--or in any other part of the Basic Pilot 
statute--prohibits the use of the confirmation system for existing 
employees or prohibits the President, acting pursuant to separate 
statutory authority, from requiring federal contractors to use the 
confirmation system for existing employees as a condition of 
contracting with the federal government.
c. Congressional Notification
    Comment: Commenters noted that IRCA requires the Administration to 
notify Congress before implementing any changes to the employment 
verification system ``established under subsection (b) of [INA section 
274A].'' INA section 274A(d)(1), (d)(3). These commenters suggest that 
this rulemaking amounts to such a change, and that it may not be 
implemented without notice to Congress called for in section 
274A(d)(3).

[[Page 67657]]

    Response: The Councils disagree. This rule instructs Federal 
contracting officers to insert the specified clause into future Federal 
contracts, thereby committing Federal contractors to use the E-Verify 
system as specified in the rule. It does not, however, constitute a 
change to ``the requirements of subsection (b)'' of INA section 274A, 
which established the paper-based Form I-9 employment verification 
process. The I-9 process that all employers must follow at the time of 
hire continues to apply to Federal contractors without any change. This 
rule, and the Executive Order on which it is based, promotes economy 
and efficiency in Federal contracting by assisting employers to avoid 
employment of unauthorized workers and by limiting the risk that 
Federal contracts performed in the United States will be staffed by 
persons unauthorized to work in the United States.
2. Executive Order Authority
    Comment: As noted above, many commenters challenged the President's 
authority to issue the Executive Order under FPASA. These commenters 
suggested that Executive Order 12989 does not promote ``economy'' and 
``efficiency'' in Government contracting, and that the Executive Order 
is therefore not supported by FPASA's statement that the President may 
enact procurement regulations which further those two ends. Commenters 
also contended that the main purpose of the Executive Order is to 
advance a social policy--a strengthening of the immigration enforcement 
relating to employment in the United States--in a way that is contrary 
to congressional intent, and that the President's power recognized by 
FPASA cannot be employed by the Executive Branch to advance policies 
that conflict with the statutes passed by Congress.
    Response: These challenges to the legal authority for Executive 
Order 12989 are outside the scope of this rulemaking. The Councils 
note, however, that Executive Order 12989 falls well within the 
established legal bounds of presidential directives regarding 
procurement policy. FPASA authorizes the President to craft and 
implement procurement policies that further the Act's statutory goals 
of promoting ``economy'' and ``efficiency'' in Federal procurement. 
See, e.g., UAW-Labor Employment & Training Corp. v. Chao, 325 F.3d 360, 
366 (D.C. Cir. 2003) (affirming authority of the President under FPASA 
to require federal contractors, as a condition of contracting, to post 
notices informing workers of certain labor law rights); Kahn, 618 F.2d 
at 792-793 (upholding an Executive Order implementing procurement wage 
and price controls, noting need for a ``nexus'' between those wage and 
price controls and procurement economy and efficiency). The fundamental 
``economy and efficiency'' principles underlying the Executive Order 
were first articulated in the original Executive Order 12989, issued in 
February 1996, which concluded that contracting with employers who hire 
unauthorized workers in violation of the INA undermines the economy and 
efficiency of the Federal procurement system. The 1996 Executive Order 
imposed debarment penalties on contractors found to have violated the 
immigration laws, and was never found by a court to be inconsistent 
with FPASA, the INA, or IRCA. Executive Order 13465 amends Executive 
Order 12989 to use new employment verification technology in order to 
advance the same goal of ensuring a stable and dependable Federal 
contractor workforce and more economical and efficient Federal 
Government contracting. See 73 FR 33285 (``This order is designed to 
promote economy and efficiency in Federal Government procurement. * * * 
I find * * * that adherence to the general policy of contracting only 
with providers that do not knowingly employ unauthorized alien workers 
and that have agreed to utilize an electronic employment verification 
system designated by the Secretary of Homeland Security to confirm the 
employment eligibility of their workforce will promote economy and 
efficiency in Federal procurement.'') The President has determined that 
this rule will produce net economy and efficiency gains in Federal 
procurement.
    The Councils also disagree with assertions that the proposed rule 
is a veiled attempt to modify immigration policy under the guise of 
procurement regulation. This rule implicates immigration, but does so 
in a permissible manner. The President may, under FPASA, promulgate 
procurement policies and directives touching upon policy matters beyond 
Government contracting, so long as there is a sufficiently close 
``nexus'' between the policy or directive and the promotion of economy 
and efficiency in Federal procurement. See Chao, 325 F.3d at 366-67; 
Kahn, 618 F.2d at 792; Chamber of Commerce v. Reich, 74 F.3d 1322, 1337 
(D.C. Cir. 1996) (``[T]he President, in implementing the Procurement 
Act, may * * * draw upon * * * secondary policy views * * * that are 
directed beyond the immediate quality and price of goods and services 
purchased.''). In this case, the ``nexus'' is explained at some length 
in the text of Executive Order 13465. (See 73 FR 33285.)
3. The MOU Requirement
    Comment: One commenter specified that ``[t]he inclusion of an MOU 
in addition to, or as a supplement to, the contract performance 
requirements, is contrary to contract formation law in that it might 
create a separately enforceable (and potentially conflicting) 
obligation between the parties beyond the scope of the contract and 
could create confusion and result in problems with contract 
administration and/or lead to the submission of contract claims.''
    Response: The Councils do not concur with these comments. The 
requirement in this clause for the contractor to comply with the 
requirements of a secondary agreement is no different than any other 
contract term that requires adherence to a standard or a specification. 
The clause merely requires adherence to the conditions of the MOU as 
part of the contractor's performance duties. The terms of the E-Verify 
MOU are readily available to the public, and were included in the 
docket of this rulemaking on the www.regulations.gov Web site so that 
commenters on this rule would have the opportunity to review and take 
into consideration the proposed terms of that agreement in providing 
comments on this rulemaking. Potential contractors have adequate 
advance notice of the ancillary agreement with which they must comply.
4. Consistency With Other Federal Regulations
a. FAR Guiding Principles
    Comment: Several commenters claim that the proposed rule 
contradicts many of the guiding principles used in the creation of the 
FAR, including (1) minimizing administrative operating costs, (2) 
conducting business with integrity, fairness, and openness, and (3) 
promoting competition.
    Response: Commenters claim that administrative operating costs can 
include start-up, implementation, training, and maintenance costs; and 
the Councils agree. All of these costs were included, and evaluated, in 
the Regulatory Impact Analysis (RIA) released with the proposed rule. 
Some adjustments have been made to the RIA as a result of comments 
received in response to the proposed rule, and they are addressed in 
the Regulatory Flexibility Analysis section of this rule. Commenters 
claim that there are also

[[Page 67658]]

other direct and indirect costs to employers who use E-Verify--
employers may perceive foreign-born workers as more expensive to employ 
than native-born workers due to the database inaccuracies. Commenters 
claim that resolving tentative nonconfirmations and correcting employee 
records costs time and money and affects other resources. In claiming 
that the costs associated with the proposed rule do not minimize 
administrative costs, however, the commenters overlook the costs 
already incurred by contractors as a result of the I-9 process mandated 
by the INA, and they overlook the gains in stability and reliability of 
the Federal contractor workforce that contractors' use of E-Verify will 
produce.
    The Councils also disagree with the claim by some commenters that 
the proposed rule fails to advance integrity, fairness, and openness in 
the way business is conducted. While Government-commissioned reports 
have found some employer abuse of the program, discriminatory behavior 
and other such prohibited employment practices is not encouraged by the 
E-Verify system. Use of E-Verify cannot prevent all such illegal 
action, but the record created by use of the system does make it more 
difficult for an employer engaged in discrimination to conceal its 
unlawful behavior. If any employer engages in discriminatory practices, 
such abuses should be reported to the appropriate Federal and State 
agencies responsible for enforcement of the anti-discrimination laws.
    Commenters claim that the proposed rule does not encourage 
competition because the harmful impact on small businesses (many of 
which are minority-, immigrant-, or family-owned) is disproportionate 
and makes the playing field for small businesses more uneven. The claim 
of a disproportionate impact on small businesses is addressed elsewhere 
in this rule (see the Regulatory Flexibility Analysis section of this 
rule). However, the Councils believe that there is an impact on 
competition, and it believes that the impact is positive rather than 
negative. Use of the E-Verify system will make it more difficult for 
firms to gain a competitive edge by hiring unauthorized workers at 
lower pay.
b. DHS Regulations
    Comment: One commenter asserted that the proposed rule's 
requirement to re-verify certain employees violates existing DHS 
regulations.
    Response: As the commenter did not identify the specific DHS 
regulations allegedly violated, this comment is not susceptible to a 
response. Other commenters have made similar assertions that E-Verify 
is contrary to law and the Councils have addressed these specific 
concerns. The Councils are not aware of any DHS regulation violated by 
this final rule.
c. Verification of Federal Employees
    Comment: Several commenters noted that OMB has directed all Federal 
departments and agencies to use E-Verify on their newly-hired 
employees, but not on their existing employees. These commenters 
asserted that the proposed rule is inconsistent with that OMB decision, 
because the rule requires Federal contractors to use E-Verify on not 
only new hires but also on existing employees working on Federal 
contracts, and argue that Federal contractors should not be held to a 
higher verification standard than is applied to the Executive branch.
    Response: The Councils disagree. The rule is consistent with the 
policy announced in Executive Order 12989 requiring the Executive 
branch to contract with employers that agree to use E-Verify for their 
employees who are working on a covered Federal contract. The aim of the 
Executive Order is to promote economy and efficiency in Federal 
procurement by ensuring stable and dependable Federal contractors.
    Furthermore, Federal employees are required to undergo background 
checks pursuant to HSPD-12, which mandates that a person must be 
suitable (minimum of a national agency check with inquiries (NACI)) in 
order to be issued an HSPD-12 card. HSPD-12 requires certain 
credentialing standards prior to issuing personal identity verification 
cards. These standards include verification of name, date of birth, and 
social security number (among other data points) against Federal and 
private data sources. The Councils agree that the degree of scrutiny 
applied to individuals granted HSPD-12 credentials provides sufficient 
confidence that any such person is likely truthful about his or her 
authorization to work in the United States that additional 
investigation through E-Verify is not necessary.
d. Appropriate Scope of Regulations
    Comment: One commenter suggested that the proposed rule's goal was 
to ``protect U.S. workers''--one that is beyond the scope of that which 
can rightfully be pursued under procurement authorities.
    Response: The Councils do not agree with the premise of this 
comment. The goal of the proposed rule is not to ``protect U.S. 
workers.'' Rather, the goal of the rule is to implement Executive Order 
12989, which aims to promote economy and efficiency in the Federal 
procurement system by ensuring that the Federal Government does not do 
business with contractors that hire or employ unauthorized aliens, 
thereby promoting the stability and dependability of contractor 
workforces and minimizing the potential for disruption to federal 
contracts. The President is well within his authority under FPASA to 
require the agencies to promulgate this rule, which has a clear nexus 
to promotion of economy and efficiency in Federal contracting, even if 
it might also have other impacts. Chao, 325 F.3d at 366 (affirming 
authority of the President under FPASA to require federal contractors, 
as a condition of contracting, to post notices informing workers of 
certain labor law rights.)

Relationship With States

1. States Prohibiting Mandatory Use
    Comment: Several commenters requested that the Administration 
clarify the effects of the proposed rule on employers conducting 
Federal Government contracting business in locations where State and/or 
local law prohibits the use of E-Verify. One of these commenters 
specifically asked if the requirements of the proposed rule would 
function as an affirmative defense in actions brought against employers 
which use E-Verify in contravention of State/local law. Two other 
commenters suggested that the proposed rule be modified to provide E-
Verify participation waivers to employers located in States prohibiting 
E-Verify enrollment, to allow such employers to participate in 
Government contracting without violating State law.
    Response: The Councils decline to provide an exemption to the E-
Verify term in contracts covered by this rule for employers located in 
States that prohibit E-Verify enrollment, because such state and local 
laws would be preempted by Executive Order 12989, as amended, and by 
these rules implementing the Order. The Councils note that an Illinois 
state statute prohibiting use of E-Verify by employers within that 
state is currently in litigation, as a result of a lawsuit filed by DHS 
arguing that the state statute is preempted by Federal law. The state 
has agreed not to enforce its statute pending the final resolution of 
the litigation.
2. Other States
    Comment: Two commenters noted that they are concerned that the 
proposed rule's requirement that certain existing employees undergo E-
Verify

[[Page 67659]]

verification could ``embolden'' States and localities to require the 
same type of verification for employees working under State/local 
contracts. These commenters fear that such an expansion would 
complicate employment verification legal requirements, to the detriment 
of both employers and employees.
    Response: The commenters concerns are speculative and, in any case, 
State and local government action is outside the scope of this case.

E-Verify System

1. E-Verify Procedural Issues
a. Burdensome
    Comment: One commenter stated that the E-Verify enrollment process 
is cumbersome and difficult and that USCIS support for employers trying 
to enroll has been inconsistent and ineffective. Three commenters felt 
that tentative nonconfirmations and the subsequent efforts to resolve 
them place additional burdens on employers and employees alike. Two 
other commenters state that costs associated with E-Verify are 
burdensome to employers. One commenter considered that the vast scope 
of coverage in the proposed rule is contrary to the ``economy and 
efficiency'' argument that justified issuance of the rule, as compared 
to other labor requirements attached to procurement.
    Response: The Councils have narrowed the coverage to the extent 
possible yet still meeting the purpose of the Executive Order. The 
Councils are not charged with administration of the E-Verify program 
and this process is not within its rulemaking authority or the scope of 
this final rule. The Councils have considered the burdens and costs 
associated with E-Verify in the RIA and Regulatory Flexibility 
Analysis.
    The E-Verify registration process is an automated process that uses 
a registration wizard to assist employers in determining which access 
method will best suit their company needs. Once that is decided, the 
individual registering the company is required to enter the company 
contact information, including the number of company locations for 
which E-Verify will be used and the address of these locations. Within 
24 hours, that individual will receive an email from E-Verify that 
includes their username and password which they will use to log on to 
the system. In mid-FY08, the E-Verify program launched a registration 
reengineering effort aimed to streamline the E-Verify registration 
process and shift to a profile based registration system. The program 
has been working with various stakeholders to determine and address the 
biggest concerns with the process, and hopes to conduct focus groups on 
ideas for improvement. The program has also undertaken a Plain Language 
Initiative, designed to simplify the language associated with the 
program and to update the materials associated with the program once 
the new verbiage has been finalized. Within this effort, the program 
also intends to conduct focus groups to determine the best response to 
various word choices.
    With regard to the burdens or costs to employers to register and 
participate in E-Verify, DHS has informed the Councils of a report 
entitled the ``Findings of the Web Basic Pilot Evaluation'' that was 
prepared by Westat in September 2007. The report may be found at http:/
/www.uscis.gov/files/article/WebBasicPilotRprtSept2007.pdf. The report 
found that 96 percent of long-term users indicated that E-Verify was 
not burdensome. The Westat report also stated that approximately 97 
percent of long-term users reported that the indirect set-up and system 
maintenance costs were either no burden or only a slight burden and 
that the majority of employers reported that they spent $100 or less in 
initial set-up costs. The Councils recognize that costs to employers 
will vary depending on employer characteristics and practices.
b. Data Accuracy
    Comment: Numerous commenters focused their concerns primarily on 
the reliance of the E-Verify system on DHS and SSA databases that 
contain high percentages of errors. Many commenters, in particular, 
specifically call out the reported 4.1 percent error rate of the Social 
Security Administration's database as a large source of inaccurate 
data. Several commenters stated concern that DHS databases are not 
updated in real-time.
    Many commenters also believe the inaccurate data in the database 
leads to the misidentification of workers and to denial of employment 
for work-authorized individuals, especially naturalized citizens and 
foreign-born authorized workers. Many commenters stated concerns that 
naturalized citizens or foreign-born authorized workers are 
considerably more likely to receive erroneous tentative 
nonconfirmations than native-born U.S. citizens. One commenter 
questions the 0.5 percent ``error rate'' claimed by E-Verify when the 
system is based on SSA databases with a 4 to 5 percent error rate.
    One commenter feels data entry or ``human'' errors on the part of 
employers are of concern as well since they cannot be completely 
eliminated. Many commenters feel this issue especially affects 
employees with nontraditional or complex names.
    Response: The improvements made to E-Verify over the last few years 
have decreased the incidence of data mismatches, which is referred to 
as a ``tentative nonconfirmation'' in the E-Verify program, and often 
referred to as the ``error rate'' by the public. DHS and SSA continue 
to analyze and implement improvements to reduce data mismatches as part 
of ongoing management of the E-Verify program. The majority of 
mismatches are with SSA data, since the SSA database is the only source 
for citizen data, against which the large majority of E-Verify queries 
are run. Instances of data inaccuracies include name changes due to 
marriage or divorce not reported to SSA, or, in the case of naturalized 
U.S. citizens, unreported changes in citizenship status. Most 
citizenship status mismatches that resolve as ``work authorized'' do 
involve naturalized citizens who have failed to notify SSA of their 
change in citizenship status. To reduce the number of SSA mismatches 
due to this situation, USCIS developed an automated check against the 
USCIS naturalization database for U.S. citizen new hires and provided 
employees who receive an SSA citizenship status mismatch notice the 
option of calling DHS directly to resolve it rather than resolving the 
mismatch with an in-person visit to an SSA field office. This has 
significantly reduced the burden of resolving tentative 
nonconfirmations for naturalized citizens. The changes went into effect 
in May 2008, and preliminary data show a 30 percent decrease in the 
number of SSA tentative nonconfirmation for naturalized citizens.
    It is important to clarify that if the E-Verify program issues an 
initial mismatch to an employee, the employer cannot fire, prevent from 
working, or withhold or delay training or wages for that employee 
during the mismatch process. All employees receiving an initial 
mismatch are given the opportunity to contest to ensure that every 
employee who has a work authorized status is not prevented from 
working. All employees must be given the opportunity to contest and 
correct their records.
    The Government recognizes the concerns over the SSA Office of the 
Inspector General Congressional Response Report (2006) estimates that 
4.1 percent of their NUMIDENT database may contain discrepancies that 
could potentially affect 12.7 million individuals. The E-Verify 
program,

[[Page 67660]]

however, provides due process for correcting any errors with SSA, which 
will help to reduce the NUMIDENT discrepancies over time and provides 
an opportunity for an individual to correct an error they may not have 
been aware of otherwise. The E-Verify MOU makes clear that employers 
are prohibited from discharging, refusing to hire, or assigning or 
refusing to assign to federal contracts employees because they appear 
or sound ``foreign'' or have received tentative nonconfirmations. If an 
employee elects to challenge a tentative nonconfirmation, the employee 
may not be terminated or suffer any adverse employment consequences 
based upon the employee's perceived employment eligibility status 
(including denying, reducing, or extending work hours, delaying or 
preventing training, requiring an employee to work in poorer 
conditions, refusing to assign the employee to a Federal contract or 
other assignment, or otherwise subjecting an employee to any assumption 
that he or she is unauthorized to work) until and unless secondary 
verification by SSA or DHS has been completed and a final 
nonconfirmation has been issued. Employers are further notified that 
any violation of the unfair immigration-related employment practices 
provisions in section 274B of the INA could subject the Employer to 
civil penalties, back pay awards, and other sanctions, and violations 
of Title VII could subject the Employer to back pay awards, 
compensatory and punitive damages. Moreover, the MOU states that 
violations of either section 274B of the INA or Title VII may also lead 
to the termination of its participation in E-Verify. If the Employer 
has any questions relating to the anti-discrimination provision, it may 
contact the Department of Justice's Office of Special Counsel for 
Immigration-Related Unfair Employment Practices (OSC) at 1-800-255-8155 
or 1-800-237-2515 (TDD).
    The ability to identify and fix any errors will help them maintain 
accurate records with SSA, which is beneficial to them in the future, 
particularly when applying for SSA benefits. The report also indicates 
that the majority of the discrepancies (64 percent) in the Numident are 
in the ``Death Indication'' field, which would not affect new hires. 
However, the E-Verify program can detect instances in which an 
individual is fraudulently using the SSN of a deceased person to gain 
unauthorized employment.
    In response to data entry error, the independent report by Westat 
does state that employee and employer data entry errors cannot be 
completely eliminated but the E-Verify program has worked to minimize 
and catch those errors before verification query results are returned. 
In September 2008 E-Verify instituted a pre-mismatch typographical 
error check that asks the employers to double-check the information 
they entered into the system with the employee's documents in the case 
of a mismatch. Preliminary data show that this enhancement has reduced 
SSA mismatches by 30 percent. In response to the issue of employees 
with nontraditional or complex names, the system provides guidance to 
employers on the system page where the name is entered into the field. 
There is a box that appears when an employer scrolls over the name 
field and there is also a help button next to the field that opens up a 
document that provides detailed guidance on how to enter complex 
surnames such as multiple last names or hyphenated names.
c. Technology Issues
    Comment: Many commenters stated that the E-Verify system remains a 
paper-based system which still requires a contractor to complete the 
paper Form I-9 after analyzing up to 25 different documents that an 
employee could present and is not an entirely electronic system. One 
commenter stated that the system should provide an electronic export or 
reporting functionality for Case Verification Numbers. They state that 
the transfer of the verification case number to paper or on-line I-9 
forms is now a manual, case-by-case ``pen and paper process'' that 
would fail under high volume. Another commenter stated concern over the 
degree of knowledge the personnel managing the toll free E-Verify phone 
number has on the myriad of complex immigration documentation and state 
that the USCIS National Customer Service (NCS) lines have been unable 
to provide accurate and timely information which can lead to confusion, 
multiple calls, and case resolution delay.
    Response: Completion of the Form I-9 is required regardless of 
whether an employer is a participant in E-Verify. DHS rules permit the 
completion and storage of the I-9 electronically rather than on paper. 
See e.g., 8 CFR 274a.2(a)(2). E-Verify provides Form I-9 support 
materials for employers on the system's website including the Form I-9, 
in English and Spanish, and the Handbook for Employers, Instructions 
for Completing the Form I-9 (M-274), as well as many immigration-
related materials such as a Guide to Selected Travel Documents. The 
Councils and DHS recognize the preference some employers have to 
utilize electronic sources for required paperwork, and DHS is 
continually working towards more paperless systems, but is still within 
that process.
    With respect to telephone inquiries, the E-Verify program has a 
Tier system when addressing phone calls. While most calls go directly 
to the first level, Tier One, for general program information or 
employer questions, there is a system in place to escalate calls to 
other Tiers depending on the complexity of the case. The program has 
subject matter experts on staff to address phone calls that require 
further attention. For cases that they are unable to resolve, USCIS has 
a Special Case Resolution unit in the Washington, DC Headquarters 
office that the cases can be referred to for further review. The 
average wait time is less than 20 seconds for a phone call to transfer 
from Tier 1 to Tier 2 and calls to the program are currently answered 
within 0.2 minutes or 12 seconds on average. The E-Verify program has 
substantially increased its customer service and program staff over the 
past two years in an effort to work with employers and ensure that 
every question or difficulty that arises is addressed.
    In any specific case where additional time may be needed to address 
an issue or research the case information before a verification query 
can be resolved, it is important to note that the employer would 
receive a ``case in continuance'' response and cannot take any adverse 
action on an employee during this time.
    DHS and SSA are constantly exploring ways to make the system more 
efficient and effective. However, the suggestion made here, that the 
system can be made totally web based so that individuals receiving a 
tentative nonconfirmation could prove that some factor generating the 
nonconfirmation was in error, is unrealistic. Generally, SSA requires 
documented proof of the factors that might be in question, SSN, date of 
birth, name, citizenship; and that the documents used be originals. The 
documents used to prove these elements (driver's licenses, birth 
certificates, etc.) are subject to forgeries, which are much easier to 
detect when a human being inspects original documents. Use of 
photocopies or fax copies, which would be necessitated by a totally Web 
based process, would make the process much more susceptible to fraud.
    If an employee believes that s/he has been discriminated against 
during the employment eligibility verification process, he or she 
should contact OSC at 1-800-255-7688 or 1-800-237-2515 (TDD). Employers 
that have questions relating to the anti-discrimination

[[Page 67661]]

provision should contact OSC at 1-800-255-8155 or 1-800-237-2515 (TDD).
d. Photo Identification
    Comment: Many commenters stated that there is an estimated 11 
percent of the population that does not have a Government-issued photo 
identification. Some of those same commenters also stated that studies 
have indicated members of minority populations such as African 
Americans, Latinos, Women, and Senior Citizens are less likely to have 
photo identification as well as many lawfully present immigrants such 
as refugees and asylees. These commenters also state that there are 
situations where an individual may have the right to work but has not 
yet received a physical Employment Authorization Document (EAD) and 
that the proposed rule fails to make exceptions for cases where photo 
identification has been lost or destroyed due to crime, accidents, 
natural disasters, or other causes.
    Response: The Councils recognize the concerns of the commenters in 
regard to the percentage of the U.S. population that do not have photo 
identification, but note that there is no evidence from the extensive 
operations of the E-Verify program to date that this has been a 
significant problem. There are also cases and studies that find a far 
lower percentage of individuals lack a photo identification, at least 
in the context of evaluating photo identification requirements for 
voting. See Indiana Democratic Party v. Rokita, 458 F.Supp.2d 775, 803 
(S.D. Ind. 2007), aff'd sub nom. Crawford v. Marion County Election 
Bd., 472 F.3d 949 (7th Cir. 2007), aff'd, 128 S.Ct. 1610, 553 U.S. --- 
(2008); see also Voter IDs Are Not the Problem: A Survey of Three 
States, American University Center for Democracy and Election 
Management, January 9, 2008, found at http://www.american.edu/ia/cdem/
pdfs/VoterIDFinalReport1-9-08.pdf (finding that 1.2% of registered 
voters lacked a government issue photo identification). Photographs 
serve a unique and essential function and significantly minimize the 
opportunities for document fraud, unlike fingerprints, by allowing a 
contractor to immediately compare the picture embedded in the document 
against the employee. IIRIRA Sec. 403(a)(2)(A)(ii), 8 U.S.C. 1324a 
note, thus requires photo identification from employees of employers 
participating in the E-Verify program. In order to be consistent with 
these standards, the E-Verify MOU requires all employees of Federal 
contractors participating in E-Verify to present a photographic 
identification document.
    Moreover, the documentation requirement is a basic requirement for 
the I-9 process that has to be completed regardless whether or not the 
employer is in E-Verify. The E-Verify photo identification requirement 
does limit the scope of acceptable ``List B'' identification documents 
somewhat, but we are not aware of a basis to conclude that the non-
photo identity documentation that is currently permitted for the I-9 is 
broadly available to, or used by the referenced populations. In other 
words, the effect of limiting the non-photo documents would appear to 
be marginal.
    USCIS has taken substantial steps to expedite EAD issuance, 
especially for refugees and asylees. The non-photo List B documents are 
not normally available to aliens who need EADs in any case. Those that 
reasonably might be available, especially the driver's license, contain 
photographs and thus are acceptable for E-Verify. Thus, this is not 
really an E-Verify issue per se; rather, it is a general issue about 
the I-9 compliance that employers are responsible for whether or not 
they participate in E-Verify.
    To address situations of lost or stolen documents, the DHS 
regulations permit temporary presentation of a receipt for the 
application for a replacement document, and this is permissible for E-
Verify employers as well as those just using the paper I-9.
    For the six commenters who assert that employees need to show an 
EAD, the Councils note that there is no requirement to states that if 
an employee has an EAD card they must provide it for purposes of the 
Form I-9. Employees may choose to provide any approved List B document 
with a photo for the purpose of verification through E-Verify. It is 
true that many aliens who apply for an EAD card would not normally have 
List C evidence of work authorization and thus cannot comply with Form 
I-9 requirements until they receive the EAD. But this is a concern 
generally applicable to Form I-9 compliance and E-Verify participation 
would not affect it one way or another.
e. SSN Number
    Comment: One commenter noted that the SSN is not required for the 
Form I-9.
    Response: The Form I-9 (Rev. 06/05/07) states ``[p]roviding the 
Social Security number is voluntary, except for employees hired by 
employers participating in the USCIS Electronic Employment Eligibility 
Verification Program (E-Verify).'' Additionally, providing an SSN to 
employers is generally necessary to comply with the IRS statutes and 
regulations that already require every employee in the United States to 
have an SSN.
f. Privacy
i. System Security
    Comment: Several commenters suggested that E-Verify has ongoing 
system security problems that jeopardize the privacy and security of 
individuals' personal information. These comments focused on (1) 
general concerns with DHS, and more generally the U.S. Government, in 
the handling of personal information, and (2) general concerns about 
the potential for cyber attacks.
    Response: The Councils disagree with these comments. Any database 
of personal information would be attractive to hackers or cyber 
attacks. That is why USCIS has developed a robust security program to 
protect the Verification Information System (VIS), the technical system 
that supports the E-Verify program, from such attacks. This security 
program fully complies with Federal Information Security Management Act 
(FISMA) requirements and has been certified and accredited as secure. 
The security measures in place include among other things both strong 
and limited access controls, transmission encryption, and extensive 
audit logging. Accordingly, the Councils have no reason to believe that 
these systems are not secure enough to ensure the effectiveness of the 
rule.
ii. Privacy Protections
    Comment: A number of comments stated that E-Verify does not 
adequately protect the privacy of individuals' personal information. 
These comments focused on (1) general concerns with E-Verify handling 
of personal information, (2) specific concerns about potential for 
employer misuse of E-Verify for pre-screening and other misuse, (3) 
specific concerns about the potential for misuse of E-Verify by those 
falsely claiming to be employers, and (4) specific concerns with E-
Verify relying on external databases.
    Response: The Councils disagree in part with these comments. 
Several comments addressed non-specific privacy concerns about the 
handling of personal information. USCIS fully appreciates the 
significant responsibilities of handling this large amount of personal 
information. DHS, and specifically the E-Verify program, has developed 
a robust privacy program to not only ensure that the privacy of this 
information is respected but also to ensure that the public is made 
aware of

[[Page 67662]]

how their information is being treated. There is a dedicated staff of 
privacy professionals who work at the operational, tactical, and 
strategic planning levels and every significant change to E-Verify is 
documented in a system of records notice (SORN) or privacy impact 
assessment, as appropriate. USCIS continuously seeks to improve 
security and privacy protections as the E-Verify program develops.
    Several commenters noted that E-Verify could be misused by 
employers, either by pre-screening applicants or by treating 
differently employees who have received a tentative nonconfirmation. 
The Westat report suggests that this indeed does take place. 
Unfortunately, some employers do not follow the requirements and 
guidelines for participating in E-Verify. Those requirements and 
guidelines address these concerns in several ways. First, E-Verify is 
educating employees and job applicants about how E-Verify should work 
and what their options are to address perceived misuse or abuses of the 
program. To this end, the E-Verify MOU requires that E-Verify 
informational posters be placed in the work site where employees can 
see them. These posters provide employees with a concise statement of 
their rights and contact information for submitting complaints 
regarding misuse and abuse of the program. In addition, E-Verify 
conducts outreach to educate employers and the general public about the 
program. Moreover, E-Verify requires user training and testing in 
addition to providing users with guidance on the appropriate use of the 
E-Verify program. Finally, USCIS has developed a monitoring and 
compliance capability to assist in identifying when an employer may be 
misusing the E-Verify program.
    Several commenters noted that E-Verify does not currently screen 
employers who register with E-Verify, therefore it is possible that 
some may not be actual employers, but rather groups or individuals 
seeking to ``phish'' E-Verify to validate personal information for 
identity theft purposes. E-Verify does capture information on employers 
and, as part of the program's monitoring and compliance activities, 
researches on an ad hoc basis whether E-Verify users are actually 
employers. E-Verify has sought authority to verify employer 
authenticity directly from other Government sources but has not, as of 
yet, received that authority. Last year, in particular, the 
Administration sought a statutory change to the current prohibition on 
Internal Revenue Service sharing of Employer Identification Number data 
with other Government agencies, such as USCIS. In advance of such a 
statutory change to that prohibition, USCIS is currently undertaking a 
robust reengineering of the employer registration process, including 
exploring ways of verifying the authenticity of employers registering 
for E-Verify.
    Finally, commenters noted that E-Verify relies to a large extent on 
databases external to DHS. The commenters questioned the integrity of 
the data in these external databases and specifically recommended that 
they be made to provide full Privacy Act protections without being 
exempt from any of the Privacy Act requirements. The SORN and privacy 
impact assessments for VIS, the underlying E-Verify system, can be 
found at the DHS Privacy Office Web site http://www.dhs.gov/privacy. 
The SORN and privacy impact assessments describe more fully what 
information is collected and how it is used, protected, and shared. The 
particular Privacy Act exemptions and the extent to which the external 
source systems apply the Privacy Act vary based on the type of system 
and reason for collection. USCIS has asserted no Privacy Act exemptions 
and fully embraces the Privacy Act protections for the E-Verify VIS. E-
Verify fully appreciates that because it is making such significant 
decisions based on information over which it does not have direct 
authority, it must be very careful to ensure that these decisions are 
made as accurately as possible. E-Verify will often check more than one 
database for verification of a single data element acknowledging that 
data may occasionally be wrong. In any event, individual employees are 
not deemed unauthorized to work as long as they are contesting a 
tentative nonconfirmation from E-Verify.
iii. Identity Theft
    1. Comment: Several commenters addressed E-Verify's current ability 
to combat identity theft. One commenter stated that there is no 
rational relationship between the E-Verify mandate on Federal 
contractors and the aim of having more efficient and dependable 
procurement sources because E-Verify does not prevent identity theft. 
The same commenter also stated a concern that the use of E-Verify would 
encourage identity theft. Another commenter stated that E-Verify could 
not prevent the hiring of unscrupulous workers because it does not 
check identity. A third commenter stated that E-Verify is inadequate 
because it does not prevent identity theft.
    Response: The Councils disagree. E-Verify has had remarkable 
success preventing those from maintaining employment who are not 
authorized to work in the United States. When Congress established E-
Verify, one of its goals was to prevent employment of those who are not 
authorized to work by detecting document fraud during the hiring 
process. Information matching and the photo identification requirement, 
while not airtight, are parts of this process. When an individual has 
presented fraudulent documents to an employer, the E-Verify program is 
more likely to identify that fact than the paper I-9 process and, is 
thus an improved process in relation to document fraud.
    Criticism has arisen from E-Verify's limited ability to detect 
identity theft, i.e., when legitimate documents are presented but have 
been stolen from another individual. A concern also has been stated 
that identity theft may increase as more employers use the E-Verify 
program. The Councils note that E-Verify was not established to prevent 
identity theft, but increasingly has the effect of doing so.
    First, while document fraud requires some level of ingenuity, 
identity theft requires far more ingenuity. E-Verify continually forces 
unauthorized workers to resort to more and more difficult methods to 
obtain unauthorized employment. USCIS anticipates that this increased 
burden and the increased danger of involvement in identity theft 
criminality causes a significant number of unauthorized workers not to 
seek employment with employers who use E-Verify.
    Second, E-Verify introduced a photo screening capability (``photo 
tool'') into the verification process in September 2007. When an 
employer is presented with an employment authorization card or 
permanent residence card during the Form I-9 documentation process, the 
employer can match the photo on the documents to the photo which 
appears on the computer screen during the E-Verify process because the 
two should be the identical photo. Fifteen million photographs are 
contained within the USCIS databases. This has led to instances where 
employees who have either used photo substituted documents or have 
created entirely counterfeit documents have been identified. USCIS is 
currently in discussions with the Department of State to add United 
States passport and visa photographs to the E-Verify process as well. 
It is USCIS's long-term goal that the E-Verify photo screening process 
will be able to verify photos on all identity documents that an 
employee may present during the Form I-9

[[Page 67663]]

process. The photo tool has identified numerous cases of document and 
identity fraud and prevented unauthorized workers from gaining 
employment. Accordingly, the Councils consider the E-Verify process 
superior to the current I-9 process for identifying and deterring 
document fraud and identity theft.
    2. Comment: Many commenters stated a concern that E-Verify's 
inability to prevent identity theft leaves employers that use E-Verify 
vulnerable to sanctions. Additionally, many commenters stated that the 
threat of penalties resulting from the use of E-Verify or pressure to 
comply with the system would encourage employers to forego hiring 
certain workers.
    Response: The Councils disagree with these comments. As explained 
above, the E-Verify system makes an employer more, not less, able to 
prevent document fraud and identity theft. If a Federal contractor 
participating in the program obtains confirmation of identity and 
employment eligibility in compliance with the terms and conditions of 
the program the contractor will have the benefit of establishing a 
rebuttable presumption that the contractor has not violated INA 
274A(a)(1)(A) with respect to the hiring. See 8 U.S.C. 1324a, note, 
Sec. 402(b). Moreover, no Federal contractor participating in the E-
Verify program can be held civilly or criminally liable under any law 
for any action taken in good faith reliance on information provided 
through the E-Verify system. Id. at 403(d). USCIS and ICE may also use 
law enforcement discretion in relation to specific instances of good 
faith operation of the program. Accordingly, the Councils do not view 
the stated concern over employer sanctions resulting from identity 
theft as an impediment to implementing this final rule.
    With respect to the comments regarding selective hiring, an 
evaluation of the E-Verify program, publicly available on the Internet 
at http://www.dhs.gov/E-Verify under ``Program Highlights''/``Findings 
of the Web-Based Basic Pilot [E-Verify] Evaluation--September 2007,'' 
included an analysis of employer's confidence in hiring certain workers 
with information collected directly from E-Verify employers. Most 
employers who use E-Verify stated that they are neither more nor less 
willing to hire immigrants. When use of the program was reported as 
impacting employer hiring practices, employers almost always stated 
that the provision of an additional means to determine work 
authorization through E-Verify resulted in increased confidence and 
security in the employee's work status and therefore, made the employer 
more likely to hire immigrants.
    3. Comment: One commenter stated that DHS needs to reduce the 
number of documents acceptable to prove authorization to work to reduce 
identity theft and confusion. The same commenter also stated that E-
Verify does not have the ability to determine if an SSN is being run 
through its system multiple times.
    Response: The number of documents acceptable for demonstrating 
authorization to work is governed by the INA and by the regulations on 
the Form I-9. The E-Verify program requires documents with a photograph 
when the employee presents a ``List B'' document for Form I-9 purposes. 
See 8 U.S.C. 1324a note, Sec. 403(a)(2)(A)(ii). The requested change to 
further restrict the documents that may be used for the Form I-9 or for 
E-Verify would be better directed to DHS than to the Councils, and is 
outside of the scope of this rulemaking.
    E-Verify is fully capable of detecting multiple uses of SSNs. 
Through the USCIS Monitoring and Compliance unit, steps are taken to 
identify those instances where suspected fraud has occurred and 
corrective action is taken where appropriate. Additional methods to 
combat identity theft, including methods to determine if a single SSN 
is being used in different geographic locations, are under 
investigation with a focus on suspected or clearly identified 
fraudulent use of SSNs, based on the number of times and geographic 
areas in which a number has been used. The Councils note that an 
employee could have more than one job, in different locations.
g. Communications
    Comment: A professional association commented that certain 
materials should be made available prior to enrollment (e.g., user 
manual) and that E-Verify should create a list of items for employers.
    Response: Currently, E-Verify does provide many materials on the 
program's Web site at http://www.dhs.gov/E-Verify including the E-
Verify Users Manual, a ``How Do I Use E-Verify'' guide, and a copy of 
the E-Verify MOU among other informational materials. E-Verify 
continues to engage in employer outreach to further educate employers 
regarding their responsibilities under the program.
2. User Liaison Organizations and Other Assistance to Contractors
    Comment: One industry association requested establishment of a user 
liaison organization to solicit, assess, and prioritize with the user 
community implementation of needed system enhancements and corrective 
actions.
    A university requested establishment of an E-Verify Ombudsman to 
assist with the expected higher than average error rates for foreign 
nationals on college and university campuses.
    Another university commented that DHS should provide Federal 
funding assistance to employers for initial setup of record retention 
capabilities and staff training and initial and ongoing verification of 
expenses.
    Response: DHS has informed the Councils that it is continually 
looking at ways to improve the E-Verify system, and believes that 
support is already provided to employers in a consistent and effective 
way. E-Verify provides general assistance through information found on 
the Web site and trained staff to address questions before or during 
the registration process in addition to continued support after an 
employer registers as an E-Verify participant. The MOU provides points 
of contact. The program also goes beyond this general support to 
provide presentations and system demonstrations to individuals or 
groups such as employers, Federal, State and local governments, 
community-based organizations, and various industry associations. The 
E-Verify program has participated in outreach events designed to 
provide information to the public and interested stakeholders regarding 
the program. The program conducts demonstrations, participates in 
conferences and outreach events, hosts webinars for interested parties, 
and created public awareness campaigns nationally and on the web and on 
radio, print and billboard in the states of Arizona, Georgia, 
Mississippi, and the metro Washington, DC area. The E-Verify Outreach 
branch has coordinated closely with the Small Business Association 
since April 2008 to conduct outreach events to ensure specific concerns 
relating to small businesses are heard and addressed.
    With regard to the request for financial assistance, the Westat 
evaluation reports that the majority of employers reported that they 
spent $100 or less for initial setup costs for E-Verify and a similar 
amount annually for operating the system. There is no additional record 
retention beyond Form I-9 requirements, with the exception of those 
employers who are presented with green cards (I-551s) or EADs (I-767) 
and need to retain photocopies of these documents for the photo tool as 
long as they are retaining the Form I-9.

[[Page 67664]]

3. Staffing
a. SSA and DHS Staffing for E-Verify
    Comment: Many commenters raised various concerns over the 
overburdening of both SSA and DHS if E-Verify is expanded. Many 
commenters commented that the rule would overwhelm DHS and SSA as 
neither organization is adequately staffed to deal with the increased 
number of tentative nonconfirmations expected. Some of these commenters 
wrote that there is a substantial difference between the current number 
of E-Verify employers and the number of E-Verify employers that would 
use the system as a result of the rule. Those commenters were concerned 
with the scalability of staff to handle the increased number of 
employers.
    Response: The Councils disagree with these comments. DHS (and its 
predecessor agencies) and SSA have worked closely for more than a 
decade to improve the E-Verify process. Since SSA does not receive 
appropriated funding for E-Verify, it is reimbursed by DHS for labor 
costs associated with resolving mismatches with SSA field offices. 
These costs include salaries and overhead for SSA field office 
employees who resolve mismatches in the field, and salaries and 
overhead for SSA employees who staff the SSA 1-800 number to answer 
calls from employees and employers. DHS has worked hard to decrease E-
Verify related work undertaken by SSA field offices.
    In May 2008, the E-Verify program launched the inclusion of 
naturalized citizen data as part of the initial E-Verify check. E-
Verify now automatically performs an initial query to check information 
against the USCIS naturalization databases for all U.S. citizen new 
hires. In the short time since this new routine was put into place, E-
Verify tentative nonconfirmations for naturalized citizens have 
decreased by 30 percent. In the event a naturalized citizen receives a 
SSA tentative nonconfirmation due to citizenship status, that 
individual now also has the option of calling DHS to reconcile the 
citizenship status mismatch rather than physically visiting SSA. DHS's 
efforts in this area will further reduce the number of E-Verify 
mismatches for naturalized citizens, thus reducing the instances of 
``walk-ins'' to SSA offices for naturalized citizens.
    Many commenters in addressing this issue did so in terms of a 
nationwide mandatory expansion of E-Verify to all employers and cited 
statistics that would apply to such an expansion. It is likely that SSA 
would need to increase its own workforce to meet the demands of a 
nationwide mandatory system that would be used by approximately 7 
million employers. However, the SSA reports that the numbers of 
employers and the workloads associated with this FAR rule would be far 
less than they would be under a nationwide mandatory system. This is 
especially true given the recent improvements made to the E-Verify 
system and the effect those have had in reducing the numbers of people 
contacting SSA.
b. Effect on Other Agency Functions
    Comment: Some commenters were specifically concerned with the 
effect that the rule would have on SSA's ability to fulfill its primary 
mission of administering benefits.
    Response: Since E-Verify uses a system separate from other SSA 
verification services, increases in E-Verify queries would have no 
effect on disability claims. As stated above, SSA and DHS are 
sufficiently staffed to handle E-Verify, therefore there should be no 
adverse impact on carrying out any of the other core functions of these 
agencies.
4. System Technology Issues
    Comment: Many commenters suggested that the E-Verify program would 
be unable to handle the increased strain on its system, and 
specifically on the transactional database. Several of those commenters 
stated that the requirement to check all new hires will overwhelm the 
current system and lead to an increase in workforce disruption. Several 
other commenters argue that E-Verify is ill-equipped to handle a vast 
increase in users, queries, transactions, and communications volumes. 
Some commenters suggested that the E-Verify program and its system 
needs further study of its capabilities and needed functionalities, 
that problems with the present technology have not been addressed, that 
the requirements of the rule would require major E-Verify system 
changes, and that the system is unable at present to handle the 
anticipated increases in usage absent the rule. Another commenter was 
concerned with the availability of an Internet-based system in the 
event of a natural disaster that would inhibit the ability of an 
affected company to access a computer and Internet access to use E-
Verify.
    Response: The commenters are correct that the FAR rule is expected 
to significantly add to the number of queries run through the E-Verify 
system. However, many commenters in addressing this issue did so in 
terms of a nationwide mandatory expansion of E-Verify to all employers 
and cited statistics that would apply to such an expansion. Based upon 
their exaggerated projections, the commenters assert that there is a 
high probability that disputes will not be resolved in a timely manner. 
But the numbers of employers and workloads associated with this FAR 
rule would be far less than they would be under a nationwide mandatory 
system, and they would not be difficult to absorb. The Councils, in 
consultation with DHS and SSA, are confident that the system will be 
able to accommodate the required greater volume of enrollments and 
queries within the time allotted. The Verification Information System 
(VIS), which is the database that supports E-Verify, underwent vigorous 
load testing in July 2007 in partnership with the SSA data systems. 
Those tests conclusively showed that the existing VIS will scale to 
meet even the most demanding current estimate of VIS operation, 
considering peak volumes for both queries and registrations. Currently, 
VIS is capable of handling 40 million queries annually. The testing 
found that the E-Verify system has the capacity to accommodate at least 
240 million queries annually, four times the projected 60 million new 
hire queries per year that would result from mandatory E-Verify 
legislation applicable to all U.S. employers. It is also worth noting 
that the employer registration process is automated, and testing 
indicates that E-Verify is capable of handling up to 145,500 
registrations per day, well over the estimated 4,000 per day that would 
occur under a nationwide all U.S. employer use scenario.
    As of September 13, 2008, over 85,500 employers representing over 
446,000 sites are registered for E-Verify. This calendar year, 
approximately 10 percent of all new hires nationwide have been run 
through the E-Verify system. In fiscal year 2008 to date, E-Verify has 
run over 6.2 million new hires through the program, which is nearly 
double the 3.2 million new hires run through the program in all of 
fiscal year 2007. Both SSA and DHS agree the current system is more 
than adequate to handle the volume increase associated with the FAR 
rule.
    With respect to comments regarding contingency plans in the event 
of a failure of information technology systems in a natural disaster, 
the Councils believe that the agencies and the Government generally 
have standards and requirements for such circumstances. USCIS and SSA 
are required to follow Federal Government policies and procedures 
related to

[[Page 67665]]

information technology continuity of operations and emergency planning. 
In any event, section 403(a)(3)(B) and the MOU provide for an extension 
of the three day period if E-Verify systems are down.
5. Other Impacts on Society
a. Macroeconomic Impact
    Comment: Many commenters, notably community organizing groups and 
religious societies, an agricultural employer, trade associations, a 
human resources society and several individual employers stated that 
the rule will have a ``devastating effect'' on the United States 
economy, will lead to increased discrimination and an unwillingness to 
hire workers who look or sound foreign, and will lead contractors who 
need workers to hire them ``off the books.'' One commenter stated that 
``the economic impact of this regulation could be devastating to the 
point where agriculture in the United States will cease to operate as 
it does today.'' In this same vein, several commenters stated that this 
is not an appropriate time for this rule, given a recent ``meltdown'' 
of the American economy, the mortgage crisis, and the resulting 
difficulties currently faced by United States employers and employees.
    Response: The Councils consider these comments as outside of the 
scope of this rulemaking. The Councils are implementing a directive 
from Executive Order 12989 that Federal contractors agree to use an 
electronic eligibility verification system designated by the Secretary 
of Homeland Security to verify the employment eligibility of all 
persons hired during a contract term by a contractor to perform 
employment duties within the United States and of all persons assigned 
by the contractor to perform work within the United States on the 
Federal contract. Decisions related to the potential impact of this 
directive on the entirety of the United States economy or on individual 
sectors within the United States economy are not delegated to or 
exercised by the Councils in this rulemaking.
    Moreover, these comments obviously assume that the existing Form I-
9 process does not verify employment authorization, and that there will 
be a significant change in the number and type of employees found 
authorized to work in the United States with the implementation of E-
Verify for Federal contractors. This should not be the case. E-Verify 
is merely a better means of verifying the work eligibility of the 
Federal contractor workforce. The Councils are not persuaded that 
permitting a less effective verification system to continue for the 
purpose of maintaining a status quo in which illegal employment is 
common is a valid reason not to implement the system as to all Federal 
contractors when a more effective system is available that will create 
a more stable and dependable cadre of Federal contractors.
    As to driving employers to hire more illegal workers ``off the 
books,'' the Councils' position is that all Federal contractors are 
bound to comply with Federal, State and local laws, and that they 
should continue to do so should they wish to continue to contract with 
the Federal Government.
b. Religious and Disability Accommodation
    Comment: One commenter stated that requirements to access the 
Internet violate some religious tenets, making the rule discriminatory. 
Other commenters indicated that the requirement that employees present 
a photographic identification unduly burdens certain religious beliefs. 
Another commenter requested confirmation that the E-Verify system would 
accommodate persons with visual disabilities.
    Response: While the Councils remain sensitive to the concerns of 
different religious groups, they must balance those concerns against 
the need to have stable and dependable Government contracting and to 
minimize document fraud in the E-Verify program in support of that 
goal. In particular, photographs serve a unique and essential function 
and significantly minimize the opportunities for document fraud, unlike 
fingerprints, by allowing a contractor to immediately compare the 
picture embedded in the document against the employee. IIRIRA Section 
403(a)(2)(A)(ii), 8 U.S.C. 1324a note, thus requires photo 
identification from employees of employers participating in the E-
Verify program. In order to be consistent with these standards, the E-
Verify MOU requires all employees of Federal contractors participating 
in E-Verify to present a photographic identification document.
    The Councils recognize that there may be occasions where U.S. 
citizens assert that religious beliefs preclude their being 
photographed and, as a result, they may not be able to present the 
required photographic documentation. The E-Verify program complies with 
all applicable civil rights laws and will provide accommodations where 
appropriate, as required by law, on a case-by-case basis.
    DHS is also implementing other processes and procedures to 
accommodate religious beliefs and disabilities, as required by law, in 
relation to the E-Verify program. These include telephonic means of 
verifying employment authorization. These alternative employment 
authorization verification methods will permit compliance with E-Verify 
while accommodating user religious beliefs and disabilities.
c. Employment Discrimination
    1. Comment: One commenter stated that E-Verify creates grave risks 
for immigrant women, particularly those who are victims of domestic 
violence, human trafficking, sexual assault and other criminal activity 
to the extent the program requires employers to enter the name, SSN and 
other identifying information of each employee into the E-Verify 
database, which is then available to the public. The commenter alleged 
that, as such, E-Verify does not adhere to Violence Against Women Act 
(VAWA) and Trafficking Victims Protection Act (TVPA) confidentiality 
provisions.
    Response: The Councils agree that the E-Verify program should be 
conducted in compliance with all Federal laws, rules and regulations 
related to privacy and confidentiality of personally identifiable 
information. USCIS and the SSA do comply with all of those requirements 
in the administration of E-Verify program. Contractors are required by 
MOU to safeguard confidential information, and means of access to it 
(such as PINS and passwords) to ensure that it is not used for any 
other purpose and as necessary to protect its confidentiality, 
including ensuring that it is not disseminated to any person other than 
employees of the employer who are authorized to perform the employer's 
responsibilities under the E-Verify MOU. The Councils direct the 
commenter to the E-Verify program systems of records notice published 
by USCIS in accordance with the Privacy Act for more information 
regarding the program's collection and use of personally identifiable 
information. 73 FR 10793, Feb. 28, 2008.
    2. Comment: A Federal Government agency requested that the Councils 
supplement the proposed rule and that USCIS supplement the proposed MOU 
to add a specific reference to Title VII of the Civil Rights Act of 
1964 (Title VII), 42 U.S.C. Section 2000e (1964), as amended, when 
discussing relevant prohibitions against illegal discrimination.
    Response: USCIS has supplemented the MOU to add specific reference 
to Title VII. The Councils supplement the statements in the preamble to 
the NPRM to clarify that Title VII, as well as INA

[[Page 67666]]

Section 274B, 8 U.S.C. 1324b, prohibits unlawful discrimination against 
any individual in hiring, firing, or recruitment or referral practices 
because of his or her national origin. Such illegal practices can 
include selective verification or use of E-Verify in a manner not 
provided for in paragraph 16 of the MOU; discharging, refusing to hire, 
or assigning or refusing to assign to Federal contracts qualified 
employment eligible employees because they appear or sound ``foreign''; 
and premature termination of employees based on tentative 
nonconfirmations. As such, Title VII applies to all employment actions 
not otherwise protected by IIRIRA Section 403(d), 8 U.S.C. 1324a note, 
or precluded by other law.
    3. Comment: Several commenters expressed concern that the photo 
identification requirements in the proposed rule will result in 
lawfully present immigrants and U.S. citizens being terminated from or 
denied employment because they cannot present photo identification.
    Response: The Councils disagree with the premise of this comment. 
There is no requirement that an employer terminate an employee who 
cannot present photo identification. The MOU will be amended to 
instruct contractors to contact USCIS regarding possible accommodation. 
The contractor is prohibited from taking adverse employment action 
against the employee until the contractor receives a final 
nonconfirmation.
    4. Comment: Many commenters, and in particular immigrants rights 
advocates, religious associations, employers, unions, chambers of 
commerce, and employer groups commented that verification through the 
use of E-Verify will result in increased disparate treatment employment 
discrimination. Some of these commenters speculate that contractors 
will give preference in hiring and assignment of work to applicants 
they believe ``look like'' U.S. citizens and discriminate against 
applicants who sound or dress ``foreign'' or have ``foreign sounding'' 
names.
    Several commenters stated that use of E-Verify will lead to 
disparate impact discrimination claims because approximately 10 percent 
of foreign-born U.S. citizens receive tentative nonconfirmations for 
work eligibility versus 0.1 percent for native-born U.S. citizens.
    Response: The Councils oppose unlawful discrimination in any form 
and, in particular, unlawful discrimination that undermines the intent 
and purpose of this E-Verify final rule. As was stated above, 
contractors who use the E-Verify system to unlawfully discriminate 
against individuals in hiring or employment violate Title VII, as well 
as INA Section 274B, and are subject to civil penalties and termination 
of participation in the E-Verify program after suspension and debarment 
procedures. Such illegal practices can include selective verification; 
discharging, refusing to hire, or assigning or refusing to assign to 
Federal contracts to qualified employment eligible employees because 
they appear or sound ``foreign''; and premature termination of 
employees based on tentative nonconfirmations. Contractors are 
protected from civil or criminal liability under IIRIRA Section 403(d), 
8 U.S.C. 1324a note, when taking actions in good faith reliance on 
information provided through the E-Verify confirmation system. This, 
however, does not permit contractors to unlawfully discriminate against 
applicants or employees in other aspects of the employment 
relationship.
    The Councils are not aware of any opportunity to discriminate in 
use of the E-Verify system that is any greater than the potential for 
discriminating against employees in application of the Form I-9 
process. Contractors may also unlawfully select out candidates for 
employment because of foreign sounding names or other ``foreign'' 
characteristics because they do not believe those employees will be 
able to complete the I-9 process. There is thus no reason to believe 
that the E-Verify program will spur any greater disparate treatment 
discrimination than the current Form I-9 process. See Chicanos Por La 
Causa, Inc. et al. v. Napolitano et al., Civil No. 07-17272, 2008 WL 
4225536 at *8 (9th Cir. 2008) (``Congress requires employers to use 
either E-Verify or I-9, and appellants have not shown that E-Verify 
results in any greater discrimination than I-9.'').
    With respect to comments related to disparate impact claims 
potentially arising from differing tentative nonconfirmation issuance 
rates for foreign-born U.S. citizens and U.S.-born citizens, the 
Councils agree that DHS and SSA should improve their database 
administration to help alleviate all instances of tentative 
nonconfirmations. As one commenter observes, ``myriad reasons'' account 
for errors in the SSA database, including clerical errors made by 
agency employees and an employer's or a worker's own errors when 
completing Government forms. Moreover, an error may stem from a name 
change due to marriage, divorce, or naturalization. An error may also 
come from the misuse of an SSN by an unauthorized worker. There are 
thus many legitimate nondiscriminatory reasons why these databases 
might produce a greater percentage of tentative nonconfirmations for 
one group of persons than another. However, these tentative 
nonconfirmations can be contested and resolved prior to final 
confirmation or nonconfirmation of employment eligibility. Contractors 
must agree not to take an adverse action against an employee based upon 
the employee's perceived employment eligibility status while SSA or DHS 
is processing a verification request unless the contractor obtains 
knowledge (as defined in 8 CFR 274a.1(l)) that the employee is not work 
authorized. A tentative nonconfirmation, or the finding of a photo non-
match, does not establish and cannot be interpreted by the contractor 
as evidence that the employee is not work authorized. Accordingly, the 
tentative nonconfirmation provided by the DHS and SSA databases does 
not necessarily lead to an employee's termination from employment or 
any other adverse action. In fact, the employee is protected from such 
actions during the process. The Councils therefore do not view the 
possibility of disparate impact claims as an impediment to issuing this 
final rule.

The MOU

1. Need for the MOU
    Comment: One commenter urged that the proposed rule be modified to 
make explicit its linkages to the required MOU. Another commenter 
suggested that the proposed rule, and all prime- and sub-contracts 
issued under the proposed rule, should set forth with specificity the 
sanctions and enforcement protocols provided for by the MOU. One 
commenter suggested that MOU use is not necessary, and that the new 
contract clause created by this rulemaking should be sufficient to 
detail E-Verify's compliance requirements.
    Response: The Councils do not agree. As noted above, the purpose of 
the FAR clause is solely to require contractors to agree to use E-
Verify and to specify when the program will be used. The clause is not 
intended to duplicate the E-Verify program's internal terms of use. 
Those program use requirements are appropriately addressed under the 
MOU. DHS has statutory responsibilities and law enforcement authorities 
that are addressed under the MOU and those responsibilities and 
authorities are inappropriate to address either in the FAR or in a 
contract clause. For the same reasons that industry and Federal 
standards are not required to be incorporated in full into each 
contract

[[Page 67667]]

that requires adherence to them, it is not necessary to incorporate the 
E-Verify MOU requirements in each covered contract. Incorporating by 
reference laws, regulations, industry standards, and other FAR clauses 
is normal practice in Federal contracting.
2. Public Comments on the MOU
    Comment: One commenter asserted that the public should be afforded 
an opportunity to comment on the provisions in the E-Verify MOU.
    Response: The Councils placed the proposed MOU reflecting the 
program participation requirements for Federal contractors into the 
public docket, and discussed the requirements under that document in 
the preamble of the proposed rule. See 73 FR 33376-77. In response, the 
Councils received many comments related to the MOU in general and as to 
specific provisions within the MOU, which are addressed in greater 
detail later in this section. Accordingly, commenters were afforded an 
opportunity to comment on the provisions of the MOU and, in fact, did 
provide such comments to the Councils. A final version of the MOU will 
be available on the E-Verify Web site http://www.dhs.gov/E-Verify.
3. Specific MOU Provisions
    1. Comment: Three commenters expressed concern with provisions of 
the draft MOU regarding those employers who may one day wish to become 
Federal contractors. One commenter commented that employers will be 
terminated from E-Verify for technical violations of the (MOU) thereby 
becoming an obstacle to an employer's later participation in Federal 
contracts. Another comment stated that those employers who are not 
currently Federal contractors will not be permitted to query existing 
workers thereby harming the interests of those employers who may be 
preparing to enter the Federal marketplace. A comment observed that 
greater clarity is needed with respect to when termination or 
suspension can be invoked. One commenter commented that the FAR rule 
materially changes the MOU between USCIS, SSA and companies 
participating in E-Verify. A university suggested that the employer 
have the ability to resolve DHS tentative nonconfirmations on behalf of 
their employees.
    Response: The Councils agree that employers who seek to obtain 
their first Federal contract may be at some disadvantage in relation to 
employers who already hold Federal contracts covered by this rule, 
since the new entrant would face the start-up costs associated with 
running E-Verify queries of its existing workforce that the already-
established contractor has previously incurred. The Councils note, 
however, that this small ``barrier to entry'' is no different from the 
myriad other such ``barriers'' that new contractors must face to come 
into compliance with the unique requirements for Federal contracting 
that are codified in the FAR.
    USCIS retains its authority to investigate violations of the E-
Verify program. DHS and SSA may terminate a contractor's MOU and deny 
access to the E-Verify system in accordance with the terms of the MOU. 
If DHS or SSA terminates a contractor's MOU, the terminating agency 
will refer the contractor to a suspension or debarment official for 
possible suspension or debarment action. During the period between 
termination of the MOU and a decision by the suspension or debarment 
official whether to suspend or debar, the contractor is excused from 
its obligations under paragraph (b) of the clause at 52.222-54. If the 
contractor is suspended or debarred as a result of the MOU termination, 
the contractor will not be eligible to participate in E-Verify during 
the period of its suspension or debarment. If the suspension or 
debarment official determines not to suspend or debar the contractor, 
then the contractor must reenroll in E-Verify.
    The Councils appreciate the recommendations of the commenter with 
respect to the ability of employers to resolve a tentative 
nonconfirmation on behalf of those employees whose work authorization 
stems from J-1, H-1B or O-1. The system is designed to give the 
employee the responsibility to handle their own case to reduce employer 
burden, allow the employee to maintain their own documents regarding 
their status and protect employee privacy. Additionally, it is 
important to note that the responsibility of providing documents for 
employment eligibility purposes is on the employee. The instructions 
accompanying Form I-9 currently require employees to present original 
documents. Placing the burden on the employee to resolve tentative 
nonconfirmations is consistent with the requirement that the employee 
provide documents establishing his or her employment eligibility. 
Privacy concerns, including confidentiality related to certain visa 
status, preclude employers from resolving tentative nonconfirmations on 
behalf of employees. Nothing prohibits an employer from assisting an 
employee with this process at the request of the employee.
    2. Comment: One commenter stated that the language referencing the 
``rebuttable presumption'' that an Employer has not violated Section 
274 (a)(1)(A) of the Immigration and Nationality Act exists only in the 
draft MOU and not in the FAR rule and that the MOU must be altered to 
include additional time for cases involving an SSA no match.
    Response: The commenter is correct that certain provisions 
mentioned by the commenter do not exist in the current clause contained 
in the rule. This is not required by the FAR. With respect to the 
recommendation that the MOU be changed to allow additional time for 
addressing SSA ``no-match'' cases, the comment appears to confuse the 
time allotted under the MOU to contact SSA (or DHS) to start resolving 
a mis-match with the time allotted under DHS's no-match rule for an 
employee to complete the process of resolving a mis-match.
    3. Comment: A building trade's association commented that several 
provisions of the draft FAR MOU is using the same disclaimer language 
as previous versions of the MOU and that that language has not been 
subjected to judicial review.
    Response: The commenter is correct that the provisions of the draft 
MOU have not been subjected to judicial review. However, the provisions 
contained in that draft MOU closely follow language in MOUs currently 
in use by over 80,000 employers, which have gone unchallenged over the 
life of the program, and which have been drafted consistent with the 
controlling law related to the E-Verify program.
    4. Comment: A chamber of commerce commented that current employees 
of Federal contractors should be allowed to opt out of work prior to 
being verified in E-Verify.
    Response: The rule does not seek to tell employers which current 
employees they should assign to Federal contract work, or what 
privileges or rights employees may have relating to which tasks they 
are assigned in their workplace. Unless there is something in the 
specific contract relating to that, that is an internal business and 
labor management decision for the contractor to make subject to its 
normal processes and requirements. Therefore, it would be inappropriate 
to include provisions relating to employees ``opting out'' of work on 
Federal contracts.
a. Reporting Change in Status
    Comment: There is no comment listed for this topic but the Councils 
nonetheless address this issue in the response below.

[[Page 67668]]

    USCIS does not require that employees report a change in status to 
E-Verify. E-Verify is able to determine whether an employee is work 
authorized using numerous databases without receiving information 
directly from an employee. Once an employee has been verified through 
E-Verify, he or she does not need to be re-verified in E-Verify until 
employed by a new employer.
    A related matter is the Form I-9. If the document presented by an 
employee (who indicated that he or she is an alien authorized to work) 
when completing the Form I-9 has expired, the employer is required to 
update the Form with the new document establishing that employee's work 
authorization. The new document should be listed under Section 3 
(``Updating and re-verification'') of the Form I-9. The Employer may 
opt instead to complete a new Form I-9 with the new document.
b. Resolution of Tentative Nonconfirmations
    Comment: Five commenters indicated that they were concerned that a 
tentative nonconfirmation might not be resolved within the time 
allotted by E-Verify. Of those, four commenters commented that 
employees had insufficient time to resolve a tentative nonconfirmation 
particularly if the employees are in remote areas that lack access to 
transportation and to a nearby SSA office. The other commenter also 
expressed concern that an SSA tentative nonconfirmation could not be 
resolved in 90 days.
    Response: Under the program rules for E-Verify, after a tentative 
nonconfirmation has been generated, the employer must provide that 
notice to the employee. Once the employee actually receives the 
tentative nonconfirmation and decides to contest it, the employer 
initiates a referral through the E-Verify system. Once a case is 
referred, then the employee has eight Federal Government work days to 
contact the appropriate agency. He or she can do so by simply 
contacting SSA or DHS. Once the employee has initiated the process of 
contesting the tentative nonconfirmation, the employee may continue 
working until the case has been resolved.
    The Councils believe that providing the employee with eight days is 
a sufficient amount of time for the employee to contact SSA or DHS to 
begin working out any discrepancy, even taking into account remote 
locations. It is important to note that the eight-day timeframe in the 
E-Verify program rules is the time allotted for the employee to 
initiate the process of resolving his or her tentative 
nonconfirmation--not the time allotted for a tentative nonconfirmation 
to be finally resolved. Most SSA tentative nonconfirmations are 
resolvable within two days, and DHS statistics show that SSA resolves 
96.6 percent of cases within 7 days of the date the individual first 
contacts SSA. In a few cases, the SSA has extended the time period in 
order to allow for the employee sufficient time to obtain a required 
document.
    With respect to employees who reside in remote locations, it is 
important to note that employees who receive a tentative 
nonconfirmation from DHS are not required to visit a USCIS office. 
Moreover, in most cases, a DHS tentative nonconfirmation can be 
resolved over the phone using a toll-free number. In an effort to make 
the process simpler for many employees living in remote areas, DHS has 
made system enhancements to E-Verify. As a result, in most instances, 
naturalized U.S. citizens who receive a tentative nonconfirmation from 
the SSA are no longer required to personally visit a SSA office. 
Naturalized citizens are now able to contact DHS directly (over the 
phone). USCIS believes that this process will greatly limit the number 
of employees who must make personal visits to a SSA office thereby 
easing the burden on those who are in remote locations.
    The Councils also note that these comments relate to a previous E-
Verify process that has since been replaced by a more efficient one. It 
is true that at one time, the way an employer verified that a tentative 
nonconfirmation was successfully resolved was to re-query the system. 
However, beginning in October 2007, SSA and DHS began using a new 
automated system known as EV-STAR to provide automated feedback to 
employers concerning the status and resolution of any tentative 
nonconfirmations received by employees. Since that time, there has been 
no need for employers to re-query the system.
c. Due Process
    Comment: An immigrant rights advocacy group and a union commented 
that workers have insufficient due process procedures in place to allow 
them redress. One commented that there are insufficient judicial 
remedies in place to provide relief to an aggrieved employee.
    Response: The Councils recognize the due process concerns raised by 
the commenters, but believe that the processes in place with the E-
Verify system provide adequate opportunity for employees to contest and 
resolve any issues that arise. E-Verify, through the MOU and its 
internal practices and procedures, which are published on the E-Verify 
program Web site, has provided a system that protects the rights of 
employees while providing the means to verify the work authorization 
status of those persons. The MOU prohibits the Employer from 
discharging, refusing to hire, or assigning or refusing to assign to 
federal contracts employees because they appear or sound ``foreign'' or 
have received tentative nonconfirmations. The Employer is further 
warned in the MOU that any violation of the unfair immigration-related 
employment practices provisions in section 274B of the INA could 
subject the Employer to civil penalties, back pay awards, and other 
sanctions, and violations of Title VII could subject the Employer to 
back pay awards, compensatory and punitive damages. The MOU agreed to 
by the Employer also states that violations of either section 274B of 
the INA or Title VII may also lead to the termination of its 
participation in E-Verify. If the employee believes that s/he has been 
discriminated against, he or she should contact OSC at 1-800-255-7688 
or 1-800-237-2515 (TDD). Employers that have questions relating to the 
anti-discrimination provision should contact OSC at 1-800-255-8155 or 
1-800-237-2515 (TDD). Concerns regarding the judicial remedies are 
better framed to other offices within the Executive and legislative 
branches of Government.
    The E-Verify program offers employees who receive a tentative 
nonconfirmation the opportunity to contest the finding and clarify 
their records with either SSA or DHS. This is a form of due process 
protection. If an employee does contest the tentative nonconfirmation 
and is not able to clarify his or her record with additional 
documentation, he/she will be issued a final nonconfirmation. Employers 
or employees may contact the E-Verify program if additional time is 
needed to provide such documentation or if they believe a final 
nonconfirmation was received in error. The E-Verify program may delay a 
final nonconfirmation finding on a case by case basis in those cases 
where employees have experienced delays in receiving needed 
documentation that will help prove their employment eligibility, and 
the program will work with the employer and/or employee to research the 
case and identify the reason for the final nonconfirmation.
    The E-Verify program is committed to protecting the rights of 
employees who feel that they have been discriminated against or who 
believe they have

[[Page 67669]]

erroneously received a tentative nonconfirmation. On the E-Verify Web 
site, on all tentative nonconfirmation letters that employees receive, 
and in the MOU that E-Verify users sign when joining the program, E-
Verify provides the contact information to OSC. In addition, E-Verify 
registered employers are also required to display two posters which 
apprise the employees of their rights and how to contact the OSC in the 
event of perceived discrimination: (1) The ``You Should Know Your 
Rights and Responsibilities under E-Verify'' poster produced by USCIS 
and (2) the ``Employee Rights Poster'' produced by the OSC. Once a 
complaint has been made, the Office of Special Counsel is able to 
investigate any case brought to its attention. The Councils believe 
that these due process protections are sufficient to ensure that the E-
Verify system promotes economical and efficient Federal Government 
contracting.

Content of FAR Rule

1. Definitions (22.1801 and 52.222-54(a))
a. ``Assigned to the Contract'' and ``Directly Performing the Work''
    Comment: Several commenters commented that there is no guidance as 
to how to identify an employee who is ``directly performing'' work 
under a contract and expressed concerns that this could result in 
inconsistent application of the rule and disagreements over which 
existing employees must be run through the E-Verify system.
    One employer suggested that ``directly performing work under a 
contract'' be clarified to mean a person customarily performing more 
than 50 percent of his/her time in direct support of the covered 
contract or multiple covered contracts.
    A university commented that the proposed rule is too unclear as to 
how to treat overhead employees who perform some work that benefits a 
contract and requests that the Councils clarify this situation.
    Many other commenters expressed concern over whether the E-Verify 
requirement applies to employees who are only tangentially involved 
with covered contracts. Specifically, they inquired whether agreements 
to provide service, support, or maintenance on an ``as needed'' basis 
would be covered even if employees would spend only a small portion of 
their time on these contracts. Commenters also asked whether employees 
working to prepare a bid or proposal be covered.
    One commenter requested clarification as to whether the requirement 
to verify current employees on covered projects extends beyond those 
working exclusively at project sites, or whether it extends to others 
working off-site but dedicated exclusively to the covered project. The 
commenter suggested that the regulations must provide a high degree of 
specificity on this issue, as the costs and employment administration 
ramifications are significant.
    Response: The Councils have removed the definition of ``assigned 
employee'' and provided instead a definition of ``employee assigned to 
the contract'' because that is the term used in the final rule. The 
revised definition makes it clear that an employee is not considered to 
be directly performing work under the contract if the employee normally 
performs support work, such as indirect or overhead functions, and does 
not perform any substantial duties under the contract. The Councils do 
not believe it is appropriate to try to establish a mathematical 
definition of an assigned employee. Contractors will instead have to 
interpret the definition stated in the final rule as it applies to 
various individual situations.
    The Councils note that it is immaterial whether services are 
provided intermittently or for only a small portion of an individual 
employee's time as long as the work is done in the United States in 
direct support of a contract. However, tangential involvement, if it is 
in terms of indirect involvement instead of directly working on a 
contract, does not necessarily trigger the E-Verify requirement. For 
example, a mailroom clerk who delivers mail to a program office 
supporting a contract as well as to all other offices served by the 
mailroom, would not be required to go through the E-Verify process. 
Other non-FAR requirements, however, would necessitate that the 
employer vet the mailroom clerk at hiring through the I-9 process.
    The Councils also note that working on a proposal, as opposed to 
working on an awarded contract, does not constitute work under the 
contract in question and would not trigger E-Verify requirements.
    There is nothing in the definition of ``employee assigned to the 
contract'' that would imply that it makes a difference where that 
employee is working, as long as it is in the United States.
b. ``Commercially Available Off-the-Shelf (COTS) Item''
    Comment: Various commenters advised that the definition of COTS 
items was not sufficiently clear with respect to ``bulk cargo.'' 
Several commenters sought clarification that the rule would not be 
applicable to their products because they believed their products 
qualify under the definition of COTS. These commenters recommended that 
the Councils make clear that the rule would not apply to the items they 
believed to be COTS. Specifically, the commenters asked that the final 
rule clarify the definition of COTS so that packaged agricultural 
products are clearly excluded from the definition of bulk cargo so as 
to avoid deliveries of fruit and other food stuffs from being 
considered ``bulk cargo'' and therefore outside of the definition of 
COTS items.
    Response: The Councils concur and have amended the final rule in 
response to these comments to clarify the definition of COTS to explain 
that a cargo subject to ``mark or count'' is not bulk cargo. Nearly all 
food and agricultural products should fall within the definition of 
COTS. The only likely exceptions would be bulk shipments of grains in 
ship holds. The final rule has added an exception for bulk cargo as 
well as COTS items.
c. ``Contract'' and ``Contractor''
    1. Comment: Commenters requested that the Councils define 
``contract'' to exclude agreements that are not governed by the FAR, 
such as grants and cooperative agreements.
    Response: The Councils do not concur with this request. The FAR 
already defines the term ``contract'' and the term does not include 
grants or cooperative agreements. A grant or cooperative agreement that 
is not governed by the FAR is not required to include the clause in 
this rule.
    2. Comment: Several commenters suggested that the Councils more 
clearly define the term ``contractor'' to exclude subsidiaries of a 
parent where the parent holds the contract but the subsidiaries do not.
    Response: Whoever signs a contract is the contractor. Only the 
legal entity that signs the contract and is bound by the performance 
obligations of the contract is covered by this E-Verify term. If 
ambiguity remains, this issue will have to be handled on a case-by-case 
basis consistent with traditional FAR principles.
    3. Comment: One commenter was concerned about the effect of mergers 
upon implementation of the E-Verify program.
    Response: If a novation agreement takes place, then the merged 
entity becomes the contractor. Otherwise, there is no impact.

[[Page 67670]]

d. ``Subcontract'' and ``Subcontractor''
    Comment: A number of commenters, in addressing the proposed rule's 
subcontractor flowdown requirement, expressed concern as to the 
definition of ``subcontract'' and ``subcontractor'' and the extent to 
which the rule might apply to their activities. This was a concern 
common to agricultural and dairy interests. Two agricultural 
associations noted that there are numerous sales and supply 
arrangements that may or may not fall within the rule's coverage. There 
are direct sales by a producer of an agricultural commodity; direct 
sales by a packing operation that obtains fruits or vegetables or other 
commodities from other producers and then sells the product directly to 
the Government; sales by a broker or handler of agricultural products 
who purchases the products from a producer or producers but who 
directly contracts with the Government; and processors of agricultural 
products that purchase them from producers and sell them to the 
Government after processing them. One commenter requested clarification 
that farmers providing food for canning are not ``subcontractors'' and 
that truckers hauling processed food are not subcontractors for 
purposes of application of this clause.
    In addition, it was noted that the proposed rule does not 
adequately address the distinct marketing characteristics of 
agricultural cooperatives. Several commenters pointed to the 
distinction between farmer cooperatives and their farmer members and 
referred to court decisions highlighting this distinction.
    Another commenter stated that many employers hold contracts with 
delivery companies, suppliers, maintenance companies, and others who 
may perform work in support of the Federal contract, and noted that it 
was unclear from the proposed rule whether these subcontractors would 
also be required to enroll in E-Verify.
    Response: With respect to agricultural and dairy products, the 
referenced items appear to fall within the definition of COTS or bulk 
cargo. COTS suppliers would not be subject to the E-Verify requirements 
because they are supplies, which are not covered at the subcontract 
level. With respect to the comment regarding potential coverage of 
delivery companies, suppliers, maintenance companies, and others who 
may perform work in support of the contract, it was determined that the 
existing FAR definitions of subcontractor when read in conjunction with 
previous applicability discussions would address the concerns noted 
above. The Councils have amended the rule at 22.1801 and the clause at 
52.222-54 to include the definitions ``subcontract'' and 
``subcontractor,'' found at FAR 44.101.
e. ``Period of Performance'' vs. ``Life of Contract''
    Comment: One commenter requested that the ``Period of Performance'' 
should be defined as ending on the date that delivery is complete. 
Another commenter questioned the use of the term ``life of the 
contract'' in the preamble to the proposed rule.
    Response: The Councils do not agree. The term ``period of 
performance'' is used throughout the FAR and various contracts further 
refine the definition of that period individually for that contract. In 
general, the period of performance would start at the award date of the 
contract and extend through the date delivery is complete, unless 
otherwise specified in the contract. The period of performance does not 
extend to the date of contract closeout. The Councils concur that for 
the sake of consistent terminology, the term ``period of performance'' 
is the correct term to express the required period of required 
compliance with E-Verify, not ``life of the contract.''
f. Distinction Between Products and Services
    Comment: One commenter stated that the rule should make a clearer 
distinction between products and services.
    Response: The Councils do not concur with this comment. Contracts 
for services are clearly defined in Part 37 of the FAR.
2. Mandatory Enrollment (22.1802 and 52.222-54(b)(1)(i))
a. Noncompliant Employers Only
    Comment: Several commenters stated that the rule should be 
restricted in its applicability only to contractors who have engaged in 
the knowing employment of unauthorized foreign nationals or who have 
shown that they routinely shirk their obligations under I-9 procedures, 
such as those who receive multiple ``no-match'' letters demonstrating 
that their concern for the work eligibility of their workforce may be 
lacking. Alternatively, the commenters recommended application of E-
Verify only to verify employees whose work eligibility may be in 
question due to receipt of a ``no-match'' letter.
    Response: The Executive Order 12989, as amended, does not authorize 
such a limited approach. In any event, restricting the applicability of 
the rule to employers who routinely shirk their obligations would not 
foster the stability and dependability across the entire Federal 
contractor community in the manner envisioned by Executive Order 12989. 
Using E-Verify at the beginning of the contract should reduce the 
number of ``no match'' letters received by the employer later in the 
process.
b. Non-Citizens
    Comment: Another commenter suggested that contractors should only 
verify non-citizen employees using E-Verify to reduce employer burden.
    Response: Executive Order 12989, as amended, directs the Councils 
to implement the President's procurement policy through a FAR rule that 
requires federal contractors to agree, as part of their contract 
performance, to verify all new hires without differentiating between 
citizens and non-citizens. Modifying the rule to require verification 
only of non-citizens would not satisfy the requirements of this 
presidential directive. Moreover, the Councils believe that verifying 
only those who do not claim to be U.S. citizens would be discriminatory 
and would not meet the ultimate goal of fostering a more stable and 
dependable Federal contractor workforce.
    Verifying only those employees who attest to work-authorized alien 
status would defeat the basic purpose of E-Verify and this rule. E-
Verify is designed to guard against identity and immigration fraud in 
the paper-based I-9 process, which may take the form of false claims of 
U.S. citizenship backed up with either false or fraudulently obtained 
driver's licenses, birth certificates, social security cards and/or 
other Form I-9 documentation other than DHS immigration status 
documents. An alien-only verification system would not only fail to 
deter this kind of fraud, but it would encourage it.
    Using E-Verify only for non-citizens would likely violate the anti-
discrimination provisions of the Immigration and Nationality Act (INA), 
8 U.S.C. 1324b, which prohibits discrimination with respect to hiring, 
firing, or recruitment or referral for a fee, on the basis of national 
origin or, for certain classes of protected individuals, on the basis 
of citizenship status. Employers may not treat individuals differently 
on the basis of national origin, and U.S. citizens, recent permanent 
residents, temporary residents, asylees and refugees are protected from 
citizenship status discrimination. This anti-discrimination provision 
is enforced by OSC. If an employee believes that he or she has been 
discriminated against during the employment eligibility verification

[[Page 67671]]

process, he or she should contact OSC at 1-800-255-7688 or 1-800-237-
2515 (TDD). Employers that have questions relating to the anti-
discrimination provision should contact OSC at 1-800-255-8155 or 1-800-
237-2515 (TDD).
c. Increase in Program Abuse
    Comment: Several commenters were concerned that mandatory use will 
increase abuse of the program. One commenter stated that preliminary 
reports from Arizona's mandatory use of E-Verify suggest that some 
employers are violating the terms of the MOU and engaging in illegal 
employment practices such as verifying existing employees, rather than 
verifying only new hires and that they are doing so in a discriminatory 
way. The commenters believed that implementation of the proposed rule 
will exacerbate the situation regarding discriminatory use of the 
program. Also, some commenters claimed that employers do not understand 
the ways in which E-Verify is to be implemented in the workplace, and 
that as a result they take mistaken actions, such as firing workers 
when they are not required to do so (or are prohibited from doing so).
    Response: The rule is clear in its requirements to verify existing 
employees. All who are assigned to a contract must be verified. This 
provides no latitude for discrimination. Also, the E-Verify program MOU 
will actually serve to reduce confusion over employer responsibilities 
when workers are in the process of clearing up questions as to their 
authorization to work in the United States. The MOU gives clear 
descriptions that prohibit employers from firing workers during that 
period or from taking other adverse actions.
    To address employer abuse and/or fraud, the E-Verify program has 
created a Monitoring and Compliance unit that can detect, deter, and 
remedy improper use of the system. The Monitoring and Compliance unit 
also works to safeguard personal privacy information; prevent the 
fraudulent use of counterfeit documents; and refer instances of fraud, 
discrimination, and illegal or unauthorized use of the system to 
enforcement authorities. Once fully staffed, the E-Verify's Monitoring 
and Compliance unit will carry out its mission by educating employers 
on compliance procedures and guidelines and providing assistance 
through compliance assistance calls. The unit will also conduct follow-
up with desk audits and/or site visits to unresponsive employers if 
necessary, and refer cases of fraud, discrimination, and illegal use to 
the OSC or ICE, as appropriate. The Monitoring and Compliance unit will 
also monitor system usage to identify when registered employers have 
not used the system within an appropriate time period given the size of 
the organization.
3. Application to Employees (22.1802(b)(2) and (c), and 52.222-54(b))
a. All New Hires During Period of Performance of the Contract
    Comment: Several commenters suggested that it is inappropriate to 
require an entire company to be subject to E-Verify for all new hires 
when the company has only a small number of Federal contracts that 
comprise a small proportion of its business. They argued that the 
proposed rule is an overbroad use of the procurement authority to cover 
new hires that are not associated with performance of a contract and 
stated that the rule should apply only to new hires at a work site that 
is performing a contract.
    Response: Applying the duty to verify all new hires of the entire 
organization of the contractor is a requirement of Executive Order 
12989, as amended. If the requirement were limited only to new hires at 
locations doing Government work, the rule would be impractical and too 
easy to undermine by transferring employees from non-contracting work 
sites to contracting work sites. Not all hires of a contractor are 
hired through the location where they work. It is very common for a 
contractor to hire through a central site that has no connection to 
various work sites. In addition, there are few Federal contractors who 
have segregated their workforces in the manner suggested in the 
comments. Modern technology, most notably email, has broadened and 
facilitated doing work in multiple dispersed locations through a 
national and even international network of collaborators. Thus, 
defining the work site would be too unwieldy for an effective rule, 
making enforcement of this aspect of the rule too difficult and too 
easy to misinterpret or undermine.
    With respect to providers with few Government contracts, the rule 
does include an exception for COTS to recognize that COTS providers 
will generally be predominantly commercial, with only a small 
proportion of business with the Government, as well as exceptions for 
institutions of higher education; State and local governments and 
governments of Federally recognized Indian tribes; and for sureties 
performing under a takeover agreement.
b. Existing Employees Assigned to the Contract
i. No Verification
    Comment: Many commenters requested that the rule eliminate the 
requirement for verification of employment of existing employees 
assigned to the contract. One commenter states that there is no policy 
reason why Federal contractors should be so radically different from 
all other employers who participate in the program. More detailed 
reasons for opposition to verification of existing employees are also 
separately addressed in the following paragraphs.
    Response: The Councils do not agree with this approach. The final 
rule reflects the requirements stated in Executive Order 12989, as 
amended, that the FAR incorporate a rule that will require verification 
of all existing employees assigned to a contract. Verification of 
existing employees who work under contracts is a critical element of 
this rule, and the elimination of that aspect of the rule would be 
contrary to the Executive Order.
ii. Burdensome To Track Which Employees Have Been Verified
    Comment: Many commenters were concerned about the burden of 
identifying employees assigned to the contract, including time and 
money required to develop new systems. For example:
     One commenter observed that assigned employees may work on 
several projects at once and it is burdensome to require them to be 
tracked to determine which ones have been verified by E-Verify.
     Another commenter stated that the chance of a single 
employee being ``dedicated'' to a single contract--whether for a 
private customer or a Government agency--is the rare exception in a 
large company. A large, multi-jurisdictional company will be challenged 
to identify which employee in fact ``directly performs work'' under a 
covered contract.
     Another commenter recommended verifying all employees at 
all hiring sites.
     Another commenter stated that in normal circumstances it 
will impose considerable burdens and take months, if not years, to put 
in place the required tracking processes.
     Several university commenters stated that these 
requirements would impose significant financial and organizational 
burdens on all affected employers, including substantial costs 
associated with developing new software systems.

[[Page 67672]]

     Another commenter stated that employers would need to 
create a new process for screening current employees and a process for 
tracking which employees already have been through the E-Verify 
screening process every time an employee is assigned to work on a 
Federal contract.
    Response: With regard to tracking which employees have been 
verified, the Councils do not believe this is a problem that warrants a 
change to the proposed rule. Modern personnel and payroll systems 
identify numerous qualifications and attributes for each employee. It 
is a minor effort to add one more attribute to those already included 
in the accounting and payroll systems. For example, each employee is 
typically identified against a wage rate, security level, FLSA coverage 
or not, vacation records, professional qualifications, labor category, 
etc. Personnel/payroll systems that track these sorts of data typically 
permit ready modification and expansion in the number and type of 
attributes that are tracked. It is typically a simple operation to add 
an attribute to such a system.
    Further, contractors can recover associated costs incurred to 
comply with this program in their proposed prices as they already do 
with other overhead costs. However, the Councils recognized that the 
task of identifying which employees are assigned to the contract may be 
more problematic for some employers. Should the employer find the task 
of identifying which employees have been assigned to the contract and 
tracking those employees who have already been verified unduly 
burdensome, the Councils have amended the rule consistent with Section 
8. (a) of Executive Order 12989 to permit a contractor to verify its 
entire workforce.
iii. Conflicts Between Public and Private Contracts
    Comment: Several commenters stated that employers are currently 
prohibited from using E-Verify to confirm the employment eligibility of 
existing employees not assigned to a Federal contract. They believe 
that the proposed rule therefore poses potential problems for firms 
that hold both public and private contracts.
    Response: The current MOU required to be signed by all employers 
that register for E-Verify does prohibit the use of E-Verify to confirm 
the employment eligibility of existing employees. Upon promulgation of 
this rule, however, there will be a revised MOU with requirements 
applicable to Federal contractors. The revised MOU does not contain the 
same prohibition on verification of existing employees as to Federal 
contractors, because the Executive Order and this final rule require 
the use of E-Verify to confirm the employment eligibility of existing 
employees who are assigned to Federal contracts. If a contractor that 
was already using E-Verify enrolls in E-Verify as a Federal contractor, 
then that contractor may need to sign a new MOU, which will allow the 
use of E-Verify for existing employees.
iv. Selective Verification Issues
    Comment: Some human resources organizations stated that selective 
screening verification of existing employees increases an employer's 
exposure to allegations of discrimination based on document abuse, 
citizenship status discrimination, national origin discrimination or 
other characteristics protected by Title VII and the anti-
discrimination provision of the Immigration and Nationality Act (INA), 
8 U.S.C. 1324b. Another commenter questioned whether employers might 
register or bid for contracts only so they can verify existing 
employees.
    Response: The requirement to ensure that any employee who is 
assigned to work directly on a contract in the United States is, in 
fact, authorized to work in the United States is not discriminatory as 
that term is defined by Title VII and case law. However, the Councils 
agree that it is appropriate to limit as much as possible opportunities 
for unscrupulous companies to abuse the E-Verify system. That is why 
the rule clearly specifies which employees must be verified by the 
employer. It is also important to note that OSC investigates 
allegations of national origin and citizenship status discrimination in 
the workplace, as well as demands for additional documentation in the 
employment eligibility verification process (``document abuse'') and 
retaliation under the anti-discrimination provision of the Immigration 
and Nationality Act (INA), 8 U.S.C. 1324b. The E-Verify MOU makes clear 
that an employer may not use E-Verify procedures for pre-employment 
screening of job applicants. In addition, an employer cannot verify 
only certain employees selectively--for example on the basis of 
perceived national origin--and may be subject to penalties under the 
anti-discrimination provision of the INA if it prescreens employees on 
the basis of perceived national origin or citizenship status.
    With regard to an employer bidding on a Government contract just to 
use E-Verify to verify existing employees, the employer would not be 
authorized to verify existing employees unless the contract was 
actually awarded to that contractor.
v. Permitting Multiple Alternatives
    Comment: Another commenter requested that if the proposed current 
employee verification system is to remain a part of these regulations, 
the Councils should provide an option for employers in the regulations 
so that they can adopt a compliance method that meets objectives with 
the least disruption or cost to contractor operations. Suggested 
examples included allowing an employer to verify all employees at all 
hiring sites, all employees at any hiring site that services a covered 
contract, or only those employees assigned to work on the contract.
    Response: Consistent with Section 8.(a) of Executive Order 12989, 
as amended, which requires implementation of the Order ``in a manner 
intended to minimize the burden on participants in the Federal 
procurement process,'' the Councils have included a provision in the 
final rule permitting contractors a voluntary alternative: The option 
to verify all existing employees of the contractor, provided the 
contractor initiates verification within 180 days of notifying DHS of 
its decision to verify its entire workforce. The Councils believe that 
this alternative best prevents opportunities for discrimination or the 
appearance of discrimination, relative to other possible alternatives, 
while potentially reducing the burden of compliance for some 
contractors.
vi. Workforce Stability
    Comment: Several commenters stated that requiring verification of 
current employees will severely impact workforce stability due to 
expected errors, delays, and other disruptive effects such as employer 
misuse of tentative nonconfirmations. The commenters stated that the 
decision to extend the E-Verify requirement to existing employees 
actually undermines the FAR Council's stated view that the Federal 
Government's procurement interests are advanced by a stable workforce 
with less turnover. The commenters claim that subjecting existing 
employees to E-Verify is guaranteed to exacerbate, rather than 
alleviate, the posited problem of instability and turnover in the 
workforces of Federal contractors and subcontractors.
    Response: The Councils do not concur. The Councils consider that 
the additional time allowed in the final rule should alleviate the 
commenters'

[[Page 67673]]

concerns regarding expected errors, delays, and other disruptive 
effects. The Councils do not believe that the concerns that E-Verify 
will exacerbate instability and turnover in the workforce are well 
founded, assuming that employers are currently complying with existing 
law and only employing individuals who are actually authorized to work 
in the United States.
vii. Employees Hired After November 6, 1986
    Comment: A university commenter believed that the proposed rule is 
applicable to all employees hired after November 6, 1986. The commenter 
stated that its concerns are magnified by the proposal in the proposed 
rule that the E-Verify program be extended to all employees hired after 
November 6, 1986 and that this requirement greatly expands the cost and 
process burden on employers far beyond the current pilot program.
    Response: The commenter is mistaken about the requirements of the 
proposed rule. The proposed rule was not to be applicable to all 
employees hired after November 6, 1986. However, because of concerns by 
some contractors that determining and tracking employees assigned to 
the contract is too difficult, the final rule does provide an option to 
contractors to verify all employees hired after November 6, 1986.
c. All Employees of the Contractor
    Comment: Several commenters believe that the contractor might have 
to verify all existing employees to achieve compliance and recommended 
that the rule should provide additional flexibility to allow this. Some 
employers may find it easier to verify all existing employees and new 
hires, rather than attempt to distinguish between those who are and who 
are not working on Federal contracts, thus ensuring compliance. Another 
company commented that it would be very burdensome to create a 
mechanism to identify ``assigned employees'' under a process accounting 
system because no one individual charges to a particular job 
(contract).
    Response: The Councils agree with these comments and have amended 
the proposed rule. In situations where a contractor does not believe it 
has an economical or efficient way to identify employees who perform 
work principally under a particular contract, or if the contractor 
believes it is more efficient to verify all employees, the final rule 
will give the contractor the option to initiate verification of the 
employment eligibility of all existing employees, within 180 days, 
rather than limiting the employees who can be verified only to those 
who are assigned to work under a contract. This approach is entirely at 
the option of the contractor.
    The Council notes that the great majority of ``process accounting'' 
would be under COTS contracts, which are exempt from the rule.

Job order costing--work is broken into   E.g., auto mechanics,
 jobs; each job is tracked separately.    carpenters, painters, print
                                          shops, computer repair.
Process costing--a large quantity of     E.g., auto assembly plants, hot
 identical or similar products are mass   dog manufacturing, any large
 produced.                                mechanized production
                                          facility.


    Each cost accounting system gathers and reports on the same 
information. The method used depends on the needs of the business. 
Process costing traces and accumulates direct costs, and allocates 
indirect costs, through a manufacturing process. Costs are assigned to 
products, usually in a large batch, which might include an entire 
month's production. Eventually, costs have to be allocated to 
individual units of product.
    Accordingly, the final rule will permit a contractor to choose 
between two alternative approaches. The rule will permit the Federal 
contractor to choose either to run only existing employees who are 
assigned to the contract and all new employees through E-Verify, or to 
run all existing employees and all new employees of the company through 
E-Verify.
d. Need for Re-Verification
    Background: It is important to distinguish what commenters mean by 
re-verification. They may mean re-verification of employees who have 
been verified by a system other than E-Verify, or they may mean re-
verification of employees who have been verified through E-Verify, by 
another employer or by the same employer. Each of these types of re-
verification will be separately addressed.
i. Re-Verification of Existing Employees
    Comment: Many commenters stated that the requirement of re-
verification of existing employees working on Federal contracts is 
unnecessary because those employees who have been hired after November 
6, 1986, have already been through the employment eligibility 
verification (I-9) process. For example, one commenter asked the 
Councils to eliminate the requirement to use E-Verify for employees 
assigned to work on contracts because such employees who were hired 
after November 1986 will have already been through an employment 
eligibility verification process.
    The following are some of the objections raised to re-verification 
for employees whose I-9s were completed long ago:
     A contractor may have accepted documents to demonstrate 
identity (drivers' licenses) or work authorization (passports or green 
cards) that have now expired.
     Until 2007, it was permissible for naturalized U.S. 
citizens to present certificates of naturalization to prove work 
eligibility, and many employees chose to use these forms in the I-9 
process. Those certificates are not usable as part of the E-Verify 
process.
     The I-9 process does not require an employee to provide an 
SSN, but E-Verify does require it. The contractor will have to devise a 
process to collect and authenticate SSNs for many employees, especially 
those who started as foreign national legal immigrants, who were not 
required to have a number when they started work.
     The E-Verify process requires a picture identification 
document.
    Another commenter remarked that the money spent re-verifying 
employees who are assigned to work directly on a Federal project would 
be much better spent in fundamental research being conducted by the 
commenter.
    Response: Executive Order 12989, as amended, requires the re-
verification of existing employees assigned to the Federal contract, 
even if the employees were screened previously using the I-9 process. 
The E-Verify process is expected to achieve a much higher level of 
accuracy in verification than was achieved under the I-9 process alone; 
E-Verify has built-in tools for accessing databases to further verify 
the employment eligibility of an employee, whereas the documents 
submitted by employees under the I-9 process were probably subjected to 
very little additional verification if they looked acceptable on their 
faces.
    With respect to the process for re-verifying existing employees, 
the draft MOU contemplated and addressed the

[[Page 67674]]

matters raised by the commenter. Employers may use a previously 
completed Form I-9 as the basis for initiating E-Verify verification of 
an assigned employee as long as that Form I-9 complies with the E-
Verify documentation requirements and the employee's work authorization 
has not expired, and as long as the employer has reviewed the Form I-9 
with the employee to ensure that the employee's stated basis for work 
authorization has not changed (including, but not limited to, a lawful 
permanent resident alien having become a naturalized U.S. citizen). If 
the Form I-9 does not comply with the current E-Verify requirements, or 
the employee's basis for work authorization has expired or changed, the 
employer shall complete a new I-9. If the Form I-9 is otherwise valid 
and up-to-date but reflects documentation (such as a U.S. passport or 
Form I-551) that expired subsequent to completion of the Form I-9, the 
Employer shall not use the photo screening tool, subject to any 
additional or superseding instructions that may be provided on this 
subject by USCIS. While in some cases these procedures will place on 
employers and employees the initial burden of completing a new Form I-
9, they are designed to avoid the greater burden of unnecessary 
tentative nonconfirmations resulting from the use of stale data to run 
E-Verify queries.
    Some contractors that are submitting an E-Verify query for a 
current employee may be put in the position of asking that employee to 
produce an I-9 document that is different from what was presented 
during the initial I-9 process. It is important that contractors not 
engage in illegal discrimination during this process, such as by 
selectively requesting or rejecting documents during the verification 
or reverification process with the purpose or intent of discriminating 
against employees on the grounds that they appear or sound foreign. See 
8 U.S.C. 1324b. If an employee believes that he or she has been 
discriminated against during the employment eligibility verification 
process, he or she should contact OSC at 1-800-255-7688 or 1-800-237-
2515 (TDD). Employers that have questions relating to the anti-
discrimination provision should contact OSC at 1-800-255-8155 or 1-800-
237-2515 (TDD).
    In addition, it is not technically correct that certificates of 
naturalization were acceptable until 2007. They were taken off the 
acceptable document list in the regulations in 1997, but DOJ and then 
DHS had a policy not to enforce violations of this regulation until it 
updated the Form I-9 instructions to reflect this change, which did not 
happen until 2007. With respect to SSNs, the Councils do not anticipate 
that the commenter or other employers should have significant 
difficulty obtaining their current employees' SSNs, as they already 
should have these on file for other business purposes.
ii. Re-Verification of Employees Verified by Another Employer
    Comment: One commenter believed that employees covered by a 
collective bargaining unit should not have to be re-verified each time 
they switch to a new company, e.g., in the construction business.
    Response: The commenter's point appears to relate to the existing 
statutory provision regarding employment pursuant to a collective 
bargaining agreement in section 274A(a)(6)(A) of the INA, which 
provides that in certain cases a subsequent employer is deemed to have 
complied with the Form I-9 requirements by virtue of verification by 
another employer within the agreement. If a previous employer within 
such an arrangement has completed the Form I-9 and E-Verify, a 
subsequent employer does not have to reverify, as long as the 
employment is within the scope of the statutory provision.
iii. Re-Verification of Employees Already Verified by the Contractor
    Comment: Many commenters were concerned about the requirement to 
re-verify an existing employee when the employee is assigned to work on 
a contract. One commenter concluded that by mandating that Federal 
contractors verify or re-verify existing employees each time they are 
assigned to work on a new contract, the proposed rule too radically 
restructures the E-Verify program, making it unmanageable and 
unworkable for employers.
    Response: The proposed rule clearly stated that a contractor is not 
required to perform additional employment verification using E-Verify 
for any employee whose employment eligibility was previously verified 
through E-Verify by that contractor. It is not necessary to run the 
employee through the E-Verify program again each time the employee is 
assigned to work on a new contract. When, however, an existing employee 
is assigned to a contract and that employee has not previously been 
verified through the E-Verify system, then that employee must be 
processed through E-Verify at the time of assignment to work on the 
contract. The end result of this procedure is that for any single 
company, no employee, whether existing or newly hired, needs to be 
verified through the E-Verify system more than once.
    In addition, the Councils have revised the final rule to exempt 
employees who hold an active U.S. Government security clearance for 
access to confidential, secret, or top secret information in accordance 
with the National Industrial Security Program Operating Manual. The 
rule also exempts employees for which background investigations have 
been completed and credentials issued pursuant to HSPD-12, promulgated 
by the President on August 27, 2004.
4. Time Periods (52.222-54(b))
    Background: The proposed rule set forth the following timeframes:

------------------------------------------------------------------------
          Timeframe                Start point         Required action
------------------------------------------------------------------------
Within 30 calendar days.....  After contract award  Enroll in E-Verify.
Within 30 calendar days.....  After enrollment....  Initiate
                                                     verification of
                                                     employees assigned
                                                     to the contract at
                                                     time of enrollment.
Within 3 business days......  After date of         Initiate a
Within 30 calendar days.....   assignment to the     verification of
                               contract; or          each assigned
                              Of the award of the    employee who is
                               contract..            assigned to the
                                                     contract after
                                                     enrollment in the E-
                                                     Verify program.
------------------------------------------------------------------------

    1. Comment: Many commenters were concerned that the timeframes 
provided were insufficient for compliance. These commenters requested 
longer timeframes because employers would need to develop complex 
systems to track and report employees. Among the various 
recommendations:
     Extend the registration period to 90 days after contract 
award, to allow time for orderly transition and provide time for 
employers.

[[Page 67675]]

     Permit larger organizations to implement E-Verify in 
stages across worksites;
     Allow a 6-month phase-in period to allow for registration, 
training and implementation and verification;
     Add a 90-day transition period before a contractor must 
begin verifying employees, after the date of contract award.
     Provide a time period to initiate verification of assigned 
employees that is no less than 60 days from enrollment and 30 days from 
assignment to a contract, respectively.
     Extend the phase-in period applicable to verification of 
existing employees for employers who are already signed up for E-
Verify. Three days is not long enough to change systems to handle 
verification of existing employees.
    Response: The Councils carefully considered all the requested 
extensions and concur that some of the timeframes need to be extended. 
The Councils recognize that some of the periods for contractor action 
in the proposed rule did not all allow sufficient time. The Councils 
have substantially extended various periods to permit contractors more 
latitude on when they must begin verifying employees.
    The Councils also noted concerns that the requirements for a 
contractor that is already enrolled as a Federal contractor in E-Verify 
were not clear. These requirements were only addressed in the policy 
section of the proposed rule, not in the clause. Nor did the proposed 
clause specify whether the enrollment referred to was as a non-Federal 
contractor or as a Federal contractor (which will become important as 
the implementation of the rule progresses). The Councils have added 
specific instructions applicable to contractors already enrolled as 
Federal contractors in E-Verify and amended the time periods in the 
clause by which the contractors must have taken various actions.
    The Councils have simplified the policy section and added more 
details in the clause. The changes in time periods in the final rule 
are summarized as follows:
     After new enrollment in E-Verify as a Federal contractor, 
90 days to initiate verification of new employees within three business 
days of hire. This allows a contractor time to set up a new system, or 
modify an existing system from the non-Federal to the Federal form of 
E-Verify.
     90 days (instead of 30) to initiate verification of 
existing employees after enrollment into the program (or after contract 
award, if already enrolled as a Federal contractor). Contractors will 
likely have to make adjustments to current employee information systems 
to be able to identify employees assigned to the contract and to track 
whether employees have been vetted through E-Verify. 90 days after 
award of a contract that contains the clause should be sufficient for 
this.

--Thereafter, verify the employee 30 days (instead of 3) after an 
employee is assigned to work under a contract.
--180 days for initiation of verification of all existing employees (if 
chosen at the option of the contractor).
    The Councils did not extend the 30-day period to enroll in E-
Verify. Very few commenters argued that this timeframe was 
insufficient. The Councils also considered that employers already 
enrolled on the Federal E-Verify program should not need additional 
time to continue verification of new employees within three business 
days of hire. The Councils also did not make amendments to timeframes 
that are required by the MOU rather than the FAR clause.
    2. Comment: One commenter suggested that E-Verify should provide 
employers with an option to mark that an SSN has been ``applied for'' 
when foreign nationals are waiting on SSN cards that could take weeks 
to receive. Another commenter expressed concern over the fact that SSNs 
are not required on the Form I-9 and the SSN is the basis for the 
electronic verification.
    Response: DHS has informed the Councils that the MOU will be 
amended to provide that notating the Form I-9 satisfies ``initiating 
verification'' in the narrow situations where (1) the employee has 
applied for an SSN from SSA and is waiting to receive a SSN; and (2) 
the employee has requested an accommodation from the photo 
identification requirement from the E-Verify program and is in the 
process of resolving the issue. The employer still has an obligation to 
work in good faith to follow through on that process and ultimately 
verify the employee with the system.
5. Threshold for Applicability in Prime Contracts (22.1803(b))
    Comment: A number of commenters requested an increase in the dollar 
threshold for applicability of the clause. Commenters state that there 
is no rationale for the $3,000 threshold.
     For example, several commenters proposed increasing the 
dollar threshold for applicability of the proposed contract clause from 
the micro-purchase threshold of $3,000 to the simplified acquisition 
threshold of $100,000. One of these commenters stated that the 
applicability standard should be proportionate to its requirement.
     Another commenter proposed raising the threshold from 
$3,000 to $50,000.
    Response: The Councils have raised the threshold for inclusion of 
the clause in a prime contract from the micro-purchase threshold to the 
simplified acquisition threshold. The statute at 41 U.S.C. 427 directs 
the FAR to provide for simplified acquisition procedures for purchases 
of property and services for amounts not greater than the simplified 
acquisition threshold. In order to promote simplified processes for 
such small acquisitions, the Councils have revised the final rule to 
exempt all prime contract awards under the simplified acquisition 
threshold from application of this rule.
    According to Federal Procurement Data System (FPDS) data, during FY 
2007, there were approximately 2.8 million contract awards (new 
contracts, not orders) Governmentwide totaling approximately $9 billion 
for which the basic contract value were less than or equal to the 
simplified acquisition threshold ($100,000) each. This is less than 3 
percent of total obligations made during FY 2007. Therefore, the 
exclusion of such low dollar value contracts should have minimal impact 
on achieving the objectives of the Executive Order, while being of 
great benefit to small businesses, since acquisitions below the 
simplified acquisition threshold are generally set aside for small 
business.
    In addition, the Councils have added to the final rule a threshold 
relating to length of the period of performance of the contract. Since 
contractors have 30 days to enroll in E-Verify and another 90 days to 
initiate verification of employees, the Councils concluded that it was 
not practical to require compliance with the clause in contracts that 
have a period of performance of less than 120 days.
6. Subcontractor Flowdown (22.1802(b)(4) and 52.222-54(e))
    Comment: Analysis of the comments relating to the subcontractor 
flowdown requirements (22.1802(b)(4) (22.1802(c) in proposed rule) and 
52.222-54(e)) discloses five general concerns from a broad range of 
commenters.
a. Definitions
    For concerns relating to the definitions of ``subcontract'' and 
``subcontractor,'' see G.1.d.

[[Page 67676]]

b. Flowdown Thresholds
    Comment: Various commenters recommended limitation of subcontract 
flowdown as follows:
     The flowdown threshold of $3,000 is extraordinarily low, 
and that an explanation and justification for this dollar threshold 
should be provided to the public.
     Raise the threshold to $10,000 and make it applicable only 
to first tier subcontractors whose subcontracts meet the stated 
criteria, consistent with the flowdown requirement for the annual EEO-1 
report and affirmative action obligations under Executive Order 11246 
and Section 503 of the Rehabilitation Act.
     Raise the threshold to $100,000.
     If the flowdown requirement is maintained, limit it to (1) 
first tier subcontractors, or (2) subcontracts valued at more than the 
threshold for obtaining cost or pricing data under FAR 15.403-4, 
currently $650,000.
     Remove the flowdown requirement or, at a minimum, limit it 
to major subcontracts exceeding $5 million.
    Response: The Councils do not agree. Although the selection of the 
appropriate threshold is always somewhat subjective, unless specified 
by statute or Executive order, rulemakers seek to achieve balance 
between achieving the policy objectives and not unduly burdening 
smaller subcontracts. With respect to subcontract actions, the flowdown 
is already limited by the proposed rule to only subcontracts for 
construction and for services. These types of subcontracts often 
involve lower dollar amounts and increasing the threshold would leave 
too high a portion of the targeted subcontracts not covered by the 
rule. There is no particular logic that would tie this threshold to EEO 
reporting, the simplified acquisition threshold (which applies only to 
prime contracts), or the cost or pricing data threshold. There is no 
compelling reason to either eliminate or limit the flowdown requirement 
since the obligation to include the clause at 52.222-54(f) is not any 
more burdensome than many other flowdown requirements, and the 
objectives of the Executive Order 12989, as amended, will not be 
adequately met without extensive subcontractor flowdown. The Councils 
have therefore maintained the subcontractor flowdown for services and 
construction to all tiers of subcontracts above the threshold of 
$3,000.
c. Period of Performance
    Comment: One commenter urged that consideration be given to 
recognizing that an early finishing subcontractor or supplier to a 
Federal prime construction contractor should not, without exception, be 
bound to the duration of the prime contract.
    Response: When flowing down the clause to the subcontractor, it 
would be effective only for the duration of the subcontract. By the 
very nature of subcontract to prime contract, many subcontracts are of 
shorter duration than the prime contract. However, the Councils decided 
not to extend the 120-day limitation on flowdown. The period of 
performance of the subcontract is not within the control of the 
Government. If the subcontractor does not have any subcontract running 
longer than 30 days, the subcontract term would end before the 
subcontractor would be required to register with E-Verify. However, if 
the subcontract period runs beyond 30 days, the subcontractor would be 
required to enroll in E-Verify, and if the subcontractor continues to 
receive subcontracts it will be obligated to begin using E-Verify for 
its new hires.
d. Prime Contractor Responsibility for Subcontractor Violations
    Comment: There was broad concern raised by commenters (covering the 
service, construction, educational, transportation, and agriculture 
sectors) regarding the extent to which a prime contractor may be held 
accountable for violations by its subcontractors. A number of 
commenters suggested that the prime contractor's flowdown obligation 
was too difficult to monitor. One commenter noted, for example, that 
subcontractors do not have privity of contract with the Government, 
thus they are not normally required to be identified in a Government 
contract as a party. There was substantial concern among these 
commenters with respect to the prime contractor's compliance assurance 
responsibilities. Specifically, these comments focused on the extent to 
which the prime contractor is responsible for subcontractor failure to 
comply with the contract obligation to use the E-Verify program. Many 
commenters questioned how a prime contractor could monitor 
subcontractor compliance and the extent to which a prime contractor 
would be accountable for a lower tier subcontractor's non-compliance.
    Many commenters argued that the prime contractors' flowdown 
responsibilities should be limited to ensuring that the clauses are 
included in their subcontracts and that their subcontractors should be 
responsible for initiating the E-Verify enrollment process and carrying 
through with use of E-Verify for employee verification. As an exception 
to this general consensus, one commenter suggested that it would be 
appropriate to require prime contractors to obtain written assurances 
from contractors that they are complying with all Federal rules, 
including verification of employment eligibility.
    Response: The Councils believe that prime contractors are 
responsible for all aspects of contract performance including 
subcontract requirements. The methods used to assure compliance are 
also the responsibility of the prime and the subcontractor. The 
contractor should perform general oversight of subcontractor compliance 
in accordance with the contractor's normal procedures for oversight of 
other contractual requirements that flow down to subcontractors. Prime 
contractors are not expected to monitor the verification of individual 
subcontractor employees. Nor is the prime contractor responsible for 
the subcontractor's hiring decisions. However, the prime contractor is 
responsible for ensuring by whatever means the contractor considers 
appropriate, that all covered subcontracts at every tier incorporate 
the E-Verify clause at 52.222-54, Employment Eligibility Verification, 
and that all subcontractors use the E-Verify system.
    Further, these roles and responsibilities are adequately addressed 
in the Federal Contractor MOU. Accordingly, the MOU contains a 
provision that the employer (prime contractor and subcontractors alike) 
acknowledge that compliance with the MOU is a performance requirement 
under the terms of the Federal contract or subcontract and that the 
employer consents to the release of information relating to compliance 
with its verification responsibilities under the MOU to contracting 
officers or other officials authorized to review the employer's 
compliance with Federal contracting requirements.
    The Councils consider that it would be an unnecessary information 
collection to impose a requirement that the prime contractor obtain 
written assurances from subcontractors that they are complying with all 
Federal rules, including verification of employment eligibility.
e. Notice to Subcontractors
    Comment: One commenter recommended that the proposed clause impose 
a requirement for a prime contractor, and any higher-tier 
subcontractor, to provide a notice along with its requests for bids 
from prospective subcontractors and suppliers on the Federal 
construction

[[Page 67677]]

contract. Such notice should make explicit to prospective 
subcontractors and suppliers that the prime contract is subject to the 
proposed new FAR Subpart 22.18 (Employment Eligibility Verification) 
and that the requirements of the proposed new clause (FAR 52.222-54, 
Employment Verification) will be imposed on a subcontractor at any 
tier, if the subcontract falls within the reach of proposed new FAR 
22.1802(b)(4).
    Response: The Councils do not endorse the need for a separate 
notice to subcontractors, apart from the notice that is provided by 
flowing down the clause to the appropriate subcontractors. Many 
requirements flow down to subcontractors, and it is the responsibility 
of the subcontractor to review all requirements associated with the 
requests for bids or proposals. However, the Contractor may write such 
a notice.
7. Waiver (22.1802(d))
    Comment: The proposed rule allows the head of the contracting 
activity to waive the clause requirement in exceptional cases. Several 
commenters noted that the proposed rule did not define the term 
``exceptional cases'' and proposed that a definition and/or standards 
for using the waiver be added to the final rule. One commenter proposed 
that the term be defined to include national security emergencies, 
natural disasters, acts of terrorism against the United States, urgent 
military war fighter needs, and FAA emergencies.
    Response: The term ``exceptional cases'' is intentionally not 
defined in the rule in order to allow the head of a contracting 
activity the flexibility to use this waiver as unique situations arise 
within each agency. Each head of the contracting activity will be 
accountable to the agency leadership to appropriately balance the needs 
of the agency and the policies and goals of the Executive Order 12989.
8. Safe Harbor
    Comment: Public comments indicated numerous concerns over the 
mechanics and operability of the E-Verify system. Specifically, 
employers expressed concerns about potential litigation that could be 
brought against them as they rely on E-Verify to verify not only newly 
hired employees, but also to verify existing employees. For example, 
one commenter cited the legal risk in the event that an unauthorized 
worker erroneously verified by E-Verify is later found to have 
committed identification fraud and was therefore improperly employed. 
Likewise, some companies fear litigation from employees who are fired 
as a result of the E-Verify process and file claims of wrongful 
discharge because E-Verify provided wrong answers in the verification 
process.
    Several commenters believed that the revised MOU for E-Verify 
leaves employers to face any such legal liability on their own. Article 
V, ``Parties'' paragraph E of the revised MOU reads: ``Each party shall 
be solely responsible for defending any claim or action against it 
arising out of or related to E-Verify or this MOU, whether civil or 
criminal, and for any liability wherefrom, including (but not limited 
to) any dispute between the Employer and any other person or entity 
regarding the applicability of Section 403(d) of IIRIRA to any action 
taken or allegedly taken by the Employer.''
    Other companies claimed that they enjoy immunity as a result of the 
language in the MOU that states ``no person or entity participating in 
a pilot program authorized [by IIRIRA] shall be civilly or criminally 
liable under any law for any action taken in good faith reliance on 
information provided through the confirmation system.'' This immunity 
language was also repeated in the preamble to this rule. However, there 
is concern that these immunity provisions may not apply to situations 
where an adverse employment action is taken against an existing 
employee.
    As a result of these litigation concerns, commenters requested that 
the rule provide protection from both DHS enforcement actions, as well 
as discrimination lawsuits, if employees are terminated after the 
employers have properly complied with program requirements. They 
recommended that provisions be included in the rule that would 
indemnify the employer with full disclosure of this indemnification to 
the employee. As one commenter stated, the rule should be revised to 
provide a safe harbor that explicitly protects contractors and 
subcontractors from penalties or other reprisals under state law 
related to the use of the E-Verify system. The commenter recommended 
that the preamble immunity language be inserted into the regulatory 
text as a clear safe-harbor to make it clear that it applies to all 
employees.
    Response: The applicable statute, section 403(d) of IIRIRA, 
provides broad legal protection to employers participating in E-Verify. 
The MOU language in Article V. E. only clarifies that the Government 
does not guarantee any level of legal protection under this or any 
other statute to employers, and will not defend or indemnify claims 
that may be brought against employers.
    The E-Verify statute (IIRIRA Section 403) does not distinguish 
between new hires and existing employees in the immunity protections it 
provides employers. IIRIRA section 403(d). The Councils find that the 
statutory protection from liability for actions taken by employers in 
good faith reliance on information provided by the E-Verify system 
provides sufficient protection.
    Issues with respect to compliance with E-Verify and adverse actions 
taken as a result of such actions are the responsibility of DHS and not 
the contracting officer. Therefore, the proposed safe harbor language 
is not appropriate for inclusion in the FAR.
9. Enforcement and Sanctions for Non-Compliance
    Comment: Several commenters requested clarification in the rule of 
how MOU violations would warrant contract sanctions, and if so, what 
procedures for contract suspension or termination would apply in that 
circumstance.
    Response: USCIS retains its authority to investigate violations of 
E-Verify program. DHS may terminate a contractor's MOU and deny access 
to the E-Verify system in accordance with the terms of the MOU. If DHS 
terminates a contractor's MOU, DHS will refer the contractor to a 
suspension or debarment official for possible suspension or debarment 
action. During the period between termination of the MOU and a decision 
by the suspension or debarment official whether to suspend or debar, 
the contractor is excused from its obligations under paragraph (b) of 
the clause at 52.222-54. If the contractor is suspended or debarred as 
a result of the MOU termination, the contractor will not be eligible to 
participate in E-Verify during the period of its suspension or 
debarment. If the suspension or debarment official determines not to 
suspend or debar the contractor, then the contractor must re-enroll in 
E-Verify.
10. Process for Resolving Disputes About Applicability of the Clause
    Comment: One commenter expressed concern that a decision about what 
contracts are required to include the clause will be left entirely 
within the discretion of the contracting officer. The commenter was 
concerned that the presumption would be in favor of including the 
clause even though it is not required with certain types of contracts, 
such as those for purchase of COTS items. The commenter was concerned 
that there is no method for disputing the applicability of the clause.

[[Page 67678]]

    Response: The Councils do not concur with the commenter's concerns. 
As an initial matter, the contracting officer's conclusions about 
whether the clause applies will be informed by what the Government is 
acquiring with the contract. The contracting officer will take into 
consideration whether the contract is for services or supplies, and 
whether the supplies are COTS items. The contracting officer will then 
evaluate whether any applicable exceptions apply such that compliance 
with E-Verify is not required. Therefore, the Councils do not agree 
with the commenter's statement that the contracting officer has 
``complete discretion'' to decide whether the E-Verify clause will be 
inserted in the contract.
    Further, the Councils do not agree that it is necessary to develop 
dispute resolution procedures, because appropriate procedures already 
exist in the FAR. If a contractor disagrees with a contracting 
officer's conclusion about the applicability of the clause in advance 
of award, the contractor may obtain review by submission of a protest 
to the Contracting Officer, Agency Head or GAO in accordance with FAR 
Part 33.
     FAR 33.101, Protest, defines a protest as a ``written 
objection by an interested party to * * * [a] solicitation or other 
request by an agency for offers for a contract for the procurement of 
property or services.''
     FAR 33.102(a) states that upon receipt of a protest, the 
contracting officer ``shall consider all protests and seek legal advice 
* * *'' The requirement to seek legal advice after receipt of a protest 
ensures that the contracting officer's conclusion about applicability 
will be reviewed.
    If a contractor's disagreement with the contracting officer's 
conclusion about the applicability of the clause arises after award and 
during administration of the contract, the process for resolving the 
dispute is set forth in FAR 33.202, Contract Disputes Act of 1978. 
Again, upon receipt of a claim, FAR 33.211 requires the contracting 
officer to ``secure assistance from legal and other advisors.'' The FAR 
also requires the contracting officer to seek input from other agency 
officials, including that of agency counsel, and therefore the 
contracting officer's conclusion about the applicability will be 
legally reviewed.
    Despite commenter's statements, the FAR specifies when the E-Verify 
requirement shall be included in a contract and the FAR also provides a 
method for resolving disputes about applicability, both pre-award and 
during contract performance. (See also H.3.f. on applicability at the 
subcontract level.)

C. Applicability of FAR Rule

1. Commercial Items
a. Commercial Items Exemption
    Comment: Several commenters recommended that the rule should exempt 
all commercial items, not just COTS items, claiming that such a change 
would be consistent with procurement reforms facilitating government 
access to commercial products and services.
    Response: The Councils do not concur with this comment. The final 
rule intentionally covers commercial item contracts that are not for 
COTS items. The intent of the rule was to cover as many contractors and 
contractor employees consistent with the mandate in Executive Order 
12989. The only reason COTS items are exempt is because the Councils 
believe that COTS providers may choose not to do business with the 
Government rather than changing their practices to use E-Verify. The 
Councils concluded that this could result in an unacceptable reduction 
in the Government's access to items it needs in order to operate. On 
the other hand, contractors who provide commercial items that are not 
COTS items are providing commercial products that are custom-made for 
the Government or services that are categorized as commercial items. 
These contractors have decided to be part of the Government 
marketplace. These contractors have established procedures and 
sometimes created organizations designed to do business with the 
Government. The Councils determined that the requirement for these 
contractors to use E-Verify would not be sufficient to drive them from 
the Government market. Also, to the extent such a business incurs added 
cost to comply with the E-Verify contract clause, it is free to include 
that added cost in its proposed contract prices, but will be required 
to take into account the pricing practices of its competitors if it 
wishes to be awarded the contract.
b. Exempt COTS-Related Services
    Comment: Various commenters pointed out that COTS suppliers 
typically sell services along with their COTS items and that the 
exemption of COTS items from the rule would not be adequate unless it 
also exempts related services. COTS suppliers who must provide services 
along with their COTS items would gain no benefit from the COTS 
exemption if the services are not also exempt.
    One commenter requested that the Councils add services to the 
definition of COTS.
    Response: The Councils concur in part with this comment. Although 
the definition of COTS is statutory and does not include services, the 
Councils agree that the clause should not apply to certain types of 
services:
     The services must be procured at the same time as the COTS 
item is procured.
     The services may be provided only by the COTS item 
supplier. That will eliminate services provided by other contractors 
who are in the service business. By covering the COTS provider 
services, the Councils intend to reduce the regulatory burden for 
companies who provide only COTS items that do not require use of E-
Verify. The services must be performed only on or for the COTS item. 
This means that we do not exempt services that are ``custom.''
     Third, the services must be typical or normal for the COTS 
provider.
c. Applicability of COTS Exception to Food Products
    Comment: Several commenters representing various agricultural 
interests commented that the rule will have far reaching and 
detrimental effects on the agriculture industry, most particularly 
growers and harvesters. Examples of sectors of the agriculture industry 
that were highlighted as problematic are: Fruit growers, fruit 
harvesters, suppliers of fruit to Federal school lunch programs, and 
distributors of fruit. These commenters wanted to make sure that the 
rule was not intended to apply to them or, if it was intended to cover 
them, they requested that it be made inapplicable to them.
    Response: The Councils do not believe that any of the examples of 
agricultural products cited by these commenters would be covered by the 
rule as originally proposed or as promulgated in this final rule.
    First, all food products described by the commenters would fall 
under the definition of commercially available off-the-shelf (COTS) 
items or a minor modification to a COTS item, which are exempt from the 
clause. COTS items are defined as ``any item of supply'' (food is an 
item of supply) that is ``a commercial item'' (the foodstuffs described 
by the commenters are commercial items) ``offered to the Government, 
without modification, in the same form in which it is sold in the 
commercial marketplace'' (the foodstuffs described by the commenter 
meet these standards).

[[Page 67679]]

    Secondly, most of the concerns relayed by the commenters centered 
on the growers and harvesters. Neither the proposed rule nor the final 
rule require flowdown of the clause to subcontractors which provide 
supplies such as food. The only subcontracts that are covered by this 
rule are services or construction subcontractors. In the unlikely event 
that a contractor enters a contract with the Government for food 
products that do not meet the definition of a COTS item or a minor 
modification of a commercial item, the subcontractors who sold the food 
to that contractor (farmers, or harvesters or distributors) are not 
required by this rule to have the contract clause in their 
subcontracts. This means that they are not covered by the rule when 
they are subcontractors because no subcontracts for supplies are 
covered by the rule for any subcontractor. The only providers of 
supplies who are covered by this rule are prime contractors, not 
subcontractors. The Councils purposely excluded all subcontracts for 
supplies from application of this rule for many of the same reasons 
that prompted the concerns of the agriculture industry commenters.
    Nevertheless, the Councils have further modified the COTS-related 
exception to address these concerns. The exception in the clause 
prescription at 22.1803 for COTS-related items has been expanded also 
to exempt items that would be COTS items but for being bulk cargo. By 
incorporating this expanded exception for COTS-related items, the 
Councils intend to exempt foodstuffs such as grains, oils, produce and 
all other agricultural products shipped as bulk cargo, to the extent 
they are otherwise classified as COTS items.
d. Acquisitions of Commercial Items Under the FAR
    Comment: Several commenters requested that the final rule make it 
clear that the rule applies only to commercial acquisitions under the 
FAR. According to these commenters, many grant recipients and State and 
local governments may incorrectly assume the rule applies to them. One 
comment also sought clarification of whether the rule would apply to a 
carnival operator hired to provide services on a military installation.
    Response: The Councils do not concur. There are several parts to 
this question, addressing both the application of the rule to 
commercial items and the question of acquisitions under the FAR versus 
``non-acquisitions.''
     The commenters misunderstand the applicability to 
commercial items. The rule does not apply only to commercial items. It 
applies to both non-commercial and commercial items (although COTS 
items are excluded).
     An exception has been added to permit State and local 
governments to limit their use of E-Verify only to employees assigned 
to the contract (allowing them to exclude new hires not assigned to the 
contract).
     Also, the requirements to use E-Verify only occur when a 
contract includes the FAR clause. There is no mechanism for the FAR to 
require insertion of the clause in any grants or contracts that use 
non-appropriated funds that are not covered by the FAR. Whether the 
clause would apply to a contractor providing carnival services will 
depend on several factors; the location of the contract performance 
alone will not be determinative, unless the contract is performed 
outside the United States.
2. Small Business
a. Unfair Impact on Small Business
    Comment: Many commenters were concerned that E-Verify may impose 
significant and costly administrative requirements on small business, 
and that the rule will have a disproportionate adverse impact on small 
business.
     For example, one commenter noted that few small businesses 
have specific human resource departments to manage the increased 
workload, and many more lack the necessary equipment to run the 
program.
     Another commenter noted that small businesses do not have 
the luxury of large staffs to prevent lost productivity while employees 
resolve tentative nonconfirmations.
     Commenters suggested that small businesses may also face 
accessibility issues, such as lack of access to high-speed internet.
     The SBA Office of Advocacy stated that small businesses 
may lack the financial resources and human capital to adapt their 
technology infrastructure systems to changing requirements being 
imposed by the Federal Government.
     The SBA Office of Advocacy also noted that small business 
Federal contractors operate on very thin profit margins and these types 
of technology systems require capital outlays that cannot be easily 
recouped by passing the cost to the client and are costly to the small 
business owner.
     Another commenter stated that small companies that do not 
have the means to set up systems and staffing with adequate training to 
monitor nonconfirmations may find themselves at risk for noncompliance.
     Some comments argued that the burden is even greater on 
small businesses that are subcontractors. SBA Office of Advocacy 
expressed concern that the compliance cost burden on small business 
subcontractors could be disproportionate, because such businesses have 
fewer contracts among which they can spread the cost of doing business.
    Some of these commenters were concerned that some small businesses 
would not have the resources to implement E-Verify and may therefore 
exit the Government market. For example, one commenter noted that E-
Verify requires both infrastructure and an investment of employee 
expertise. Small businesses that do not have the resources to implement 
may decide not to pursue Government contracts. Further, a small 
business council was concerned that to stay competitive, small 
businesses would not be able to pass the extra costs of E-Verify on to 
the Government, and will therefore be deterred from bidding.
    Several commenters expressed concern about the detrimental effect 
that loss of participation by small businesses will have on the 
Government and the taxpayers. One commenter noted that through the loss 
of competition by small businesses, the Government loses out on the 
innovative ideas of small businesses that exit the market. Another 
commenter stated that the Federal sector will lose the benefit from the 
``ingenuity and flexibility'' that small businesses bring to the table.
    Several commenters noted that Congress has expressed concern about 
the potential impact of E-Verify on small businesses. For example, 
various commenters cited to the mandated study of impact on small 
business in H.R. 6633, a bill passed by the House of Representatives 
that would have extended the E-Verify program for another 5 years.
    Response: The Councils do not agree that this rule imposes an 
unfair burden on small businesses. The economic analysis found that 
total compliance costs increase as the size of the contractor 
increases. For example, a 10-employee firm may only need one person 
trained to execute E-Verify queries, but a 100-person firm may need 2 
or 3 employees trained in E-Verify. However, when compliance costs are 
considered as a percent of revenue, the impact on smaller contractors 
is greater than the impact on larger contractors since smaller firms 
have less revenue available. The Small Business Administration 
publication The Impact of Regulatory Costs on Small Firms (2005) shows 
that on a per employee

[[Page 67680]]

basis, smaller firms have a larger regulatory compliance cost burden 
than larger firms. The SBA study states: ``On a per employee basis, it 
costs about $2,400, or 45 percent, more for small firms to comply than 
their larger counterparts.'' Consequently, the results of the economic 
analysis that show a relatively higher regulatory impact burden on the 
smaller entities than the larger entities are not unusual or specific 
to this final rule.
    The requirement for entities (both large and small) to enroll in E-
Verify only applies to contractors and subcontractors who choose to 
perform certain work for the Federal Government. Presumably, entities 
which do not receive the desired return on revenue to justify the 
expense of participating in E-Verify would choose not to be a Federal 
contractor or subcontractor.
    It has been the law since 1986 that all employers must verify the 
eligibility of new hires to work in the United States. E-Verify 
provides a tool that will make this verification easier and more 
reliable. Although the E-Verify system does require the employer to 
have access to some equipment such as a computer, Internet access, a 
printer, and either a scanner, photo copier, or a digital camera, the 
Councils believe that this equipment is not prohibitively expensive. 
Almost all small businesses doing business with the Government would 
already have such equipment or be able to readily acquire it. The 
equipment for a small business to implement E-Verify need not be 
particularly sophisticated or complex.
    H.R. 6633, which has been passed by the House allows 2 years for 
the GAO study of the impact of E-Verify Pilot Program on small 
businesses, including specific details on small entities operating in 
States that have mandated the use of E-Verify. The bill has not been 
passed by the Senate, but it does not request that any implementation 
of E-Verify be suspended pending completion of the study. In addition, 
Congress reauthorized E-Verify and appropriated $100 million for the 
program for fiscal year 2009 in the Consolidated Security, Disaster 
Assistance, and Consolidated Appropriations Act, 2009, Public Law 110-
329 (Sept. 30, 2008), without requiring this study, and it does not 
appear that there will be any additional legislative developments on E-
Verify in the 110th Congress.
    The Councils have endeavored to limit the impact of this rule on 
small businesses by raising the threshold of applicability of the 
clause to contracts in excess of the simplified acquisition threshold. 
As a result of this change, a substantial quantity of contracts below 
that threshold will be exempt from the E-Verify clause, and will be 
available to small business contractors that do not wish to participate 
in the program. Since the FAR currently requires set-aside of contracts 
below the simplified acquisition threshold for small business 
participation, contracting opportunities that do not necessarily 
require E-Verify use will remain available for small businesses.
b. Small Businesses Exemptions
    Comment: Various commenters suggested exemption or waiver for some 
or all small businesses. For example:
     Exempt all small businesses: The SBA Office of Advocacy 
recommended that, until better data is available, small businesses 
should be exempted from the requirements of the rule. Another commenter 
recommended consideration of exempting all small businesses that 
qualify under the size standards established by SBA.
     Exempt small businesses with less than 15 employees: One 
commenter recommended that the applicability standard should be 
proportionate to its requirements and suggested that this rule should 
follow E.O. 13201, under which the Notice of Employee Rights Concerning 
Payment of Union Dues does not apply to contractors with less than 15 
employees.
     Exempt small businesses with less than 75 employees: 
Several commenters recommended exemption for businesses with less than 
75 employees. One commenter asserted that small enterprises do not have 
the administrative capacity to comply with this contract clause. 
Another commenter stated that applying the new verification 
requirements only to locations employing at least 75 individuals full-
time would allow for sufficient personnel to manage the system and 
ensure compliance and consistency.
     Waive the requirement for certain small businesses: 
Several commenters recommended waivers for certain small businesses for 
which compliance with the system would be burdensome.
    Response: The goal of this rule is to apply verification broadly, 
to the extent feasible and consistent with Executive Order 12989, in 
order to enhance the stability of Government contractors' and 
subcontractors' workforces and to assist them in compliance with the 
immigration laws of the United States. Nonetheless, the Councils have 
inserted certain dollar and contract duration thresholds for 
applicability and have provided specific exceptions because the 
Councils have concluded those thresholds and exceptions are consistent 
with their mandate to implement Executive Order 12989 in a way best 
calculated to improve the efficiency and economy of the Federal 
contracting system. The Councils do not believe providing exemptions 
for small businesses based on the number of employees will further that 
goal and note that other revisions, discussed above, will likely ease 
the burden on small businesses.
c. Alternatives To Lessen the Burden on Small Businesses
    Comment: Various commenters suggested other ways to reduce the 
burden on small businesses that participate in E-Verify under this 
rule, for example:
     Allow small businesses more time to initiate the clearance 
process for new assigned employees (see G.4).
     Raise the thresholds to the simplified acquisition 
threshold (or other thresholds more than $3,000).
    Response: Most of these comments are discussed elsewhere in the 
report in more detail. The Councils have agreed to the above 
modifications to the E-Verify rule which will lessen the burden on 
small businesses, as well as other revisions, such as:
     Lengthening other time periods for compliance (See G.4).
     Applying a period of performance of 120 days (See G.5).
    In addition, the USCIS E-Verify Program's outreach office has 
coordinated closely with the Small Business Administration since April 
2008 to conduct outreach events to ensure specific concerns relating to 
small businesses are heard and addressed.
3. Agriculture
a. Applicability to Agricultural Cooperatives
    Comment: Some commenters asked if the agricultural cooperative is 
the prime contractor under a FAR contract, whether the grower member is 
considered the prime contractor as well for purposes of checking the 
status of grower employees. Commenters also asked whether the answer 
would be the same when the agricultural cooperative is a marketing 
cooperative.
    Response: The Councils have made clear in the final rule that 
virtually all food products are COTS and COTS contracts are exempt from 
the rule. Therefore, the Councils believe these concerns have been 
addressed.
    However, there are various types of cooperatives, and many are 
corporations. Some cooperatives buy the

[[Page 67681]]

agricultural product from the grower and resell to the Government. In 
this case, the grower is a subcontractor and would be exempt from the 
rule because--
     This involves a supply rather than a service; and
     Supplies are exempt from subcontract flowdown.
    Other cooperatives involve pooling arrangements that are not 
subcontracts, but rather under which there is one prime contract 
between the Government and the cooperative (on behalf of the growers). 
In this case the answer is more difficult. If the growers are 
considered prime contractors for other purposes of Government 
contracting, then they would be so for purposes of E-Verify 
application. If, on the other hand, the cooperative alone is the prime 
contractor, then the growers are not the prime contractor. 
Applicability of the clause to each contract and different types of 
agricultural producers is a fact-based analysis that cannot be 
definitively answered by the Councils.
b. Rural Farms
    Comment: Some commenters pointed out that many growers are small 
farms located in remote rural areas. Many farms hire seasonal workers 
at field sites that are not in an office, and so electronic or 
telephonic use of E-Verify is not readily available to the employer. In 
addition, employer and employees are not near the Social Security 
office.
    Response: The Councils have made clear in the final rule that 
virtually all food products are exempt from the requirements of this 
rule. The commenters concerns about access to technology necessary to 
use E-Verify or the remote location of the contractor have been raised 
by other commenters as well and addressed in this rule.
    The Councils believe that most entities involved in Federal 
contracting at any level, or their designated agents, will have access 
to basic office equipment such as a telephone, computer, and internet 
access. The employer is not required to visit the Social Security 
office; only the employee must visit if an SSA tentative 
nonconfirmation is received, and he or she is afforded eight Federal 
Government working days in which to contact SSA or USCIS. As noted 
above, when the employee is a naturalized citizen, the employee may 
choose to call USCIS directly to resolve a citizenship-based tentative 
nonconfirmation, rather than visit the SSA office. DHS tentative 
nonconfirmations can be handled with a telephone call rather than a 
personal visit.
c. Implementation During Harvest
    Comment: Some commenters stated that implementing the rule in some 
agriculture sectors will be unworkable because of the rapid pace 
required for harvest. Seasonal laborers will move out to another job 
long before employer is able to obtain verification of employment 
status. Seasonal laborers need to work on harvesting/packing, not 
traveling to and spending time at the Social Security office.
    Response: The Councils have made clear in the final rule that 
virtually all food products are exempt.
d. Government Sales
    Comment: Some commenters noted that the increased costs, and risks 
of losing large percentage of workforce, would be too great for some 
growers to continue selling to the Government. Increased grower costs 
and less competition would increase the Government's costs. If food 
growers stop selling to the Government, commenters claim that foreign 
countries will become the source of food for U.S. servicemen and school 
children.
    Response: The Councils have made clear in the final rule that 
virtually all food products are exempt, therefore the concerns 
expressed by the commenters have been addressed.
e. Agricultural Employees
    Comment: One commenter noted that the Westat study data on recently 
enrolled users showed that recently enrolled users were more likely 
than long-term users to have a small percentage of foreign born 
employees. This is different from U.S. agricultural employers, where 
according to a recent USDA study, over a third of hired farm workers do 
not have citizenship status, and of those 90 percent list Mexico as the 
birth country.
    Response: The FAR Council notes that agricultural employees are 
more likely to have immigration issues than most other kinds of 
employees. Nevertheless, because of the exception for COTS, non-
agricultural employers are much more likely to be covered by the 
electronic verification requirements of the rule.
f. Shift to Foreign Agricultural Growers
    Comment: One commenter noted that prime contractors might not want 
to hire U.S. agricultural growers as subcontractors because of wanting 
to avoid E-Verify problems. Also, the prime contractors might force 
subcontractors to use E-Verify even when the FAR would exempt the 
subcontract.
    Response: The E-Verify clause does not flow down to subcontracts 
for supplies. A subcontractor for supplies that has an E-Verify clause 
in the subcontract should contact the prime contractor or next higher 
tier subcontractor that included the clause. If unable to obtain 
resolution, the subcontractor may contact the contracting officer for 
assistance in resolving the issue.
4. Institutions of Higher Education; State and Local Governments and 
Governments of Federally Recognized Indian Tribes; and Sureties
a. Institutions of Higher Education
    Comment: Seven universities and two associations opposed the 
application of the rule to educational institutions. In general, the 
universities supported efforts to encourage improvements to compliance 
with requirements to demonstrate work authorization and citizenship, 
but recommend an exemption for research and higher education 
institutions, arguing that the rule would impose an unnecessary 
financial and administrative burden. The commenting associations 
predicted that including academic institutions within the scope of this 
rule would place stress on the E-Verify system.
    The several commenters emphasized various aspects of the 
interrelated problems that universities face, as follows:
     One of the largest universities contended that E-Verify is 
difficult to use and that the proposed rule underestimates the time and 
resources required by an organization of its size to implement E-
Verify, and its impact on U.S. citizens and lawful permanent residents.
     Another university described its use of a ``sponsored pool 
accounting system'' to facilitate frequent changes in researchers' and 
staff members' funding sources, and how its separation of contract 
administration and human resources processes complicates E-Verify's 
clearance procedure.
     Another university that employs a large number of foreign 
nationals claimed to have a strong program to monitor work 
authorizations. It stated that the added procedural burden on the 
university and its employees will hamper its ability to attract highly 
sought foreign nationals, impacting the quality of its research 
programs.
     Another estimated that modifying its existing employment 
eligibility monitoring system to comply with the proposed 3-day 
clearance requirement would cost $1 million because new processes would 
need to be implemented outside the payroll system it currently uses. In 
addition, the

[[Page 67682]]

commenter claimed that employee relations issues would be a major 
impact, and notes that Federal contracts are only 2 percent of its 
business.
     Another university described universities as low-risk 
employers because their international population is already subject to 
oversight through the Federal visa approval processes and their own 
internal recruitment and other mechanisms.
     Another university was most explicit about the other 
internal mechanisms that reduce the vulnerability of educational 
institutions to immigration violations. According to this comment, 
research organizations operate in an environment of strict regulation 
and control, including export control and intellectual property as well 
as immigration and employment requirements. These contribute to their 
high level of regulatory compliance and they rarely encounter problems 
with document fraud or with employees lacking proper documentation of 
their employment authorization.
     Another university also recommended exempting universities 
from the proposed contract term, but also expressed concerns about the 
impact on grants and cooperative agreements as well. (Grants and 
cooperative agreements are not covered by FAR, so the requirements do 
not in fact apply.)
     One association cited, as an example of potential stress 
on the E-Verify system's resources, the fact that the University of 
California employs approximately 170,000 faculty and staff. The demand 
on system resources at a university is subject to annual spikes at the 
beginning of the academic terms, according to another association. 
Association commenters were also concerned about the potential impact 
of this rule on international personnel at colleges and universities 
who face delays in securing SSNs. Its members report that many 
international employees were incorrectly denied SSNs by the SSA. 
According to these commenters, many who eventually received SSNs did so 
only after repeated interventions by institutions and after a process 
that took, in many cases, several months. These delays may be as long 
as some student workers or staff members are employed by the 
institution. Such individuals can be employed in a range of positions, 
from short-term work-study jobs in smaller offices to long-term 
research projects in large laboratories. The commenters claimed that 
delays resulting from E-Verify use could jeopardize both the 
individuals and employers.
    Response: The Councils do not find the comments about value, 
accuracy, or capacity of the E-Verify system to be bases to exempt 
educational institutions from the rule, for reasons addressed elsewhere 
in this final rule. Moreover, other Government contractors also attract 
a foreign talent base that supports U.S. science and technology 
capabilities.
    However, the Councils recognize that coverage of a large number of 
educational institutions was not anticipated in the proposed rule. 
These entities have a large number of students with intermittent 
employment, which may complicate these institutions' efforts to comply 
with E-Verify requirements. Most Federal funding of universities is in 
the form of Federal grants, and there are relatively few Federal 
contracts, but under the proposed rule, a single contract could be 
sufficient to require an entire university to use E-Verify for all its 
new hires.
    The Councils are also concerned that including universities under 
this broad rule may increase incentives for academic institutions to 
insist on grant funding rather than agreeing to enter into contracts. 
This would increase costs and performance risks to the Federal 
Government.
    Accordingly, the Councils have reduced the burden on institutions 
of higher education by revising the applicability of the E-Verify 
requirements to cover only those employees assigned to a Government 
contract. In order to focus this exception, it is limited to 
institutions of higher education as defined at 20 U.S.C. 1001(a).
b. State and Local Governments and Governments of Federally Recognized 
Indian Tribes
    Comment: One commenter was concerned about whether the rule might 
be misconstrued when applied to contracts under the Randolph-Sheppard 
Program. The concern was whether the State licensing agency, which 
signs the contract with the Federal Government on behalf of the blind 
entrepreneur would be required to enroll in E-Verify.
    Response: The State licensing agency would be considered the 
contractor, but the Councils have decided that State and local 
Governments, as well as the Governments of federally recognized Indian 
tribes, should only be required to use E-Verify to verify the 
employment eligibility of employees assigned to the Government 
contract. The clause would be included in the contract, however, and 
would flow down to covered subcontractors for services or construction, 
including the blind entrepreneurs under Randolph-Sheppard.
c. Sureties
    Comment: A sureties association requested a de minimis exception. 
Government construction contracts require that contractors obtain 
performance and payment bonds in accordance with the Miller Act, 40 
U.S.C. 3131 et seq. A performance bond secures the contractor's 
performance in the event of a default. If the construction contractor 
defaults, the surety steps in to complete the contract using one of 
three methods.
     Sureties can enter into a takeover agreement with the 
Government and then the surety completes the project using a completing 
construction contractor.
     The second method involves the surety obtaining bids for 
completion of the project after which the Government contracts with the 
winning bidder to complete the project.
     The third method permits the surety to reimburse the 
Government for the excess costs incurred by the Government to pay a 
completing contractor.
    The first method, where surety enters into a takeover agreement 
directly with the Government, is frequently selected. Sureties are 
concerned that if the rule applies to sureties who enter into takeover 
agreements, then many sureties will select one of the other options to 
avoid the cost of complying with the FAR rule. Additionally, issuing 
performance bonds on Federal construction contracts is often a very 
small portion of each surety's business because the sureties often sell 
other types of insurance such as auto, homeowners and general 
liability. If the FAR rule applies to all employees performing 
activities unrelated to bonds as well as new hires of the surety after 
the effective date of the takeover agreement, sureties may conclude 
that it is too expensive to enter into takeover agreements. The 
commenter also noted that when a surety enters into a takeover 
agreement with the Government, the actual work of completing the 
construction project is performed by a construction contractor hired by 
the surety and not by the surety itself. The sureties requested a de 
minimis exception ``under which companies whose contracts with the 
Federal Government are a small portion of the company's total revenues 
need only verify the eligibility of employees involved with the 
contract.''
    Response: The Councils, while not agreeing to an across-the-board 
de minimis exception, have individually

[[Page 67683]]

considered the issues and agree that an exception applicable to 
sureties is appropriate. E-Verify use will not be necessary unless a 
surety provides a performance bond, the contractor defaults and the 
surety subsequently enters into a takeover agreement with the 
Government to complete the project. Prompt completion of construction 
projects using the most appropriate method available is a priority and 
it is not in the Government's interest to create an obligation that 
will discourage sureties from entering into a takeover agreement with 
the Government if such an agreement is appropriate. Therefore, E-Verify 
compliance will apply only to those employees of the surety directly 
assigned to the takeover agreement and to the construction 
contractor(s) that are hired by the surety. The full clause 
requirements will flow down to the construction subcontractors.
5. Financial Institutions
    1. Comment: Several commenters recommended that banks and other 
financial institutions whose contracts are limited to serving as 
issuing and paying agents for U.S. savings bonds and savings notes or 
being insured by the FDIC should be excluded from the e-verification 
requirement. One commenter requested similar treatment for financial 
institutions that are parties to financial agency agreements (FAAs) 
with the Federal Government because FAAs are not subject to the FAR. 
This commenter stated that FAAs explicitly state: ``This FAA is not a 
Federal procurement contract and is therefore not subject to the 
provisions of the Federal Property and Administrative Services Act (41 
U.S.C. Sections 251-260), the Federal Acquisition Regulations (48 CFR 
Chapter 1), or any other Federal procurement law.''
    Response: Agreements or activities performed by financial 
institutions that are not subject to the FAR are not required to comply 
with the E-Verify provisions and clauses of the FAR.
    2. Comment: One commenter requested clarification that the rule 
applies to ``contracts in which a Federal agency is purchasing goods or 
services, and does not apply to companies who purchase goods or 
services from the Federal Government.''
    Response: Contracts for purchase of goods by companies from the 
Federal Government are not subject to the FAR and therefore are not 
required to comply with the E-Verify provisions and clauses in the FAR.
6. Hospitality Industry
    Comment: One commenter commented on the difficulty of applying E-
Verify to hotel employees. This commenter stated that it is impossible 
to determine beforehand which specific employee would be interacting 
with a guest, since many of the individual interactions are initiated 
by the guest and could involve one of many possible employees in each 
instance. Further, hotels do not have segregated areas for Government 
employees nor do they assign specific employees to serve Government 
employees. This situation is further complicated by the fact that 
employers are specifically prohibited from screening existing employees 
through E-Verify, except for those employees assigned to the Government 
contracts.
    Response: First, the revision to the proposed rule that will make 
the clause inapplicable to contracts that will have a period of 
performance of less than 120 days may eliminate almost all hotel 
contracts from being subject to the rule. Second, the decision to allow 
contractors the option of using E-Verify for all existing employees, 
rather than just those assigned to the contract, will likely resolve 
any remaining issue.
7. Other
a. Security Clearances
    Comment: Several commenters recommended that the rule permit 
employees who hold security clearances or HSPD-12 identification to be 
an equivalency for use of E-Verify.
    Response: HSPD-12 mandates that a person must be suitable (minimum 
of a national agency check with inquiries (NACI)) in order to be issued 
an HSPD-12 card. Specifically, HSPD-12 imposes certain credentialing 
standards prior to issuing personal identity verification cards, 
including verification of name, date of birth, and social security 
number (among other data points) against Federal and private data 
sources. The Councils agree that the degree of scrutiny applied to 
individuals granted HSPD-12 credentials provides sufficient confidence 
that any such person is likely truthful about his or her authorization 
to work in the United States that additional investigation through E-
Verify is not necessary.
    With regard to security clearances, the degree of scrutiny applied 
to individuals granted security clearances also provides sufficient 
confidence that any such cleared person is likely truthful about his or 
her authorization to work in the United States that additional 
investigation through E-Verify is not necessary if the security 
clearance is active.
b. Hiring Halls and Intermittent Work
    Comment: One commenter requested clarification about how new hires 
are impacted if they are not full time employees, such as ``hiring 
hall'' laborers hired for short time work on a specific project.
    Response: The INA requires employers to verify the work eligibility 
of all new hires. There is no exception for short-term or part-time 
employment, as long as the situation involves ``employment'' as defined 
in 8 CFR 274a.1(h). When the employer completes the Form I-9 process, 
it should also use E-Verify to verify employment eligibility. If the 
employment is for less than three days, the I-9 must be completed at 
the time of hire, as opposed within the three days after hire that is 
allowed for longer-term employment. In either situation, the E-Verify 
query must be initiated when the I-9 process is completed. In addition, 
there is an existing statutory provision regarding employment pursuant 
to a collective bargaining agreement in section 274A(a)(6)(A) of the 
INA, which provides that in certain cases a subsequent employer is 
deemed to have complied with the Form I-9 requirements by virtue of 
verification by another employer within the agreement. If a previous 
employer within such an arrangement has completed the Form I-9 and E-
Verify query, a subsequent employer does not have to reverify, as long 
as the employment is within the scope of the statutory provision.
c. Applicability To Change Orders and Material Modifications
    Comment: Various commenters requested that the rule should 
specifically clarify whether and how the new requirements would apply 
to change orders or material modifications entered into after the 
effective date of the regulations on base contracts that were entered 
into before the regulations take effect. Another commenter recommended 
that the rule should be revised to specifically disallow inclusion of 
this E-Verify clause in such amendments, so that existing contractors 
are allowed to complete their current contracts under the same terms 
that were initially agreed upon.
    Response: Inclusion of the E-Verify clause in change orders or 
material modifications will be implemented on a bilateral basis.

[[Page 67684]]

D. Implementation Schedule

1. Effective Date
a. More than 30 Days After Publication of the Rule
    Comment: Several commenters asked that the effective date be some 
time more than the usual 30 days after publication of the final rule.
     Some commenters asked for an extension, but did not ask 
for a specific time period.
     Many commenters asked for 120 days after publication.
     Some universities and a personnel council asked for a 
minimum of 180 days. One commenter justified this because it needed 
time to hire and train new staff to use E-Verify, time to develop new 
processes to support compliance, and time to evaluate equipment and 
computer software upgrades.
    Response: The rule will be effective on January 15, 2009. The 
timelines for initial verifications have been increased. In the 
proposed rule, verification queries on new and existing employees 
assigned to the contract had to be initiated within 30 calendar days of 
enrollment; whereas in the final rule it will be 90 calendar days.
    Also note that the burden on some of the commenters (agriculture 
and education in particular) will not be as severe as the commenters 
expected. Agriculture will mostly be unaffected, due to the COTS 
exception. Institutions of higher education will be able to choose to 
only verify the existing employees and new hires that are assigned to 
the contract. The impact on sureties has also been minimized.
b. Congressional Action
    Comment: Several commenters felt the final rule should not be 
published until Congress reauthorized the E-Verify program, which at 
the time was set to expire in November 2008. Another commenter wanted 
Congress to study the rule, or enact comprehensive immigration reform. 
One commenter suggested that a one year postponement would give an 
opportunity for Congress to consider the consequences of a mandatory 
program.
    Response: Congress reauthorized E-Verify and appropriated $100 
million for the program through the end of fiscal year 2009 in the 
Consolidated Security, Disaster Assistance, and Consolidated 
Appropriations Act, 2009, Public Law 110-329 (Sep. 30, 2008). If in the 
future Congress fails to extend E-Verify and the program is terminated, 
the rule will need to be reconsidered at that time. Otherwise, the 
Councils must implement the Executive Order 12989, as amended.
c. Finalization of the ``No-Match'' Rule
    Comment: One commenter asked that the effective date be delayed 
until the ``no-match'' rule is finalized. It pointed out that the 2007 
proposed rule regarding safe-harbor steps associated with SSA's no-
match program would provide up to 90 days for employers to resolve 
discrepancies within their records.
    Response: The Councils disagree. As an initial matter, DHS's No-
Match Rule has been finalized with the publication of the Supplemental 
Final Rule on October 28, 2008. More significantly, the comment 
confuses two separate and independent programs. The DHS No-Match Rule 
provides guidance to employers that receive a no-match letter from SSA 
on how to conduct appropriate due diligence and settle questions raised 
by the no-match letter regarding the work authorization of employees 
identified by the letter. Employers that follow the steps set forth in 
DHS's No-Match Rule are guaranteed a safe harbor from the use of the 
no-match letter as evidence of the employer's violation of INA section 
274A.
d. Finalization of the Revised MOU and Training
    Comment: One commenter noted that DHS needed to finalize the MOU 
prior to the effective date of the FAR rule. Another commenter expanded 
upon this point to assert that DHS needs to finalize the E-Verify Web 
site, training materials, and program manual prior to the effective 
date of the FAR rule. A chamber of commerce wanted DHS to undertake a 
nationwide program to educate and train contractors prior to the rule's 
effective date.
    Response: The Councils concur that implementation of the final rule 
must coincide with finalization of the MOU and other necessary systems 
revisions. The Councils expect that the MOU and other DHS systems and 
procedures will be ready in time for the effective date of the final 
rule.
e. Establishment of a Post-Final Nonconfirmation Process
    Comment: One commenter, citing its experience with E-Verify, asked 
that DHS adopt processes for a post-final nonconfirmation process, 
initiated by either the employee or the employer, so that performance 
of contracts is not hampered by unnecessary termination of work-
authorized employees.
    Response: Under E-Verify rules, an employee must be permitted to 
continue working until a final nonconfirmation is issued. After the 
final nonconfirmation, if the employer has grounds to believe the final 
nonconfirmation is in error, the employer may still allow the employee 
to work, but the employer must inform DHS of its decision to retain the 
worker, and if the worker is later found to be unauthorized, the 
employer will be subject to a rebuttable presumption that the employer 
knowingly employed an illegal alien. See IIRIRA Section 403(a)(4)(C). 
Employers or employees may contact the E-Verify program if additional 
time is needed to provide such documentation or if they believe a final 
nonconfirmation was received in error. The E-Verify program may delay a 
final nonconfirmation finding on a case by case basis in those cases 
where employees have experienced delays in receiving needed 
documentation that will help prove their employment eligibility, and 
the program will work with the employer and/or employee to research the 
case and identify the reason for the final nonconfirmation.
f. Inaccuracies in the DHS and SSA Data Bases Are Fixed
    Comment: Several commenters asked the rule be delayed until DHS and 
SSA fixed alleged inaccuracies in their data, which could stem from 
name changes, incorrect data entry, and delayed citizenship status 
updates.
    Response: Some of these inaccuracies cannot be fixed until the 
employee takes steps to correct the problem, and the employee will 
discover the problem when the employer initiates a verification query 
and receives a tentative nonconfirmation. The actual numbers of 
inaccuracies can only be estimated, and the estimates vary 
significantly according to the estimator. As noted above, DHS has 
implemented several improvements to the E-Verify system to avoid 
tentative nonconfirmation responses resulting from out-of-date 
citizenship data. The Councils do not agree that the rule should be 
delayed.
g. Implementation of the Westat Report Recommendations
    Comment: One commenter recommended that the Westat report 
recommendations be implemented before the E-Verify system is expanded.
    Response: DHS's continues to improve and further develop the E-
Verify system. Many of the Westat recommendations have already been 
implemented. There is no need to delay the rule.

[[Page 67685]]

h. GAO Study Completed
    Comment: Some commenters asked that the rule be postponed until GAO 
completed its study called for under the pending five-year re-
authorization legislation. One commenter felt the studies mandated by 
H.R. 6633 (if enacted) might offer insights on ways to strengthen the 
program. The first study is an examination of the causes of tentative 
nonconfirmations, and the second is an assessment of the impacts on 
small businesses.
    Response: The Councils have decided not to postpone the rule. H.R. 
6633, which has been passed by the House of Representatives, allows two 
years for the GAO study of the impact of E-Verify Pilot Program on 
small businesses, including specific details on small entities 
operating in States that have mandated the use of E-Verify. The bill 
has not been passed by the Senate, but it does not request that any 
further implementation of E-Verify be held up pending completion of the 
study. In addition, Congress reauthorized E-Verify and appropriated 
$100 million for the program through the end of fiscal year 2009 in the 
Consolidated Security, Disaster Assistance, and Consolidated 
Appropriations Act, 2009, Public Law 110-329 (Sep. 30, 2008), without 
requiring this study, and it does not appear that there will be any 
additional legislative developments on E-Verify in the 110th Congress.
2. Phased Transition
a. General
    Comment: One commenter suggested that because of the existing 
``error rates'' and capacity concerns, the Government should take a 
more measured or phased approach in increasing E-Verify participation, 
rather than implementing a rule that will encompass almost all 
Government contractors within a very short period. Another commenter 
argued that USCIS indicated the current issues could be adequately 
addressed in four to five years, which suggests that neither DHS nor 
SSA anticipated that the agencies would be required to immediately 
implement full coverage for all contractors at one time and instead 
contemplated a more realistic implementation period of anywhere from 
four to five years.
    Response: The Councils have decided that a delay in the 
implementation of the rule is not necessary. DHS and SSA have stated 
that they are ready to handle full implementation.
b. Four-Phase Transition
    Comment: One commenter recommended a four-step phase-in--
     New employees of prime contractors;
     New employees of subcontractors; following this, the 
Councils should evaluate the success of the program for new employees 
before proceeding to:
     Existing employees of a prime contractor assigned to a new 
Federal contract; and then
     Existing employees of new subcontractors.
    Response: The Councils must implement the Executive Order 
expeditiously. The time periods for verification have been lengthened, 
to ease the burden on employers.
c. From Largest to Smallest Contractors or Contracts
    Comment: Several commenters recommended phased implementation, over 
periods of up to 7 years, based on number of employees of the 
contractor, or the number of employees required to effectuate the 
contract.
     The first year of the program would be for the largest 
noncommercial contracts, and gradual rollout over the next four years 
in descending order of size, measured by the number of employees who 
would be required to effectuate the contract.
     Apply the first year to contractors and subcontractors 
with 2,000 or more employees. Do not count harvest-time employees as if 
they were year-round employees in measuring the number of employees for 
a phase-in.
    Response: The Councils do not expect agricultural employers to be 
significantly affected by this rule, because of the COTS exemption. 
Implementation of the suggested phase-in would be very difficult, and 
the Councils have decided against this proposal. The dollar threshold 
exception for prime contracts has been raised to $100,000 (which will 
especially help small business) and the verification deadlines 
lengthened.
d. By Agency
    Comment: One commenter suggested a phase-in over a period of time 
or perhaps by agency.
    Response: The phase-in by agency is an interesting suggestion. 
However, the Councils do not believe it is necessary to phase-in by 
time or agency. DHS and SSA are prepared to support implementation of 
this rule as revised.
3. Applicability to Indefinite Delivery/Indefinite Quantity Contracts
a. Existing IDIQs
    Background: The proposed rule's preamble stated that the proposed 
rule: ``Applies to solicitations issued and contracts awarded after the 
effective date of the final rule in accordance with FAR 1.108(d).'' 
Under the final rule, Departments and agencies should, in accordance 
with FAR 1.108(d)(3), amend existing indefinite-delivery/indefinite-
quantity (IDIQ) contracts to include the clause for future orders if 
the remaining period of performance extends at least six months after 
the effective date of the final rule and the amount of work or number 
of orders expected under the remaining performance period is 
substantial.
    1. Comment: One commenter suggested that not applying the rule to 
existing IDIQ contracts would enable a more even rollout of the 
program.
    Response: The Councils have been advised that DHS and SSA are 
prepared to process E-Verify queries of contractor employees subject to 
the rule, including those performing under existing IDIQ contracts.
    2. Comment: The same commenter objected to applying the rule to 
existing IDIQ contracts because companies made business decisions to 
bid on these contracts initially without contemplating the significant 
cost that will be incurred as a result of this new requirement.
    Response: The contracts would be modified on a bilateral basis. The 
contractor will be able to decide whether it wishes to accept the 
clause. There can be no unilateral imposition of the clause on any pre-
existing IDIQ contract without the contractor's consent.
b. Cost Recovery for Modified Contracts
    Comment: Two commenters asked for the rule to spell out the amount 
contractors would receive to implement compliance on existing IDIQ 
contracts.
    Response: The FAR does not normally spell out the amount of 
consideration it expects the Government to pay on a contract 
negotiation. This is a contract-by-contract issue determined by 
individual contracting officers.
c. Meaning of ``Substantial''
    Comment: One commenter asked the Councils to define ``substantial 
work'' or ``substantial number of orders.''
    Response: The interpretation of ``substantial'' will be within the 
discretion of the contracting officer. The normal use of the word 
applies.
d. Meaning of IDIQ Contract.
    Comment: One commenter stated that the FAR proposed rule would 
require re-verifying all employees currently employed under 
``indefinite delivery/indefinite quantity'' contracts, and that most 
university Federal grants are multiyear agreements under which

[[Page 67686]]

thousands are employed. Another commenter discussed a multiyear 
contract it had with HHS to provide social services on a national level 
to victims of human trafficking, where HHS paid for services, up to a 
certain amount, and for a fixed period, to victims of trafficking on a 
per capital basis. This commenter asserted that--
     Its contract was not IDIQ;
     A contract extension is not a new contract; and
     A Federal contract for the provision of mainly social 
services to victims of trafficking is not an IDIQ contract.
    Response: The commenters may be somewhat confused about what a FAR 
IDIQ contract is. A grant is not an IDIQ contract; grants are not 
covered by the FAR. A contract for social services to victims of 
trafficking might be an IDIQ contract. The contract itself will say 
whether it is an IDIQ contract; if so it would contain an IDIQ clause, 
such as 52.216-22 ``Indefinite Quantity.'' IDIQ contracts are described 
in the FAR at Subpart 16.5, especially at 16.504.

E. Regulatory Flexibility Analysis and/or EO 12866/Regulatory Impact 
Analysis/Paperwork Reduction Act

1. Benefit Analysis Issues
    Comment: Several commenters believe this rule will increase the 
Government's cost of doing business because many contractors will pass 
back to the Government their costs of using E-Verify. Also, commenters 
claim that this rule will mean fewer businesses will want to bid on 
Government contract work.
    Response: The Councils concur that this rule may result in 
additional compliance costs for contractors, and these additional costs 
could be passed back to the Government. However, Executive Order 12989, 
as amended, requires that contractors use an electronic employment 
eligibility verification system designated by the Secretary of Homeland 
Security to verify the employment eligibility. The President has found 
that Executive Order 12989 ``is designed to promote economy and 
efficiency in Federal Government procurement. Stability and 
dependability are important elements of economy and efficiency. A 
contractor whose workforce is less stable will be less likely to 
produce goods and services economically and efficiently than a 
contractor whose workforce is more stable.'' Consequently, the 
President has made the finding that the increased economy and 
efficiency to the Government as a result of this rule outweighs the 
cost of the rule.
2. Cost Estimates
a. On Contractor
    1. Comment: Commenters, including the SBA Office of Advocacy, argue 
that the Initial Regulatory Flexibility Analysis (IRFA) did not 
consider all of the relevant costs. They state that profit margins vary 
by industry, and even very low compliance costs could be significant 
for some businesses. For example, in the architecture and engineering 
contracting environment, the maximum allowable profit margin is six 
percent. Commenters also claim that the analysis did not consider costs 
such as the social welfare cost or the cost of penalties and lawsuits.
    Response: The IRFA fully complied with the requirements of the 
Regulatory Flexibility Act, 5 U.S.C. 603. The IRFA compared estimated 
compliance costs for four distinct sizes of small business (10, 50, 
100, and 500 employees) to the respective revenue of these businesses, 
using information obtained from the Small Business Administration.
    The Councils do not agree that a compliance cost burden of 0.03 
percent of revenue could typically be regarded as a significant 
economic impact. The Councils further disagree that it would be 
appropriate to add additional cost factors such as the ``upcoming three 
percent mandatory IRS withholding'' when these costs are not direct 
compliance costs of the rule.
    With regard to the full social welfare cost of the rule, Regulatory 
Flexibility Analyses are only to include the direct impacts of a 
regulation on a small entity that is required to comply with the 
regulation. Mid-Tex Electric Coop. v. FERC, 773 F.2d 327, 340-343 (D.C. 
Cir. 1985) (holding indirect impact of a regulation on small entities 
that do business with or are otherwise dependent on the regulated 
entities not considered in RFA analyses). See also Cement Kiln 
Recycling Coalition v. EPA, 255 F.3d 855, 869 (D.C. Cir. 2001) (In 
passing the Regulatory Flexibility Act, ``Congress did not intend to 
require that every agency consider every indirect effect that any 
regulation might have on small businesses in any stratum of the 
national economy. * * * [T]o require an agency to assess the impact on 
all of the nation's small businesses possibly affected by a rule would 
be to convert every rulemaking process into a massive exercise in 
economic modeling, an approach we have already rejected.''). See, also, 
Regulatory Flexibility Improvements Act, Hearing before the 
Subcommittee on Commercial and Administrative Law, Committee on the 
Judiciary, on H.R. 682, 109th Cong., 2nd Sess. (2006), at 13 (Statement 
of Thomas Sullivan, Chief Counsel for Advocacy, Small Business 
Administration, testifying on the RFA by noting that ``the RFA * * * 
does not require agencies to analyze indirect impacts.'').
    2. Comment: A commenter stated that OMB guidelines direct agencies 
to account for all regulatory (i.e., non-budgetary) costs and that, in 
general, costs that are not within the discretion of an agency to avoid 
or prevent are properly attributable to the statute, and an agency may 
assign them accordingly. The commenter further stated that, 
nevertheless, all regulatory (i.e., non-budgetary) costs must be 
accounted for and must be included in the IRFA.
    Response: The commenter has confused the requirements of the 
Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA), with the 
requirements of other administrative reviews. For example, the 
commenter is apparently suggesting that the IRFA should comply with OMB 
Circular A-4 and Executive Order 12866. These analyses are not required 
by the RFA, nor are they mandated for this rule under any other 
provision of law. The internal, managerial nature of this and other 
similarly-worded Executive Orders has been recognized by the courts, 
and actions taken by an agency to comply with the Executive Order are 
not subject to judicial review. Cal-Almond, Inc. v. USDA, 14 F.3d 429, 
445 (9th Cir. 1993) (citing Michigan v. Thomas, 805 F.2d 176, 187 (6th 
Cir. 1986)). Although the requirements of the RFA analysis is fairly 
compatible with many of the analytical requirements under OMB guidance, 
the comments invoking Executive Order 12866 and OMB Circular A-4 
standards to identify alleged deficiencies in the IRFA are misplaced.
    3. Comment: A commenter stated that, upon hiring a new worker or 
upon assigning an employee to Federal contract work, and running the 
employee against E-Verify, the employer who receives a tentative 
nonconfirmation for an employee must continue to pay and train the new 
employee, only to possibly find out later that the worker cannot 
resolve the nonconfirmation and must be terminated. According to the 
commenter the IRFA should have taken these costs into account.
    Response: The economic analysis included a cost of $5,000 in 
termination and replacement expenses for each authorized employee that 
is terminated or resigns employment due to this rule. This $5,000 
estimate is meant to include the full range of the direct costs of 
termination, such as administrative expenses and training costs.

[[Page 67687]]

    4. Comment: The SBA Office of Advocacy claimed that the economic 
analysis did not distinguish between prime small business contractors 
and small business subcontractors and that there is a disproportionate 
compliance cost burden on small business subcontractors.
    Response: It is not clear how the direct cost of complying with the 
rule would materially differ depending on whether the contractor was a 
prime contractor or a subcontractor. The commenter did not give any 
specific examples of how a subcontractor's direct compliance costs 
would differ from a prime contractor's direct compliance costs.
    5. Comment: The SBA Office of Advocacy stated that some contractors 
in the construction or manufacturing industries, for example, can have 
hundreds of employees and still be considered small. The commenter 
claimed that it is doubtful that DHS' $419 figure is an accurate 
statement of the costs of the rule to these small businesses.
    Response: The economic analysis did not state the cost to a 
contractor with ``hundreds of employees'' would be $419. The economic 
analysis presented information showing how the rule would impact four 
sizes of small entities (10, 50, 100, and 500 employees) by comparing 
their estimated compliance costs to their respective revenues. The 
estimate of $419 was for a contractor with ten employees. The economic 
analysis estimated the compliance cost to a company with 500 employees 
to be $8,964, so the Councils agree with the commenter that a 
contractor with hundreds of employees would be expected to incur more 
than $419 in compliance costs.
    6. Comment: The SBA Office of Advocacy stated that if, after 
reviewing the comments received regarding its RFA certification, the 
FAR Council has reason to believe that it can no longer certify that 
the proposed rule will not have a significant economic impact on a 
substantial number of small entities, then the FAR Council should 
examine feasible alternatives that would lessen the burden on small 
entities. In that event, the commenter stated that the FAR Council 
should also publish an IRFA detailing those alternatives, describing 
the scope and impacts of the proposed rule on small entities, and 
provide another opportunity for small businesses to comment prior to 
publication of the final rule.
    Response: The Councils did prepare an Initial Regulatory 
Flexibility Analysis. The Councils did not certify that the rule would 
not have a significant economic impact on a substantial number of small 
entities. For the final rule, the Councils have prepared a Final 
Regulatory Flexibility Analysis. The proposed rule, at 73 FR 33379, 
explained the alternatives that were considered in order to minimize 
the impact of the rule on small entities. The Councils have considered 
additional alternatives in the FRFA based on public comments.
    7. Comment: Many commenters argued that the assumption contained in 
the economic analysis that the costs related to unauthorized workers, 
such as the turnover and replacement costs and lost productivity costs 
due to the employment of unauthorized workers ``are attributable to the 
Immigration and Nationality Act, not to the Federal Acquisition 
Regulation'' would be true only if the Immigration and Nationality Act 
imposed on employers a continuing duty, post-hire, to investigate the 
immigration status of existing employees. The commenters are of the 
opinion that the Act imposes no such duty, and that Congress 
deliberately decided against imposing such a duty when it enacted IRCA 
in 1986. They argue that an employer who is currently employing 
unauthorized employee Jane Roe, after having hired her in 2002 in full 
accordance with I-9 procedures, and who has no knowledge or suspicions 
as to Roe's immigration status, is not breaking any law and is not 
illicitly avoiding any cost of doing business by keeping Roe in its 
employ without periodically investigating her status. Therefore, the 
commenters conclude that any new regulation that would force the 
employer to investigate Roe and acquire the knowledge that would 
require the employer to terminate her and replace her would impose a 
cost on the employer.
    Response: The Immigration and Nationality Act expressly prohibits 
employers from knowingly continuing to employ an alien who is not 
authorized to work in the United States. INA section 274A(a)(2), 8 
U.S.C. 1324a(a)(2). How an employer obtains knowledge of an employee's 
illegal status is immaterial--employers that have actual or 
constructive knowledge of their employees' illegal work status are 
statutorily obligated to cease their employment, and any costs that 
result are attributable to the statute, not to this rulemaking.
    The commenters suggest that they would not have discovered the 
illegality but for their compliance with this rule, and that the 
consequences of their discovery should be accounted as a cost of this 
rule. This argument appears to rest on the belief that the INA's 
prohibition on illegal employment applies only until the employee has 
filled out the Form I-9. While it may be that many employers have taken 
a misguided ``see no evil'' approach under which they hope to avoid 
learning inconvenient truths about the legal status of their existing 
workforce, that is not an approach that is countenanced by the INA.
    While the cost of terminating or replacing unauthorized workers 
cannot properly be considered a cost of this rule, some turnover 
involving legal workers that are unable or unwilling to resolve their 
tentative non-confirmations can be counted as a cost of the rule. Such 
turnover costs for legal workers were estimated in the IRFA and Final 
Regulatory Flexibility Analysis (FRFA).
    8. Comment: A commenter stated that the economic analysis assumes 
that the employee would bear the cost of driving to SSA, ``but it will 
be the employer who likely will bear the salary cost of that time.'' In 
addition, the commenter believed that contractors and subcontractors 
will suffer far larger lost opportunity and productivity costs than 
those included in the economic analysis.
    Response: The Councils disagree with the commenter. The economic 
analysis actually assumes the employer would incur a lost productivity 
cost 100% of the time an authorized employee needed to visit SSA to 
resolve the tentative non-confirmation and used ``fully-loaded'' wages 
to estimate lost productivity. A fully-loaded wage includes such 
benefits as retirement and savings, paid leave (vacations, holidays, 
sick leave, and other leave), insurance benefits (life, health, and 
disability), legally required benefits such as Social Security and 
Medicare, and supplemental pay (overtime and premium, shift 
differentials, and nonproduction bonuses). The Councils used data from 
the Bureau of Labor Statistics in order to estimate the fully-loaded 
wage. Nevertheless, in practice we believe some employers may not incur 
lost productivity or opportunity cost if the employee takes personal 
time to resolve their non-confirmations. Also, to the extent employers 
have the capability to plan around employee absences and other 
employees are available, the productivity losses estimated in the 
economic analysis could be higher than what employers may actually 
incur. Given the fact that the economic analysis estimated a lost 
productivity cost 100 percent of the time an authorized employee needed 
to visit SSA at the fully loaded wage rate for a full eight hour day, 
the Councils

[[Page 67688]]

do not believe that the lost-productivity cost estimate for going to 
SSA is unreasonable.
    9. Comment: Commenters stated that the economic analysis did not 
allocate costs for the time required for employers to identify covered 
employees and manage compliance with E-Verify. For new employees, 
commenters noted that these costs are admittedly nominal, as new 
employees are self-identified, and the E-Verify process goes hand-in-
hand with the I-9 process already required. But the commenters stated 
that this is not the case for current employees because--
     To comply with current employee requirements, the employer 
must first take steps, through performance file review or manager 
interviews, to determine which employees are subject to the current 
employee obligation;
     Once the covered employees are identified, the employer 
must then ascertain if an E-Verify query is required, by checking E-
Verify or I-9 records to see if a prior query was obtained;
     If not, the employer must then proceed to obtain the 
information necessary to conduct an E-Verify query for all such 
employees.
    Response: The rulemaking requires existing employees assigned to 
the contact to be vetted through E-Verify. The economic analysis 
accounted for the marginal cost of the time it would take to execute 
the queries for the existing employees; however, the Councils agree 
that additional time should be added to account for the time needed to 
identify the covered existing employees.
    Contractors will incur an opportunity cost of time to determine 
which of their existing employees will actually need to be vetted. 
After those employees have been identified, the contractor will review 
the employee's previously completed I-9 form to see if the I-9 complies 
with the terms of E-Verify enrollment. If the I-9 meets the criteria 
for E-Verify enrollment, the human resources specialist is expected to 
contact (by telephone for example) the employee to ensure that the 
information on the existing I-9 is still accurate (such as the stated 
basis for work authorization).
    Some commenters appear to have assumed that each I-9 required a 
``face-to-face'' meeting between the employee and a company 
representative. A ``face-to-face'' meeting may not be necessary if the 
I-9 does not need to be updated. Contractors will not normally need to 
spend several minutes with each employee discussing the need to confirm 
their Form I-9 information. For example, many contractors may send out 
an e-mail to their employees or otherwise communicate to alert them 
that human resources may be contacting them in the future to validate 
the information on their I-9. However, there will be occasions when a 
face-to-face meeting will have to be arranged between the human 
resources specialist and an employee (to review E-Verify acceptable 
work authorization documents for example). Assuming an average of 20 
minutes for a human resources specialist to review an existing I-9 and 
either call an employee to validate this I-9 or meet with the employee 
to review documents and an employee's average opportunity cost of 10 
minutes to discuss the I-9 information, the RIA will be updated. In 
addition, the RIA will include an assumption that 10 percent of the 
time a second 20 minute contact (phone call or meeting) between the 
employee and human resources specialist could be necessary to resolve 
any additional I-9 issues related to E-Verify.
    10. Comment: A commenter stated the economic analysis estimates 3.5 
million Government contractor employees will be required to be vetted 
through E-Verify in 2009. Using the Government's own estimate, the 
commenter stated that about 370,000 employees will be terminated even 
though they are legally entitled to work in the United States.
    Another commenter stated that in the economic analysis of the 
proposed rule, the assumption is made that 3.8 million employees of 
Federal contractors will be required to be run through E-Verify as a 
result of this rule for the first year the rule is in effect. Based on 
prior statements by DHS, the commenter notes that two percent of these 
workers will ultimately be fired because of their inability to resolve 
a tentative non-confirmation with the SSA or DHS. Thus the commenter 
calculates that, as a conservative estimate, approximately 70,000 
lawfully authorized workers will be fired as a result of this rule.
    Response: The economic analysis estimated that two percent of the 
cases where the tentative non-confirmation was not resolved could 
potentially result in an authorized worker either choosing to resign 
instead of working diligently to resolve the tentative non-confirmation 
or the employee being terminated. The economic analysis indicated that 
5.3 percent of the time there was a tentative non-confirmation that was 
not resolved. Multiplying 2 percent times 5.3 percent equals 0.106 
percent. In order to estimate the number of authorized employees that 
choose to get employment elsewhere or otherwise do not resolve the 
tentative non-confirmation (for whatever reason), multiply the 
3,831,992 employees vetted through E-Verify times 0.106 percent to get 
4,060 authorized employees, not the 370,000 stated by the one 
commenter, nor the 70,000 ``fired'' as stated by the other commenter.
    11. Comment: A commenter stated the RIA subtracted 10 percent of 
contract dollar volume but did not provide any basis for that 
assumption.
    Response: Page 21 of the RIA stated that 10 percent was the 
approximation for contracts with no work performed in the U.S. The 
Federal Procurement Data System--Next Generation was the source of that 
information.
    12. Comment: A commenter stated the economic analysis assumes that 
labor turnover at Government contractors mimics the annual labor 
turnover rates in private industry. Multiplying the calculated number 
of employees (1.5 million) by 1.4 yields 2.2 million contractor 
employees, a number that is compounded at a 5 percent annual rate for 
future years. The commenter stated that this appears to be a reasonable 
first approximation because contractors are not burdened by civil 
service rules that effectively forbid employee termination. The problem 
is that this assumption is logically inconsistent with the previous 
assumption that contractor labor and Government labor earn the same 
wages and salaries. The commenter concludes that, if this were true, 
turnover in Government employment would be no different than private 
sector turnover.
    Response: The economic analysis stated ``in order to adjust for 
turnover we assumed an annual turnover rate of 40.7 percent as the 
Bureau of Labor Statistics (BLS) estimated the annual turnover rate for 
all industries and regions in 2006 at 40.7 percent.'' We disagree that 
it is ``logically inconsistent'' to assume for the purposes of the 
economic analysis that Federal Government contractors have a turnover 
rate that is equivalent to the turnover in ``all industries and 
regions'' in the U.S. It is not entirely clear if the commenter 
believes the turnover rate used in the economic analysis is too high or 
too low as the commenter did not suggest a specific turnover rate that 
should be used in place of the 40.7% rate used in the economic 
analysis.
    According to the BLS publication Job Openings and Labor Turnover: 
January 2007 (which is the same source used for the 40.7% turnover 
estimate), the turnover rate for the federal government was 25%. It is 
very possible that the turnover rate for the federal government 
contract workforce more closely resembles the 25% turnover in the 
federal workforce than the 40.7% ``all

[[Page 67689]]

industries and regions'' turnover rate used in the economic analysis 
and that we have overestimated the number of employees vetted through 
E-Verify. However, there are more factors involved with turnover than 
simply pay. For example, the perceived increased job security of 
federal employment compared with the private sector likely influences 
the federal turnover rate. Also, the pension a federal employee 
receives is based on age and years of service and likely serves to 
encourage federal workers who have accrued significant amount of 
federal service not to leave federal employment. Many federal employees 
also choose to work for the federal government in order to serve the 
public good. Consequently, we did not feel it was appropriate to assume 
that federal contractor turnover rate was equivalent to the federal 
government turnover rate since there are nonwage considerations 
involved with job turnover. If federal contract employees do have a 
turnover rate closer to the federal government of 25% rate than the 
40.7% estimated in the analysis, the amount of turnover and number of 
employees vetted through E-Verify have been overestimated in the 
economic analysis and the costs of the rule are therefore an 
overestimate.
    13. Comment: A commenter stated the RIA includes what is described 
as an uncertainty analysis, but in fact it consists of merely a 
numerical sensitivity analysis with respect to two assumptions: (1) The 
number of contractors and subcontractors affected by mandatory E-
Verify; and (2) the number of contractor and subcontractor employees 
that would be vetted through mandatory E-Verify. The commenter stated 
that ``[t]he product of this `uncertainty analysis' is a series of 
impressive looking, but substantively and presentationally misleading 
color graphs.'' The commenter also claimed that this analysis violates 
Office of Management and Budget's Guidelines for Ensuring and 
Maximizing the Quality, Objectivity, Utility, and Integrity of 
Information Disseminated by Federal Agencies (2002); Notice and 
Republication.
    Response: The Regulatory Flexibility Act does not require any 
sensitivity analysis or uncertainly analysis be performed in an IRFA. 
However, the RIA provided a sensitivity analysis simply to show how the 
costs of the rule could change if the primary estimates of two key cost 
drivers were varied. First, the sensitivity analysis varied the number 
of employees that are vetted through E-Verify (holding all else 
constant) and determined how the overall cost of the rule would change. 
Secondly, the sensitivity analysis varied the number of covered 
contractors and subcontractors (holding all else constant) that have to 
be enrolled into E-Verify and determined how the overall cost of the 
rule would be impacted. Finally, the sensitivity analysis varied both 
the number of employees and the number of contractors simultaneously in 
order to get an overall sense of how uncertainty in these two key 
variables impacts the overall cost.
    The model developed by the Councils to estimate the number of 
employees vetted through E-Verify included variables that were informed 
by professional judgment. Such variables include the contract 
percentage for labor (26 percent), overhead (26 percent), material 
expenses (26 percent), general and administrative (12 percent), 
subcontractors (20 percent), and the average wage of a Federal contract 
worker ($66,705). (Some of these figures are percentages of others.) 
Changes in any of these variables would impact the estimate of the 
number of employees vetted through E-Verify. As the estimate of the 
number of employees vetted through E-Verify is directly influenced by 
these variables, we believe it is useful to show how the overall costs 
of the rule could change if the number of employees vetted changed. The 
Councils continue to believe its estimate of the number of employees 
vetted through E-Verify is reasonable; but the sensitivity analysis 
does show how the costs would change if the number of employees 
estimated were varied by 50 percent using a triangular distribution.
    The estimate of the number of primary contractors within the scope 
of the rule is based on a query of the Federal Procurement Data System-
Next Generation and is not based on a professional estimate. However, 
the number of covered subcontractors that are not otherwise a prime 
contractor is not available and this variable is a professional 
estimate. The sensitivity analysis shows how the costs would change if 
the number of covered contractors estimated were varied by 25 percent 
using a triangular distribution. Both the 25 percent and 50 percent 
ranges used in the sensitivity analysis were selected based on 
professional judgment.
    14. Comment: A commenter disagreed with the Fiscal Year 2007 
estimate that 3,475,730 employees will be vetted through E-Verify. The 
commenter believes that the Government is assuming that 75 percent of a 
contractor's employees will be assigned to a contract while only 25 
percent will not. The commenter knows of many large employers and with 
few exceptions the portion of their revenue derived from Federal 
contracts is significantly less than 25 percent. The commenter believes 
many more employees will be vetted through E-Verify than has been 
estimated by the Government. Thus the commenter concluded that the 
costs have been understated.
    Response: The Councils agree that there are numerous businesses 
which contract with the Federal Government but derive a relatively 
small portion of their revenue from the Federal Government. However, 
there are also many contractors that have enough Federal contracting 
business that they have organized themselves into business units that 
concentrate on Federal contracting sales. The estimate takes into 
account both businesses that do both relatively little Federal 
contracting and those that do extensive Federal contracting.
    Many commenters appear to be interpreting the term ``contractor'' 
in an overbroad fashion. Only the legal entity that signs the contract 
is bound by the E-Verify obligation, not necessarily all affiliates or 
subsidiaries of that entity. Each contractor has the ability to 
organize or incorporate itself as it chooses, and questions of whether 
certain entities are a part of the contracting legal entity can only be 
answered in specific factual contexts.
    Regarding the commenter's belief that the number of employees 
vetted through E-Verify is understated, there were several assumptions 
made when conducting the economic analysis that may mean the actual 
number of employees vetted has been overestimated. The proposed rule 
does not apply to any employees hired prior to November 6, 1986, as 
these employees are not subject to employment verification under INA 
section 274A, 8 U.S.C. 1324a. The economic analysis did not remove any 
of these workers from the estimate of the number of employees vetted.
    In addition, several States have laws that already require varying 
degrees of E-Verify use. There are also Federal contractors that have 
already chosen to enroll in E-Verify that do not operate in a State 
with an E-Verify requirement. Since many Federal contractors are 
already enrolled in E-Verify or operate in a State with an E-Verify 
requirement, these contractors have already incurred many of the 
enrollment costs of this rulemaking and their newly hired employees 
would be vetted through E-Verify even absent this rulemaking. The 
economic analysis did not reduce the cost estimate to account for the 
costs of

[[Page 67690]]

employers who have already enrolled in E-Verify.
    Furthermore this final rule has narrowed the scope of those 
required to be vetted through E-Verify. For example, the final rule 
clarifies that the E-Verify requirement does not apply to prime 
contracts with performance periods of less than 120 days and raises the 
threshold for prime contractors to the simplified acquisition threshold 
($100,000) instead of the micro-purchase threshold ($3,000). However, 
the estimate of the number of employees vetted through E-Verify has not 
been reduced. We believe for these reasons the cost estimates are not 
understated.
    15. Comment: Other commenters, including the SBA Office of 
Advocacy, that believed that the number of contractors that will be 
vetted through E-Verify has been underestimated criticize the fixed 
factors (e.g., 26 percent for labor) used in the economic analysis as 
well as the estimate that the number of subcontractors is assumed to 
equal 20 percent of the number of prime contractors. One commenter 
claims that the estimates used by the Councils are not based on 
``empirical data'' and that the economic analysis was not explicit 
regarding how these factors were determined.
    Response: The dollar value of the contracts estimated to be within 
the scope of the rule was found by querying the Federal Procurement 
Data System and does not rely on an estimate by the Councils. Instead 
of simply providing a ``top-level'' estimate, the Councils developed a 
model to estimate the number of employees that would be expected to be 
vetted through E-Verify. The factors utilized (e.g., 26 percent for 
labor) are all multiplied against the estimated dollar value of 
contracts. When describing the percentage estimates used to estimate 
factors utilized, the economic analysis specifically stated ``we 
understand these assumptions are rough and we welcome public comment 
providing more precise information.'' However, the commenters have not 
provided better information.
    We note that the analysis required by the Regulatory Flexibility 
Act need not produce statistical certainty. The law requires that the 
Councils ``demonstrate a `reasonable, good-faith effort' to fulfill 
[the RFA's] requirements.'' Ranchers Cattlemen Action Legal Fund, 415 
F.3d 1078, 1101 (9th Cir., 2005). See also Associated Fisheries of 
Maine v. Daley, 127 F.3d 104, 114-15 (1st Cir. 1997). The IRFA and 
economic analysis produced by the Councils in this rulemaking meet that 
standard. The assumptions underlying the economic analysis are 
reasonable, and the Councils have utilized the best data available to 
produce the IRFA and the economic analysis. We continue to believe the 
estimates we provided are reasonable.
    16. Comment: A commenter stated that over 54 million people are 
currently employed by companies that work on Government contracts 
(commenter cited Wall Street Journal Examines How Federal Government 
Use of Contract Workers Contributes to Number of Uninsured U.S. 
Residents, Wall Street Journal, 26 March 2008). The commenter assumed 
an 8 percent error rate for E-Verify, and claimed that as many as 
432,000 legal employees could have their employment disrupted.
    Response: The article cited by the commenter stated there were 
``5.4 million Federal service-contract workers'' not the 54 million 
contract workers cited by the commenter. We note that the 5.4 million 
estimate may include contracts that are not covered by the rule. For 
example, the scope of the rule excludes contracts that do not include 
any work that will be performed in the United States.
    The Councils disagree that 432,000 legal employees will have their 
employment disrupted. The economic analysis stated there was a 5.8 
percent tentative non confirmation rate. Multiplying 3,831,992 
employees by 5.8 percent equals 222,256 employees (who are both 
authorized and unauthorized) that would receive a tentative non-
confirmation under the projections in the economic analysis. Current 
experience with E-Verify shows that about 0.5 percent of employees 
successfully take steps to resolve the tentative non-confirmation, 
which equals 19,160 authorized employees who may be required to resolve 
a tentative nonconfirmation.
    17. Comment: The SBA Office of Advocacy stated that the Regulatory 
Planning and Review section of the rule states that the rule will 
impact 168,324 businesses. The commenter further stated that the 
regulatory flexibility analysis states that there will be 162,125 small 
businesses affected by the rule. The commenter concludes that the 
public is left to assume that there are 162,125 small business with 
prime contracts and subcontracts. The commenter cites data from the 
Small Business Administration that in FY 2006 agencies awarded 
$60,703,667,336 to small business subcontractors. The commenter 
calculates that if this amount were distributed to 162,125 small 
business subcontractors it would mean that each business received on 
the average a contract valued at $375,000. However, the commenter noted 
that DHS cites the average annual revenue of a ten-person firm as 
approximately $1.4 million.
    Response: The estimate of 168,324 contractors impacted is the FY09 
annual estimate. However, the 162,125 small business subcontracts is 
not an annual estimate. As noted in the proposed rule at 73 FR 33378, 
``while there are no reliable numbers for subcontracts awarded to small 
businesses, the Dynamic Small Business database of the Central 
Contractor Registration--a database of basic business information for 
contractors that seek to do business with the Federal Government--gives 
a number of 324,250 small business profiles that are registered. 
Assuming that 50 percent of these small businesses contract with the 
Federal Government at either the prime or subcontract level, then that 
number is 162,125 small businesses.'' Registration with the Central 
Contractor Registration (CCR) does not mean the small business is 
currently or ever will be a Federal contractor; it simply means the 
registrant seeks to do business with the Federal Government. 
Consequently, dividing 50 percent of the small business CCR registrants 
(162,125 small businesses) by the FY 06 SBA estimate of $61 billion in 
small business contract awards may yield $375,000, but the meaning of 
that statistic is not clear.
    As explained in the economic analysis, the estimate of average 
annual revenue of $1.4 million for a ten-person firm is based on data 
from the Small Business Administration. We have no reason to believe 
this data from SBA is unreliable. We assume many small businesses have 
revenue from sources other than Federal Government contracts. The 
economic analysis also made no claim that a ten-person firm was the 
average size of a small business that received a Federal contract. 
Rather, it presented information on how the rule would impact four 
sizes of small entities (10, 50, 100 and 500 employees) by comparing 
their estimated compliance costs to their estimated respective 
revenues.
    18. Comment: Commenters noted that, in order to comply with the E-
Verify MOU, employers agree to only accept ``List B'' documents listed 
on the Form I-9 that contain a photo. Commenters stated that the cost 
of obtaining a photo ID for those employees should be included as a 
cost of this rule. In addition, commenters stated that 11 percent of 
U.S. citizens do not currently have a photo ID and cited the Brennan 
Center for Justice's report entitled ``Citizens Without Proof, A Survey 
of Americans' Possession of Documentary Proof of Citizenship and Photo

[[Page 67691]]

Documentation, Brennan Center for Justice, New York School of Law, 
November 2006.''
    Response: The cost of obtaining a photo ID should be included as a 
cost of the regulation, and it has been added into the economic 
analysis. However, the Councils do not agree that 11 percent of the 
employees covered by the requirements of the rule might not have a 
photo ID.
    The entire study cited by the commenter was only three pages and 
did not include many details such as survey methodology and how the 
results were determined. In addition to the Brennan survey cited by the 
commenter, a publicly available American University study entitled 
``Voter IDs Are Not the Problem: A Survey of Three States'' was 
reviewed. (American University Center for Democracy and Election 
Management, January 9, 2008. http://www.american.edu/ia/cdem/pdfs/
VoterIDFinalReport1-9-08.pdf). This survey of 2,000 registered voters 
in Indiana, Maryland, and Mississippi determined that, overall, only 
1.2 percent of the total respondents lacked Government-issued photo 
identification. Comparing the results of the American University study 
with the Brennan survey shows there appears to be considerable 
disagreement among the estimates of the percentage of Americans without 
a photo ID.
    However, it is not clear how either the results of the Brennan 
study or the American University study is definitive for the purposes 
of the final rule's economic analysis. The rulemaking is regulating 
federal contractors. The universe of federal contractors is not 
directly comparable to either the population of ``voting-age American 
citizens'' (the Brennan survey sample) or ``registered voters'' (the AU 
study sample). Both the ``voting-age American citizen'' and 
``registered voter'' populations by definition include people not in 
the workforce.
    Consequently, the final economic analysis will assume 0.5 percent 
of workers vetted through E-Verify will need to obtain a photo ID and 
that employers will incur an eight-hour opportunity cost so that the 
employees can obtain a photo ID.
    19. Comment: Commenters believed that the costs of implementing the 
rule are underestimated.
    Response: The Councils agree in part, and have reviewed the 
economic analysis with the E-Verify program and have increased certain 
enrollment and training time cost estimates in the economic analysis 
for those contractors that enroll in E-Verify. Additional costs have 
been added for employers to identify those existing employees that need 
to be vetted through E-Verify. Consequently, the estimated 
implementation costs have increased for the final rule relative to the 
costs estimated for the proposed rule. Another category of 
implementation costs was added to the economic analysis. This category, 
called ``Miscellaneous Implementation Costs,'' is estimated to be an 
additional 10 percent of the total calculated implementation costs 
(such as employer enrollment, reviewing and updating the I-9's of 
existing employees, the purchase of a computer) to cover costs 
companies may incur to execute the rulemaking requirements, such as 
planning.
    20. Comment: A commenter stated that the proposed rule requires 
contracting officers to modify covered existing indefinite quantity/
indefinite delivery (IDIQ) contracts to add the proposed E-Verify 
contract clause. Commenters believe the RIA excludes the cost of 
modifying these IDIQs and that the Government will need to engage in 
negotiations with these IDIQ contractors. In addition, the commenter 
believes the Government will owe ``consideration'' to the contractors 
in exchange for agreeing to include the E-Verify contract clause. The 
commenter believes, based on the professional estimate of a former 
Federal procurement official, that the number of existing IDIQ 
contracts that would need to be modified is approximately 10,000.
    Response: The Councils agree that the economic analysis did not 
include the cost of modifying these IDIQ contracts, but disagree 
regarding the extent of the cost burden of these modifications. For the 
purpose of the economic analysis, the commenter's estimate that 10,000 
existing contracts will need to be modified was used. However, 
extensive ``negotiations'' between the Government and the contractors 
are not expected. The final economic analysis uses a two-hour 
opportunity cost of time for the contractor to process the modification 
and have discussions with the Government, if needed.
    The Federal Register does not normally spell out the amount or type 
of consideration the Government expects to pay on a contract 
negotiation. This is a contract-by-contract issue determined by 
individual contracting officers. This is a pass-through cost to the 
Government. However, due to the statutory preference for multiple award 
IDIQs and the resultant competitive pressures, the Councils expect that 
the amount of consideration required at time of contract modification 
would be negligible.
    21. Comment: A commenter disagrees with the estimate of the average 
wage of a Federal contractor used in the economic analysis. The 
commenter notes that the economic analysis assumed the average yearly 
salary a Federal Government employee earns ($66,705) is a reasonable 
proxy for the average annual salary of a Federal contractor and noted 
that, according to the Bureau of Labor Statistics, the average wage 
rate in the U.S. is approximately $40,000. The commenter believed that 
the average salary a Government contractor earns is less than the 
average salary a Federal employee earns and the BLS estimate of $40,000 
is a better approximation of Federal contractor pay than the $66,705 
used in the economic analysis. The commenter concludes that the 
consequence of the annual salary of Federal contractors being 
overestimated is an underestimate of the number of contract employees 
and an underestimate of the costs of mandatory E-Verify.
    Response: The Councils do not have data that shows the average wage 
of a contract employee on a Federal contract. Consequently, we had to 
rely on our extensive knowledge of Federal contracts and our knowledge 
of the personnel who perform work on those contracts to inform our 
estimate of a reasonable wage rate of a Federal contractor.
    The Councils continue to believe the average U.S. wage rate of 
approximately $40,000 annually is a poor proxy for the average Federal 
contractor wage. As explained in the economic analysis, the average 
educational attainment level of the average Federal Government employee 
is significantly higher than the educational attainment level of the 
general U.S. workforce. In addition, according to the Bureau of Labor 
Statistics, ``Although the Federal Government employs workers in every 
major occupational group, workers are not employed in the same 
proportions in which they are employed throughout the economy as a 
whole * * * The analytical and technical nature of many Government 
duties translates into a much higher proportion of professional, 
management, business, and financial occupations in the Federal 
Government, compared with most industries. Conversely, the Government 
sells very little, so it employs relatively few sales workers.'' (see 
http://www.bls.gov/oco/cg/cgs041.htm).
    As a result of the higher Government educational level, which is 
driven by the higher proportion of professional, management, business, 
and financial occupations in Government when

[[Page 67692]]

compared to the U.S. workforce, the U.S. workforce's average annual 
$40,000 salary can not reasonably be used as a proxy for the work the 
Federal Government is required to perform. The Councils believe the 
average wage rate for employees performing the work the Federal 
Government is required to perform is certainly higher than the U.S. 
average wage rate and based on our experience with contracts we 
continue to believe that $66,705 is a reasonable approximation of the 
average Federal contractor's annual salary. This estimate is an 
approximation and the actual wage rate of a Federal contractor could be 
higher or lower than our estimate. The economic analysis includes a 
sensitivity analysis that shows how the cost of the regulation changes 
based on increases or decreases in the number of employees being vetted 
through E-Verify.
    We further note there is some credible information that shows 
Federal Government employees are significantly underpaid when compared 
to similar private sector occupations. For example, according to the 
Federal Salary Council, ``Federal employees make an average of 23 
percent less than their private sector counterparts.'' (see http://
www.govexec.com/story_page.cfm?articleid=38212&ref=rellink). While we 
did not increase the $66,705 average Federal Government salary upward 
by 23 percent to account for this ``pay gap'' when estimating the wage 
of Federal Government contractors, commenters should be aware of this 
information.
    22. Comment: A commenter provided wage survey data that established 
the prevailing rate for many occupations covered under the McNamara 
O'Hara Service Contract Act and the Davis Bacon Act for seven specific 
job titles. The commenter provided hourly and annual wage rates for the 
jobs: Accounting Clerk I, Data Entry Operator I, Cook I, Food Service 
Worker, Janitor, Laborer, Grounds Maintenance, Computer Operator I. The 
commenter noted that the wage rates for the seven specific occupations 
(selected by the commenter) were much less than the $66,705 average 
wage rate used in the economic analysis.
    Response: While the Councils do not dispute that there are specific 
occupations in which Federal contractors make less than the average 
wage rate of $66,705 used in the analysis, the higher proportion of 
professional, management, business, and financial occupations in the 
Federal Government, compared to the U.S. workforce, means the work the 
Federal Government performs requires a relatively higher educated 
workforce that earns more than the national average.
    23. Comment: A commenter stated that the economic analysis begins 
with a figure for the number of prime Government contractors in 2007 
and assumes that this number will increase at a 5 percent compound 
annual rate over the study period. No justification is provided for 
this assumption.
    Response: The economic analysis noted that it is difficult to 
project the number of contractors over the ten-year period of analysis 
(FY 2009-FY 2018) due to the number of variables that could influence 
the amount of Government spending and the amount of that spending that 
would be used to purchase contract support. The Councils continue to 
believe that a 5 percent growth rate is a reasonable assumption.
    24. Comment: The SBA Office of Advocacy stated that the proposed 
rule does not allow small businesses to fully assess the impact of the 
rule because the economic analysis lacks transparency. The commenter 
argues that the economic analysis in the docket is problematic from a 
methodological point of view because the proposal includes only the 
number of contracts in FY06, total value of contracts in FY06, and the 
total value of contracts in FY07. The commenter concludes that the 
remainder of the analysis amounts to a series of behavioral assumptions 
that are neither substantiated nor justified.
    Response: The Councils disagree that the economic analysis is 
problematic or that it lacks transparency. The write-up, accompanying 
tables, and sample calculations show exactly how the costs were 
calculated. In addition, the economic analysis included a section that 
showed how small entities of various sizes (10, 50, 100, and 500 
employees) would be impacted by the specific cost categories of the 
rule (start-up and training costs, verification costs, authorized 
employee replacement cost) and compared those costs to the estimated 
revenue of companies in those respective sizes in order to get an idea 
of the economic impact of the rule on those sizes of small entities.
    The economic analysis did use FY 2006 data to estimate the number 
of contractors, but as explained in the economic analysis, the number 
of real dollars spent on Federal contracts remained nearly the same in 
FY 2006 and FY 2007. The commenter did not provide any information to 
show why our assessment was incorrect or unreasonable, but just 
asserted that it was ``problematic.'' While there is not ``empirical 
data'' to support every assumption in the economic analysis, the use of 
professional judgment is accepted practice when conducting IRFAs. The 
IRFA requested comments in the section of the analysis that explained 
very methodically how the number of employees impacted were modeled and 
invited more precise information from the public to inform our model. 
None was received.
    25. Comment: The SBA Office of Advocacy stated that the total 
number of contracts is derived by making various assumptions, such as 
assuming that subcontractors have a 20 percent share, there are 20 
percent new contracts per year, and that the total number of contracts 
grows at five percent per year. The commenter states if any of these 
assumptions were to change the total number of contracts in the 
analysis would be affected. The commenter further states the proposal 
does not indicate where the percentages came from.
    Response: Page 19 of the economic analysis stated ``The 20 percent 
estimate of covered subcontractors is a ``best guess'' provided by 
Government contracting professionals.'' Page 20 states ``* * * the 
Federal Government does not have an estimate of the total number of 
assigned employees that perform work on Government contracts or an 
estimate of the number of new hires at a covered contractor or 
subcontractor. In order to estimate the number of employees that will 
be vetted through the E-Verify system, we must make a series of 
assumptions that allow us to estimate the amount of contract labor 
being purchased by the Government and then convert the amount of labor 
being purchased into Full Time Equivalent positions (FTE's).'' Pages 21 
through 23 explain the calculations and clearly label which numbers are 
estimates.
    The Councils agree that changes in these assumptions would change 
the number of contractors and the number of personnel vetted through E-
Verify. The economic analysis includes an appendix that shows how the 
cost of the rule would change if the number of contractors and the 
number of employees vetted through E-Verify change.
    26. Comment: A commenter stated that the rule should consider the 
cost of the rule on businesses that make a business decision not to do 
business with the Federal Government due to the rule.
    Response: The Councils agree, but we note that under the Regulatory 
Flexibility Act, the economic analysis need only include the direct 
impact of a regulation on a small entity that is required to comply 
with the regulation. Nevertheless, the analysis provided

[[Page 67693]]

under the requirements of EO 12866 and the Regulatory Flexibility Act 
implicitly takes this potential impact into account. The analysis is 
conducted under the assumption that every federal contractor and 
subcontractor would choose to incur the cost of the rulemaking and 
continue to do business with the Federal Government. Businesses may 
choose not to incur the cost of compliance with this rule, but would 
presumably only do so were the cost of compliance higher than avoiding 
doing business with the government. In such cases, the analysis would 
actually have overestimated the impact of the rule.
    27. Comment: A commenter believes the Federal Procurement Data 
System-Next Generation (FPDS-NG), the source for the estimate of the 
number of FY 2006 prime contractors in the economic analysis, contains 
inaccurate data. The commenter believes the use of data from the FPDS-
NG in the economic analysis is ``questionable'' and that the number of 
contractors in FPDS-NG is underreported.
    Response: The Councils disagree. FPDS is the comprehensive web-
based tool for agencies to report contract actions. It collects, 
processes, and disseminates official data on Government contracts. It 
is therefore the best available source of data on Government contract 
actions.
    28. Comment: A commenter stated that multiple people would need to 
be trained to run the E-Verify checks and estimated that it would take 
``3 to 4 hours of time for one person to register, understand the MOU 
and take the tutorial.'' The commenter questioned estimates contained 
in the economic analysis such as: The ten-minute registration process, 
the training time needed for the different types of E-Verify Users 
(Corporate Administrator and General User 1.5 hours and Program 
Administrator 2.5 hours; Program Administrators and General Users would 
also incur 0.5 hours of recurring training), and the estimate of the 
amount of time needed to review the MOU. The commenter further noted 
that the economic analysis assumed that to sign the MOU would take 30 
minutes for a Human Resources Manager; if a General Manager reviews the 
MOU (assumed to be 40 percent of the time) the General Manager's review 
would add another 30 minutes, and if an attorney reviewed the MOU 
(assumed to be 25 percent of the time), the attorney's review would add 
another one hour. The commenter did not believe these estimates were 
accurate for a multinational corporation.
    Response: The burden estimates used in the economic analysis are 
assumed to reflect an average burden for all contractors that enroll in 
E-Verify. Experiences of one company or a specific group of companies 
may not accurately reflect the burden at the typical contractor. 
However, the E-Verify program office has reviewed the commenter's 
comments and has agreed that some of the estimates used in the economic 
analysis should be increased.
    The economic analysis assumed that a human resources manager would 
take 0.5 hours to read and sign the MOU; that estimate has been 
increased to 1.5 hours. Also, the hours for attorney review are being 
increased from 1 hour to 2 hours, and the estimate for a general 
manager review will be raised from 0.5 hour to 1 hour. Note that in 
many companies, especially the smaller entities; the human resources 
manager is the same person as the general manager. We have assumed 
that, even though there is no requirement for more than one person to 
be involved with registering the company and signing the MOU, there may 
be multiple personnel involved in some instances.
    The initial training hours for the corporate administrator have 
been increased from 1.5 hours to 2 hours, the program administrator 
initial training hours have been raised from 2.5 hours to 3 hours, and 
the general user initial training hours are increased from 1.5 hours to 
2 hours.
    The 30-minute estimate for annual recurring training for the 
program administrator and general user will be increased to a full hour 
for each. This ``recurring training'' includes time to review new 
additions to the user manual.
    In summary, while it could take three to four hours to register, 
understand the MOU, and take the tutorial, these activities only occur 
when the contractor initially enrolls. Staff later registered by the 
contractor as general users and program administrators will only need 
to take the tutorial to begin utilizing the E-Verify system.
    29. Comment: Commenters believed that on-going compliance 
obligations have been understated. The commenters stated that 
calculations did not include an analysis of coping with the constantly 
changing program. Commenters argue that--
     Every time the MOU changes, E-Verify employers will have 
to analyze whether they need to sign a new MOU;
     Every time the manual changes, employers will need to 
spend time reviewing what has changed, whether it impacts them, and how 
to accommodate any required changes; and
     Every time the photo tool changes and expands, all E-
Verify organizations will need to train their staff and change their 
processes accordingly and then will need to audit compliance with the 
new standards.
    The commenters consider that this on-going compliance obligation is 
compounded by the fact that a large employer cannot simply distribute 
the information provided by the Government about legal changes, because 
each change must be translated into materials specific to the 
employer's processes and procedures.
    Response: We disagree with the characterization that E-Verify is a 
burdensome, constantly changing program. The September 2007 Westat 
report found that ``The vast majority of [E-Verify] employers (96 
percent of long-term users) disagreed or strongly disagreed that the 
tasks required by the system overburden their staff.'' (pg. 65) The 
report also stated that approximately 97 percent of long-term users 
found the indirect set-up and maintenance costs associated with the 
system were either no burden or only a slight burden (pg. 106). DHS 
does not require employers to sign a new MOU when there is a change to 
the program. Currently, upon logging onto E-Verify, users are greeted 
with a message board that contains all new enhancements to the system 
and any applicable policy changes. The message board contains a full 
archive of all messages in the event that the employer has not logged 
on to the E-Verify system in several months. Of all the recent 
enhancements to the program, only the addition of the Photo Tool 
required E-Verify users to complete additional training. This action 
was atypical. This additional training was an unusual requirement for 
the program as changes to the program do not typically require 
mandatory training. The analysis includes a full hour of ``on-going'' 
training each year so that the user can keep current on any changes to 
E-Verify.
    Federal contractors who happen to be currently enrolled in E-Verify 
will be required to take a tutorial refresher that addresses the 
verification of existing employees. However, the economic analysis 
assumed that none of the Federal contractors were currently enrolled in 
E-Verify and consequently estimated the costs for the full training 
module, not for the refresher module. To the extent that the contractor 
is an existing E-Verify user, the economic analysis likely 
overestimates the training burden.
    30. Comment: A commenter noted the challenges and costs of 
resolving tentative nonconfirmations are understated. Commenter states 
that, for its members, consistency and

[[Page 67694]]

compliance are critical and must be built into the process from day 
one. This is especially important for implementing tentative 
nonconfirmation procedures. Based upon the experience of its members 
that are E-Verify users, the commenter believes the RIA estimates are 
grossly understated. One large multinational employer provided the 
following data on its experience with E-Verify when it was hiring many 
student interns between January 1, 2008 and May 22, 2008. Out of 598 
queries submitted, it received tentative nonconfirmation notices on 92 
or 15.38 percent. Out of the 83 DHS tentative nonconfirmations (the 
remainder were SSA tentative nonconfirmations), about 80 percent of 
those tentative nonconfirmations required personal attention to 
resolve, at a great cost to the employer and the impacted foreign 
nationals.
    Response: While the RIA estimated that 5.1 percent of the employees 
would receive SSA tentative nonconfirmations; the employer in the 
example only received 9 SSA tentative nonconfirmations (if 83 were DHS 
tentative nonconfirmations) out of 598 total queries. This is 1.5 
percent, or significantly less than the 5.1 percent estimated in the 
RIA.
    However, the Councils agree with the commenter that the RIA 
estimate of ten minutes to complete the tentative nonconfirmations 
should be increased. The Councils believe ten minutes is a reasonable 
estimate solely for the time needed to review the tentative 
nonconfirmation notice with the employee and for the employee to decide 
if he/she want to contest the tentative nonconfirmation. If the 
employee decides to contest the tentative non-confirmation, it should 
take an additional ten minutes for the employer to print out and 
provide the referral notice to the employee; this additional time is 
being added to the estimate.
    The employee must then contact the appropriate Government office 
within eight Federal working days. The employer is not required to 
spend any additional time on the resolution process until the employee 
has resolved the case with the appropriate Federal agency. This time 
commitment is part of the verification process followed by all E-Verify 
users and is not unique to Federal contractors.
    31. Comment: A commenter noted that its members report that 
corrections at the SSA usually take in excess of 90 days. The members 
report that employees must wait four or more hours per trip, with 
repeated trips to SSA frequently required to get their records 
corrected. The members also report that policies for handling this, 
e.g., does the employee get paid time off to go to SSA, must be 
consistent and fair. One member reports that its biggest issue actually 
happens after an employee gets his or her record corrected by SSA. At 
that point, the member states that the employer must spend weeks 
waiting in limbo. According to the employer, E-Verify instructed this 
employer to check the record weekly because it was still not clearing 
even after SSA fixed the error. The commenter notes that when this 
occurs, the employer and employee are left in an awkward predicament 
because nothing happens--no approval is issued, no new tentative 
nonconfirmation is issued, and no final nonconfirmation is issued.
    Response: First, this rule does not require that the employer 
compensate the employee for time away from work. Next, the September 
2007 Westat report concluded that ``[m]ost case study employees who had 
received tentative nonconfirmations reported no costs associated with 
resolving the finding * * *.'' (pg. 101) Data capture methods 
instituted for E-Verify with the new electronic secondary process at 
SSA show that the vast majority of SSA tentative nonconfirmations (94.9 
percent) are resolved within 24 hours of contacting the SSA Field 
Office.
    32. Comment: A commenter stated that a number of the commenter's 
members have made arrangements to electronically deliver tentative 
nonconfirmations, and they inform the commenter that it is not unusual 
for 24 hours to pass before the tentative nonconfirmation even reaches 
the employee. The commenters state that where companies conduct some of 
their E-Verify queries in-house and outsource other queries to a third 
party, the amount of time needed to discuss a tentative nonconfirmation 
will vary depending on who submitted the query.
    Response: A 24-hour or longer delay in passing a tentative 
nonconfirmation notice to an employee does not impact the eight-day 
timeframe for contacting DHS or SSA. The employee must be given the 
tentative nonconfirmation notice in advance of an employer referring a 
case to DHS or SSA. The employer must review the tentative 
nonconfirmation notice with the employee and ask the employee whether 
he/she chooses to contest the tentative nonconfirmation. If the 
employee chooses to contest the tentative nonconfirmation, the employer 
will then go back into the E-Verify system and initiate the referral in 
the system, which begins the eight-day period.
    33. Comment: One commenter disagreed with the economic analysis 
regarding the one-minute estimate to resolve a final nonconfirmation.
    Response: The one-minute period estimated for resolution of a final 
nonconfirmation refers solely to the time it takes for an employer to 
close the case in the E-Verify system, not the external processes the 
employer may take in response to a final nonconfirmation. The economic 
analysis includes a $5,000 termination and replacement cost for an 
authorized employee who leaves employment with the employer (the 
employee is terminated or resigns). The cost of replacing unauthorized 
workers is attributed to the cost of current immigration law and is not 
considered to be a cost of this rule.
    34. Comment: Commenters stated that the eight-day timeframe 
provided to employees for resolving a discrepancy is likewise 
inadequate. They state that--
     When an employer receives a tentative non-confirmation, 
the employer must notify the employee and provide him or her with an 
opportunity to contest that finding;
     If the employee contests, he or she then has eight 
business days to visit an SSA office or call USCIS to try to resolve 
the discrepancy; and
     Eight business days does not provide enough time for many 
employees to visit an SSA office, particularly in cases where the 
employee is working on a remote jobsite potentially hundreds of miles 
away from the closest SSA office and/or where transportation is not 
readily available.
    Therefore, the commenter suggested amending the requirement to 
allow employees thirty business days to try to resolve the discrepancy 
with SSA or DHS.
    Response: An employee who receives a tentative nonconfirmation is 
given eight Federal Government work days to contact the appropriate 
agency. After visiting SSA, or placing a phone call to DHS, the 
applicable agency must also provide a response to the employee within 
two days.
    The E-Verify statute (404(c) of IIRIRA) sets forth the design 
parameters for the secondary confirmation system. It states that the 
Secretary of Homeland Security shall specify a secondary verification 
system capable of providing a final confirmation or nonconfirmation 
within 10 working days after the date of the tentative nonconfirmation. 
USCIS experience in administering the program shows that 95 percent of 
secondary verifications are completed within 2 days. In order for the 
system

[[Page 67695]]

to comply with the statutory specifications, USCIS allows eight working 
days for the employee to visit SSA or contact DHS.
    In cases where additional time may be required for resolving the 
discrepancy with SSA or DHS, the employer will receive a message 
through E-Verify called ``Case in Continuance,'' which may extend 
beyond the ten-day resolution period. During this time, the employer 
may not take action against the employee while the employee is 
resolving his or her case.
    35. Comment: A commenter from an institution of higher education 
expected that most rejections will involve non-immigrant post-doctoral 
associates and fellows who have already undergone careful scrutiny in 
obtaining a visa to enter the United States.
    Response: The Immigration Reform and Control Act of 1986 (IIRCA) 
requires all employers to verify the identity and work authorization of 
any employee working in the U.S. by having the employee complete a Form 
I-9. While nonimmigrant post-doctoral associates and fellows have 
already obtained a visa to enter the U.S., this does not alleviate the 
employer of its responsibility under IRCA. In addition, the fact that 
an alien has been issued a visa has nothing directly to do with whether 
the alien is work-authorized in the United States, as millions of 
aliens who are issued visas and admitted to the United States in B, F 
or certain other nonimmigrant categories are not authorized to be 
employed in this country.
    36. Comment: The SBA Office of Advocacy was concerned about its 
ability to successfully complete the on-line tutorial, required by the 
MOU that contractors will be required to sign. The commenter states 
that, while the proposed rule acknowledges the tutorial, it does not 
acknowledge the requirement that a proficiency test at the end of the 
tutorial needs to be taken and a 71 percent pass rate achieved. The 
commenter is concerned about the cost implications to an employer who 
does not pass the test, stating that the costs involved have more 
dimensions than just the opportunity cost.
    Response: The E-Verify program knows of no situation in the history 
of the program where an employer was ultimately unable to participate 
because it could not pass the mastery test. The cost and burden 
associated with the tutorial is more than adequate to also cover the 
mastery test as well.
    Employers are able to retake the mastery test as many times as is 
necessary to pass. Taking the tutorial and the mastery test is a 
requirement to use the system and run verification queries. Those 
responsible for running queries (and passing the mastery test) are not 
always the same as those who have signed the MOU on behalf of the 
entire company.
    37. Comment: Commenters stated that not all contractors have 
computers at all sites at which they engage in hiring. Consequently, 
they conclude that they will incur costs to computerize and establish 
Internet accessibility for every facility at which they hire employees. 
Given the mobile nature of traveling carnivals and circuses, as well as 
the sporadic availability of Internet access in some rural areas, the 
commenter does not believe that all employers can have reliable 
Internet access or even regular access to a computer while traveling to 
conduct business. Being mobile, the carnival industry would face 
additional costs associated with transporting this equipment from 
location to location.
    Response: It would be unusual for a Federal Government contractor 
not to have Internet access and a computer. Still, employers have the 
option of using an outside company or vendor to run their queries. 
Through this method of using E-Verify, the third party engages in an 
MOU with the DHS and SSA on behalf of its client. Employers could also 
seek out other sources of Internet access, such as a public library. 
While the commenter offered no specific information on the increased 
marginal cost of transporting a laptop computer and printer, it does 
not appear to be significant.
    The economic analysis estimated that two percent of contractors did 
not have a computer or Internet connection at their hiring site. The 
economic analysis stated ``If we do not receive comments indicating 
that covered Federal contractors or subcontractors would need to 
purchase a computer and/or internet connection, we may eliminate this 
category of costs in the final rule.'' As such comments were received, 
that cost will be included in the final rule.
    38. Comment: Commenters noted the E-Verify MOU requires the 
employer to make photocopies of certain documents, and to print certain 
documents if a tentative non-confirmation occurs. The commenters stated 
that the analysis fails to consider the additional cost of printing and 
copying equipment an employer must acquire and maintain at each hiring 
site under the rule. Further, the commenters noted that the E-Verify 
MOU requires, under certain circumstances, that the employer either 
scan certain documents provided by the employer for electronic 
submittal to DHS or use an express mail account. The commenters stated 
that the added cost of a scanner--wherever employees are hired--is not 
considered by the analysis.
    Response: The economic analysis will add additional printing costs 
to the analysis. The analysis will add the cost of an ``all-in-one'' 
printer/copier/scanner/fax machine for the contractors that may need to 
purchase a computer. The economic analysis had already considered 
certain photocopying costs. However, the printer/copier/scanner/fax 
machine that is being included provides an alternative (such as 
scanning a document) to photocopying documents.
    39. Comment: The SBA Office of Advocacy stated that contractors 
will be required to sign a MOU that is an agreement between them, the 
SSA, and USCIS. The commenter stated that the proposed rule provides 
the contractor with an opportunity to negotiate the terms of the MOU 
and that the cost of compliance includes a line item for the 
contractor's attorney to read the MOU. The commenter recommended that 
the cost of compliance should recognize the cost for an attorney to 
negotiate an acceptable MOU.
    Response: The terms of the MOU are not negotiable.
    40. Comment: A commenter stated that the rule does not take into 
account the costs businesses would incur as a result of ``erroneous 
nonconfirmations'' that result from E-Verify database inaccuracies. The 
commenter stated that Government-commissioned reports, congressional 
testimony, and other evidence support its opinion about the 
unreliability of the E-Verify program. The commenter also stated that 
the recent reauthorization of the program by the U.S. House of 
Representatives specifically acknowledged this fact by requiring 
further study by the GAO of the erroneous tentative nonconfirmation 
rate.
    Response: The Westat report in 2007 found that the erroneous 
tentative nonconfirmation rate for all workers from October 2004--March 
2007 was 0.6 percent. (Westat report pg. 57, table) This means that 0.6 
percent of workers that were found work-authorized by the system 
initially received a tentative nonconfirmation during the verification 
process. A system that correctly verifies authorized workers as work-
authorized 99.4 percent of the time cannot reasonably be termed 
``unreliable.'' Further, the economic analysis did estimate the cost to 
employers of resolving the tentative nonconfirmations.
    41. Comment: A commenter stated that there are no reliable figures 
to report the number of erroneous final nonconfirmations because there 
is

[[Page 67696]]

currently no process in place to appeal such an outcome. The commenter 
submits that most employers will simply fire individuals with a final 
nonconfirmation report from E-Verify.
    Response: Employers or employees may contact the E-Verify program 
if additional time is needed to provide such documentation or if they 
believe a final nonconfirmation was received in error. The E-Verify 
program may delay a final nonconfirmation finding on a case by case 
basis in those cases where employees have experienced delays in 
receiving needed documentation that will help prove their employment 
eligibility, and the program will work with the employer and/or 
employee to research the case and identify the reason for the final 
nonconfirmation. Where an employer or employee has questions about a 
final nonconfirmation, DHS or SSA can place such cases ``in 
continuance'' for resolution by either SSA or DHS.
    42. Comment: A commenter states that according to a June 7, 2008, 
Government Accountability Office Report, the existing electronic 
verification systems in place at DHS and SSA are frequently unable to 
provide the ``instant'' verification that E-Verify is supposed to 
provide. The commenter quotes this report as finding that in eight 
percent of the cases, ``[r]esolving these nonconfirmations can take 
several days, or in a few cases even weeks.'' June 7, 2008 GAO Report, 
``Electronic Verification: Challenges Exist in Implementing a Mandatory 
Electronic Verification System,'' p. 3. The commenter states that the 
delays are attributable to several factors, including USCIS's failure 
to promptly update its database when it receives new citizenship 
information. The commenter claims that, in those circumstances, an 
authorized worker will be terminated under the proposed rule even if he 
or she promptly attempts to correct the database error.
    Response: Employees are not penalized if their case requires 
additional time to resolve. As long as they contact the appropriate 
agency within the required eight-day timeframe and begin the process of 
contesting a tentative nonconfirmation, they must be permitted to 
continue working until their case is resolved.
    Contrary to the commenter's assertions, DHS does update its 
database when immigrants are naturalized as citizens. However, when 
naturalized employees properly state that they are citizens, their 
information is verified against the SSA database, which may not yet 
reflect their naturalized status. USCIS implemented a change to the E-
Verify system in May 2008 to re-check against DHS naturalization 
databases any citizens that SSA cannot verify because of a citizenship 
mismatch. This change prevents naturalized citizens from receiving a 
tentative nonconfirmation if their information is available in the more 
current DHS database. However, new citizens remain responsible for 
updating their records with SSA when they are naturalized.
    Moreover, the E-Verify MOU makes clear that employers are 
prohibited from discharging, refusing to hire, or assigning or refusing 
to assign to federal contracts employees because they appear or sound 
``foreign'' or have received tentative nonconfirmations. The MOU also 
notifies an employer that any violation of the unfair immigration-
related employment practices provisions in section 274B of the INA 
could subject the Employer to civil penalties, back pay awards, and 
other sanctions, and violations of Title VII could subject the Employer 
to back pay awards, compensatory and punitive damages. Violations of 
either section 274B of the INA or Title VII may also lead to the 
termination of the employer's participation in E-Verify. If the 
employee believes that he or she has been discriminated against, he or 
she should contact OSC at 1-800-255-7688 or 1-800-237-2515 (TDD). 
Employers that have questions relating to the anti-discrimination 
provision should contact OSC at 1-800-255-8155 or 1-800-237-2515 (TDD).
    43. Comment: A commenter stated that the FAR Council says that the 
only currently employed lawful workers who will be casualties of its 
proposed rule are those who ``choose not to take the steps necessary to 
resolve a tentative nonconfirmation,'' and who thereafter are fired. 73 
FR at 33377. The commenter states that that assertion is premised on 
the notion that there are no errors in the relevant databases that 
cannot be quickly corrected in the eight-day period provided for in the 
Proposed Rule. The commenter contends that that notion is undeniably 
false--as the GAO Report makes clear when it says that it sometimes 
takes ``weeks'' to correct an error under the E-Verify system.
    Response: The commenter appears to misunderstand the eight-day 
period under the E-Verify program for an employee with a tentative 
nonconfirmation to contact SSA or DHS. Employees are not expected to 
resolve their tentative nonconfirmations within eight days--they are 
only required to contact the appropriate agency within that timeframe 
in order to challenge the tentative nonconfirmation. The economic 
analysis does assume there could be some authorized employees who are 
terminated, but this should occur only under unusual circumstances. The 
authorized worker has an economic incentive to ensure his/her 
information properly matches SSA's records both to preserve his/her job 
and to ensure the employee receives full credit for contributions made 
into Social Security. The analysis estimated that 2 percent of the 5.3 
percent unresolved tentative nonconfirmation cases (2% x 5.3% = .106%) 
represent an authorized employee who either resigned or was terminated.
    44. Comment: A commenter stated that, so far this year, the 
commenter has initiated nearly 1,400 new-hire queries through E-Verify 
and anticipates that new-hire queries will approximate 3,000 a year. 
The commenter states that its E-Verify tentative non-confirmation rate 
far exceeds the estimated rate of non-confirmations published by E-
Verify and USCIS. The commenter notes that all of its tentative 
nonconfirmations have ultimately been cleared by E-Verify as work 
authorized, but only after significant investment of time and money.
    Response: Employers' tentative nonconfirmation rates will vary 
depending on the makeup of their workforces. While the majority of SSA 
tentative nonconfirmations are resolved within ten days, E-Verify does 
accommodate employees whose cases cannot be resolved within that 
timeframe provided that they have contacted SSA and have followed all 
of the requirements.
    USCIS continues to partner with SSA in the implementation of the E-
Verify program, especially in diminishing database errors and resolving 
mistaken final nonconfirmations. It is the responsibility of individual 
citizens to update their records with SSA; this includes the most 
common updates of name change due to marriage and change in citizenship 
status due to the naturalization process.
    45. Comment: A commenter stated that mandating contractors to use 
the Basic Pilot/E-Verify program will not eliminate the U.S. economy's 
demand for unauthorized workers. According to the commenter, 
contractors who need workers will continue to hire them ``off the 
books.''
    Response: The INA prohibits hiring or continuing to employ aliens 
whom the employer knows are not authorized to work in the United 
States. INA section 274A(a)(1), (a)(2). Any employment of aliens whom 
the employer knows are not authorized to work in the United States is a 
violation of the law. We disagree with the implication that

[[Page 67697]]

employers will find a way to violate the law anyway, so lax enforcement 
of the law is in the U.S. economy's best interest.
    46. Comment: A commenter stated that smaller businesses may find it 
financially more difficult to comply with Executive Order 12989. 
According to the commenter, the proposed rule indicates that the costs 
of participation in the E-Verify program will likely include startup 
registration costs, opportunity costs of the time spent on training, 
opportunity costs of the time spent on employee verification, 
productivity costs when employees need to leave work to visit SSA/USCIS 
to correct information, and employee turnover costs. The commenter 
quotes statistics drawn from a survey of employers who have used the 
system to demonstrate that the startup process for E-Verify can be 
burdensome.
    Response: The statistics reported by the commenter in the example 
from page 60 of the September 2007 Westat report are incorrectly drawn 
from the table in the report. In fact, 72.9 percent of employers 
disagreed with the statement ``the on-line registration process was too 
time consuming''; only 13.4 percent agreed with the statement (of which 
2.4 percent strongly agreed). Also, 75.9 percent of employers surveyed 
disagreed with the statement ``the on-line tutorial was hard to use,'' 
an additional 21.2 percent of employers surveyed strongly disagreed 
with the statement, only 2.8 percent agreed (of which 0.2 percent 
strongly agreed). Finally, 67.9 percent of employers disagreed with the 
statement ``the tutorial takes too long to complete;'' only 21.6 
percent of employers agreed (of which 3.8 percent strongly agreed). The 
statistic on the importance of passing the mastery test and the 
perceived burden was correctly drawn from the table.
    System set up and maintenance costs are a concern for the program 
and especially their impact on smaller employers. Therefore, questions 
on these costs have been and will continue to be asked in the 
independent evaluations of the program. The statistics cited in the 
example are accurately quoted from the Sept. 2007 Westat report, 
however, it must be noted that the average start-up and maintenance 
costs are calculated from a very widely skewed distribution of cost 
data. As stated on pg. 104 of the Westat report, ``Eighty-four percent 
of employers that used the Web Basic Pilot for more than a year 
reported spending $100 or less for start-up costs, and 75 percent said 
they spend $100 or less annually to operate the system. However, 4 
percent of long-term users said they spend $500 or more for start-up 
costs, and 11 percent spent $500 or more annually for operating 
costs.'' The report does not segregate the employers that reported a 
high level of cost into large and small employers. However, the report 
does state on page 106 that ``[n]ot surprisingly, maintenance costs 
were higher for employers that verified employees at multiple locations 
than for those that verified at only one location ($1,653 versus 
$490).'' So, to the extent that small employers are less likely to 
verify employees at multiple widely distributed locations, their costs 
would be expected to be lower than the average provided in the report.
    Separate from this final rule, the E-Verify program is working to 
identify and address issues that may result in an employee not fully 
understanding the opportunity to contest an initial mismatch, e.g., the 
Plain Language Initiative. The program currently provides program 
materials in English and Spanish and is currently working to produce 
documents in nine additional languages.
    47. Comment: Commenters stated that the RIA assumes that 2 percent 
of authorized workers for whom E-Verify generates a tentative 
nonconfirmation will not resolve their records to the Government's 
satisfaction. Commenters believe that failing to resolve a tentative 
nonconfirmation leads inexorably to a final nonconfirmation, which 
results in employee termination. The commenters note that the RIA 
claims that these workers ``choose not to resolve the non 
confirmation,'' but no evidence is provided showing that the lack of 
records resolution is the result of worker choice. Furthermore, the 
commenters note that the RIA does not explain why workers would 
intentionally choose a path that leads to termination. The commenters 
believe that a more plausible explanation is that these workers have 
unusually difficult problems to resolve or they are less capable than 
their peers at navigating multiple Government bureaucracies or they are 
marginal workers for whom the burden of resolving records exceeds the 
gain from remaining in the formal labor market. Whatever the cause(s), 
the commenters believe E-Verify will be responsible for these 
terminations and the RIA acknowledges this and includes, as a cost to 
employers, the additional recruitment and training that are required to 
replace these employees. However, commenters believe the RIA ignores 
the opportunity cost of termination to the employees themselves. The 
$10 billion present value cost estimate should be understood as a 
lower-bound for the true social cost of forced unemployment of 
authorized workers.
    Response: The Councils disagree that there will be any significant 
``forced unemployment'' cost caused by this rule on authorized workers. 
If the E-Verify program issues a tentative non confirmation to an 
employee, the employer cannot fire, prevent from working, or withhold 
or delay training or wages for that employee during the resolution 
process. All employees receiving tentative nonconfirmations are given 
the opportunity to contest and correct their records.
    A limited case study in the 2007 Westat report notes that ``Most 
employees reported positive experiences correcting their paperwork with 
SSA or USCIS'' and ``Overall, employees who contested SSA findings did 
so quickly: The record review showed an average of only 2.1 days 
between the referral to SSA and the date the SSA representative signed 
the referral letter (if one was provided to the employee)'' (Appendix E 
pages E-13 and E-14). This 2.1 day average time to resolve a tentative 
non-confirmation suggests the resolution process is not an unreasonably 
difficult burden for those that choose to utilize the process.
    As there is no law that compels an authorized worker to resolve a 
tentative non-confirmation, the Councils believe it is reasonable to 
add a cost for an employer to replace an authorized worker who does not 
resolve the tentative non-confirmation. For the purpose of the economic 
analysis, the Councils assumed that 2 percent of the 5.3 percent 
unresolved tentative non-confirmations were authorized workers leaving 
employment with the employer (2% x 5.3% = .106%). The employer would 
incur employee replacement (turnover) costs whether the authorized 
employee resigned or was terminated. Due to the economic incentive to 
ensure one's records are correct with SSA and to continue employment, 
it would be a very unusual circumstance for an authorized worker not to 
work diligently to resolve the tentative non-confirmation.
    We disagree with the commenter's assertion of a ``$10 billion'' 
present value cost estimate of ``forced unemployment.'' The commenter's 
$10 billion estimate is apparently premised upon assuming a 15 year 
period of analysis of ``forced unemployment'' and a ``disemployment 
rate'' of ``1.060%.'' We assume the ``disemployment rate'' used by the 
commenter was meant to be the ``.106%'' estimate in the RIA for the 
proposed analysis of people who are authorized to work but either 
resign or

[[Page 67698]]

are terminated for failure to resolve the tentative non-confirmation. 
If true, this would cause an order of magnitude error in the 
commenter's calculations. Also, the economic analysis assumed the 2% 
replacement rate for authorized workers who do not resolve their 
tentative non-confirmations included any and all reasons an authorized 
employee potentially leaves employment, such as voluntary resignation.
    Finally, the E-Verify program knows of no information that supports 
the commenter's assertion that workers who do not resolve their 
tentative non-confirmations have ``unusually difficult problems to 
resolve, or they are less capable than their peers at navigating 
multiple government bureaucracies, or they are marginal workers for 
whom the burden of resolving records exceeds the gain from remaining in 
the formal labor market.''
    48. Comment: Commenters stated the RIA extrapolates to a coerced 
population of Federal contractors from the current E-Verify population, 
which consists of volunteers. In this case, the commenters believed 
volunteers are likely to be firms for which participation in the 
program is actually beneficial. The commenters concluded, if this were 
the only criterion for participation, then they would expect data from 
these firms to be ``better'' than data the Government will obtain once 
it makes participation mandatory.
    Response: The economic analysis used actual information regarding 
the E-Verify authorization process (i.e., percentage of tentative non-
confirmations, percentage of final nonconfirmations, etc.) generated by 
the entities that were using the E-Verify program during October 2006-
March 2007 in order to estimate costs.
    The rate of tentative non-confirmations, percentage of final 
nonconfirmations, and other operational statistics may be different for 
entities that choose to be Federal contractors than for the existing E-
Verify population, but there is no evidence to support the theory that 
data from the existing E-Verify enrollees would be ``better'' (lower 
tentative nonconfirmation rates) than data the Government will obtain 
once additional Federal contractors join E-Verify. We note there are 
many states that currently require certain employers to participate in 
E-Verify. For example, Arizona and Mississippi are currently requiring 
all employers to enroll in E-Verify and authorize the work status of 
newly hired employees. Also, Idaho, Minnesota, and North Carolina 
require state government agencies to vet newly hired state employees 
through E-Verify.
    In fact, there is data that suggests there could be fewer tentative 
non-confirmations among the federal contractor population than in the 
general population. The September 2007 Westat report stated on page 41 
(note that E-Verify was formerly known as ``Basic Pilot''): ``* * * 
establishments registering for the Web Basic Pilot differ significantly 
from employers not enrolled in the program. More specifically, pilot 
participants tend to be larger than most establishments, have higher 
proportions of foreign-born employees, and be more concentrated in 
certain industries and locations.'' The report also stated, ``* * * it 
appears currently that citizens are underrepresented in the Web Basic 
Pilot program compared to the nation. Since citizens are more likely 
than noncitizens to be authorized automatically and less likely to get 
an erroneous tentative nonconfirmation, it is reasonable to expect that 
a program that verifies all new hires nationally would have a higher 
percent verified automatically and a lower erroneous tentative 
nonconfirmation rate than is currently the case, if nothing else 
changes.'' (pg. 134) Consequently, we could reasonably expect that 
tentative non-confirmation rates for federal contractors could be lower 
than the rates experienced by current E-Verify enrollees.
    49. Comment: A commenter stated that the calculations from the 
sample should be treated with caution because the sample consisted of a 
six-month season that did not include Spring- and Summer-hires. The 
commenter further stated that seasonal workers would be covered by E-
Verify but are excluded from this sample. In addition, the commenter 
stated that if a Federal agency had proposed to collect data from 
volunteer E-Verify participants and use them to predict results from a 
mandatory E-Verify program, the Office of Management and Budget would 
have been compelled by law and its own regulations to disapprove the 
information collection on the ground that it lacked practical utility 
(commenter cited in footnote 24--``OMB's information collection rule 
forbids it from approving a statistical survey `that is not designed to 
produce valid and reliable results that can be generalized to the 
universe of study.' '' See 5 CFR 1320.5(d)(2)(v); 60 FR 44988.
    Response: The Council agrees a full year's worth of data would 
provide a better indicator of the likely impacts of the final rule. 
Therefore, for the final rule's economic analysis, a full 12 months of 
data are used, instead of the six months used in the proposed rule's 
economic analysis. However, given that the economic analysis did not 
conduct a ``statistical survey,'' the commenter's purpose in stating 
that the economic analysis did not comply with OMB ``statistical 
survey'' guidelines is not clear.
    50. Comment: The SSA provided additional information regarding the 
marginal cost of the rule to SSA.
    Response: The economic analysis will be revised to incorporate the 
cost estimates provided by SSA. For example, the economic analysis 
estimated the cost to SSA in FY09 to be $622,699, while the SSA 
estimated its FY09 costs to be $1,023,294.
b. On Federal Acquisition Workforce
    Comment: A commenter stated that the proposed rule assumes only 
$1,547,194 in costs that the Federal Government will incur in 2009 as 
``operating costs from each query that an employer executes'' and 
``resolving tentative nonconfirmations.'' According to the commenter, 
the proposed rule has not considered costs associated with contracting 
officer time and effort.
    Response: Contracting officer duties under the final rule consist 
almost exclusively of inserting the clause into appropriate 
solicitations and contracts. The marginal effort associated with that 
duty is so slight as to be practically immeasurable. Further, there is 
no reason to believe that additional contracting officers will need to 
be hired due to the impact of this rulemaking.
3. Reasonable Alternatives
    Comment: The SBA Office of Advocacy suggested that the 
Administration should examine feasible alternatives to the proposed 
rule, if comments received indicate that the proposed rule would have a 
significant economic impact on a substantial number of small 
businesses. Another commenter wrote that the Administration's analysis 
of reasonable alternatives is flawed for failure to take into account 
all reasonable alternatives, and for failure to adequately address the 
lone alternative taken into account.
    Response: The Council has considered all reasonable alternatives, 
as addressed herein and in the FRFA, and has adopted all the 
alternatives that fulfill the objective of the Executive Order.
4. Paperwork Reduction Act
    Comment: An immigration lawyers association commented that the 
proposed rule violated the Paperwork Reduction Act by imposing an 
additional information collection

[[Page 67699]]

burden on employers and because employers who fail to keep such records 
will face significant liability.
    Response: The Councils recognized in the proposed rule that the 
rule contains information collection requirements over and above the 
burden hours already approved for the E-Verify System. 73 FR 33379. The 
Councils have requested and received approval from OMB for this new 
information collection requirement. Accordingly, the information 
collection requirements of this rule fully comply with the requirements 
of the Paperwork Reduction Act.

F. Final Regulatory Flexibility Act Analysis

    This Section F constitutes the Final Regulatory Flexibility Act 
Analysis (FRFA), as required by the Regulatory Flexibility Act, 5 
U.S.C. 604. The issues covered here are also addressed in detail in the 
Regulatory Impact Analysis for FAR Case 2007-013, available at http://
www.regulations.gov.
    This final rule implements Executive Order, 12989, as amended, to 
enhance the stability and dependability of Federal Government 
contractor workforces by requiring them to use the USCIS' E-Verify 
system as the means for verifying employment eligibility of certain 
employees.
    The Councils expect this rule to impact nearly every small entity 
in the Federal contractor base. However, the direct cost this rule 
imposes does not appear to have a significant economic impact on a 
substantial number of small entities, within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq. Nevertheless, the 
Councils have not formally certified the rule as not having a 
``significant economic impact on a substantial number of small 
entities,'' as allowed under section 605(b) of the Regulatory 
Flexibility Act.
    In addition to the costs of this final rule, the Councils expect 
this rule to carry certain benefits to employers in that it provides an 
economical, web-based method for performing verification of employment 
eligibility of employees, improving the reliability of the employment 
verification procedures employers are already required to perform. 
Federal contractors' participation in E-Verify is also expected to 
reduce the likelihood that contractors will discover, long after the 
fact, that they have hired unauthorized aliens, thereby sparing 
contractors the cost of terminating and replacing employees not 
authorized to work under Federal immigration law after resources have 
been expended on the training of those employees.
    In addition, a number of changes have been made in the final rule 
to lessen the impact on small businesses; they should also benefit 
large businesses in reduced compliance costs. Specifically, the 
timelines have been significantly extended (see Section B., ``Changes 
Adopted in the Final Rule'', paragraph 1., ``Significantly Extended 
Timelines'', for the precise changes); the threshold for prime 
contracts has been raised from $3,000 to the simplified acquisition 
threshold ($100,000); contracts with a performance period of less than 
120 days are exempted; the COTS-related exemption has been expanded 
(see Section B., ``Changes Adopted in the Final Rule'', paragraph 9., 
``Expanded COTS-related exemptions for:'' of this rule); contractors 
are offered the option of using E-Verify on all existing employees so 
as to eliminate the necessity of segregating employees performing 
directly on a Federal Government contract from those who are not; and 
contractors may exempt employees with an active, current security 
clearance or for whom background investigations have been completed and 
credentials issued pursuant to Homeland Security Presidential Directive 
(HSPD) 12.
    Executive Order 12989, as amended, prohibits Federal agencies from 
contracting with companies that knowingly hire employees not eligible 
to work in the United States and instructs Federal agencies to contract 
with companies that agree to use an electronic employment verification 
system to confirm the employment eligibility of their workforce. The E-
Verify System is the best available means for contractors and 
subcontractors to verify employment eligibility. Consequently, this 
final rule is being promulgated to institute a contractual requirement 
for contractors and subcontractors to utilize E-Verify as the means of 
verifying that (1) all new hires of the contractor or subcontractor and 
(2) all employees directly engaged in performing work under covered 
contracts or subcontracts are eligible to work in the United States. 
The final rule adds a new FAR Subpart 22.18 and a new clause.
    The prohibition against Federal agencies contracting with companies 
that knowingly hire employees not eligible to work in the United States 
has existed since 1996. Virtually all employers in the United States, 
including Federal Government contractors and subcontractors, are 
prohibited from hiring an individual without verifying his or her 
identity and authorization to work and from continuing to employ an 
alien whom they know is not authorized to work in the United States 
(section 274A(a) of the Immigration and Nationality Act of 1952, as 
amended (INA), 8 U.S.C. 1324a; 8 CFR part 274A). Many aliens, including 
lawful permanent residents, refugees, asylees, and temporary workers 
petitioned by a U.S. employer, are authorized to work in the United 
States (see 8 CFR 274a.12, listing classes of work-authorized aliens).
    The new contractual requirement to use the E-Verify System will 
enhance the Government's procurement system by decreasing the 
employment of unauthorized aliens in the Government's supply chain and 
thereby fostering a more stable and dependable Federal Government 
contracting community.
    This rule will impact many small entities in the Federal contractor 
base. Major exceptions are contractors providing commercially available 
off-the-shelf (COTS) items and items that would be COTS items but for 
minor modifications, entities that enter into contracts with a value 
less than $100,000, and subcontractors that provide supplies rather 
than services or construction. In Fiscal Year 2006, there were over 
100,000 small businesses that received direct Federal contracts. While 
there are no reliable numbers for subcontracts awarded to small 
businesses, the Dynamic Small Business database of the Central 
Contractor Registration--a database of basic business information for 
contractors that seek to do business with the Federal Government--gives 
a number of 324,250 small business profiles that are registered. 
Assuming that 50% of these small businesses contract with the Federal 
Government at either the prime or subcontract level, then that number 
is 162,125 small businesses.
    The Councils have placed in the public docket a detailed Regulatory 
Impact Analysis of the compliance requirements of this rule. Generally, 
employers will incur opportunity cost of the time their employees will 
spend complying with the requirements of the regulation. Employees will 
need to be trained in order to be able to operate the E-Verify system, 
as well as spending time on processing employee verifications. 
Employers will incur start-up costs from enrolling in the E-Verify 
program, including costs such as reviewing and updating USCIS Form I-9 
(Employment Eligibility Verification) for existing employees and 
potentially a cost to modify an existing personnel or payroll system to 
be able to record the E-Verify status of their employees. We believe a 
small number of employers may need to purchase a computer,

[[Page 67700]]

internet connection, and printer for their hiring site. Certain 
employee replacement (turnover) costs may also be incurred due to this 
regulation.
    In order to further inform our understanding of the economic impact 
of this rule on small entities, we considered hypothetical contractors 
with 10, 50, 100, and 500 employees and estimated the economic impact 
of the rule on those four sizes of entities in their initial year of 
enrollment. The initial year a contractor enrolls in E-Verify is 
expected to be the year with the highest compliance cost, as the 
contractor is incurring both the start-up costs of enrolling in E-
Verify as well as the majority of the costs of vetting its existing 
employees through the E-Verify system.
    The estimated average direct cost of this rule to a contractor with 
10 employees is $1,254 in the initial year. For a contractor with 50 
employees, the estimated average direct cost of participating in E-
Verify is $3,163 in the initial year. For a contractor with 100 
employees, the estimated initial-year impact is $5,615. A contractor 
with 500 employees is expected to have an initial year impact of 
$24,422. This level of direct cost burden is well under 1% of the 
expected annual revenue of these four sizes of entities and does not 
appear to represent an economically significant impact on an average 
direct cost per contractor basis. To the extent that some small 
entities incur direct costs that are significantly higher than the 
average estimated costs, those employers may reasonably be expected to 
face a significant economic impact.
    As discussed previously, the Councils do not consider the cost of 
complying with preexisting immigration statutes to be a direct cost of 
this rulemaking. Thus, while some employers may find the costs incurred 
by replacing employees that are not authorized to work in the United 
States to be economically significant, those costs of complying with 
the Immigration and Nationality Act are not direct costs attributable 
to this rule.
    In addition, the requirement for entities (both large and small) to 
enroll in E-Verify only applies to contractors and subcontractors that 
choose to perform certain work for the Federal Government. When an 
entity's leadership determines that participating in E-Verify would 
impose a significant economic impact on the operation, the leadership 
must make a business decision whether the revenue generated by doing 
business with the Federal Government would provide a financial return 
sufficient to justify the cost of such participation in E-Verify. 
Presumably, entities that do not receive the desired return to justify 
the expense of participating in E-Verify would choose not to be a 
Federal contractor or subcontractor.
    The SBA Office of Advocacy claims that the initial analysis did not 
consider costs such as the social welfare cost or the cost of penalties 
and lawsuits. However, the IRFA fully complied with the requirements of 
Sec.  603 of the Regulatory Flexibility Act. The IRFA compared 
estimated compliance costs for four distinct sizes of small business 
(10, 50, 100, and 500 employees) to the respective revenue of these 
businesses, using information obtained from the Small Business 
Administration, and identified a compliance cost burden of 0.03 percent 
of revenue for the small entity with 10 employees. The Councils do not 
agree that 0.03 percent would typically be regarded as a significant 
economic impact. Further, with regard to the full social welfare cost 
of the rule, regulatory flexibility analyses need not include anything 
other than the direct costs of a regulation on a small entity that is 
required to comply with the regulation.
    The SBA Office of Advocacy believes that the Councils 
underestimated the number of contractors that will be vetted through E-
Verify and criticizes the fixed factors (e.g., 26 percent for labor) 
used in the economic analysis, as well as the estimate that the 
assumption that the number of subcontractors is 20 percent of the 
number of prime contractors. It claims that the estimates the Councils 
used are not based on ``empirical data'' and that the economic analysis 
was not explicit regarding how these factors were determined. The 
Councils respond that the dollar value of the contracts within the 
scope of the rule was found by querying the Federal Procurement Data 
System and does not rely on an estimate by the Councils. Instead of 
simply providing a ``top-level'' estimate, the Councils developed a 
model to estimate the number of employees that would be expected to be 
vetted through E-Verify. The factors utilized (e.g., 26 percent for 
labor) are all multiplied against the estimated dollar value of 
contracts. When describing the percentage estimates used to estimate 
factors utilized, the economic analysis specifically stated ``we 
understand these assumptions are rough and we welcome public comment 
providing more precise information.'' However, no better information 
was provided in the comments. The SBA Office of Advocacy encouraged the 
FAR Council to revisit the economic analysis as more data become 
available. The Councils will consider reviewing this aspect of the 
economic analysis once the final rule has been in effect and useful 
data becomes available.
    The Councils are unaware of any duplicative, overlapping, or 
conflicting Federal rules. There are current requirements for all 
employers, not just Federal contractors and subcontractors, to verify 
the employment eligibility of their newly hired employees. These 
requirements have existed since 1986. Arguably related rules include 
DHS's ``No-Match'' rule, which provides guidance to employers on how 
best to respond to the Social Security Administration's (SSA) no-match 
letters, through which employers are alerted annually about their 
employees whose names and Social Security numbers submitted on tax 
forms do not match up to the information in the SSA's database. 
Although this ``No-Match'' rule concerns the SSA's letters generated 
from one of the data sources used by the E-Verify system, the ``No-
Match'' rule is not directly associated with use of the E-Verify 
System. The two rules interact insofar as use of E-Verify--and the 
resulting strengthening of Federal contractors' employment verification 
processes--is expected to reduce the incidence of SSA ``No-Matches'' in 
the Federal contract workforce resulting from the employment of 
unauthorized alien workers. But the ``No-Match'' rule is designed to 
assist employers to ensure that their entire existing workforce remains 
work-authorized, while this amendment to the FAR is designed to ensure 
that unauthorized aliens are not brought into the Federal Government's 
contractor workforce.
    In addition to the alternatives discussed above in the response to 
public comments--particular, the section entitled ``Small Business,'' 
and its subsections including ``Alternatives to Lessen the Burden on 
Small Businesses''--the Councils considered the following alternatives 
in order to minimize the impact on small business concerns:
     Whether to exempt small businesses entirely from the 
requirement to use E-Verify. The SBA Office of Advocacy was concerned 
that small businesses do not have the financial resources and human 
capital to adapt their technology infrastructure systems to rapidly 
change requirements being imposed by the Federal Government. The 
Councils limited the applicability of this rule to small businesses by 
raising the dollar threshold, limiting flowdown, exempting COTS 
suppliers, and in various other ways discussed throughout this notice.

[[Page 67701]]

     How to limit the compliance costs for small businesses. 
The SBA Office of Advocacy noted that small business Federal 
contractors operate on very thin profit margins and the types of 
technology systems necessary here require capital outlays that cannot 
be easily recouped by passing the cost to the client and are costly to 
the small business owner. Although the E-Verify system does require the 
employer to have access to some equipment such as a computer, Internet 
access, a printer, and either a scanner, photo copier, or a digital 
camera, the Councils believe that this equipment is not prohibitively 
expensive. Almost all small businesses doing business with the 
Government would already have such equipment or be able to readily 
acquire it. The equipment for a small business to implement E-Verify 
need not be particularly sophisticated or complex. The Councils have 
made every effort to limit the cost of compliance.
     How to limit appropriately the burden of compliance on 
subcontractors. The SBA Office of Advocacy is concerned that there is 
disproportionality in the compliance cost burden on small business 
subcontractors because there are fewer avenues and fewer contracts 
among which the small businesses can spread the cost of doing business. 
The final rule adds a number of exemptions that will ease the burden on 
small business and large business contractors; for example, contractors 
will have the option of verifying all existing employees, not just 
those performing directly on the contract. This eliminates the need to 
develop a system to identify employees assigned to the contract.
     Whether to require E-Verify participation as a preaward 
eligibility requirement rather than as a postaward contract performance 
requirement. The rule is distinct from the existing E-Verify program, 
in that it would require E-Verify queries to be performed on certain 
existing employees of a contractor, and the Councils believe that the 
obligations created by the rule should be codified as a postaward 
contract performance requirement.
     Whether the use of E-Verify should be required for 
existing employees of the contractor who are assigned to work under the 
Government contract or should be limited only to the new hires of the 
contractor. Executive Order 12989, as amended, instructs Federal 
contracting agencies to contract with employers that agree to use E-
Verify to confirm the work eligibility of their existing employees 
assigned to work on Federal contracts. The Councils decided that 
requiring employment eligibility confirmation of all workers assigned 
to a new Government contract was most consistent with Executive Order 
12989 and with the Federal Government's own obligation to use E-Verify 
when hiring Federal employees, and it would most effectively ensure 
that the Federal Government does not indirectly exploit an illegal 
labor force.
     Whether to require contractors to use E-Verify only for 
new hires that would be assigned to work under a Government contract 
and exclude all other new hires of the contractor from the E-Verify 
requirement. Executive Order 12989, as amended, instructs Federal 
contracting agencies to contract with employers that agree to use E-
Verify for all new hires of the contractor. The Councils decided that 
requiring contractors to use the E-Verify program as part of standard 
hiring practices would simplify employment verification, and conforms 
with the requirements of Executive Order 12989 and with a principal 
goal of the rule--to ensure that the Federal Government does business 
with companies that do not employ unauthorized aliens.
     Whether the use of E-Verify should be required for all 
prime contracts or only for those contracts that do not call for COTS 
items or items that would be COTS items but for minor modifications, as 
defined at FAR Part 2 (containing the definition of a commercial item). 
Because COTS suppliers, by definition, do not specialize in serving the 
Federal Government, and because the Government might lose access to 
COTS suppliers if they determine the cost of complying with the rule 
outweighs their gains from Government business, the Councils decided 
not to require the use of E-Verify for COTS items and items that would 
be COTS items but for minor modifications. As noted above, the Councils 
expanded the reach of this exception for COTS items in response to 
comments received on the proposed rule.
     Whether the requirements of the rule should flow down to 
all subcontracts or should be limited to subcontracts for services or 
construction. The Councils determined to apply the rule only to 
subcontracts for commercial or noncommercial services, including 
construction. It does not apply to subcontracts for material or to 
subcontracts less than $3,000.

G. Statutory and Regulatory Requirements

Executive Order 12866
    Executive Order 12866, ``Regulatory Planning and Review,'' directs 
agencies and the Office of Management and Budget (OMB) to determine 
whether a regulatory action is ``significant'' and therefore subject to 
review by OMB and subject to the analyses directed by that Executive 
Order. 58 FR 51735, October 4, 1993, as amended. The Councils have 
determined that this rule is a ``significant regulatory action'' under 
Executive Order 12866, section 3(f), because there is significant 
public interest in issues pertaining to immigration and because this is 
an economically significant rule pursuant to this Executive Order. 
Accordingly, this final rule has been submitted to OMB for review.
    This is a major rule under 5 U.S.C. 804.
    A Regulatory Impact Analysis that more thoroughly explains the 
assumptions used to estimate the cost of this final rule is available 
in the docket as indicated under ADDRESSES. For access to the docket to 
read background documents or comments received, go to http://
www.regulations.gov. A summary of the cost and benefits of the final 
rule follows:

    In the initial fiscal year the rule is expected to be effective 
(fiscal year 2009), the Councils estimate that there will be 
approximately 168,624 contractors and subcontractors that will be 
required to enroll in E-Verify due to this rule and that there will 
be an additional 3.8 million employees vetted through E-Verify. In 
the initial year, the cost of the final rule at 7% net present value 
is approximately $245.4 million, and, over the ten-year period of 
analysis (2009-2018), the cost of the final rule is approximately 
$1,105.4 million. In the initial year, the cost of the final rule at 
3% net present value is approximately $254.9 million, and, over the 
ten-year period of analysis (2009-2018), the cost of the final rule 
is $1,336.5 million. Compliance costs from participating in the E-
Verify program fall into the following general categories, and Table 
1 below provides a summary of the costs:
     Startup Costs: Employers must register to use the E-
Verify system and sign a Memorandum of Understanding with USCIS and 
SSA. Employers will also incur costs such as reviewing and updating 
USCIS Form I-9 (Employment Eligibility Verification) for existing 
employees and potentially a cost to modify an existing personnel or 
payroll system to be able to record the E-Verify status of their 
employees. A very small number of employers may need to purchase a 
computer, internet connection and printer for their hiring site if 
that hiring site does not already have internet access.
     Training: Employees who use the E-Verify system are 
required to take an on-line tutorial. While USCIS does not charge a 
fee for this training, employers will incur the opportunity cost of 
the time the employee spends on the training, as the employee's time 
could have been spent on other activities.

[[Page 67702]]

     Employee Verification: Employers will incur the 
opportunity cost of the time spent entering data into E-Verify and, 
if the employee receives a tentative nonconfirmation, employers 
would inform the employee and spend time closing out the case after 
resolution of the tentative nonconfirmation. In addition, the 
employer would incur lost productivity when an employee needs to be 
away from work to visit SSA to correct his/her information. As 
estimated, the employee would bear the cost of driving to SSA.
     Employee Replacement (Turnover) Cost: There may be a 
small percentage of workers who are authorized to work in the U.S. 
and who receive a tentative nonconfirmation but do not take the 
steps necessary to resolve it (despite the strong economic 
incentives to do so). The Councils cannot predict why an authorized 
employee would not work diligently to resolve the tentative 
nonconfirmation, given the incentives to do so, but we believe the 
economic analysis should reasonably account for such a possibility. 
Assuming that a small number of authorized employees would not 
resolve their tentative nonconfirmations, and would either resign or 
be terminated, is simply a conservative analytical assumption in 
light of the fact that there is no law compelling employees to 
resolve their tentative nonconfirmations; thus, employers may incur 
some additional costs due to having to replace a small number of 
authorized employees. To the extent that the accompanying E-Verify 
rulemaking results in the termination or resignation of a worker 
authorized to work in the U.S., those associated employee 
replacement costs would be considered to be a cost of the rule. 
However, the termination and replacement costs of unauthorized 
workers are not counted as a direct cost of this rule because 
current immigration law prohibits employers from hiring or 
continuing to employ aliens whom they know are not authorized to 
work in the U.S. The termination and replacement of unauthorized 
employees will impose a burden on employers, but INA section 
274A(a), 8 U.S.C. 1324a(a), expressly prohibits employers from 
hiring or continuing to employ an alien whom they know is not 
authorized to work in the United States. Accordingly, costs that 
result from employers' knowledge of their workers' illegal status 
are attributable to the Immigration and Nationality Act, not to the 
FAR rule.
     Federal Government Cost: The Government will incur 
operating costs from each query that an employer executes and will 
also incur costs from resolving tentative nonconfirmations.

                                                           Table 1--10 Year Cost of Final Rule
                                                                   [7% present value]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Employer                          Employee        Government
                                                   -------------------------------------------------------------------------------------
                                                                        Authorized
                       Year                                              employee       Verification     Verification     Verification        Total
                                                     Startup costs     replacement          cost             cost             cost
                                                                           cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
2009..............................................     $188,138,945      $15,041,464      $37,836,372       $2,436,863       $1,928,888     $245,382,532
2010..............................................       72,368,319        7,798,427       19,616,690        1,263,415          998,560      102,045,411
2011..............................................       71,015,802        7,652,663       19,250,187        1,239,831          979,895      100,138,378
2012..............................................       69,688,407        7,509,622       18,890,355        1,216,654          961,579       98,266,617
2013..............................................       69,443,845        7,369,253       18,537,018        1,193,865          943,606       97,487,587
2014..............................................       68,145,775        7,231,511       18,190,724        1,171,588          925,973       95,665,570
2015..............................................       66,872,076        7,096,345       17,850,716        1,149,689          908,670       93,877,497
2016..............................................       65,621,976        6,963,703       17,516,996        1,128,187          891,691       92,122,553
2017..............................................       65,041,291        6,833,541       17,189,537        1,107,092          875,028       91,046,490
2018..............................................       63,825,632        6,705,812       16,868,275        1,086,406          858,677       89,344,803
                                                   -----------------------------------------------------------------------------------------------------
    Total.........................................      800,162,068       80,202,341      201,746,869       12,993,591       10,272,566    1,105,377,436
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Because unauthorized workers are at risk of being apprehended in 
immigration enforcement actions, contractors who hire them will 
necessarily have a more unstable workforce than contractors who do not 
hire unauthorized workers. Given the vulnerabilities in the I-9 system, 
many employers that do not knowingly employ illegal aliens nevertheless 
have unauthorized workers, undetected, on their workforce.
    This rule will promote economy and efficiency in Government 
procurement. Stability and dependability are important elements of 
economy and efficiency. A contractor with a less stable workforce will 
be less likely to produce goods and services economically and 
efficiently than will a contractor with a more stable workforce. 
Because of the Executive Branch's obligation to enforce the immigration 
laws, including the detection and removal of illegal aliens identified 
through worksite enforcement, contractors that employ illegal aliens 
cannot rely on the continuing availability and service of those illegal 
workers. Such contractors inevitably will have a less stable and less 
dependable workforce than contractors that do not employ such persons. 
Where a contractor assigns illegal aliens to work on Federal contracts, 
the enforcement of Federal immigration laws imposes a direct risk of 
disruption, delay, and increased expense in Federal contracting. Such 
contractors are less dependable procurement sources, even if the 
contractors did not knowingly hire or knowingly continue to employ 
unauthorized workers.
    Contractors that use E-Verify to confirm the employment eligibility 
of the 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. Rigorous employment verification 
through E-Verify will also help contractors confirm the identity of the 
persons working on Federal contracts, enhancing national security at 
less expense to the Government than it would cost for contractors to 
obtain more rigorous security clearances that may not be otherwise 
required by their contracts. This is likely to be particularly 
beneficial where contractors operate at sensitive national 
infrastructure sites.

H. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995, Public Law 104-13, 109 
Stat. 163 (1995) (PRA), all Departments are required to submit to the 
Office of Management and Budget (OMB), for review and approval, any 
information collection requests in a final rule. It is estimated that 
this rule will increase the information collection burden hours already 
approved for the E-Verify Program. The OMB control number for the 
currently approved E-Verify Program Information Collection Request is 
1615-0092.

[[Page 67703]]

    Although the E-Verify Program has a currently approved Paperwork 
Reduction Act clearance, we are seeking OMB approval on the proposed 
amendments to the current OMB approved collection. The purpose of this 
notice is to allow 60 days for public comments on the amendments to the 
E-Verify Program collection of information, not on the amendments to 
the FAR rule. Comments on the amendments to the E-Verify Program should 
be submitted no later than January 13, 2009. This process is conducted 
in accordance with 5 CFR 1320.10.
    When submitting comments on the information collection, they should 
address one or more of the following four points:
    (1) Evaluate whether the collection of information is necessary for 
the proper performance of the agency, including whether the information 
will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the collection of information, including the validity of the 
methodology and assumptions used;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of the information on 
those who are to respond, including through the use of any and all 
appropriate automated, electronic, mechanical, or other technological 
collection techniques or other forms of information technology, e.g., 
permitting electronic submission of responses.
    Overview of Information Collection for the E-Verify System (OMB 
Control Number 1615-0092):
    a. Type of information collection: Revision of currently approved 
information collection.
    b. Title of Form/Collection: E-Verify Program.
    c. Agency form number, if any, and the applicable component of the 
Department of Homeland Security sponsoring the collection: No form 
number. OMB Control Number 1615-0092; U.S. Citizenship and Immigration 
Services.
    d. Affected public who will be asked or required to respond, as 
well as a brief abstract: Primary respondents are business or other 
for-profit entities, small business, or other organizations. The E-
Verify Program allows employers to electronically verify the 
eligibility status of newly hired employees. Certain Federal 
contractors and subcontractors will also be required to perform queries 
on existing employees assigned to the contract.
    e. An estimate of the total number of respondents and the amount of 
time estimated for an average respondent to respond:
    Implementation: 125,015 at 0.86 hours per response.
    Training: 521,134 at 2.26 hours per response.
    ID/IQ Contracts: 3,333 at 2.00 hours per response.
    Initial Query: 4,094,955 at 0.12 hours per response.
    Secondary Query: 195,329 at 1.94 hours per response.
    For implementation, it is estimated that the number of responses 
per respondent will be 17. For all others, the number of responses per 
respondent will be one.
    f. An estimate of the total of public burden (in hours) associated 
with the collection: Approximately 3,882,482 burden hours.
    All comments regarding this information collection should be 
directed to the Department of Homeland Security, U.S. Citizenship and 
Immigration Services, Regulatory Management Division, 111 Massachusetts 
Avenue, NW., 3rd Floor, Washington, DC 20529, Attention: Chief, 202-
272-8377.

List of Subjects in 48 CFR Parts 2, 22, and 52

    Government procurement.

    Dated: November 6, 2008.
Al Matera,
Director, Office of Acquisition Policy.

0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 22, and 52 as set 
forth below:
0
1. The authority citation for 48 CFR parts 2, 22, and 52 continues to 
read as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 2--DEFINITIONS OF WORDS AND TERMS

0
2. Amend section 2.101 in paragraph (b)(2), in the definition ``United 
States'', by redesignating paragraphs (6) through (8) as paragraphs (7) 
through (9), respectively, and adding a new paragraph (6) to read as 
follows:


2.101  Definitions.

* * * * *
    (b) * * *
    (2) * * *
    United States * * *
    (6) For use in Subpart 22.18, see the definition at 2.1801.
* * * * *

PART 22--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

0
3. Amend section 22.102-1 by removing from the end of paragraph (g) the 
word ``and''; removing the period from the end of paragraph (h) and 
adding ``; and'' in its place; and adding paragraph (i) to read as 
follows:


22.102-1  Policy.

* * * * *
    (i) Eligibility for employment under United States immigration 
laws.

0
4. Add Subpart 22.18 to read as follows:

Subpart 22.18--Employment Eligibility Verification

Sec.
22.1800 Scope.
22.1801 Definitions.
22.1802 Policy.
22.1803 Contract clause.


22.1800  Scope.

    This subpart prescribes policies and procedures requiring 
contractors to utilize the Department of Homeland Security (DHS), 
United States Citizenship and Immigration Service's employment 
eligibility verification program (E-Verify) as the means for verifying 
employment eligibility of certain employees.


22.1801  Definitions.

    As used in this subpart--
    Commercially available off-the-shelf (COTS) item--
    (1) Means any item of supply that is--
    (i) A commercial item (as defined in paragraph (1) of the 
definition at 2.101);
    (ii) Sold in substantial quantities in the commercial marketplace; 
and
    (iii) Offered to the Government, without modification, in the same 
form in which it is sold in the commercial marketplace; and
    (2) Does not include bulk cargo, as defined in section 3 of the 
Shipping Act of 1984 (46 U.S.C. App. 1702), such as agricultural 
products and petroleum products. Per 46 CFR 525.1 (c)(2), ``bulk 
cargo'' means cargo that is loaded and carried in bulk onboard ship 
without mark or count, in a loose unpackaged form, having homogenous 
characteristics. Bulk cargo loaded into intermodal equipment, except 
LASH or Seabee barges, is subject to mark and count and, therefore, 
ceases to be bulk cargo.
    Employee assigned to the contract means an employee who was hired 
after November 6, 1986, who is directly performing work, in the United 
States, under a contract that is required to

[[Page 67704]]

include the clause prescribed at 22.1803. An employee is not considered 
to be directly performing work under a contract if the employee--
    (1) Normally performs support work, such as indirect or overhead 
functions; and
    (2) Does not perform any substantial duties applicable to the 
contract.
    Subcontract means any contract, as defined in 2.101, entered into 
by a subcontractor to furnish supplies or services for performance of a 
prime contract or a subcontract. It includes but is not limited to 
purchase orders, and changes and modifications to purchase orders.
    Subcontractor means any supplier, distributor, vendor, or firm that 
furnishes supplies or services to or for a prime contractor or another 
subcontractor.
    United States, as defined in 8 U.S.C. 1101(a)(38), means the 50 
States, the District of Columbia, Puerto Rico, Guam, and the U.S. 
Virgin Islands.


22.1802  Policy.

    (a) Statutes and Executive orders require employers to abide by the 
immigration laws of the United States and to employ in the United 
States only individuals who are eligible to work in the United States. 
The E-Verify program provides an Internet-based means of verifying 
employment eligibility of workers employed in the United States, but is 
not a substitute for any other employment eligibility verification 
requirements.
    (b) Contracting officers shall include in solicitations and 
contracts, as prescribed at 22.1803, requirements that Federal 
contractors must--
    (1) Enroll as Federal contractors in E-Verify;
    (2) Use E-Verify to verify employment eligibility of all new hires 
working in the United States, except that the contractor may choose to 
verify only new hires assigned to the contract if the contractor is--
    (i) An institution of higher education (as defined at 20 U.S.C. 
1001(a));
    (ii) A State or local government or the government of a Federally 
recognized Indian tribe; or
    (iii) A surety performing under a takeover agreement entered into 
with a Federal agency pursuant to a performance bond;
    (3) Use E-Verify to verify employment eligibility of all employees 
assigned to the contract; and
    (4) Include these requirements, as required by the clause at 
52.222-54, in subcontracts for--
    (i) Commercial or noncommercial services, except for commercial 
services that are part of the purchase of a COTS item (or an item that 
would be a COTS item, but for minor modifications), performed by the 
COTS provider, and are normally provided for that COTS item; and
    (ii) Construction.
    (c) Contractors may elect to verify employment eligibility of all 
existing employees working in the United States who were hired after 
November 6, 1986, instead of just those employees assigned to the 
contract. The contractor is not required to verify employment 
eligibility of--
    (1) Employees who hold an active security clearance of 
confidential, secret, or top secret; or
    (2) Employees for whom background investigations have been 
completed and credentials issued pursuant to Homeland Security 
Presidential Directive (HSPD)-12.
    (d) In exceptional cases, the head of the contracting activity may 
waive the E-Verify requirement for a contract or subcontract or a class 
of contracts or subcontracts, either temporarily or for the period of 
performance. This waiver authority may not be delegated.
    (e) DHS and the Social Security Administration (SSA) may terminate 
a contractor's MOU and deny access to the E-Verify system in accordance 
with the terms of the MOU. If DHS or SSA terminates a contractor's MOU, 
the terminating agency must refer the contractor to a suspension or 
debarment official for possible suspension or debarment action. During 
the period between termination of the MOU and a decision by the 
suspension or debarment official whether to suspend or debar, the 
contractor is excused from its obligations under paragraph (b) of the 
clause at 52.222-54. If the contractor is suspended or debarred as a 
result of the MOU termination, the contractor is not eligible to 
participate in E-Verify during the period of its suspension or 
debarment. If the suspension or debarment official determines not to 
suspend or debar the contractor, then the contractor must reenroll in 
E-Verify.


22.1803  Contract clause.

    Insert the clause at 52.222-54, Employment Eligibility 
Verification, in all solicitations and contracts that exceed the 
simplified acquisition threshold, except those that--
    (a) Are only for work that will be performed outside the United 
States;
    (b) Are for a period of performance of less than 120 days; or
    (c) Are only for--
    (1) Commercially available off-the-shelf items;
    (2) Items that would be COTS items, but for minor modifications (as 
defined at paragraph (3)(ii) of the definition of ``commercial item'' 
at 2.101);
    (3) Items that would be COTS items if they were not bulk cargo; or
    (4) Commercial services that are--
    (i) Part of the purchase of a COTS item (or an item that would be a 
COTS item, but for minor modifications);
    (ii) Performed by the COTS provider; and
    (iii) Are normally provided for that COTS item.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Amend section 52.212-5 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraphs (b)(26) through (b)(41) as paragraphs 
(b)(27) through (b)(42), respectively, and adding a new paragraph 
(b)(26); and
0
c. Redesignating paragraph (e)(1)(xi) as paragraph (e)(1)(xii), and 
adding a new paragraph (e)(1)(xi) to read as follows:


52.212-5  Contract Terms and Conditions Required to Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required to Implement Statutes or 
Executive Orders--Commercial Items (Jan 2009)

* * * * *
    (b) * * *
    -- (26) 52.222-54, Employment Eligibility Verification (Jan 
2009). (Executive Order 12989). (Not applicable to the acquisition 
of commercially available off-the-shelf items or certain other types 
of commercial items as prescribed in 22.1803.)
* * * * *
    (e)(1) * * *
    (xi) 52.222-54, Employment Eligibility Verification (Jan 2009).
* * * * *

(End of clause)

0
5. Add section 52.222-54 to read as follows:


52.222-54  Employment Eligibility Verification.

    As prescribed in 22.1803 and 12.301(d)(3), insert the following 
clause:

Employment Eligibility Verification (Jan 2009)

    (a) Definitions. As used in this clause--Commercially available 
off-the-shelf (COTS) item--
    (1) Means any item of supply that is--
    (i) A commercial item (as defined in paragraph (1) of the 
definition at 2.101);
    (ii) Sold in substantial quantities in the commercial 
marketplace; and

[[Page 67705]]

    (iii) Offered to the Government, without modification, in the 
same form in which it is sold in the commercial marketplace; and
    (2) Does not include bulk cargo, as defined in section 3 of the 
Shipping Act of 1984 (46 U.S.C. App. 1702), such as agricultural 
products and petroleum products. Per 46 CFR 525.1(c)(2), ``bulk 
cargo'' means cargo that is loaded and carried in bulk onboard ship 
without mark or count, in a loose unpackaged form, having homogenous 
characteristics. Bulk cargo loaded into intermodal equipment, except 
LASH or Seabee barges, is subject to mark and count and, therefore, 
ceases to be bulk cargo.
    Employee assigned to the contract means an employee who was 
hired after November 6, 1986, who is directly performing work, in 
the United States, under a contract that is required to include the 
clause prescribed at 22.1803. An employee is not considered to be 
directly performing work under a contract if the employee--
    (1) Normally performs support work, such as indirect or overhead 
functions; and
    (2) Does not perform any substantial duties applicable to the 
contract.
    Subcontract means any contract, as defined in 2.101, entered 
into by a subcontractor to furnish supplies or services for 
performance of a prime contract or a subcontract. It includes but is 
not limited to purchase orders, and changes and modifications to 
purchase orders.
    Subcontractor means any supplier, distributor, vendor, or firm 
that furnishes supplies or services to or for a prime Contractor or 
another subcontractor.
    United States, as defined in 8 U.S.C. 1101(a)(38), means the 50 
States, the District of Columbia, Puerto Rico, Guam, and the U.S. 
Virgin Islands.
    (b) Enrollment and verification requirements. (1) If the 
Contractor is not enrolled as a Federal Contractor in E-Verify at 
time of contract award, the Contractor shall--
    (i) Enroll. Enroll as a Federal Contractor in the E-Verify 
program within 30 calendar days of contract award;
    (ii) Verify all new employees. Within 90 calendar days of 
enrollment in the E-Verify program, begin to use E-Verify to 
initiate verification of employment eligibility of all new hires of 
the Contractor, who are working in the United States, whether or not 
assigned to the contract, within 3 business days after the date of 
hire (but see paragraph (b)(3) of this section); and
    (iii) Verify employees assigned to the contract. For each 
employee assigned to the contract, initiate verification within 90 
calendar days after date of enrollment or within 30 calendar days of 
the employee's assignment to the contract, whichever date is later 
(but see paragraph (b)(4) of this section).
    (2) If the Contractor is enrolled as a Federal Contractor in E-
Verify at time of contract award, the Contractor shall use E-Verify 
to initiate verification of employment eligibility of--
    (i) All new employees. (A) Enrolled 90 calendar days or more. 
The Contractor shall initiate verification of all new hires of the 
Contractor, who are working in the United States, whether or not 
assigned to the contract, within 3 business days after the date of 
hire (but see paragraph (b)(3) of this section); or
    (B) Enrolled less than 90 calendar days. Within 90 calendar days 
after enrollment as a Federal Contractor in E-Verify, the Contractor 
shall initiate verification of all new hires of the Contractor, who 
are working in the United States, whether or not assigned to the 
contract, within 3 business days after the date of hire (but see 
paragraph (b)(3) of this section); or
    (ii) Employees assigned to the contract. For each employee 
assigned to the contract, the Contractor shall initiate verification 
within 90 calendar days after date of contract award or within 30 
days after assignment to the contract, whichever date is later (but 
see paragraph (b)(4) of this section).
    (3) If the Contractor is an institution of higher education (as 
defined at 20 U.S.C. 1001(a)); a State or local government or the 
government of a Federally recognized Indian tribe; or a surety 
performing under a takeover agreement entered into with a Federal 
agency pursuant to a performance bond, the Contractor may choose to 
verify only employees assigned to the contract, whether existing 
employees or new hires. The Contractor shall follow the applicable 
verification requirements at (b)(1) or (b)(2), respectively, except 
that any requirement for verification of new employees applies only 
to new employees assigned to the contract.
    (4) Option to verify employment eligibility of all employees. 
The Contractor may elect to verify all existing employees hired 
after November 6, 1986, rather than just those employees assigned to 
the contract. The Contractor shall initiate verification for each 
existing employee working in the United States who was hired after 
November 6, 1986, within 180 calendar days of--
    (i) Enrollment in the E-Verify program; or
    (ii) Notification to E-Verify Operations of the Contractor's 
decision to exercise this option, using the contact information 
provided in the E-Verify program Memorandum of Understanding (MOU).
    (5) The Contractor shall comply, for the period of performance 
of this contract, with the requirements of the E-Verify program MOU.
    (i) The Department of Homeland Security (DHS) or the Social 
Security Administration (SSA) may terminate the Contractor's MOU and 
deny access to the E-Verify system in accordance with the terms of 
the MOU. In such case, the Contractor will be referred to a 
suspension or debarment official.
    (ii) During the period between termination of the MOU and a 
decision by the suspension or debarment official whether to suspend 
or debar, the Contractor is excused from its obligations under 
paragraph (b) of this clause. If the suspension or debarment 
official determines not to suspend or debar the Contractor, then the 
Contractor must reenroll in E-Verify.
    (c) Web site. Information on registration for and use of the E-
Verify program can be obtained via the Internet at the Department of 
Homeland Security Web site: http://www.dhs.gov/E-Verify.
    (d) Individuals previously verified. The Contractor is not 
required by this clause to perform additional employment 
verification using E-Verify for any employee--
    (1) Whose employment eligibility was previously verified by the 
Contractor through the E-Verify program;
    (2) Who has been granted and holds an active U.S. Government 
security clearance for access to confidential, secret, or top secret 
information in accordance with the National Industrial Security 
Program Operating Manual; or
    (3) Who has undergone a completed background investigation and 
been issued credentials pursuant to Homeland Security Presidential 
Directive (HSPD)-12, Policy for a Common Identification Standard for 
Federal Employees and Contractors.
    (e) Subcontracts. The Contractor shall include the requirements 
of this clause, including this paragraph (e) (appropriately modified 
for identification of the parties), in each subcontract that--
    (1) Is for--(i) Commercial or noncommercial services (except for 
commercial services that are part of the purchase of a COTS item (or 
an item that would be a COTS item, but for minor modifications), 
performed by the COTS provider, and are normally provided for that 
COTS item); or
    (ii) Construction;
    (2) Has a value of more than $3,000; and
    (3) Includes work performed in the United States.


(End of clause)

[FR Doc. E8-26904 Filed 11-13-08; 8:45 am]
BILLING CODE 6820-EP-P ?>



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