E-VERIFY:  ELECTRONIC EMPLOYMENT

ELIGIBILITY VERIFICATION SYSTEM

House Bill 4355 (Substitute H-2)

House Bill 4969 as introduced

Sponsor:  Rep. David Agema

Committee:  Judiciary

Complete to 1-18-10

A SUMMARY OF HOUSE BILLS 4355 AND 4969 AS REPORTED FROM COMMITTEE

House Bill 4355 would require, among other things, certain employers who contract or subcontract with public agencies to verify the employment eligibility of new employees though the E-Verify system.  (That system is explained in the Background Information section.)

House Bill 4969 would prohibit personnel agencies from referring an individual to a public agency for hire without first verifying the individual’s employment eligibility through the E-Verify system.

House Bill 4355 - Public Contract and Employment Eligibility Verification Act

The bill would create the Public Contract and Employment Eligibility Verification Act to require a public employer to register and participate in the E-Verify system to verify the documentation of each new employee.  "Public employer" would be defined to mean a department, agency, or instrumentality of the state or a political subdivision of the state.  The Department of Energy, Labor, and Economic Growth would be required to promulgate departmental rules to implement the new act. 

"E-Verify" would mean the electronic verification of work authorization program of 8 USC 1324a operated by the U.S. Department of Homeland Security or any other designated federal agency authorized to verify the documentation of newly hired employees pursuant to the federal Immigration Reform and Control Act.

Impact on public employers.  As stated above, a public employer would have to register and participate in the E-Verify system to verify the documentation of each new employee.  Documentation of existing employees would not be required under the bill.  In addition, a public employer could only enter into a contract for services performed within the state with a contractor who was registered with and who participates in the E-Verify system to verify the documentation of all new employees. 

Impact on contractors.  A contractor or subcontractor could not enter into a contract or subcontract with a public employer – concerning services to be performed within Michigan – unless first registering with and participating in the E-Verify system to verify the documentation of all new employees.  In addition, the contractor or subcontractor would have to agree to notify the public employee of all new employees assigned by the contractor or subcontractor to work on the contract.  "Subcontractor" would include a subcontractor, contract employee, staffing agency, and a contractor.  [The term "staffing agency" is not defined in statute, but appears to apply to personnel or employment agencies that provide employment services under a state contract and also to professional employer organizations (PEO).  Currently, both types of entities are exempt from regulation under Article 10 (Personnel Agencies) of the Occupational Code, and thus would not fall under the amendment proposed by House Bill 4969.]

An employer – defined to mean a person who employs for compensation ten or more individuals at one time during the calendar year – could not discharge an employee who is a citizen or permanent resident alien if, on the date of the discharge, the employer knowingly employed an alien who was not authorized to work in the U.S.  If this provision were violated, the discharged employee would have a private cause of action against the employer.  The provision would not apply to a discharge for cause.

Civil immunity for employers.  An employer, public employer, or contractor who used the E-Verify system for its intended purpose would not be civilly or criminally liable under any law for any action taken in good faith based on information provided through the E-Verify confirmation system.

Verifying an employee's employment eligibility.  To verify the lawful presence of an individual in the U.S. as required by the bill, an employer, an agency, or political subdivision of the state would have to obtain a Form I-9 executed by the individual under penalty of perjury stating that he or she is a U.S. citizen or a qualified alien under the federal Immigration and Nationality Act.  In the case of an independent contractor, the employing entity would have to obtain an affidavit (instead of the Form I-9) executed – under penalty of perjury – by the independent contractor and each employee of that independent contractor that stated the same information required for the Form I-9.

The entity would have to further verify the status of the individual who executed the Form I-9 or affidavit through the E-Verify system.  Until the eligibility verification was made, the Form I-9 or affidavit would be presumed to be proof of lawful presence for purposes of this provision. 

"Form I-9" is defined to mean the employment verification form that fulfills the employment verification obligations under federal requirements (8 CFR 274a.2).

Penalties.  An individual who knowingly and willfully made a false, fictitious, or fraudulent statement or representation in the required affidavit would be guilty of perjury punishable as provided in Section 423 of the Michigan Penal Code.  (Under Section 423, perjury is a felony punishable by no more than 15 years in a state prison.)

An individual who willfully and repeatedly violated the act would be responsible for a state civil infraction.  A court would have to order the individual to pay a civil fine of not less than $100 but not more than $1,000 per violation.  (It is not clear how many violations would be needed before this penalty would be triggered.  For instance, would an individual who violated the act twice be considered to have met the threshold of "repeatedly" being in violation, or would it take a third or subsequent violation before the penalty would be triggered?  It also is unclear if the penalty only applies to a job applicant who made a false statement on an I-9 form or affidavit, or if it would also encompass actions by employers, contractors, and subcontractors. )

Bar to a public contract.  Failure of a contractor or subcontractor to register with and participate in the E-Verify system prior to entering into a contract with a public employer would result in that contractor or subcontractor being excluded from contracting with any public body in the state for one year from the date of the final determination of the violation by a public body or a court of law.

A public employer would have to immediately terminate for default the public contract or subcontract of any business, including a subcontractor, found to have employed two or more unauthorized aliens during the period in which the business had failed to register with and participate in the E-Verify system.

However, an employer who had registered with and participated in the E-Verify system, including cooperation with an investigation of an alleged violation by a subcontractor, would not be subject to the one-year exclusion from contracting with a public employer for the actions of a subcontractor or individual independent contractor.

House Bill 4969 - Occupational Code, Article 10 (Personnel Agencies)

The bill would amend Article 10 (Personnel Agencies) of the Occupational Code (MCL 339.1019).  Section 1019 prohibits a personnel agency, or any licensed agent or other agent or employee of a personnel agency from engaging in listed acts.  For example, using any name other than the name in which the personnel agency is licensed or persuading, inducing, or soliciting an employer to discharge an employee.

House Bill 4969 would add the following to the list of prohibited conduct:  referring an individual for employment without having verified through the E-Verify system (or its successor) that the individual is authorized to work in the U.S.

[Note:  Section 1003 of the code exempts several types of entities providing employment counseling and services from regulation under Article 10.  Included in the exemption are persons under a contract with the state to provide employment services and professional employment organizations (PEO).  However, the term "staffing agency" contained in the definition of "subcontractor" in House Bill 4355 may encompass both of those entities.]

BACKGROUND INFORMATION:

E-Verify system.  Employers can voluntarily verify the employment eligibility of their employees through an Internet-based system called E-Verify[1].  The program is operated by the Department of Homeland Security’s U.S. Citizenship and Immigration Services (DHS/USCIS) in partnership with the Social Security Administration (SSA).  Under the program, an employer submits information about new hires from a form completed by the new employee (e.g., name, date of birth, Social Security number, immigration/citizenship status, and alien number – if applicable).  E-Verify then checks the information against information contained in SSA and DHS databases. 

On September 8, 2009, a new federal rule took effect that requires certain federal contractors (a contract more than $100,000) and subcontractors (more than $3,000) to confirm the employment eligibility of all persons hired during the contract term and all persons performing work within the U.S. on the federal contract (this includes current employees).  The rule applies to contracts entered into after the rule took effect.[2]

According to the National Conference of State Legislatures, 12 states have enacted some form of an E-Verify mandate, either by legislation or executive order.  The laws differ as to applicability, with some applying only to state contractors and others applying to all employers – both public and private.[3]

Brief discussion of the bills.  House Bill 4355 would require both public employers and a contractor or subcontractor entering into a contract with a public employer to screen new hires through the E-Verify system.  The requirement would apply to larger contractors and subcontractors – specifically, those who employed at least ten people at one time during a calendar year.  The bill would afford some employment protections to workers with legal status, and would protect employers who did due diligence according to the requirements of the bill from being sued if an employee was discharged in good faith based on information provided by the E-Verify system.  An employer, contractor, or subcontractor who entered into a public contract without first registering with the E-Verify system and confirming the status of its employees would be barred for a period of one-year from entering into any other public contracts, as well as having the public contract cancelled by the public employer.  However, an employer who had complied with the bill’s requirements would not be subject to these sanctions for the actions of a subcontractor or individual independent contractor. 

 

House Bill 4969 would require personnel agencies to screen all individuals through the E-Verify system prior to referral for employment to confirm that the individual was authorized to work in the U.S.  (Note:  Where House Bill 4355 only applies to persons working under public contracts, House Bill 4969 is broader in scope and would require the screening of all persons referred by a personnel agency.)

Brief arguments in support.  Supporters of verifying legal status of employees say that such measures ensure fair competition among businesses vying for government contracts.  For instance, a company paying union wages to persons authorized to work in the U.S. cannot compete for bids with a company who pays less than minimum wage to illegal immigrants.  In addition, the bills have the potential to increase security in the state and on job sites, increase revenue to state and local governments through the appropriate collection of personal income taxes, increase the likelihood wages will be spent locally rather than sent to relatives living abroad, and reduce human services costs and educational costs for services provided to illegal residents.  The bills will provide an incentive for persons wishing to live in the U.S. to use the legal channels for immigration and citizenship and make the state less attractive to those who have entered the country illegally.

Brief arguments in opposition.  Opponents of mandatory use of the E-Verify system cite problems with software, unreliable information in government databases, and human error in processing forms that result in many false hits – meaning that persons who are legal citizens or legally authorized to work in the U.S. can be tagged by the E-Verify system as being illegal.  According to the National Conference of State Legislatures, 96 percent of persons attesting to be U.S. citizens were confirmed by E-Verify as authorized to work, but only "72 percent of lawful permanent residents and 63 percent of immigrants authorized to work" were confirmed.  There is nothing in the bill to prevent a person from being fired if the E-Verify system erroneously fails to confirm the person’s legal status.  And, as amended in committee, House Bill 4355 would prevent any legal employee who was fired based solely on misinformation provided by E-Verify from suing the employer to recoup lost wages or to get his or her job back.  That bill also contains several provisions that are awkward in construction or are imprecise, and therefore unclear in application; for example, it is not clear if the penalty for willfull and repeat violations of the provisions of HB 4355 apply to applicants for employment, employers, or both, or how many violations would be needed to trigger the penalty. 

House Bill 4969 is also not clear as to applicability.  For instance, the Occupational Code distinguishes between personnel agencies that make direct contact with employers on the behalf of clients (Type A agencies) and those who simply provide clients with a list of potential employers for the client to contact (Type B agencies).  The bill, however, does not specify if "referring" a client would involve direct contact by the agency (which would include Type A agencies but not Type B) or would be more broadly interpreted to include the services of both types of agencies.

In addition, some current users of the E-Verify system say that the system is not yet ready for mandatory screening policies, as the system is still cumbersome in parts to use and the system is still vulnerable for both fraud and error as shown in recent incidents in which illegal workers were screened but passed as legal workers by the E-Verify system.  Better, say opponents, to support proposed federal legislation that would, among other things, expand the E-Verify pilot program to work out all the bugs (or support creation of a more accurate and secure system) before mandating state and local governments and their contractors, as well as personnel agencies providing services to private businesses, to use it. 

FISCAL IMPACT:

House Bill 4355 - Perjury Felony

False representation under the bill would be punishable as perjury, which is a felony punishable by imprisonment for up to 15 years.  To the extent that offenders were convicted of violations of the bill that would not otherwise be criminal offenses, the bill could increase costs for state and local corrections systems, the amount of which would depend on the number of convictions and the severity of sentences.  There are no data to indicate how many offenders might be convicted under the bill. 

 

Perjury is a Class E offense.  Exclusive of sentences for habitual offenders, the sentencing guidelines recommended range for the minimum sentence for a Class E offense varies from 0-3 months, for which a prison sentence is mandated.  To the extent that the bill increased the number of offenders sentenced to prison, the state could incur increased costs of prison incarceration, which currently average about $32,000 per prisoner per year, a figure that includes various fixed administrative and operational costs.  To the extent that more offenders were sentenced to felony probation supervision, the state could incur increased costs of felony probation supervision; parole and probation supervision average about $2,100 per supervised offender per year, exclusive of the costs of electronic tether.  To the extent that more offenders received jail sentences, affected counties could incur increased costs; jail costs vary by county.

House Bill 4355 – Civil infraction fine

The bill would have an indeterminate fiscal impact on the judiciary.  Any fiscal impact would be the result of increased caseloads for violation of the provisions under the act.  Any civil fine revenue collected under the provisions of the act will be dedicated to the support of public libraries and county law libraries.

House Bill 4355 - Public Contract and Employment Eligibility Verification Act

The bill would have varying cost implications on the state, local governments, private employers, and employees subject to an E-Verify check.[4] There are few, actual direct costs (outlays) imposed on employers (public or private) by the federal government simply to enroll in the E-verify program. 

Employers (public and private) participate in the program by completing an E-Verify registration and entering into a Memorandum of Understanding (MOU)[5] with the Department of Homeland Security (DHS), where the employer agrees to comply with current legal hiring practices and to not discriminate against employees based on the results of an employment verification.  While the registration and MOU impose no direct costs, employers would incur some indirect (opportunity) costs related to the use staff time and resources to review and complete the registration and MOU.[6] 

After an employer signs the MOU, employees responsible for interacting with the E-Verify system participate in an online training tutorial, also provided by USCIS at no cost to the employer.  Again, employers would incur some indirect (opportunity) costs related to the use of staff time and resources to complete the training tutorial.[7]

The use of the E-Verify system requires that employers have a computer and Internet access.  Presumably, employers affected by the bill (i.e., private employers with at least 10 employees and public agencies) would already have the necessary technology requirements to comply with the bill and, as such, the bill would impose no significant initial start-up IT costs.  In the event that there are employers who do not currently have the required technology to comply with the bill and utilize E-Verify, start-up costs could be upward of $1,500 per employer.[8] 

Upon hiring a new employee, and completing and reviewing the requisite forms, the employer submits a query to the E-Verify system.  There is no associated cost on employers for querying the E-Verify system.  (The cost of each query, borne by the federal government, is estimated to be $0.26).[9]  If an individual's work eligibility has been confirmed, a confirmation screen appears, and the employer can write the confirmation number on the I-9 Form or can print out the screen (and incur some associated printing costs). If the E-Verify system returns a "SSA Tentative Nonconfirmation" (TNC), the employer would generally verify that the entered information is indeed correct or, if it is, provide the employee with a TNC notice (incurring some associated printing costs).[10]  Employees may contest a TNC by going, in-person, to the local Social Security Administration Office, incurring some travel expenses along the way.[11]  A similar process exists when a non-citizen employee utilizes a Photo Screening Tool and E-Verify returns a "DHS tentative non-confirmation."  

The bill would also grant the Department of Energy, Labor, and Economic Growth with rule-making authority to carry out the provisions of the bill.  At this point, it is not entirely clear what, if any, additional rules would be required to carry out the bill, particularly given that primary administration of the E-verify program is a responsibility of the federal government.  In this regard, the bill would appear to have no fiscal impact on the department, including the State Office of Administrative Rules, or the Legislative Service Bureau (which reviews proposed administrative rules).

The bill would have an indeterminate impact on the Department of Management and Budget, which has general responsibility over state procurement practices.  If DMB were required to alter procurement practices to ensure compliance with the bill, there may be additional administrative costs involved.  Moreover, if DMB were forced to terminate an existing contract and renegotiate a contract in its place, there would likely be an associated fiscal impact depending upon the terms of the new contract.  It could also be the case that the costs incurred by a contractor to comply with the bill's requirements would be incorporated into the cost of public contracts, although any such increase is mitigated somewhat to the extent that a contract is subject to competitive sourcing requirements.[12] The contracting activities of many local units of government would be similarly affected.  Any associated costs are also mitigated to the extent that the affected employers are voluntarily participating in the E-Verify program, are also federal contractors and to be subject to E-Verify under federal rules, or are exempt from the E-verify check because of the number of employees it has per the bill's requirements. 

The impact of the bill on local units of government is also mitigated to the extent that individual local units are taking action on their own to require the use of E-Verify.  Reportedly, the boards of Macomb and Oakland counties have recently adopted policies requiring county contractors to use E-Verify.[13]

House Bill 4969 - Occupational Code, Article 10 (Personnel Agencies)

The bill would have an indeterminate impact on the Department of Energy, Labor, and Economic Growth (Bureau of Commercial Services) relevant to the enforcement of the E-Verify requirement placed on personnel agencies, depending on the extent to which personnel agencies refer individuals for employment without subjecting them to an E-Verify check.  Articles 5 and 6 of the Occupational Code provides the Bureau of Commercial Services with the authority to receive complaints and conduct investigations of alleged violations of the code, and to impose a variety of administrative penalties upon determining that a violation occurred.  These penalties include the issuance of cease and desist orders, suspension and revocation of licenses, and the issuance of fines, which may generally not exceed $10,000. 

POSITIONS:

Representatives of the following testified in support of the bills on 8-19-09:

-Farm Bureau (House Bill 4355) 

-ProofSpace, Inc.

-Oakland County Board of Commissioners

-Macomb County Board of Commissioners

-Kent Companies

-M&S Construction

-WMRA, Inc. (House Bill 4355)

Testifying in opposition on 8-19-09 were representatives of:

-The ACLU of Michigan

-The Michigan Health & Hospital Association (MHA)

Indicating opposition to the bills on 11-18-09 were:

-The Michigan Chamber of Commerce

-Michigan Catholic Conference 

NFIB/Michigan

Kelly Services indicated a position of neutrality on House Bill 4969.  (8-19-09)

Further Reading:

1.                  Electronic Employment Eligibility Verification, Congressional Research Service, R40446 (March 13, 2009), [http://assets.opencrs.com/rpts/R40446_20090313.pdf]. 

2.                  Electronic Employment Verification Systems, U.S. Chamber of Commerce - Labor, Immigration and Employee Benefits Division, April 2009,

[http://www.uschamber.com/assets/labor/090331_EEVS_book.pdf]. 

3.                  National Immigration Law Center, [http://www.nilc.org/immsemplymnt/index.htm]

4.                  Findings of the Web Basic Pilot Evaluation, Westat, prepared for the U.S. Department of Homeland Security, September 2007,

[http://www.uscis.gov/files/article/WebBasicPilotRprtSept2007.pdf].

5.                  Employment Eligibility Verification Systems, U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Social Security, June 7, 2007, Serial No. 110-45, [http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_house_hearings&docid=f:47008.wais.pdf]

6.                  Electronic Employment Verification Systems:  Needed Safeguards to Protect Privacy and Misuse, U.S. House of Representatives, Committee on the Judiciary, Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law, April 27, 2007, Serial No. 110-18,

[http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_house_hearings&docid=f:34927.pdf]

7.                           Problems in the Current Employment Verification and Worksite Enforcement System, U.S. House of Representatives, Committee on the Judiciary, Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law, April 24, 2007, Serial No. 110-17, [http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_house_hearings&docid=f:34925.pdf].

8.                           Electronic Employment Verification Systems:  Needed Safeguards to Protect Privacy and Misuse, U.S. House of Representatives, Committee on the Judiciary, Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law, June 10, 2008, Serial No. 110-132,

[http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_house_hearings&docid=f:42826.wais.pdf].

9.                           Ensuring a Legal Workforce: What Changes Should be Made to Our Current Employment Verification System?, U.S. Senate, Committee on the Judiciary, Subcommittee on Immigration, Border Security, and Citizenship, July 21, 2009, [http://judiciary.senate.gov/hearings/hearing.cfm?id=3982].

10.                 E-Verify:  Challenges and Opportunities, U.S. House of Representatives, Committee on Oversight and Government Reform, Subcommittee on Government Management, Organization, and Procurement, July 23, 2009,

[http://governmentmanagement.oversight.house.gov/story.asp?ID=2552]

11.                 Hearing on Employment Eligibility Verification Systems and the Potential Impacts on SSA’s Ability to Serve Retirees, People with Disabilities, and Workers, U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Social Security, May 8, 2008, [http://waysandmeans.house.gov/hearings.asp?formmode=detail&hearing=629].

                                                                                           Legislative Analyst:   Susan Stutzky

                                                                                                  Fiscal Analyst:   Mark Wolf

                                                                                                                           Marilyn Peterson

                                                                                                                           Ben Gielczyk

■ This analysis was prepared by nonpartisan House staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.

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