While much attention has been paid to the imploding U.S. economy, DHS’ Immigration and Customs Enforcement (ICE) applied its own version of inflation to the ‘cost of the doing business’ by seeking for the first time the debarment of seven companies from federal contracting opportunities. The Federal Acquisition Regulations (FAR) provide that contractors may be considered for debarment if they have been found to have either knowingly hire an unauthorized worker or to continue to employ an alien who is or becomes unauthorized. According to ICE, the seven companies were targeted for federal contract debarment because each has been found to be unlawfully employing persons without employment authorization. This debarment action is the latest of many enforcement approaches adopted by ICE to crack down on employers who hire undocumented workers – all with the stated goal of increasing the cost of such illegal practices. This latest action, coupled with an increase in the number of worksite raids and criminal prosecutions of undocumented employees and employers again, once again raises the stakes faced by employers in an ongoing game of immigration enforcement poker.

Under the announced debarment penalty, the seven listed companies would:

  • Be entered into the Excluded Parties List System, a federal web-based system listing parties suspended from, debarred, proposed for debarment or otherwise excluded from receiving federal contracts, certain subcontracts, and other federal financial assistance;
  • Immediately be prohibited from maintaining any federal government contract(s); and
  • Immediately be prohibited from competing for any federal government contract(s).

For many federal contractors, the impact of no longer being able to maintain and compete for federal contracts on account of hiring undocumented workers is the equivalent of a kiss of death. It should be noted that the debarment does not solely apply to DHS or ICE contracts, but rather applies to all federal contract opportunities including those at the Department of Defense, the Department of Education, and the Department of Health and Human Service contract opportunities. Federal contractors should realize that they no longer are in the situation of figuring out how many $250 civil penalty fines they will be paying per undocumented employee. In fact, ICE is eschewing the historically ineffective civil fines in favor of seeking the more dramatic criminal indictment, and now federal contract debarment, to deter employers from hiring undocumented workers. This and the other ICE enforcement actions against employers are being performed under pre-existing regulation and legal authorities that in the past laid dormant while the nation grappled with its immigration policies. Following Congress’ failure to enact immigration reform, DHS initiated an aggressive program to enforce all immigration laws, including those applicable to the employers. As far as DHS is concerned, no stone is being left un-turned when it comes to cracking down on unscrupulous employers and enhancing employee verification.

What does this mean for federal contractors and those seeking government contract opportunities? Well, for starters, those simple Form I-9s that are filled out by each new employee hire and the overworked HR officers who are responsible for screening and verifying all your new employee hires – their significance has dramatically increased. Give short shrift to them and you may be explaining to investors why your federal contract revenues have just disappeared with no prospect of returning. You may also face explaining to employees why the company is closing. In my opinion, the significant risks and penalties mandate that federal contractors give as much attention to their employee verification processes as they currently do to Sarbanes-Oxley requirements. The reality is that the penalties and costs to defend against sanctions for insufficient employee verification protocols are the same if not greater than those faced under Sarbanes-Oxley. Unlike Sarbanes-Oxley, however, the damage is incurred even if the company and its officials are not found culpable.

Despite the mounting ICE trophies, I continue to encounter national companies whose HR offices are not fully in control of the I-9 employee verification process, lack uniform protocols, and in dire need of training. This is a costly disaster waiting to happen. The good news is that they are heeding the warnings and taking steps to address these shortcomings and build up their good faith defenses. Now, ICE hopes that federal contractors take notice of their new position in the cross-hairs of immigration enforcement.