Markets & Finance

Hiring Illegals: Inside the Deal Ahead


If President Bush's May 15 call to send 6,000 National Guard troops to border states was aimed at winning over conservatives opposed to his immigration plan, it hasn't worked. But even as policy gridlock continues, Washington is quietly closing in on a compromise in one critical area. BusinessWeek has learned that a bipartisan working group of five senators has reached a consensus on a massive new government system to verify the status of anyone who applies for a job in the U.S.

A legislative amendment agreed upon by Republicans Charles E. Grassley of Iowa and Jon Kyl of Arizona and Democrats Edward M. Kennedy of Massachusetts, Max S. Baucus of Montana, and Barack H. Obama of Illinois would require all U.S. employers to submit job applicants' Social Security numbers or other ID to a new federal verification system and face stiff fines for violations. The deal was worked out with input from interest groups from across the spectrum, including the American Civil Liberties Union and the U.S. Chamber of Commerce. "We've got a bipartisan agreement to get a national employment-verification database for new hires up and running in 18 months," Obama tells BusinessWeek.

The compromise attempts to balance the concerns of hard-liners, who want tougher measures against hiring illegals, and those of civil libertarians and companies worried about a new, untested government system causing major employment and privacy hassles. Of course, the plan may yet change when it reaches the full Senate as part of the larger immigration bill. (As of May 17, Kyl was holding out for a tamper-proof Social Security card as the price of his support.) It would also have to clear the more conservative House of Representatives, which wants a new card as well as checks run on the entire U.S. workforce.

Still, experts think the approach hammered out in private by the five senators' staffers over the past month is likely to stick as the blueprint for a broad new crackdown on employers. "We've still got concerns, but we know strong enforcement has to be part of a final [immigration] package," says Randel K. Johnson, the Chamber's vice-president for labor and immigration, who worked closely with the Senate staffers. "We're willing to accept substantial increases in penalties for employers who normally violate the law as long as it's not for those who just make mistakes."

IDENTITY CRISIS. The current debate mirrors the one that led to the last major immigration overhaul, in 1986. That year, Congress agreed to an amnesty for 3 million illegals living in the U.S. in exchange for tough sanctions on employers. But after a few years, the feds largely stopped enforcing the law, in part because of employers' complaints that they had no way to tell if workers were using phony Social Security numbers or other documents.

The proposed new system would rewrite identification rules for anyone seeking a job. It would require employers to demand a U.S. passport or what's called a Real ID driver's license, a secure license that states must issue by 2008 under a law passed last year in response to Sept. 11. Employers would submit the information to a new verification system to be created by the Homeland Security Dept. The system would check Social Security numbers or, for immigrants who don't have one, their immigration status. The process would become mandatory for all employers in 18 months.

The new electronic database would be a massive expansion of something dubbed the Basic Pilot, a tiny voluntary program Congress started in 1997 that helps employers check applicants' Social Security numbers. Currently used by just 5,000 employers, the pilot program has been plagued by high error rates. Rejected workers could appeal and would be allowed to work if Homeland Security couldn't say definitively whether they're illegal, which happens up to 20% of the time. This safeguard would remain until the new system hits 99% accuracy, according to a draft of the Senate proposal.

"A GOOD COMPROMISE." To guard against an expected outbreak of stolen Social Security numbers, the proposal would make identity theft a felony for the first time. But it doesn't include a tamper-resistant Social Security card for all Americans, which civil libertarians see as a precursor to a national identity card. "We're still concerned about a major new government database, but we're pleased with the consensus so far," says ACLU Legislative Director Caroline Fredrickson, who was involved in drafting the Senate plan.

As for employers, the Senate plan would double the fines put in place in the 1986 law and expand workplace inspectors to enforce the law, to 10,000 from just 200 now. This may not satisfy House hard-liners such as F. James Sensenbrenner (R-Wis.). Still, even conservative supporters figure they may not get much more. The new Senate plan "is a good compromise between those who want tough verification to kick in fast and those who want to protect people from the failures of a new system," says Tamar Jacoby, a senior fellow at the conservative Manhattan Institute, which pushed the Senate group for a restrictive approach.

The Chamber's Johnson and other business representatives expect some work-verification system to become law, no matter how the debate plays out over border security and guest workers. Clearly there's no easy way to check the work status of millions of people, or it would have been done. But employers and employees alike should get ready to give it a try.


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