I was not able to use IMPORTRANGE as a data validation as PatrickdC clarified.
I was able to do the following:
Create a Google Sheet (call it Sheet A) that has all employees in our organization.
From my other Sheet (call this Sheet B) I then did an IMPORTRANGE in the sheet cells rather than in data validation. This brings in all the data from my Sheet A. I then created another tabbed sheet on Sheet B and I was able to use the imported data on the other tab of Sheet B to then do an IMPORT for data validation.