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E-Verify Mandate for Federal Contractors Effective September 8, 2009

After lengthy consideration by two administrations, multiple delays in the implementation date, and a ruling by a federal district court in favor of the Government, the regulations mandating use of the E-Verify program by most federal contractors will become effective on September 8, 2009. The regulations can be found at: http://edocket.access.gpo.gov/2008/pdf/E8-26904.pdf.

The E-Verify program is a free federal program to check the names and social security numbers of employees against the Social Security Administration’s database and an immigration database to confirm that the name matches the number and that there is no database information indicating the individual is unauthorized to work. The participating employer accesses the program through the internet and receives an internet report on the names that are being checked.

The U.S. Chamber of Commerce, the Society for Human Resource Management and other employer organizations filed a lawsuit in the federal court for the District of Maryland seeking to enjoin the implementation of the E-Verify federal contractor regulations. Chamber of Commerce, et al., v. Janet Napolitano, et al., No. AW-08-3444 (D.Md.). After the Obama administration determined that it was going to implement the regulations effective September 8, 2009, the federal lawsuit proceeded with briefing and cross motions for summary judgment. On August 25, 2009, the district judge found in favor of the government and against the employer organizations. This ruling means the regulations will go into effect on September 8 unless further legal action stays or enjoins the implementation.

The good news is that federal contractors and subcontractors will not be caught by surprise so long as they are paying attention to bid specifications and contract language. The regulations apply to solicitations issued and contracts awarded after September 8, 2009. Even then, a covered federal contractor or subcontractor will have one month to enroll in E-Verify and another three months to initiate verification.

The E-Verify participation requirement clause will appear in prime federal contracts with a period of performance longer than 120 days and a value above $100,000. Subcontracts that flow from a covered prime contract will also require subcontractor E-Verify participation if the subcontract is for services or for construction with a value over $3,000. The rule only applies to employees working in the United States or the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands. The regulations also may apply to existing indefinite-delivery/indefinite-quantity contracts if the remaining period of performance extends at least six months after September 8, 2009 and the amount of work or number of orders expected under the remaining performance period is substantial. However, federal contractors with such contracts will be notified by the Contracting Officer concerning a bilateral modification. The regulations will not apply to contracts that include only commercially available off-the-shelf items and related services.

Although an employer who voluntarily signs up for participation in the E-Verify program may use the program only to check the status of new hires, employers covered under the federal contractor rules must use the program not only for new hires on a company-wide basis, but also for all current employees assigned to work directly on the federal contract involved. An employee “assigned to the federal contract” is any employee hired after November 6, 1986, who directly performs work in the United States under a federal contract that includes the clause committing the contractor to use E-Verify. Importantly, 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 federal contract. There is no exemption for short periods of work or intermittent work. Federal contractor employees will not have to be re-verified if they have previously been run through E-Verify by the federal contractor or if the employee has been granted and holds an active federal agency HSPD-12 compliant credential or a U.S. government security clearance for access to confidential, secret, or top secret information in accordance with the National Industrial Security Program Operating Manual.

A contractor who is not currently participating in E-Verify and who is awarded a covered federal contract on or after September 8, 2009 will have 30 calendar days from the award date in which to enroll in E-Verify and then an additional 90 days from the date of E-Verify enrollment in which to initiate verification queries for employees who will be working on the contract and to begin using the system to verify newly hired employees company-wide. After the 90-day phase-in period, the covered federal contractor will be required to initiate verification of each newly hired employee within three business days after their start date. Pre-screening of job applicants is not allowed. The E-Verify program may be used for new hires only after the employee has been offered the job and has accepted. The program then must be continued for the life of the federal contract for all new hires, whether or not they are assigned to the contract, as well as for all employees assigned to the contract.

Employers who are already enrolled in E-Verify will need to update the online company profile once they have been awarded a covered federal contract. There is a federal contract tutorial online that explains the new policies and features unique to federal contractors. If the federal contractor has been enrolled in E-Verify for more than 90 days at the time that the company is awarded a contract containing the E-Verify clause, the employer must continue to initiate verification of newly hired employees within 3 business days of the start date, but will have 90 days from the contract award date to begin using E-Verify for each employee already on staff who is assigned to the federal contract.

Federal contractors may elect to end E-Verify participation once the covered federal contract has ended. Alternatively, such companies may continue to use E-Verify as non-federal contractors. In other words, they will no longer be able to run existing employees through E-Verify. Use of E-Verify by non-federal contractors is limited to new hires only.

Federal contractors and subcontractors who are required to participate in E-Verify also will have the option of verifying their entire work force, both new hires and existing employees. Such an employer must notify DHS by updating the E-Verify company profile to elect the entire workforce option. Such a federal contractor must initiate an E-Verify query for each employee in the entire work force within 180 days of the election.

Practical Pointers

Due to the recession and the greater availability of federal funds, many employers are contemplating undertaking federal contracts now who have never done so in the past. Those employers who are new to the realm of federal contracts as well as employers who are familiar with the requirements very much need to watch for the E-Verify clause in bid solicitations and in contract awards. Even employers who already are participants in the E-Verify program will need to take affirmative steps to comply with E-Verify program requirements that only apply to federal contractors.

There is little advantage for an employer to voluntarily sign up for the E-Verify program now if they are only doing so because they expect to get a covered federal contract in the future. Voluntary participation in E-Verify prior to the award of a covered federal contract would permit the program to be applied only to new hires. Once an employer receives the covered federal contract award, the employer would need to change its status to that of a federal contractor E-Verify participant and begin applying the program additionally to all employees assigned to the contract. However, some employers may decide to voluntarily sign up now for E-Verify participation for other reasons or to train staff (particularly in a large organization) about the fundamentals of the E-Verify program.

There is also no absolute right or wrong answer to the question of whether covered federal contractor employers should sign up for the option to verify the entire work force. The option may be most appropriate for companies who expect to be rapidly and perhaps unexpectedly moving employees in and out of a covered federal contract. On the other hand, there is some question as to how the E-Verify program will function as some additional 200,000 employers are added to the roughly 140,000 employers already participating on a voluntary basis. Accordingly, employers may want to take a watchful waiting approach to see how well the system is functioning before deciding on the option to verify the entire workforce.