Mandatory E-Verify Participation for Certain Federal Contractors is Effective September 8, 2009

September 18, 2009

By: Kseniya Premo

E-Verify is a free, Internet-based system operated by the Department of Homeland Security (“DHS”) and the U.S. Citizenship and Immigration Services (“USCIS”) in partnership with the Social Security Administration (“SSA”). E-Verify enables participating employers to electronically verify the employment eligibility of their employees based upon electronic information and records maintained by the DHS and SSA databases. As of September 8, 2009, many federal contractors and subcontractors are required to use the E-Verify system to confirm whether their employees are eligible to work in the United States. This change is the result of the final version of the applicable Federal Acquisition Regulation (“FAR”). The scope of coverage of the new rule is described below. DHS, SSA and USCIS have a variety of informational resources on E-Verify on the USCIS website, www.uscis.gov.

E-Verify and Federal Contracts and Subcontracts

Prior to September 8, 2009, the use of E-Verify was voluntary and applied only to new hires. As of September 8, 2009, however, the final rule requires the insertion of the E-Verify clause into applicable federal contracts. If the contract contains the E-Verify clause, federal contractors are obligated to use the E-Verify system not only for all new hires, but for all existing employees “assigned to the federal contract.” That includes any employee hired after November 6, 1986, who is directly performing work in the United States under a contract that includes the clause committing the contractor to use E-Verify. 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 contract.

Not all federal contractors and/or subcontractors are subject to this new E-Verify requirement.  The final rule calls for inclusion of the E-Verify clause in prime federal contracts with a performance period of more than 120 days and a value of more than $100,000. With respect to subcontractors, the E-Verify clause will normally be included in subcontracts if: (i) the prime contract includes the clause; and (ii) the subcontract is for services or for construction with a value of more than $3,000. In addition, the final rule does not apply to contracts that include only commercially available off-the-shelf (“COTS”) items (or minor modifications to a COTS item) and related services. Nor does it apply to contracts where all work is performed outside the United States.

The final rule also recognizes some exceptions to the requirement to use E-Verify for all new hires. For instance, institutions of higher education, state and local governments, federally recognized Indian tribes, and sureties operating under a takeover agreement with a Federal agency pursuant to a performance bond may choose to only use E-Verify for those new hires who are assigned to perform work on the covered federal contract.

Participation in E-Verify has some benefit to the contractor. While it does not a provide safe harbor from work site enforcement, it does create a rebuttable presumption that the federal contractor or subcontractor has not knowingly hired an unauthorized alien. In this regard, contractors are responsible for monitoring the E-Verify system and following-up with employees if a non-verification response is received from the E-Verify system.

Overview of the E-Verify Employment Verification Process

Companies awarded a contract with the E-Verify clause after September 8, 2009, will be required to enroll in E-Verify within 30 days of the contract award date. After enrolling, federal contractors have up to 90 days to initiate verification queries for all new hires, whether employed on a federal contract or not, as well as existing employees who are working directly on the federal contract.

After the 90-day phase-in period, the federal contractors will be required to initiate verification of each newly-hired employee within 3 business days after the employee’s start date. Federal contractors may choose to initiate the verification of a newly-hired employee prior to the start of employment. However, the federal contractor may only verify an individual’s employment eligibility if the following conditions have been met: (i) the individual has been offered the position; (ii) the individual has accepted the job offer; and (iii) the individual has completed the Employment Eligibility Verification Form I-9.

Posting Requirement

Contractors participating in E-Verify are required to post the notice provided by DHS indicating the employer’s participation in the E-Verify program, as well as the anti-discrimination notice issued by the Office of Special Counsel for Immigration-Related Unfair Employment Practices at the Department of Justice. These postings must be placed in prominent locations that are clearly visible to prospective employees and all employees who are to be verified through the E-Verify system.

Pending Litigation

Mandatory use of E-Verify by federal contractors and subcontractors has been challenged in the courts. In August 2009, the District Court of Maryland upheld the legality of the final rule in Chamber of Commerce, et al. v. Napolitano (Aug. 26, 2009). The district court’s decision has been appealed.