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FMG Law Blog Line

Federal Contractor E-Verify Requirement Upheld

Posted on: August 28th, 2009

By Benton J. Mathis, Jr. and Kelly E. Morrison

On August 26, 2009, paving the way for full implementation on September 8, 2009, the US District Court for the District of Maryland upheld the Department of Homeland Security’s (DHS) E-Verify federal contractor rule, which requires certain federal contractors and subcontractors to register for and use the federal government’s Internet-based electronic verification system called E-Verify (Chamber of Commerce v Napolitano, No AW-08-3444, 8/26/09).  The Obama administration has backed implementation of the rule following the court’s decision.

Background

The E-Verify federal contractor rule implements Executive Order 12989, as amended by President George W. Bush on June 6, 2008, which directs all federal departments and agencies to require contractors, as a condition of each future federal contract, to agree to use E-Verify for all persons performing work within the United States on that federal contract.

The final rule is further explained and expanded upon in the Federal Acquisition Regulation (FAR), the principal set of rules that govern the “acquisition process” through which the federal government purchases goods and services.  The final FAR rule inserts a clause into prime federal contracts with a period of performance longer than 120 days and a value above $100,000 requiring the use of E-Verify. For subcontracts that flow from those prime contracts, the rule extends the E-Verify requirement for services or for construction with a value over $3,000.

Opponents of the rule, including a coalition of business groups, filed suit in December 2008, challenging the legality of the Executive Order and related federal regulations. According to the business opponents, the Illegal Immigration Reform and Responsibility Act of 1996 (IIRIRA), which created the E-Verify program, states that “the Secretary of Homeland Security may not require any person or other entity to participate in the pilot program.”  Therefore, business opponents argued, the program should be voluntary, not mandatory.  The district court found that the rule was not mandatory because, “[t]he decision to be a government contractor is voluntary and…no one has a right to be a government contractor.”

Implementation

Starting September 8, federal contracts awarded and solicitations with a period of performance longer than 120 days and a value above $100,000 must include a clause requiring federal contractors to use E-Verify. The same clause will also be required in subcontracts over $3,000 for services or construction that flow from those prime contracts. These contractors and subcontractors must confirm that all new hires and existing employees directly performing work under federal contracts are authorized to work in the United States.

To ensure compliance with the new rules, federal contractors and sub-contractors should take the following steps in anticipation of the September 8, 2009 effective date:

• Determine whether you are a federal contractor or sub-contractor required to enroll.  If a contract under FAR (1) includes some work in the United States, (2) has performance terms of 120 days or more, and (3) has a value threshold in excess of $100,000, enrollment in E-Verify is required.  Only sub-contracts for services or construction with values in excess of $3,000 that are necessary to the performance of a prime federal contract that is itself subject to the E-Verify requirements require enrollment.[1]

• If required to enroll, determine whether you are already enrolled in the E-Verify program as a federal contractor – even if already enrolled in E-Verify, an entity may not be enrolled as a federal contractor.  If not enrolled in any respect, you must register and enroll within thirty (30) calendar days of receiving the qualifying federal contract award here.

• If already enrolled in E-Verify but not as a federal contractor, return to the E-Verify online system to modify enrollment to reflect status as a federal contractor.  In addition, the “Memorandum of Understanding” must be signed and completed (completion of the Memorandum will also be required for new enrollees).  A copy of the Memorandum is available here.

• After the effective date of September 8, 2009, if currently performing a federal contract as defined above, a contractor must initiate verification of all new hires within three (3) business days after the date of hire (a grace period of ninety (90) days exists for those contractors who were not already enrolled in E-Verify, however).

It is advisable to work closely with counsel during performance of federal contracts and the periods before and after.  Several restrictions on the use of E-Verify with associated penalties exist.  For example, a company that is not classified as a federal contractor may not use E-Verify on its incumbent employees, but only on new hires.

Additional Resources:

E-Verify Quick Reference Guide, is available here.

Frequently Asked Questions Before Your Company Enrolls in E-Verify, is available here.

“How Do I Use E-Verify” Guide for Employers, is available here.

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