Executive Orders issued during the past two presidential administrations have placed a specific obligation on federal contractors to ensure that only individuals legally authorized to work in the United States perform work on federal contracts.

Newly published changes to the Federal Acquisition Regulations ("FAR") now take that obligation one step further by requiring that federal contractors and subcontractors begin using the E-Verify online employment eligibility verification system, co-managed by the Social Security Administration and the Department of Homeland Security.

Covered federal contracts and subcontracts awarded or modified after January 15, 2009, are expected to include an express provision requiring the contractor to use E-Verify to verify the employment eligibility of all new hires plus any existing employees directly performing work under the contract, for the duration of the contract. Federal contracting officers are further directed to seek bilateral modification of existing contracts to include this provision; although, the contractor retains the right to reject such a request.

The regulations contain certain exemptions to this requirement based on the size, nature, and duration of the contract, intended to ease the burden on small businesses. Most notably, the requirement will not apply to:

• Prime contracts of less than $100,000
• Contracts that provide commercially-off-the-shelf items
• Subcontracts providing supplies to the covered prime contractor
• Subcontracts for services or construction of less than $3,000
• Federal grant recipients
• Certain financial institutions

Further, while most contractors affected by this regulation must use E-Verify for all new hires, some contractors may choose to do so only for new hires assigned to the contract. Those contractors include:

• Institutions of higher education
• State or local governments or governments of federally recognized Indian tribes, and
• Sureties performing under a takeover agreement entered into with a federal agency pursuant to a performance bond

Finally, the E-Verify requirement does not apply to employees working outside of the United States and its territories or to employees who already hold certain federal security clearances.

Contractors presented with a federal contract or subcontract containing the E-Verify requirement will have 30 days from the contract date to enroll in the E-Verify system and 90 days from the date of enrollment to begin using the system to verify the employment eligibility of covered employees. As part of the enrollment process a contractor further may elect to verify the employment eligibility of all its employees (not just those working on a covered contract), but such a decision remains voluntary under the new regulations.

Covered contractors who fail to enroll in the E-Verify program or fail to engage in the required verification of new hires and employees performing work under covered contracts, however, face possible debarment from future federal contracts or other such action as may be appropriate under FAR.

Facts about E-Verify

E-Verify originally started in 1997 as a voluntary pilot program for employers administered by now defunct Immigration & Naturalization Service and the Social Security Administration. The Department of Homeland Security and its agencies have replaced the INS. Since the program was launched, several states have made enrollment in E-Verify a requirement of performing work under state contracts. There is no cost to employers to enroll in or use the E-Verify System, which gives employers the real-time ability to compare an employee's Form I-9 information with over 444 million records in the SSA database, and more than 60 million records in the DHS immigration databases.

According to the United States Citizenship and Immigration Services, approximately 92,000 employers have enrolled in E-Verify, and approximately 6.6 million employment verification queries have been run in FY 2008 (more than double the number run in the previous year). Employers sign a memorandum of understanding when enrolling in E-Verify, committing themselves to follow the procedures outlined in the E-Verify program. Among the commitments is termination of employees whose employment eligibility is not ultimately confirmed by E-Verify, or explanation to Department of Homeland Security as to the reason the termination was not made.

The use of E-Verify does not replace the employer's obligation to complete a form I-9 within 3 days of a new hire. E-Verify requires however, that the new hire establish identity by presenting a photo identification, which is not otherwise required for I-9 completion. The employer first completes the I-9 step with the employee, then proceeds to enter the I-9 data into the E-Verify system. Enrolled employers must post an approved notice from DHS alerting employees and prospective employees of the employer's participation in the E-Verify program.

In the event that an individual's I-9 information does not match the information contained in the SSA and/or DHS databases, the E-Verify system first advises the employer that the individual is "tentatively non-confirmed" to work in the United States. The system further supplies instructions, which the employer is to provide to the affected individual, about how the individual can start the process of resolving this "tentative non-confirmation." It is the obligation of the individual, not the employer, to resolve this "tentative non-confirmation," requiring primarily the affected individual to contact an identified government agency within eight federal government working days. If the individual contacts the identified government agency within the prescribed period to contest the "tentative non-confirmation," he/she is placed in "pending" status and allowed to continue working until a final determination is made. In fact, an employer is prohibited from taking adverse action against an individual on the basis of a "tentative non-confirmation." If, however, the individual fails to act within the prescribed 8-day period or if a determination is made that the individual is not, in fact, legally authorized to work in the United States, the E-Verify system provides a "final non-confirmation" notice to the employer, which requires the employer to terminate the individual's employment.

Despite its seemingly straightforward purpose, the E-Verify program has been the subject of both media scrutiny and legal action claiming that the system has an unacceptably high error rate that, among other things, has resulted in "tentative non-confirmations" for many naturalized United States citizens, who clearly are work authorized. An outside research firm contracted to study the E-Verify system recently reported, however, that between April and June 2008 approximately 96.1% of all cases queried through E-Verify were instantly found to be work authorized, 3.5% ended with a final non-confirmation, and only 0.4% of the time was a tentative non-confirmation issued to someone who was later determined to be work authorized.

Even that low error rate, however, suggests the possibility of over 25,000 instances in FY 2008 where an individual receiving a “tentative non-confirmation” was actually work authorized. And the federal government has estimated that every work authorized employee who resigns or is terminated due to an unresolved tentative non-confirmation finding costs an employer $5,000 in administrative and replacement expenses.

How Dorsey Can Help

Much like the new regulations combine both immigration and government contracting law, Dorsey has long counseled employers on immigration matters (including I-9 compliance, work eligibility issues, cross-border employment, and temporary and permanent visa applications and sponsorship) and procurement and AA/EEO requirements under federal, state, and local government contracting laws (including developing written affirmative action plans, responding to agency compliance reviews, and defending against audits and enforcement actions). Moreover, Dorsey itself is enrolled in the E-Verify program and can literally offer "hands on" advice to employers considering whether to enroll in the program on a voluntary basis or having to utilize the system for the first time as a covered federal or state contractor. We therefore are uniquely positioned to address every aspect of the E-Verify process.

Should you have questions about what the new E-Verify regulations may mean to your organization, immigration or federal contractor matters more generally, or any other labor or employment law issue, please feel free to contact any of the experienced lawyers in our Labor & Employment Law Group.

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