E-Verify Required for Federal Contractors as of January 15, 2009

The final rule implementing President George W. Bush's Executive Order that requires certain federal contractors and subcontractors to use E-Verify to confirm the employment eligibility of all new hires and any current employees assigned to work on federal contracts has been published and will be effective on January 15, 2009.

What is E-Verify?

E-Verify is a free, Internet-based system operated by the Department of Homeland Security (DHS) in partnership with the Social Security Administration (SSA) and allows enrolled employers to verify the employment eligibility of certain employees online after the employee has completed an I-9. Participation in the program is currently voluntary for all U.S. employers.

Who is a federal contractor?

An employer is a federal contractor if it has entered into a contract with the federal government to furnish supplies or services (including construction). In addition to formal contracts, federal contracts include, but are not limited to, awards and notices of awards, job orders or task letters issued under basic ordering agreements, letter contracts, purchase orders, and contract modifications. Federal contracts do not include grants and cooperative agreements.

What federal contractors are affected by the new rule?

Employers with prime federal contracts (including construction contracts) valued at $100,000 or more with a period of performance of 120 days or more that are entered into on or after January 15, 2009 are required to comply with this new rule. Employers with federal contracts that include only commercially-off-the-shelf (COTS) items or federal contracts where all work is to be performed outside of the United States are exempt. All federal contracts awarded on or after January 15, 2009 will include a clause requiring the federal contractor to use E-Verify to verify the employment eligibility of all new hires and all current employees assigned to the federal contract.

Existing and indefinite federal contracts that meet the time and monetary requirements stated above should be modified to include the new E-Verify requirement if the remaining period of performance under the contract extends at least six months beyond January 15, 2009 and the amount of work or number of expected orders under the remaining period is substantial. "Substantial" for this purpose is not clearly defined and interpretation will fall within the discretion of the contracting officer.

What federal subcontractors are affected by the new rule?

Employers with subcontracts flowing from qualifying federal contracts are also covered by this rule if the subcontract is over $3,000. The qualifying federal contractor is responsible for ensuring that its subcontracts include the E-Verify clause and subcontractors are responsible for reviewing and complying with all requirements contained within those contracts.

What specific employees are affected?

Current participation in E-Verify requires that employers verify the employment eligibility of all new employees hired after the employer voluntarily enrolls in the program and signs a Memorandum of Understanding with DHS and the SSA. Under the new rule, affected federal contractors and subcontractors must verify the employment eligibility of all new hires and must also verify the employment eligibility of all current employees assigned to the federal contract or subcontract. Federal contractors and subcontractors who are affected by the new rule also have the option to verify the employment authorization of their entire workforces as long as the employer updates any current company profile they may have with DHS and initiates E-Verify queries for all employees within 180 days of enrollment or the update. Importantly, all other employers who are using E-Verify on a volunteer basis and are not federal contractors or subcontractors under this new rule may only use E-Verify to verify the employment eligibility of new hires, and NOT existing employees.

Does the new rule also apply to colleges and universities?

Colleges and universities who have qualifying federal contracts are also subject to this rule. Funding to institutions of higher learning in the form of federal grants, however, do not constitute "federal contracts" for purposes of this rule. For those colleges and universities who do have qualifying federal contracts or subcontracts, the same requirements for all other federal contractors and subcontractors will apply EXCEPT that colleges and universities are NOT required to use E-Verify for all new hires. These institutions of higher learning must still verify the employment eligibility of any employee who will be assigned to the federal contract by using the E-Verify system.

What should employers do now?

Employers affected by this new rule who have not yet enrolled in E-Verify are not required to do so until they are awarded a new federal contract or subcontract on or after January 15, 2009. Employers with existing contracts affected by the rule should work with legal counsel to determine whether contracts should be modified to require E-Verify participation. Once the new contract is awarded or an existing contract is modified, the federal contractor has 30 days from the contract award/modification date to enroll in the E-Verify program and has an additional 90 days from the enrollment date to verify new hires and all current employees assigned to the federal contract or subcontract.

Affected employers who have already voluntarily enrolled in the program should update their company profiles and identify the company as a federal contractor through E-Verify's online system. Such employers will have 90 days from the contract award/modification date to verify current employees assigned to the federal contract. These employers should already be verifying the employment eligibility of all new hires under the original E-Verify requirements. Employees who have already been verified should not be re-verified in connection with this new rule.

All employers participating in E-Verify must also post a notice issued by DHS confirming participation along with the anti-discrimination notice issued by the Department of Justice's Office of Special Counsel. These notices are available for download from the E-Verify website after enrolling in the program and should be posted in a prominent place clearly visible to affected and prospective employees.

Please contact Tami Earnhart with any questions regarding your requirement to enroll in E-Verify as a federal contractor or subcontractor or Jenifer Brown regarding E-Verify in general or other questions concerning I-9 compliance, employment verification, and other immigration-related issues.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.