Client Alert Government Contracts & Disputes

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September 3, 2009

Government Contractors and Subcontractors Required to Use the E-Verify Program by C. Joël Van Over and Evan D. Wesser

Beginning September 8, 2009, new rules will require most federal contractors and subcontractors to use the E-Verify program to ensure that their employees are eligible to work in the United States. The final regulation adopting E-Verify requires most contracts and subcontracts entered into after January 15, 2009 to include a clause requiring E-Verify compliance. Recipients of government contracts will need to ensure compliance with the regulations by registering with the E-Verify system and timely verifying the eligibility of their employees through the system. Those using the E-Verify system are subject to stringent ethical limitations and face legal penalties for misuse of the E-Verify system.

The Federal Acquisition Regulation (“FAR”) Councils issued their final rule on November 14, 2008, requir-ing federal government contractors and subcontractors to use the online E-Verify program to ensure that their employees are legally eligible to work in the United States.1 After a delay in requiring contractors to use E-Verify and an unsuccessful challenge to the requirements in U.S. District Court,2 the Department of Homeland Security is requiring contractors to start using E-Verify beginning on September 8. After Sec-retary of Homeland Security Janet Napolitano announced that the E-Verify requirements would be imple-mented effective September 8, 2009, on August 25, 2009, the Court granted the Government’s motion for summary judgment upholding the E-Verify requirements.

Under the regulations, a key contract clause, FAR 52.222-54, Employment Eligibility Verification, must be included in most federal contracts and subcontracts. Federal contractors and subcontractors who will be affected by the rule must register with the E-Verify system or, if currently registered, ensure their regis-tration is current. The highlights of the requirements are addressed below.

1 73 FR 67651 (2008). The final rule follows a proposed rule issued June 12, 2008, 73 FR 33374 (2008), and implements

“Economy and Efficiency in Government Procurement Through Compliance with Certain Immigration and Nationality Act Provisions and Use of an Electronic Employment Eligibility Verification System,” Amended Executive Order 12989 issued on June 6, 2008.

2 See Chamber of Commerce of the United States of America v. Napolitano, 8:08-CV-03444-AW.

Government Contracts & Disputes

Client Alert Government Contracts & Disputes

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Amended Executive Order 12989, dated June 6, 2008, establishes the federal policy to only award federal contracts and subcontracts to businesses “that do not knowingly employ unauthorized alien workers” and have agreed to use an electronic verification system to ensure the lawful eligibility of their employees to work in the United States. To this end, the Department of Homeland Security and the Social Security Administration have collaborated to create the E-Verification system.3 The E-Verification website allows a contractor or subcontractor, free of charge, to register, create an account, and receive confirmation that employees assigned to work on the affected federal contract are eligible to work within the United States, all by entering the information that the employer must collect from the employee’s I-9 form, a form required by the Immigration Reform and Control Act of 1986. The contractor enters the information from the I-9 form into the E-Verify system and the system compares the information with Social Security Administration and Department of Homeland Security records. The system will, within seconds, indicate whether the employee is eligible for employment or if the employee’s information does not match the Social Security Administration’s records. If the latter, the employer must advise the employee of the results and, through the system, generate a letter that the employee may take to a Social Security office if the employee wishes to challenge the determination. In some instances, the Department of Homeland Security may require additional review of a submission and will respond to the submission within one to three federal workdays.

Prior to using the E-Verify system, a contractor must sign and execute a Memorandum of Understanding (“MOU”) with the Department of Homeland Security governing the use of the E-Verify website. Under the terms of the MOU, the E-Verify system may not be used to pre-screen applicants or to engage in employ-ment discrimination. Violation of the terms of the MOU may result in the Department of Homeland Security terminating the MOU, denying the contractor access to the E-Verify program, and referring the contractor to the procuring agency for suspension or disbarment. In addition, employers must post a conspicuous notice at their worksites informing employees that they use the E-Verify system and a notice prepared by the Office of Special Counsel for Immigration-Related Unfair Employment Practices at the Department of Justice, both of which are available through the E-Verify system following registration. While use of the E-Verify system will not provide a “safe harbor” for parties hiring ineligible employees, the Department of Homeland Security has stated that a contractor’s use of E-Verify will create a rebuttable presumption that the contractor did not knowingly hire ineligible employees.

Contracting officers are required to insert the E-Verify Contract Clause, clause 52.222-54 of the FAR, Employment Eligibility Verification, into contracts executed on or after January 15, 2009. In addition to new contracts, however, contracting officers must include the requirements for employee verification in existing indefinite delivery-indefinite quantity contracts with a remaining period of performance that is six months or more beyond the regulation’s effective date when the remaining amount of work or anticipated number of orders under the contract are substantial.

Employee verification is required for most prime contracts exceeding the minimum acquisition threshold of $100,000. Prime contractors, whose contracts contain the clause, must include the E-Verify contract clause in subcontracts for construction and services in excess of $3,000. If the contractor is not registered with E-Verify at the time of the contract award, the contractor must register within 30 calendar days of the award. Contractors who are currently registered with E-Verify must ensure that their registration is com-plete and accurately identifies the party as a federal contractor. If the contractor elects to verify all of its

3 Registration and other information may be found at www.uscis.gov/e-verify.

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employees, the contractor must verify within 180 calendar days of enrollment with the E-Verify system or provide notice pursuant to its MOU with the Department of Homeland Security. Alternatively, the con-tractor must verify the employees assigned to the contract within 90 calendar days of enrollment or within 30 calendar days after assignment to the contract, whichever is later. After this initial 90 day period, any new hires of the contractor must be verified through E-Verify within three days of being hired.

The regulation requires the verification of all existing employees “assigned” to a contract, meaning those parties who are directly performing work under the contract. Existing support staff or those who do not perform any substantial duties under the contract are not subject to E-Verify requirements. However, a contractor may choose to certify all of its employees in order to ensure compliance and avoid any inad-vertent assignment of employees who have not been verified to perform contract work. However, all new hires of the contractor must be verified through E-Verify, regardless of whether they perform work under a federal contract.

The regulation provides several exemptions based on the nature of the contract or the special circum-stances regarding an individual employee. The regulation does not apply to commercial off-the-shelf (“COTS”) items (including items that would be COTS items but for minor modifications), services that are part of the purchase of a COTS item that are performed by the COTS provider and are normally provided for that COTS item, or contracts for work performed outside of the United States.4 In the case of individu-als, a contractor is not required to verify the eligibility of employees who have previously been verified through the E-Verification program by the contractor, employees hired and retained by the contractor since before November 6, 1986, employees who have undergone a completed background investigation for fed-eral employment, or employees who hold a valid security clearance.

The requirements for compliance and the category of contract scenarios exempt from the requirements of the E-Verification system can be daunting and contractors must ensure that they have in place internal compliance processes and measures. Early registration is an option to alleviate any potential missteps attendant with attempting to register on a registration deadline. Additionally, contractors should ensure that employees conducting the E-Verify checks abide by all applicable federal and state employment and pri-vacy laws and the terms of the MOU. Pillsbury attorneys have a wide range of experience in assisting gov-ernment contractors as they navigate the complex requirements imposed by federal regulations.

If you have any questions about the content of this alert, please contact the Pillsbury attorney with whom you regularly work, or the authors of this alert.

4 The United States is defined to include the 50 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin

Islands.

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C. Joël Van Over (bio) Northern Virginia +1.703.770.7604 joel.vanover@pillsburylaw.com

Evan D. Wesser (bio) Northern Virginia +1.703.770.7583 evan.wesser@pillsburylaw.com

This publication is issued periodically to keep Pillsbury Winthrop Shaw Pittman LLP clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The comments contained herein do not constitute legal opinion and should not be regarded as a substitute for legal advice. © 2009 Pillsbury Winthrop Shaw Pittman LLP. All Rights Reserved.