Mandatory Electronic Employment Eligibility Verification Around the Corner for Federal Contractors

George W. Ash and Brandi F. Walkowiak

Federal contractors may soon be required to use an electronic employment verification system designated by the Secretary of Homeland Security to verify the employment eligibility of its new hires and employees assigned to work directly on government contracts, according to a proposed FAR rule. As the term implies, a “proposed rule” is one under consideration but not yet effective. It could become an interim or final rule (either of which would be effective immediately) in its current form, or be revised based upon comments received from the public.

The proposed rule requires certain federal contractors and subcontractors to use the U.S. Citizenship and Immigration Services' (USCIS) E-Verify system, an internet-based employment verification program, to verify that certain of their employees are eligible for work in the United States. Specifically, the proposed rule inserts a clause into covered federal solicitations and contracts requiring a contractor or subcontractor to, within 30 days of contract award, enroll in the E-Verify Program, and then within 30 days of enrollment, begin verifying the employment eligibility of all employees hired after enrollment in E-Verify. In addition, the clause requires the verification of all existing employees that are directly engaged in the performance of work under the covered contract. Once enrolled in E-verify (after the initial start-up), the contractor is required to verify newly-hired and newly-assigned employees within 3 days. Prime contractors are required to flowdown this clause to its subcontracts that are for commercial or noncommercial services or construction, exceed $3,000, and include work performed in the United States.

The rule excludes contracts that do not involve work performed in the United States. For example, the rule excludes any work outside of the United States, including work on US embassies and military bases in foreign countries. The rule also excludes prime contracts for commercially available off-the-shelf items (COTS) or items that would be COTS, but for minor modifications. It also does not apply to contracts that do not exceed the micro-purchase threshold (generally $3,000).

The E-Verify system is expected to help contractors avoid employment of unauthorized workers and assist federal agencies in avoiding contracting with companies that knowingly hire unauthorized workers. Specific information on registration for and use of the E-Verify program can be obtained at the Department of Homeland Security website. Enrollment in the E-verification program includes a requirement that the employer sign a Memorandum of Understanding with the Department of Homeland Security and the Social Security Administration. The MOU requires that employers abide by legal hiring procedures and ensure that no employee will be unfairly discriminated against as a result of the E-verify program. Employers participating in E-verify must still complete, retain, and make available for inspection I-9 Forms for each newly-hired employee.

The E-Verify query will determine whether the information provided by the worker on the I-9 report matches information in the Social Security Administration and USCIS records. If the data does not match SSA or USCIS records, the employer will receive either a "SSA Tentative Nonconfirmation" or "DHS Tentative Nonconfirmation." No action may be taken against the employee at that time. The worker has eight working days to visit an SSA office or call USCIS to resolve the discrepancy. If the worker fails to contest the tentative nonconfirmation or if SSA or USCIS are unable to resolve the discrepancy the employer will receive a notice of final nonconfirmation and the employee may, at that time, be terminated. If an employer obtains confirmation of employment eligibility through E-Verify, it creates a rebuttable presumption that the employer has not violated the Immigration and Nationality Act.

The proposed rule follows a June 6, 2008 Executive Order enunciating that having contractors utilizing an agreed-to electronic employment verification system to confirm the employment eligibility of their workforce "will promote economy and efficient in Federal procurement."

The notice and comment period on the proposed rule ended in mid-August. Accordingly, contractors should be on the alert for a final rule requiring them to enroll in and utilize the E-Verify system on their covered contracts.

George W. Ash and Brandi F. Walkowiak are members of the law firm of Foley & Lardner LLP in Detroit, where they specialize in government procurement issues. They may be reached at (313) 234-7100.

Note: This update provides information of general interest presented in summary form, and does not constitute individual legal advice.