FEDERAL CONTRACTORS REQUIRED TO USE E-VERIFY TO CONFIRM LEGAL STATUS OF EMPLOYEES

Executive Order 12989. On June 6, 2008, President Bush signed Executive Order (“EO”) 12989, Economy and Efficiency in Government Procurement Through Compliance with Certain Immigration and Nationality Act Provisions and Use of an Electronic Employment Eligibility Verification System. In summary, the EO requires Federal contractors to use an electronic employment eligibility verification system to confirm the legal status of certain employees, specifically the system designated by the Secretary of Homeland Security. On June 13, 2008, the Secretary of Homeland Security, Michael Chertoff, designated the E-Verify system as the system to be used by Federal contractors pursuant to the requirements of the EO. E-Verify is operated by the U.S. Citizenship and Immigration Services (“USCIS”) in partnership with the Social Security Administration (“SSA”).

Implementing Regulations. The EO instructed the Secretary of Defense, the Administrator of General Services, and the Administrator of the National Aeronautics and Space Administration to amend the Federal Acquisition Regulation (“FAR”), as necessary and appropriate, to implement the EO. On June 12, 2008, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the “Councils”) issued a proposed rule amending the FAR to implement the EO. Comments are due by August 11, 2008. The proposed rule inserts a clause into Federal contracts that requires contractors to use E-Verify as required by the EO.

The proposed clause applies to Federal contracts that include work in the United States, other than those that do not exceed the micro-purchase threshold (generally $3,000) or that are for commercially available off-the-shelf (“COTS”) items or items that would be COTS items but for minor modifications. The proposed rule applies only to employment in the United States as defined in the Immigration and Nationality Act (“INA”) (the fifty States, the District of Columbia, Guam, Puerto Rico, and the United States Virgin Islands). It does not apply to any employment outside the United States.

The proposed clause is to be included in Federal subcontracts over $3,000 for commercial or noncommercial services or construction that include work to be performed in the United States. A Federal contractor or subcontractor is required to:

+Enroll in the E-Verify program within 30 calendar days of Federal contract award, and use the system within 30 calendar days thereafter to verify employment eligibility of employees assigned to the contract at the time of enrollment in E-Verify. An assigned employee is defined as an employee hired after November 6, 1986, who is directly performing work, in the United States, on the contract. If the contractor is already enrolled in E-Verify, it must use the system within 30 days of contract award to verify employment eligibility of employees assigned to the contract.

• Following the initial period, use E-Verify to verify employment eligibility of all new hires and all employees newly assigned to the contract, within three business days of the date of hire or the date of assignment.

It is very important to understand what worker eligibility must be verified. Specifically, all new hires brought on board during the Federal contract term must be verified, regardless of whether the new hires will be assigned the contract. In addition, all employees assigned to the contract must be verified. Thus, an employee hired before November 6, 1986, or hired before enrollment in E-Verify and not assigned to the Federal contract, would not need to be processed through E-Verify.

How E-Verify Works (see http://www.dhs.gov/E-Verify). The requirements for accessing E-Verify and procedures for use of the system are established by DHS. Before participating in the E-Verify program, employers must enter into a Memorandum of Understanding (“MOU”) with DHS and SSA. The MOU requires employers to agree to abide by current legal hiring procedures and to ensure that no employee will be unfairly discriminated against as a result of E-Verify. Employers must still complete a Form I-9 (Employment Eligibility Verification Form) for each newly hired employee, as required under current law. Employers must then enter the employee’s information into E-Verify, and the information is checked against SSA and USCIS databases. If either SSA or USCIS is unable to verify the information, the employer will receive an “SSA Tentative Nonconfirmation” or a “DHS Tentative Nonconfirmation.” The employer must provide the employee a written notice – “Notice to Employee of Tentative Nonconfirmation.” The employee must indicate whether s/he contests the tentative nonconfirmation, and both the employer and the employee must sign the notice. If the employee contests the tentative nonconfirmation, the employer must print a second notice, a “Referral Letter.” This notice provides information about resolving the tentative nonconfirmation and SSA or USCIS contact information.

The contesting employee has eight work days to resolve the issue. The employer is prohibited from terminating or taking other adverse action against the employee while s/he awaits a final resolution. If the employee does not contest the tentative nonconfirmation, or if SSA or DSCIS is not able to resolve the issue, the employer will receive a notice of final nonconfirmation, and the employee may be terminated.

Participation in E-Verify does not exempt an employer from the responsibility to complete, retain, and make available for inspection Forms I-9, as required under current law. However, some modified requirements apply when an employer participates in E-Verify:

• Identity documents used for verification purposes must have photos.
• If an employer obtains E-Verify employee confirmation, a rebuttable presumption is established that the employer has not violated section 274A(A)(1)(A) of the INA, which provides that it is unlawful to hire an unauthorized alien.
• The employer must notify DHS if it continues to employ an employee after receiving a final nonconfirmation, and is subject to a civil penalty of $500 to $1000 for each failure to notify. If an employer continues to employ an employee after receiving a final nonconfirmation, and the employee is subsequently found to be an unauthorized alien, the employer is subject to a rebuttable presumption that it has knowingly employed an unauthorized alien in violation of section 274A(a) of the INA.
• No person or entity participating in E-Verify is civilly or criminally liable for any action taken in good faith based on information provided through E-Verify.

USCIS is revising the MOU, program manual, training materials, website, and other E-Verify materials to reflect the new duties of Federal contractors. A Federal contractor’s compliance with the revised MOU will be a contract performance requirement. Furthermore, the contractor must consent to release of information related to its compliance to contracting officers and other officials authorized to review compliance with Federal contracting requirements.

What will it cost? The Councils estimate that during the first fiscal year the rule is expected to be effective (2009), over 168,000 Federal contractors will be required to enroll in E-Verify, and there will be an additional 3.8 million employees vetted through the system. The initial year cost at 7% net present value will be over $107,000,000, and the ten-year cost (2009-2018) will be over $550,000,000.

Criticism and E-Verify at the State Level. E-Verify is not without its critics. As recently as November 2007, a 250+ page report from USCIS concluded that E-Verify did not meet accuracy standards established by Congress. In addition, the report found that foreign-born work-authorized employees were thirty times more likely to receive a false-positive nonconfirmation than a U.S.-born employee. The report also noted employer compliance problems, such as failure to properly train employees using E-Verify, employers terminating workers improperly, and employers restricting work assignments, delaying training, or reducing pay during the period in which a nonconfirmation is being contested. Critics have complained that the system is prone to mistakes regarding naturalized as opposed to the United States born citizens and that data entry errors by both employers and the government can have significant consequences. Some community groups have raised concerns that E-Verify intrudes individual privacy and foreshadows a “Big Brother” system where every citizen would have to ask the government for permission to work.

Obviously, the EO and implementing regulations will have a substantial impact on many Federal contractors. Also keep in mind that many states and localities are considering requiring state and local governments to use E-Verify, as well as businesses within the state’s or locality’s jurisdiction, through licensing or contracting requirements. Although the constitutionality of state laws addressing the hiring of unauthorized workers, a matter thought to be addressed by Congress under federal law, remains unclear, twelve states, including Alabama’s neighbors, Georgia and Mississippi, as well as Arizona, Colorado, Idaho, Minnesota, Missouri, North Carolina, Oklahoma, Rhode Island, South Carolina, and Utah, have passed laws or issued executive orders requiring some use of E-Verify. In fact, Mississippi is one of two states, the other being Arizona, that require all employers, public and private, to use E-Verify. A legal challenge to the Arizona law was dismissed in February 2008, and an appeal is pending before the U.S. Court of Appeals for the Ninth Circuit.

On the other end of the spectrum, recent legislation in California would prohibit state and local agencies from using E-Verify and discourage private employers from doing so. The bill passed the State Assembly and is now in the State Senate. On June 4, 2008, the U.S. District Court for the Western District of Oklahoma issued a temporary injunction barring implementation of the E-Verify portions of Oklahoma’s Taxpayer and Citizen Protection Act. In Illinois, the state legislature passed a law prohibiting use of any employment eligibility verification system, including E-Verify, “until the Social Security Administration and Department of Homeland Security databases are able to make a determination on 99% of the tentative non-confirmation notices issued to employers within 3 days, unless otherwise required by federal law.” Although the law was scheduled to become effective on January 1, 2008, the state agreed not to enforce it until a suit filed against the state by DHS to declare the law invalid is resolved.

We will continue to watch the progress of the proposed rule and the use of E-Verify at the state, local, and private level and will provide updates as needed.