The Civilian Agency Acquisition Counsel and the Defense Acquisition Regulations Counsel recently submitted a final regulation to the Office of Management Budget (“OMB" requiring certain federal contractors and subcontractors to enroll in and use the E-Verify program to electronically verify the employment eligibility of all new hires (regardless of whether they work on the federal contract) and all persons already performing work on the federal contract. On June 6, 2008, President Bush issued an Executive Order to direct all federal departments and agencies to require contractors as a condition of each federal contract to agree to use the E-Verify System. Subsequently, the Department of Homeland Security (DHS) issued a proposed rule amending the Federal Acquisition Regulation to require that all prime contracts, which were generally over $3,000, contain a clause requiring that the contractor and certain subcontractors enroll in E-Verify to verify the employment eligibility of: (1) all newly hired employees of the contractor or subcontractor; and (2) all employees of the contractor or subcontractor directly engaged in the performance of work in the United States under those contracts. The proposed regulation would treat federal contractors and subcontractors differently than other employers in the E-Verify System. Federal contractors and subcontractors would be required to verify all current employees assigned by the contractor to perform work in the United States under those contracts. Employers who are not subject to this regulation cannot verify employment eligibility of current employees. Instead, employers who are not subject to this regulation can only verify the employment eligibility of new hires through the E-Verify program.

The proposed regulation would require federal contractors and subcontractors to begin enrolling in the E-Verify program within 30 days after signing a contract with the federal government. These contractors and subcontractors must then begin verifying the employment eligibility of all new employees that are hired after enrolling in E-Verify and to continue to use the E-Verify program for at least the life of the contract. After the issuance of the final regulation, federal agencies would be required to include the E-Verify program requirement clause in any contracts awarded or solicitations issued after the regulation takes effect. The proposed regulation also includes a clause to have federal agencies reopen long term contracts to insert the E-Verify program requirement clause.

The final regulation was sent to OMB on October 14, 2008. Media reports indicate that the final regulation could be released in November. After the final rule is issued, it will not take effect until 30 days after publication.