The much-anticipated Final Rule (“the Rule”) amending the Federal Acquisition Regulation (“FAR”) provision to require federal contractors to use the E-Verify System was published in the Federal Register on November 13, 2008. The E-Verify System is a free internet-based program operated by the U.S. Department of Homeland Security, U.S. Citizenship and Immigration Service (“CIS”) to allow employers to verify the employment eligibility of new hires. All federal contracts awarded and solicitations issued after January 15, 2009 will include a clause mandating use of E-Verify for all employees hired during the contract period, and those employees who will perform work under the contract, with a surprising exception for employees who perform support work on the contract, such as indirect or overhead functions. Institutions of higher education, state and local governments, and governments of federally recognized Native American tribes need only verify employees assigned to a covered federal contract (and not all newly hired employees, as is the case for all other federal contractors).

There are exemptions in the Final Rule for contracts that are for less than $100,000 or fewer than 120 days in duration. The Rule also exempts contracts where all work is performed outside the United States or those for commercially available off-the-shelf items (“COTS”), including nearly all food and agricultural items. The Rule extends the E-Verify requirement to subcontracts for services or construction with a value of more than $3,000. It will also apply to existing indefinite-delivery/indefinite-quantity contracts if the remaining period of performance extends at least six months after the Rule’s effective date of January 15, 2009.

Those entities subject to this amended FAR provision will be required to enroll in E-Verify within 30 days of the award of the contract, and to initiate the verification queries within 90 days of the enrollment. After the initial 90-day phase-in period, all newly hired employees will have to be processed in E-Verify within three days of their start date. Contractors may choose to verify all employees, in which case it must notify the government and begin verifying all employees within 180 days of the notification. Federal contractors who no longer wish to participate in E-Verify after a contract has ended can terminate their participation.

To date, the E-Verify program has been voluntary for all employers and, at times, controversial because some employers have found the database unreliable. There are some employer advocacy groups considering filing suit to enjoin enforcement of the Rule. Although E-Verify is operated and managed by CIS, it relies on the Social Security Adminstration’s database to verify the information provided by the employee. Other advocacy groups oppose the program as potentially violative of an employee’s privacy and due process rights. For employers not covered under the new Rule, E-Verify still remains a voluntary program, with only 11 states requiring employers and/or state contractors to use E-Verify. Those states include: Arizona, Colorado, Georgia, Minnesota, Mississippi, Missouri, North Carolina, Oklahoma, Rhode Island, South Carolina and Utah. Illinois currently has legislation forbidding the use of E-Verify, but that law is in the process of litigation.