In our Spring 2009 newsletter, we provided an update on the status of the Final Rule imposing an obligation on most federal contractors to register for and utilize E-Verify for employment verification purposes of all new hires and existing employees working on designated federal contracts. The rule had been stalled by court action in the federal district court in Maryland. That action was dismissed at the end of August, clearing the way for the implementation of the rule as of September 8th. As a result, all affected federal contracts awarded or modified after that date will contain a FAR E-Verify clause.

For those not familiar with E-Verify, it is an internet based system operated by the Department of Homeland Security in partnership with the Social Security Administration. The system is used to verify employment eligibility consistent with the requirements of the Immigration Reform and Control Act, which went into effect in November 1986. The system electronically verifies name, date of birth, social security number and (for non-citizens) immigrant status information of each individual. The program has its share of proponents and critics, with the latter voicing concerns over the reliability of the data in the system, an allegedly high error rate, and concern over the scope of the Memorandum of Understanding (MOU) that all users must sign. Although E-Verify has been available to employers on a voluntary basis for several years, the program was not mandatory until the promulgation of the final rule concerning federal contractors.

Under the final rule, all prime contracts with a value over $100,000 and a period of performance of 120 days or more, as well as any amendments of such existing contracts, will contain the FAR E-Verify clause. This requirement does not cover contracts for commercially available off-the-shelf products, nor does it encompass contracts performed entirely outside the U.S. It does, however, reach down to all tiers of subcontractors on such prime contracts with a value in excess of $3,000, and imposes an obligation on the prime to ensure compliance by the subcontractors.

Affected contractors are required to enroll in E-Verify within 30 calendar days of the contract award date, and initiate E-Verify queries of employees within 30 days thereafter for existing employees and within 90 days for new hires. Once an employer begins entering Form I-9 information for a new hire, however, they must enter such information no later than the third business day after the employee's start date. Employers subject to the FAR E-Verify clause may also elect to verify new and existing employees with active confidential, secret or top secret security clearances or HSPD-12 compliant credentials, as well as existing employees who perform support work (administrative, overhead or indirect services). Institutions of higher education, state and local governments, federally recognized Indian tribes and sureties performing under a takeover agreement entered into with a federal agency under a performance bond need only verify existing employees and new hires assigned to the contract.

DHS has posted a new PowerPoint -- "E-Verify for Federal Contractors" -- on its website: www.uscis.gov. In addition, there is a webinar and demonstration video available to explain the E-Verify requirements and operation of the system for those unfamiliar with the operation of the system. The website also includes a number of FAQs to answer the more common questions about the Final Rule and E-Verify use. Affected contractors are encouraged to review this information and to carefully review and understand their obligations under the MOU. This latter document gives DHS apparently broad authority to request documentation from participating employers concerning their compliance with IRCA and the E-Verify program, including the right to interview employees.

While it is too soon to tell what the overall impact of the Final Rule will be, it represents a significant shift toward E-Verify as a mandatory system for employment authorization. In this regard, DHS Secretary Napolitano is in full agreement with the goals of her predecessor, who saw E-Verify's future application to all workplaces. It is critically important to understand the scope of your obligations as an employer, both under the regulations and in the broader context of applicable state and federal laws, as well as your contractual obligations under the MOU. Privacy issues, issues of governmental access to private business records and property as well as a host of other related legal issues are implicated by this Final Rule. Employers with questions are encouraged to consult with counsel before wandering into this wilderness alone.