The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) agreed on a final rule implementing a Presidential Executive Order that will require federal contractors and certain subcontractors to use the E-Verify system to confirm the employment eligibility of all newly hired employees and all employees (including existing employees) directly working on federal contracts. The final rule, effective January 15, 2009, amends the Federal Acquisition Regulation (FAR) by adding new FAR Subpart 22.18.

The final rule takes into account more than 1,600 comments received by the Councils after a proposed rule was published in June. Accordingly, the final rule reflects changes from the proposed rule that limit the number of employers required to register with E-Verify and extend the timelines for registering.

Under the rule, all federal solicitations issued after January 15, 2009 for contracts having a performance period of more than 120 days and a value above the simplified acquisition threshold of US$100,000 must include the new E-Verify clause at FAR §52.222-54. The clause requires government contractors and subcontractors to use E-Verify for all new hires and all existing employees "assigned to the contract" or directly performing work under the contract. The rule instructs federal departments and agencies, in accordance with FAR §1.108(d)(3), to amend – on a bilateral basis – existing indefinite delivery/indefinite-quantity contracts to include the clause for future orders if the remaining period of performance extends at least six months after the effective date of the final rule. Prime contractors generally must flow down the E-Verify clause in all subcontracts for services and construction having a value exceeding US$3,000.

Companies awarded a contract or subcontract that includes the new E-Verify clause at FAR §52.222-54 will be required to enroll in E-Verify within 30 days of the contract award date and must begin using the system for new and applicable existing employees within 90 days. Finally, the rule only applies to employees working in the United States including the territories of Guam, Puerto Rico and the US Virgin Islands.

Exemptions and limitations to the rule include:

  • Contracts for commercial off-the-shelf items (COTS);  
  • Institutions of higher education need only verify employees assigned to a covered federal contract;  
  • State and local governments and "federally recognized Indian tribes" need only verify employees assigned to a covered federal contract;  
  • Sureties performing under a takeover agreement entered into with a federal agency pursuant to a performance bond need only verify employees assigned to the covered federal contract; and  
  • The rule exempts employees who hold an active security clearance of confidential, secret or top secret from verification requirements. The rule also exempts employees for which background investigations have been completed and credentials issued pursuant to the Homeland Security Presidential Directive (HSPD)-12.  

Although the rule is final and will take effect on January 15 its ultimate fate could be called into question. Under the Congressional Review Act, Congress has 60 days to reject the final rule. Congress could also refuse to appropriate money for the new rule. In fact, the E-Verify program is only funded through March 2009. Additionally, employers, civil liberties groups or employer associations could institute legal proceedings to prevent the rule's implementation.

For more information regarding E-Verify, see our April 2008 Immigration Alert. "Frequently Asked Questions: Federal Contractors and E-Verify" is available on the US Citizenship and Immigration Services website.