Today, the Administration finalized a sweeping regulation that will require businesses contracting with the federal government (“Federal contractors”) to "verify the employment eligibility of: (1) all persons hired during the contract term by the contractor to perform employment duties within the United States; and (2) all persons assigned by the contractor to perform work within the United States on the Federal contract."

Here is what employers need to know about this change in the law:

  1.  What is E-Verify?

E-Verify (formerly known as the “Basic Pilot/Employment Eligibility Verification Program”) is an Internet-based database operated by the Department of Homeland Security (DHS) in partnership with the Social Security Administration (SSA) that allows participating employers to electronically verify the employment eligibility of their newly hired employees. U.S. Citizenship and Immigration Services (USCIS) administers the E-Verify program for DHS. For more information on the E-Verify program, please click here.

  1.  When does this regulation go into affect?

The new regulation is effective January 15, 2009. Contracts entered into on or after that effective date will include a clause requiring Federal contractors to use the E-Verify program. Additionally, some current indefinite-delivery/indefinite-quantity federal contracts may be modified to include the E-Verify clause.

  1. I am a current Federal Contractor. How does the regulation affect me?

This new regulation affects employers entering into future federal contracts with Executive Branch agencies and departments

  • for prime contracts longer than 120 days and valued above $100,000, and
  • for subcontracts for services and construction over $3,000 if the prime contract contains the E-Verify clause.

As of January 15, 2009, Federal contractors will be obligated to participate in E-Verify and electronically verify the employment eligibility of (1) all of the employer's new hires across-the-board (regardless of whether those new hires perform work pursuant to the federal contract), and (2) all employees (meaning both new hires and current employees) directly performing work under the contract.

Some contractors will have lesser requirements under the E-Verify clause. Institutions of higher learning, state or local governments or the government of a federally recognized Indian tribe, or a surety performing under a takeover agreement may choose to verify only those employees assigned to the contract, whether they are existing employees or new hires. Therefore, these organizations will not be required to use E-Verify for all new hires.

  1. Are there any contracts that are exempt from this regulation?

Yes, prime contracts are exempt from the E-Verify rule if:

  • the contract is for a period of less than 120 days; or
  • the contract is valued at less than $100,000; or
  • the contract is only for commercially available off-the-shelf items (or with minor modifications) and related services; or
  • all work performed under the contract is performed outside the United States.
  1.  As a Federal contractor, when must I begin participating in E-Verify?

The timing of the contractor's obligation to comply with the verification requirements depends on when the contractor enrolls in E-Verify. For contractors not enrolled at the time of the contract award, the contractor has 30 days to enroll and 90 days from enrollment to initiate verification of employees already on staff who will be working on the contract and to begin using the system to verify newly hired employees. For contractors enrolled in E-Verify for more than 90 days at the time of the contract award, the contractor must initiate verification of new hires within 3 days and will have 90 days to initiate verification of each employee already on staff who is or will be assigned to the contract.

  1.  Must I use E-Verify to confirm the employment eligibility of current employees?

You must initiate an E-Verify query if current employees will be assigned to the contract, meaning that the employee will be directly performing work under the contract. Under this regulation, an employee is not considered assigned to the contract if the employee normally performs support work and does not perform any substantial duties applicable to the contract. Federal contractors and subcontractors also have the option of verifying their entire workforce, both new hires and existing employees – including those not assigned to a federal contract – but this entire workforce verification is not required.

  1. What is the "Memorandum of Understanding?"

The Memorandum of Understanding (MOU) is the agreement among the DHS, the SSA, and the Federal contractor. The MOU identifies each party's responsibilities with respect the E-Verify program and steps for resolving nonconfirmations. If a Federal contractor violates the terms of the MOU, DHS or SSA could terminate the MOU and suspend or debar the contractor from participating in E-Verify, which could result in a violation of the E-Verify clause in the federal contract. The final version of the MOU for federal contractors will be available on the E-Verify website, http://www.dhs.gov/E-Verify.