Since the mid-1990s, the United States government has made available to employers, on a voluntary basis, an electronic system to check the social security number given by a new employee against a database maintained by the Social Security Administration. This database confirmed the legal status of employees for employers. While the previous system was voluntary, a recent Executive Order and proposed regulations will soon require federal government contractors to use the Department of Homeland Security’s E-Verify system, thus likely eliminating or possibly duplicating, the paper I-9 forms.

On June 6, 2008, President George W. Bush signed Executive Order 13465, requiring federal contractors and subcontractors to verify the legal status of all employees when obtaining contracts with the federal government and participate in E-Verify. On June 9, 2008, President Bush amended Executive Order 12989 to direct all federal departments and agencies to require contractors, as a condition of each future federal contract, to agree to use an electronic system to confirm workers’ employment eligibility.

In response to these Executive Orders, and as an indication of how seriously the government intends to enforce the use of E-Verify by government contractors, the federal government issued proposed regulations to modify the Federal Acquisition Regulations (“FAR”) June 12, 2008. In summary, the proposed regulations require that, as a condition of receiving a federal government contract, the contractor must use E-Verify 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. E-Verify is the Administration’s automated system for allowing employers to verify job applicants’ eligibility to work as U.S. citizens, legal permanent residents and authorized immigrants. E-Verify can check an employment applicant’s personal information against Social Security Administration and Homeland Security databases. Currently, E-Verify allows employers to confirm the employment eligibility of new hires only, and forbids the use of the system for current employees assigned to perform under government contracts. The regulations, as proposed, will not apply retroactively, thus will only apply to those contractors who enter into new contracts with the federal government. However, the proposed rule will require, as follows:

n Insertion of an employment verification clause in government prime contracts (reflecting the changes to the FAR) to flowdown the employment verification in subcontracts that include work in the United States. Exempt from the proposed rule flowdown requirements are contracts valued at less than the micro-purchase threshold (currently $3,000), or that are for commercially available off-the-shelf (“COTS”) items.

  • Prime contractors to include the clause in commercial or noncommercial service subcontracts more than $3,000, but not in material-only subcontracts.
  • Contractors or subcontractors to enroll in the E-Verify program within 30 days of contract award, and verify employees assigned to the contract within 30 days in the initial contract start-up phase; also, newly hired and newly assigned employees to be verified within three days.
  • Contractors or subcontractors already enrolled in E-Verify, to verify the eligibility of current employees hired after Nov. 6, 1986, and who are assigned to covered contracts or subcontracts, within 30 days of award.
  • Application to solicitations issued, and contracts awarded, after the effective date of the final rule. However, Departments and agencies would amend existing indefinite-delivery/indefinite-quantity (“IDIQ”) 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, and the amount of work or number of orders expected under the performance period is substantial.

To date, approximately 80,000 employers participate in E-Verify. The system has been operating for about five years. According to a June 10, 2008 General Accountability Office report, about 7 percent of the queries to E-Verify cannot be verified immediately by the Social Security Administration, and about 1 percent cannot be immediately confirmed as workauthorized by the U.S. Citizen and Immigration Services. Those that are critical of the E-Verify system believe that those errors in the system penalize unfairly many legitimate workers.

Besides the proposed rule pertaining to federal contracts, a number of states have implemented E-Verify legislation, and many more states are considering adoption of E-Verify. The penalties for noncompliance are severe and include revocation of business licenses and termination of government contracts on both the state and federal level. Public comments for the proposed rule were due by Aug. 11, 2008; thus, a final rule is expected in the upcoming months. Reed Smith government contracts and immigration attorneys will continue to monitor the status of this proposed regulation, and they remain uniquely qualified to assist government contractors with these new employment verification requirements.