On June 11, 2008, Baker Hostetler issued an Executive Alert advising of a proposed rule requiring federal contractors to begin using the E-Verify employment eligibility verification system to confirm the employment eligibility of certain parts of their workforce. Recently, a final rule was published that will mandate E-Verify use by certain federal contractors and subcontractors beginning January 15, 2009.

E-Verify (formerly known as the Basic Pilot/Employment Eligibility Verification Program) is a free Internet-based system operated by the Department of Homeland Security and the Social Security Administration that allows participating employers to confirm an individual's employment eligibility by inputting information gathered during the I-9 process. The system either confirms the individual's eligibility to work or issues a tentative nonconfirmation, which requires further action by the individual to validate his/her authorization to work.

Under the new rule, as of January 15, 2009, all federal contracts for goods or services for more than $100,000 (with limited exceptions), and subcontracts for services or construction for more than $3,000 (with limited exceptions), will contain a clause mandating the use of E-Verify. If the E-Verify clause is included, a federal contractor or subcontractor will have 30 days to register for E-Verify and will be required to sign an E-Verify Memorandum of Understanding with the U.S. Department of Homeland Security and the Social Security Administration (the MOU is currently being revised to comply with the new rule).

Once registered, the federal contractor or subcontractor (or its designated agent) will be required to (1) within 90 days of enrollment, begin to E-Verify all new hires company-wide within three days of their hiring (and after the I-9 form is complete); and (2) E-Verify all current employees assigned to the contract or subcontract within 90 days of enrollment or within 30 days of the employee's assignment to the contract, whichever is later. Contractors or subcontractors will not be required to E-Verify current employees who will not be assigned to federal contracts or subcontracts, but may do so voluntarily with notice to DHS.