Federal Contractor E-Verify Rule Implemented on September 8, 2009
- United States
- 10/02/2009
On September 8, 2009 the E-Verify Rule regarding federal contracts went into effect following eight months of delays. The final rule implements the Executive Order issued in June 2008 directing federal agencies to insert clauses into their contracts requiring that federal contractors agree to electronically verify the employment eligibility of employees hired during a contract term, as well as existing employees directly performing work under federal contracts in the United States.
Which federal contracts will be affected by the rule?
The rule applies to solicitations issued and federal contracts awarded on or after September 8, 2009. The E-Verify clause will be inserted into prime federal contracts with a period of performance longer than 120 days and a value above the simplified acquisition threshold ($100,000). If a prime contract includes the E-Verify clause, the prime contractor will be required to include the E-Verify clause in subcontracts for services or construction with a value over $3,000.
Does the rule apply to existing contracts?
The rule generally does not apply to existing contracts, with the exception of certain indefinite-delivery/indefinite-quantity (IDIQ) contracts. Federal agencies have been instructed to amend current IDIQ contracts to include the E-Verify requirement for future orders if the remaining period of performance extends at least six months beyond September 8, 2009, and the amount of work or number of orders expected under the remaining performance period is substantial. Federal agencies cannot unilaterally impose the E-Verify requirement even on IDIQ contracts but must negotiate the inclusion of the requirement on a bilateral basis with the contractor.
What will federal contractors and subcontractors be required to do if the contract includes the E-Verify clause?
Employers (or “contractors”) that are not currently enrolled in E-Verify who are awarded a federal contract containing the E-Verify clause will be required to enroll in the E-Verify program for all worksites within 30 calendar days of the contract or subcontract award date. They must begin using the system to verify all newly hired employees within 90 days from the date of enrollment with E-Verify. Affected employers must also initiate verification queries for employees already on staff who are assigned to the contract within 90 days after enrollment or within 30 days of the employee’s assignment to the contract, whichever is later. After the 90-day phase-in period, affected employers will be required to initiate verification of each newly-hired employee within three business days after his or her start date.
Employers that have already been enrolled in E-Verify at the time they are awarded a federal contract containing the E-Verify clause but not yet designated as a Federal Contractor in E-Verify will need to update the company profile in the E-Verify system through the “Maintain Company” page within 30 days of the contract award date to designate the company as a Federal Contractor. In addition, if only selected worksites were previously enrolled in E-Verify, the company will need to add all remaining worksites to the systems. Employers in this case will be required to continue to initiate verification of newly-hired employees within three business days of their start dates for new hires at hiring sites already using the system. However, they will have 90 days from the date the company profile was updated to Federal Contractor status to begin using E-Verify for new hires at hiring sites not previously enrolled in E-Verify and for each employee already on staff at any hiring site who is assigned to work on the contract. Once the employer designates the organization as a Federal Contractor, all E-Verify users at the company will need to take a federal contractor tutorial that explains the new policies and features that are unique to federal contractors. E-Verify users will not be able to proceed with processing cases in E-Verify until the tutorial has been taken.
Employers that have already been enrolled in E-Verify as designated Federal Contractors at the time an additional contract containing the E-Verify clause is awarded will be required to continue using the program as noted above and initiate verification of all existing employees assigned to the covered contract within 90 days of the contract award date or 30 days of the employee’s assignment to work on the contract, whichever date is later. Participating employers must continue to use E-Verify throughout the duration of the federal contract for all new hires, regardless of whether the new employees are assigned to the contract, unless certain exceptions apply.
Once an employer is enrolled and using E-Verify for all new hires as a result of a federal contract, which additional employees must be verified through the E-Verify system?
In addition to requiring the electronically verification of the employment eligibility of all new employees, the E-Verify clause will require federal contractors to E-Verify current employees who were hired after November 6, 1986 and who will directly perform work under federal contracts (containing the E-Verify requirement) in the United States. An employee is not considered to be directly performing work under the contract if the employee normally performs support work, such as indirect or overhead functions, and does not perform any substantial duties under the contract. However, the rule does not exempt employees based solely on the intermittent nature of the work or the length of time spent performing the work. Therefore, an employee would be included even if the employee is only working on the contract for a short amount of time. The rule applies only to employees working in the United States, which is currently defined to include the fifty states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.
May employers elect to E-Verify all employees in response to this rule instead of tracking who is assigned to work on the contract?
The final rule also provides contractors the option of using E-Verify for all employees hired after November 6, 1986, including any existing employees not currently assigned to work on a federal contract. A contractor that chooses to exercise this option must notify DHS through the E-Verify program and must initiate verifications for the contractor’s entire workforce within 180 days of such notice to DHS. This option is presented at the time an employer enrolls in E-Verify as a Federal Contractor or updates the Company Profile.
Are there any exemptions to the E-Verify requirement that will be imposed in federal contracts?
Certain types of prime contracts are exempt from the rule. Exemptions include contracts for less than $100,000 or covering terms of less than 120 days, as well as contracts where all work is performed outside the United States. Contracts that include only commercially available off-the-shelf (COTS) items (or minor modifications to a COTS item) and related services will also be exempt. A COTS item is a commercial item that is sold in substantial quantities in the commercial marketplace and is offered to the government in the same form, or with minor modifications. Nearly all food and agriculture products fall within the definition of COTS items and are exempt from the rule.
Federal contractors will also not be required to use E-Verify for any employee who has been granted and holds an active federal agency HSPD-12 compliant credential or a U.S. Government security clearance for access to confidential, secret, or top secret information in accordance with the National Industrial Security Program Operating Manual. However, the employer will still need to complete the Form I-9 at the time of hire for such employees.
If a current employee’s name was previously run through E-Verify, the employee should not be re-verified through E-Verify by the same employer, even if the employee is later assigned to work on another contract. However, if a former employee is re-hired, the employer will need to initiate a new E-Verify query even if one was performed at the time the individual was previously hired.
An additional exception is available under the Federal Contractor rule for institutions of higher education, state or local governments, federally recognized Indian Tribes, and sureties performing under a takeover agreement, which allows those types of employers to elect only to E-Verify employees assigned to designated contracts or subcontracts, whether new hires or previously hired.
Has the government provided any guidance on how contractors should implement the rule?
Once the rule was implemented, the federal government released a new version of the E-Verify Manual for Federal Contractors and a Supplemental Guide for Federal Contractors which contain detailed information about using E-Verify and the unique requirements imposed on contractors who must utilize the Federal Contractor version of the system. In addition, the current version of the E-Verify Memorandum of Understanding (“MOU”) contains an overview of contractors’ obligations once enrolled in E-Verify. These are available online from the Department of Homeland Security (“DHS”) here (links appear at the bottom of the page). Additional information for Federal Contractors, including Frequently Asked Questions issued by DHS, is also available at the same website.
BAL Comment
Please note that the E-Verify requirement does not automatically attach to all employers engaged in federal contracts simply because the rule has now been implemented.
The requirement will attach by virtue of E-Verify clauses to be contained in all solicitations and federal contracts awarded after September 8, 2009. This requirement may also be triggered when certain already-existing IDIQ contracts are modified - on a bilateral basis - to include the clause for future orders. Modification of existing IDIQ contracts may be sought under the following circumstances:
- If the remaining period of performance extends at least six months after September 8, 2009,
- and the amount of work or number of orders remaining is substantial.
In the meantime, for employers enrolled in E-Verify, verification of employees through E-Verify is limited to new hires only, and general E-Verify guidelines must be followed.
In light of the extreme difficulty in identifying and monitoring which existing employees might be assigned to a given federal contract, a number of companies will be forced to evaluate the option of E-Verifying their entire workforces. The obligation to E-Verify existing workers assigned to federal contracts is the most vexing component of the new rule and will inevitably significantly increase the burden of these provisions, regardless how each company proceeds.
