E-Verify: Use It or Lose Your Federal Contract

On June 9, 2008, an Executive Order was issued by President Bush requiring that certain federal contracts contain a clause committing the contractor and certain subcontractors to use E-verify as a condition of the federal contract. E-Verify is an Internet-based system that allows an employer to verify the identity and work eligibility of new employees for purposes of Form I-9. Both federal contractors and their subcontractors will be required to enroll in E-Verify within 30 days of being awarded the federal contractor and must continue use of E-Verify throughout the duration of the contract.

The rationale behind the Executive Order is that due to Immigration and Customs Enforcement’s (ICE) increased enforcement efforts, federal projects could be jeopardized, delayed or derailed if a federal contractor’s workforce is disrupted pursuant to a worksite raid. If federal contractors use E-Verify, the government reasons that the risk of these disruptions and delays are lessened. Notably, while E-Verify does not ordinarily offer any protection from worksite enforcement raids conducted by ICE, the federal government has indicated that federal contractors that use E-Verify are much less likely to face immigration enforcement actions.

Just a word about E-Verify… It’s free, it’s fast and it’s easy…it’s also riddled with erroneous information. E-Verify uses records from the Social Security Administration (SSA) and the Department of Homeland Security (DHS) to verify the employment authorization of individuals; however, the SSA itself estimates that approximately 17.8 million of its records contain discrepancies. Further, statistics also show that E-Verify has an error rate that is between ten to fifteen percent.

Nonetheless, federal contractors as well as certain subcontractors will be required to use E-Verify to verify new employees and all employees that will directly work under the federal contract, whether they are new employees or existing employees. Interestingly, DHS has acknowledged that this is a deviation from the rule normally applicable to employers—that an employer may not re-verify employees who have already properly completed Form I-9—and has seemed to indicate that this deviation is necessary for the stability and security of federal projects.

With respect to subcontractors’ compliance with the Executive Order, federal contractors are required to “flow down” the E-Verify contract clause to certain subcontracts. Subcontracts that exceed $3,000.00 and where the subcontractor will provide commercial or noncommercial services or construction in the U.S. must contain language requiring the subcontractor to use E-Verify. Clearly, the inclusion of this language in subcontracts could have exponential effects. The government’s aim is to protect the integrity of its “supply chain” but not burden federal contractors or subcontractors with the cost of compliance, thus the $3,000.00 threshold.

At this time, we are in the middle of a comment period that will end on August 11, 2008. After the comment period ends, final regulations will be issued by DHS regarding the implementation of the Executive Order. Expect the final regulations to include harsh consequences for a contractor’s failure to use E-Verify, including fines and possible debarment.