A January Surprise!

Are you on the 'E-Verify' hook? If you have a contract for services or construction with the Federal Government, then you probably need to get to know 'E-Verify'. But even if you don't have a federal contract, you still might need to get to know 'E-Verify'. Here's why:

In an earlier blog posted on July 21, 2008, Senitria Goodman explained the computer-based E-Verify program of the U.S. Department of Homeland Security and discussed the proposed rule that makes it mandatory for any federal contractor or subcontractor to use 'E-Verify' for all employees 'assigned' to the federal contract. After a comment period on the proposed rule, a slightly revised final rule was published on November 14, 2008. Its effective date is January 15, 2009.
Basically, the new regulation states that if you provide services or goods (except goods that are 'commercially available off-the-shelf') under a contract with the U.S. government, you are required to use the 'E-Verify' program to verify whether your employees working under the federal contract are eligible to work in in the U.S. (When we talk about being 'eligible' we are talking about making certain that you are not employing someone in violation of U.S. Immigration laws; this is why you complete a Form I-9 for all of your employees.)
If you have a federal contract, you must use E-Verify on all employees assigned to work under the government contract. Furthermore, you must also use E-Verify on all new hires - whether or not they are assigned to work under the government contract.
Now, here's the fun part. All federal contractors must include language in their subcontracts that the subcontractor will use the E-Verify program under the same circumstances. By now you have probably figured out that - even if you are not a federal contractor - this means that if you do business with someone who is a federal contractor - or even another subcontractor of a federal contractor - you may also have to use the E-Verify program for your employees.

Here is the language from the regulation identifying who a 'subcontractor' is:

"Subcontractor means any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime contractor or another subcontractor." (emphasis added)

Following this to its absurd conclusion, you might be required to use E-Verify for your employees if a product you provide ultimately ends up in the hands of a federal contractor.
Fortunately, there are some restrictions that narrow this interpretation; the subcontract must meet the following specifications:

1. The subcontract is for 'commercial or noncommercial services' or it is a construction contract;
2. The subcontract has a value of more than Three Thousand Dollars ($3,000.00); and
3. The subcontract includes work performed in the United States.

Nonetheless, if you perform a contract meeting these qualifications, you might be obligated to use the E-Verify program for your employees. The federal contractors are required to put this requirement in their contracts with their subcontractors, so read your contracts carefully - and govern yourself accordingly.

Happy New Year!

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.