E-Verify Deadline Looming for Federal Contractors

September 03, 2009

Unless a federal court grants an emergency injunction at the last minute, the rule requiring certain federal contractors to participate in the E-Verify program is due to take effect on September 8, 2009. Our office has received a number of common questions regarding this rule, some of which are addressed in the USCIS FAQ on the topic.

Generally, qualifying federal contracts are those which:

· Meet the $100,000 acquisition threshold;

· Are awarded or modified on or after September 8, 2009;

· Have a performance period exceeding 120 days; and

· Actually contain the E-Verify clause.

There are some exceptions to the above, including contracts for Commercially Available Off-the-Shelf Items (“COTS”). Also, the scope of the E-Verify obligations for colleges and universities can be different. The following is a sampling of common questions we have fielded.

Do I need to be participating in E-Verify as of September 8, 2009?

Not surprisingly, the most common question we have fielded from federal contractors is: What exactly happens on September 8th and do I need to be up and running on that date? Keep in mind that the rule requires that specific language be put in the contract, not that contractors immediately participate in E-Verify. Specifically, the rule requires that qualifying contracts awarded or modified on or after September 8, 2009 include the E-Verify clause. It does not require that federal contractors immediately participate in E-Verify absent specific language in the contract mandating participation. In other words, a federal contractor may need to do nothing as of September 8th if its contract is not awarded or modified on that date.

Can I use E-Verify on my existing employees?

A number of employers have decided to get out in front of things and participate voluntarily. Employers may participate in the voluntary E-Verify program at any time, but that program is limited to verification of employment eligibility for new hires. If a federal contractor decides to get a jump on things and participate voluntarily before the contract requires participation, it would not want to use E-Verify to check the employment eligibility of existing employees. Rather, it would restrict use of E-Verify to new hires only in that situation.

Once the federal contract requires participation, the federal contractor has 30 days to enroll in the E-Verify program. It has 90 days thereafter to commence verification under the program. Once subject to the rule, covered federal contractors have the option of using E-Verify on their entire workforce, not just on new hires and those employees assigned to work on the contract as required.

Are related or affiliated entities all subject to the E-Verify requirement?

Some contractors have asked whether the requirement applies to an entire multi-state operation, with various subsidiary companies. The short answer is that the E-Verify requirement applies to the party to the federal contract. The comment section of the rule provides as follows on this issue.

2. Comment: Several commenters suggested that the Councils more clearly define the term ``contractor'' to exclude subsidiaries of a parent where the parent holds the contract but the subsidiaries do not.

Response: Whoever signs a contract is the contractor. Only the legal entity that signs the contract and is bound by the performance obligations of the contract is covered by this E-Verify term. If ambiguity remains, this issue will have to be handled on a case-by-case basis consistent with traditional FAR principles.

Accordingly, on its face, the E-Verify rule would not automatically apply to an entire organization if only one subsidiary of that organization is party to the contract and performs the work under the contract. That said, the contract may contain language which applies the requirement to entities related to or affiliated with the contracting party, and the law may develop where related entities are considered a single employer for this purposes, much like what can currently happen under the FLSA and related laws. Also, if portions of the work are done by affiliates, they could be considered subcontractors under the rule. We will probably need to wait and see how this develops.

There is no need to panic. Although it is unfortunate that the federal government has decided to create redundancy in the employment eligibility verification process by requiring E-Verify while continuing to require I-9 completion, federal contractors should have sufficient time to get up to speed on the use of E-Verify.

Please contact Matt Raynes at our Bangor, Maine office with questions.

This paper is provided as general information, and is not a substitute for legal or other professional advice.