E-Verify rule brings new compliance requirements

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The politically charged issue of illegal immigration has entered the federal procurement arena, and the result likely will be a new compliance obligation for many contractors, along with workforce turnover for those employing illegal aliens.

The Federal Acquisition Regulation drafters are soliciting comments, due Aug. 11, on a proposed rule that would require many prime contractors and subcontractors to use the U.S. Bureau of Citizenship and Immigration Services' E-Verify system to ensure that certain workers are eligible for employment in the United States.

E-Verify is an Internet-based system administered by the bureau in partnership with the Social Security Administration. Participating employers enter into a memorandum of understanding (MOU) with the government, agreeing to abide by legal hiring procedures and not discriminate against employees because of the program. Participating employers submit an employment eligibility verification form for newly hired workers and enter their personal information into the Web site. The government checks that information against its databases to confirm the workers' eligibility.

Information that does not match the government's databases or indicates ineligibility will trigger an administrative review process, which permits affected workers to confirm their eligibility. Per the MOU, once the process starts, employers are prohibited from terminating the employee until a final determination is made. An employer is subject to a fine of $500 to $1,000 for failure to notify the government that it continues to employ an individual for whom a final eligibility determination has been made. The employment of such individuals also can create liability under the Immigration and Nationality Act.

The proposed rule, expected to become final in 2009, creates a new contract clause committing contractors to use E-Verify for all new hires, in addition to existing and new employees directly engaged in the performance of work under federal government contracts. With few exceptions, the clause will be included in all prime contracts involving work within the United States valued at more than $3,000, except for contracts for commercially available or similar items. Prime contractors will also be required to include the clause in service or construction subcontracts for more than $3,000.

Affected contractors will be required to enroll in the program within 30 days of a contract award. They must then begin to verify employees' eligibility and continue to use the program for the life of the contract. Although the final rule will apply only to solicitations issued after its effective date, agencies will amend existing indefinite-delivery, indefinite-quantity contracts to include the clause for future orders if the remaining performance period extends at least six months beyond the effective date and substantial work or orders are anticipated during the remaining period.

The requirement is intended to safeguard against high levels of employee turnover, prevent disruption when such employees are removed by the government, promote national security and provide a disincentive to hire such individuals at lower wages. It is expected to affect more than 168,000 contractors and subcontractors and result in about 3.8 million additional employees being vetted through E-Verify.

Compliance costs will include startup fees to register with E-Verify and enter into the MOU, training to use the system including a mandatory online tutorial, labor hours for data entry, and time to address inaccurate red flags during verification. Because employers are legally prohibited from hiring or continuing to employ illegal aliens, the government does not view their replacement as a cost associated with the rule. But for companies employing such individuals, the impact of the rule might be significant. Such companies would do well to assess their potential legal and financial liabilities sooner rather than later.

Curley (seamus.curley@dlapiper.com) is an attorney with the Government Contracts practice of DLA Piper US.

About the Author

Seamus Curley is an attorney with the Government Contracts practice of DLA Piper US.

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