Federal Construction Contracting Blog : Federal Construction Contracting Law Firm : Cohen Seglias Pallas Greenhall & Furman PC : Construction Law, Dredging and Claims

By:  Michael H. Payne and Craig A. Schroeder
 
Effective September 8, 2009, federal contractors awarded new contracts of $100,000 or more with a performance period of longer than 120 days will be required to use E-Verify, an internet-based system that allows employers to electronically verify the employment eligibility of their newly hired employees.  In addition, affected contractors will also be required to confirm the employment eligibility of their current employees who perform contract services for the federal government within the United States. The contractor and any covered subcontractors on the project are required to enroll in the E-Verify program within 30 calendar days of the contract or subcontract award date.  The rule only covers subcontractors if a prime contract includes the E-Verify clause (73 FR 67704, available at http://www.acquisition.gov/far/current/html/52_222.html#wp1156645).  For subcontracts that flow from those prime contracts, the rule extends the E-Verify requirement to subcontracts for services or for construction with a value over $3,000.  Usage of E-Verify also applies to indefinite-delivery/indefinite-quantity contracts modified after the September 8, 2009 rule effective date. 
 
The rule, however, exempts the following contracts:

Contracts that include only commercially available off-the-shelf (COTS) items (or minor   modifications to a COTS item) and related services;

      Contracts of less than the simplified acquisition threshold ($100,000);
      
      Contracts with a performance period of less than 120 days; and
      
      Contracts where all work is performed outside the United States.
        
Employees who normally perform support work, e.g., indirect or overhead functions, and do not perform any substantial duties under the contract, are also excluded from the E-Verify requirement.
 
Proponents of the E-Verify rule say that it confirms the government’s commitment to maintain a legal workforce, creating more reliable employees and reducing illegal hiring practices.  They also say that E-Verify reduces discrimination against immigrant workers since employers feel confident that the new hires are authorized to work and are not using false documents.  This alleviates employer concerns about discrimination lawsuits since the employer is relying on the government for authorization.
 
While the system is accurate, it’s not fail-proof – if the program inaccurately rules out a potential employee, that employee may not get a job.  It also creates yet another hoop through which contractors that want to work with the government must now jump through.   

This program, of course, simply adds to the recent ARRA reporting requirements, and the ethics compliance requirements, that make contracting with the federal government more and more difficult.  Contractors need to be ever vigilant in their compliance with solicitation requirements to avoid inadvertent violations that could lead to suspension and debarment.

More information about the rule can be found at www.uscis.gov/e-verify and http://www.dhs.gov/files/programs/gc_1185221678150.shtm

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The Department of Homeland Security has postponed the start date of the E-verify requirement (please see our earlier article).  The new rule will go into effect no earlier than Friday February 20, 2008.  Proponents of the new rule insist that the rule remains intact with as much legal force as before and that it is only being postponed.  Opponents of the new rule hope that the delay will allow the Obama administration ample time to evaluate the impact it could have on the world of government contracting. 

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In November, 2008, the Department of Homeland Security (DHS) implemented a new rule through the Federal Acquisition Regulation (FAR) that would force companies doing business with the federal government to clear their workers through a verification database. This database is called E-Verify and it electronically confirms whether a new hire is in the United States legally and therefore eligible to work on a federal project.  It works by comparing the name of the queried worker against submitted I-9 forms - the Social Security Administration’s paper based means of verifying worker status - and the DHS’s 60 million records of immigrants. Currently participation in E-Verify is voluntary. According to the October 23, 2008 DHS press release, over 92,000 employers have used E-Verify, with nearly 7 million queries made in Fiscal Year 2008, and 450,000 queries so far in Fiscal Year 2009.  In 96% of the queries made, the worker is deemed eligible to work on a federal project.

The new rule was placed into effect on June 6, 2008 by President Bush as part of an Executive Order, and pending the outcome of the case discussed below, it will be implemented on January 15, 2009. If implemented, it will require contractors and subcontractors who win federal contracts to verify their employees’ status and makes it very difficult for any company to knowingly employ illegal immigrants. In the past, illegal immigrants have been discovered working on U.S. military bases and in other federal offices on multiple occasions. The rule is not without limitation - it would only apply to contracts valued at over $100,000.00 and subcontracts valued over $3,000.00, and to the workers assigned to that particular project.    

The legality of this new requirement is being challenged in federal court where many groups, including the U.S. Chamber of Commerce and Associated Builders and Contractors among other co-plaintiffs, have filed suit to prevent its implementation. The Complaint names Michael Chertoff, Secretary of Homeland Security, et. al., as Defendants and was filed on December 23, 2008 in the United States District Court for the District of Maryland.  The lawsuit contends that it is illegal to require participation in a program such as E-Verify. The law in question, an amended version of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, designated E-Verify as one of several pilot programs that contractors can enroll in, but it also asserts that their participation cannot be made mandatory, as it would be if this new rule were implemented.    

The rule has the potential to impact a very large number of contractors. The rule could make participation in federal government contracting more costly for contractors: the Complaint notes an estimated increased cost of $188 million to private employers if the rule is implemented, a very negative outcome given the current state of the economy.  In a statement issued by the U.S. Chamber of Commerce, Randy Johnson, Vice President of Labor, Immigration and Employee Benefits stated that, “The DHS intends to expand E-Verify on an unprecedented scale in a very short timeframe, and to impose liability on government contractors who are unable to comply.” He adds that, “Given the current economy, now is not the time to add more bureaucracy and billions of dollars in compliance costs to America’s businesses.”  Additionally, the press release includes comments regarding the legality of the rule from Robin Conrad, executive vice president of the National Chamber Litigation Center (NCLC), the Chamber’s public policy law firm, who stated that, “This massive expansion of E-Verify is not only bad policy, it’s unlawful,” adding that, “The Administration can’t use an Executive Order to circumvent federal immigration and procurement laws. Federal law explicitly prohibits the Secretary of Homeland Security from making E-Verify mandatory or from using it to re-authorize the existing workforce.” Considering all of the changes we are expecting to see with the inauguration of Barack Obama in January, it will be interesting to see how this all plays out in the coming months. 

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