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E-Verify Update for Federal Contractors

In June 2008, President Bush issued an Executive Order requiring certain federal contractors and subcontractors to use the E-Verify electronic employment eligibility verification system. In 2008, various federal agencies proposed rules requiring these contractors to use E-Verify. Subsequently, legal challenges against these rules were filed by various business groups. However, on August 25, 2009, in the case of Chamber of Commerce of the USA v. Napolitano, the U.S. District Court for Maryland ruled that the Department of Homeland Security did not violate the law by requiring all employers contracting with the federal government to use the E-Verify system.

The final rule requiring the use of the E-Verify system for federal contractors and subcontractors is set to go into effect on September 8, 2009. An employer is deemed to be a federal contractor if it has entered into a contract with the federal government or one of its agencies to provide supplies or services.

Under the new rule, employers with prime federal contracts (including construction contracts) valued at $100,000 or more, with a period of performance of at least 120 days that are entered into on or after September 8, 2009, are required to comply with this new rule. Employers with subcontracts derived from covered federal contracts are also required to use E-Verify if the subcontract is valued over $3,000. A covered federal contractor is responsible for ensuring that its subcontracts include the E-Verify clause, and subcontractors are responsible for reviewing and complying with all requirements contained within those contracts. The rule does not apply to federal contracts for commercially-off-the-shelf (COTS) items only.

All covered federal contracts that are awarded on or after September 8, 2009 will include a clause requiring the federal contractor to use E-Verify to verify the employment eligibility of all new hires and all current employees assigned to work on the federal contract. Current federal contracts that satisfy the duration and monetary requirements above will likely be modified to include the new E-Verify requirement, if the remaining period of performance under the contract extends at least six (6) months beyond September 8, 2009, and the amount of work or number of expected orders under the remaining period is substantial. The term "substantial" is not clearly defined, and interpretation of this term will likely be within the discretion of the federal agency. Employers with current contracts without an E-Verify clause will not need to abide by the mandatory E-Verify requirements until the contract is modified.

If your company is a federal contractor or subcontractor, the E-Verify requirements will take effect on September 8, 2009. Once a new contract is awarded or an existing contract is modified, a federal contractor has 30 days from the contract award/modification date to enroll in the E-Verify program, and has an additional 90 days from the enrollment date to verify new hires and all current employees assigned to the federal contract or subcontract.

Federal contractors that are not yet enrolled in E-Verify should: (1) enroll in the E-Verify program within 30 days of a contract award; (2) within 90 days of enrollment, verify newly hired employees within three business days after their start date; (3) within the later of 90 days after enrollment or 30 days after the assignment of existing employees to the contract, verify existing employees assigned to the contract; and (4) utilize E-Verify for the duration of the contract. Federal contractors that are already enrolled in E-Verify for 90 days or more should verify newly hired employees within three business days after their start date. Federal contractors that were enrolled in E-Verify for less than 90 days should, within 90 days after enrollment, verify newly hired employees within three business days after their start date.

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