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Untitled Document
napbs Journal July 2008
National Association Professional Background Screeners
Legislative Update from Greenberg Traurig LLP
Regulation Requiring Federal Contractors to Use E-Verify Published in Federal Register
By Montserrat Miller,Of Counsel; Joshua Sanderlin, Assistant Director of Governmental Affairs
contractor to use E-Verify to verify the
employment authorization of employees
“assigned to the contract,” as well as all
new hires.
Compliance with the E-Verify rules will
be a performance element of contracts that
contain the requirement. Briefly, the terms
that will be required to be included as an
element of performance under contracts
are the following:
- That the contractor will enroll in the
E-Verify program within 30 days of the
date a contract is awarded, and within 30
days of that date use E-Verify to verify the
employment authorization of all employees
“assigned to the contract.” If the contractor
is already enrolled in E-Verify, it must use
E-Verify for these employees assigned to
the contract within 30 days.
- That the contractor will use E-Verify for
all new hires within three days of the
date of hire for all new employees hired
after the contract is awarded, as well as
for all existing employees who later are
“assigned” to the contract.
- That the contractor will require all
subcontractors performing work under
the contract that exceeds $3,000 to adhere
to the E-Verify requirement.
Federal contractors will have to closely monitor
their workforce and the projects employees are
working on in order to comply with the rule, and will
have to strategically consider which business entities
they use to bid on federal contracts.
What Event Triggers the
Requirement to Use E-Verify?
A contract award is the triggering event
requiring enrollment in E-Verify. Within
30 days of the award of a contract, a
contractor must enroll in E-Verify if
not already enrolled. This means that
the rule should not apply to existing
contracts, although the rule does direct
contracting officers to amend existing
indefinite delivery/indefinite quantity
contracts to include the clause for
future orders if the remaining period of
performance extends at least six months
after the effective date of the final rule
and the amount of work or number of
orders expected under the remaining
performance period is substantial. It is
unclear whether contracting officials
have the power to unilaterally impose
such modifications, and most likely such
amendments will have to be bargained by
the parties, resulting in what is, in effect,
a new contract covered by the rule.
Which Employees Must be
Verified through E-Verify?
The rule defines a covered employee as an
employee who is performing “direct work”
in the United States under a contract and
who was hired after Nov. 6, 1986. This
means that all employees who perform
work under a federal contract, regardless of
whether they are new hires or existing hires,
must be verified through E-Verify. The rule
does not require contracting employers to
verify all of its employees once the employer
becomes a federal contractor.
U.S. Citizenship and Immigration
Services (“USCIS”) is currently
modifying the E-Verify Memorandum of
Understanding (“MOU”) that all employers
participating in the program must sign, as
well as its Web site and training materials.
This is needed because prior to the
executive order and this rule, employers
were prohibited from using E-Verify for
existing employees. As federal contractors
will now be required to verify all employees,
both new and current, working on covered
federal contracts, the program rules must
be changed by USCIS. Employers who
are not federal contractors and who are
thus not bound by this requirement will
continue to be prohibited from using EVerify
for existing employees.
The requirement to use E-Verify
for existing employees working on a
contract, not only new hires, referred to
as “re-verification,” may turn out to be
a watershed moment. The employment
verification regulations have always
limited the events that would trigger a
re-verification of existing employees, and
the E-Verify program rules have until now
prohibited the use of E-Verify for existing
employees. This marks the first time that
the government will be requiring large
numbers of workers to be re-verified and
run through the E-Verify database even
though they are not changing jobs and
have already been verified through the
I-9 process. This will be a significant
burden in terms of time and resources
on federal contractors, particularly for
larger employers.
Are Subcontractors and
Related Entities Covered?
The rule contains what is known as a
“subcontractor flowdown.” This means
that a federal contractor will be required
to impose, or flow down, the E-Verify
requirement to its subcontractors under
the federal contract if the subcontract:
- Is for commercial or noncommercial
services or construction;
- Exceeds $3,000; and
- Includes work performed in the
United States.
It should be noted that the responsibility
for the flowdown lies with the principal
contractor, not the subcontractor. In
other words, the principal contractor
must insert the E-Verify language in its
contract with the subcontractor and must
see that it is adhered to. This will be an
additional burden on federal contractors
who are already faced with a difficult task
in managing their various subcontractors,
as well as a burden on the subcontractors
who must enroll in and use E-Verify. Many
subcontractors are small entities and may
not be able to afford the cost and disruption
of E-Verify.
Employers who are federal contractors
will also need to pay careful attention to
how they structure their organizations in
terms of entering into federal contracts
and which entity employs workers working
on federal contracts. The obligation to use
E-Verify runs to the contracting entity,
but the persons who must be E-Verified
are the “employees” of that entity. It thus
is questionable whether the employees of
an entity that is related to the contracting
entity but that is not a subcontractor to the
entity would have to be run through
E-Verify, even if they are performing
work for the related entity that relates
to the contract. In other words, the
interplay of the terms “contractor” and
“employee” may allow some corporate
organizations to structure their contracting
and employment relationships in such
a way as to limit the applicability of the
E-Verify requirement.
Conclusion
This proposed rule has the potential to
dramatically affect how federal contractors
structure their operations, manage
their workforce and determine whether
to bid on federal contracts. There are
significant interpretive questions raised
by the proposed rule that will need to
be addressed in the final rule. Federal
contractors should review their workforce
and their current federal contracts to
determine the best way to structure those
relationships going forward.
Further information on E-Verify and the
corresponding executive order can be found
at the following Web sites:
Link to the executive order:
http://www.whitehouse.gov/news/
releases/2007/01/20070124-2.html
DHS press release: http://www.dhs.gov/
xnews/releases/pr_1213039922523.shtm
FAQ from DHS for federal contractors on
the executive order: http://www.uscis.gov/
portal/site/uscis/menuitem.5af9bb95
919f35e66f614176543f6d1a/?vgnextoid
=00ccb85299d6a110VgnVCM100000471819
0aRCRD&vgnextchannel=75bce2e26140511
0VgnVCM1000004718190aRCRD
Greenberg Traurig will continue to
keep NAPBS and its members informed as
to the status of the proposed rule and the
corresponding executive order. Additionally,
Greenberg Traurig is closely following the
progress of legislation in Congress which
deals with the extension and/or expansion
of the E-Verify program.
If you have any questions or
commentsplease contact us at the
Email addresses below.
If you have any questions or commentsplease contact us at the Email addresses below.
Montserrat Miller
Of Counsel
Joshua Sanderlin
Assistant Director of Governmental Affairs
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