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Executive Order on Use of E-Verify for Federal Contractors, July 2008

On June 6, President Bush issued an executive order that will, when implemented, require all federal contractors to use the E-Verify electronic employment verification system once they enter into a contract with a federal agency or executive branch department. The executive order modifies a previous executive order issued by President Clinton in 1996 which required federal contractors to comply with provisions of the Immigration and Nationality Act that forbid the employment of individuals who are not authorized to work in the United States.

The new executive order does not specifically name E-Verify as the required medium for electronic verification of employment status for federal contractors. However, it does require that the electronic verification system be "designated" by the secretary of the Department of Homeland Security (DHS) and that DHS maintain the system. DHS Secretary Michael Chertoff has since designated E-Verify as the system of choice to carry out the objectives of the executive order.

On June 12, a proposed rule was published in the Federal Register that implements the new executive order. The proposed rule amends the Federal Acquisition Regulation (FAR) to require that all covered federal contracts entered into after the effective date of the final rule contain language imposing, as a performance requirement, that the contracting party enroll in and use E-Verify for all employees working on the contract and all new hires during the life of the contract.

The proposed rule provides a 60-day public comment period, and the government will have to consider all comments received and address them in any final rule that will again need to be published in the Federal Register before taking effect. As such, the requirements established by the executive order are not expected to become effective for several months at the earliest.

E-Verify Electronic Employment Verification Program

The E-Verify program was originally established as the Basic Pilot Program by the Illegal Immigration Reform and Immigrant Responsibility Act of 1996. It was officially renamed "E-Verify" in 2007 and is a voluntary, electronic verification system in which an employer agrees to enter into a memorandum of understanding with the Department of Homeland Security and the Social Security Administration requiring adherence to certain hiring practices. It maintains the current requirement to have new employees complete the I-9 Form but also requires that the employer enter the I-9 information into an automated system within three days of hiring an employee. The automated system then returns confirmation of the employee’s employment status or a tentative non-confirmation. Non-confirmed employees have eight days to resolve any inaccuracies. If the reason for the non-confirmation cannot be rectified within a specified time period, the employee must be terminated.

E-Verify provides a "safe harbor" for employers against immigration violations if an employer complies with the terms and conditions of the program. It provides civil and criminal liability protection for employers for any action taken in good faith based on information provided by E-Verify.

Basic Requirements of the Executive Order

The proposed rule requires federal contracting officials to include as an element of performance under the contract 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 the program for those 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

Applicability to Existing Contracts

The proposed rule does NOT apply to existing federal contracts but only to new solicitations and contracts awarded after the effective date of the final rule. However, the rule directs contracting officers to seek 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.

The rule contains a limited waiver provision in which the head of a contracting agency can waive the E-Verify requirement as set forth in the rule. However, we expect such waivers will be extremely rare.

Who is a Contractor?

The existing executive order uses the definition of contractor found in the FAR, which is broad. Under the FAR, "contractor" means "any individual or other legal entity that—(1) Directly or indirectly (e.g., through an affiliate), submits offers for or is awarded, or reasonably may be expected to submit offers for or be awarded, a Government contract, including a contract for carriage under Government or commercial bills of lading, or a subcontract under a Government contract; or (2) Conducts business, or reasonably may be expected to conduct business, with the Government as an agent or representative of another contractor."

Applies Only to the Executive Branch

The president may only affect the executive branch through issuance of an executive order. Therefore, the order does NOT apply to the federal courts (judicial branch) or to congress (legislative branch).

Penalties for Noncompliance

The Department of Homeland Security is revising the terms of the memorandum of understanding that governs the E-Verify program to reflect the changes made by the proposed rule. The memorandum will spell out a federal contractor's obligations under E-Verify. Federal contractors’ compliance with the revised memorandum will be a performance requirement under the terms of the federal contract, so termination of the contract for failure to perform will be one consequence of noncompliance. Also, federal contractors will be required to consent to the release of information relating to compliance with its verification responsibilities to contracting officers or other officials authorized to review an employer's compliance with federal contracting requirements.

Outlook

DHS and the agencies responsible for the FAR will have to work out the details of how this executive order will be implemented. Standard contractual language will have to be developed. Until this happens, federal contractors should not see this requirement in the contracts they bid for or enter into.

NRCA members do not need to do anything at this time to comply with the executive order because it has not yet been finalized. Moreover, the rule that implements the order may undergo substantial revision before being finalized as experts indicate the proposed rule raises a number of complex legal and policy questions which will need to be addressed through the regulatory process. NRCA members will be notified of any new developments related to this executive order.

If you have any questions or comments, or need further information, please contact Duane Musser, NRCA's senior director of federal affairs, at (202) 546-7584 or dmusser@nrca.net.

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