Final Rule Requires Certain Federal Government Contractors to Use The E-Verify System

On November 14, 2008, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (collectively, the Councils) issued a final rule (Final Rule), which amends the Federal Acquisition Regulation (FAR) to mandate that certain contractors and subcontractors of the Defense Department, the General Services Administration and the National Aeronautics and Space Administration use the E-Verify system as the means of confirming that certain employees are entitled to work in the United States. The effective date of this Final Rule is January 15, 2009.

The Final Rule resulted from Executive Order 13465 (Executive Order), which President Bush issued on June 6, 2008. As we previously reported, the Executive Order required Executive departments and agencies to issue regulations that require all government contractors, as a condition of each contract, to agree to use an electronic employment eligibility verification system designated by the Secretary of Homeland Security to verify the employment of: (i) all persons hired during the contract term by the contractor to perform employment duties within the United States; and (ii) all persons assigned by the contractor to perform work within the United States on the federal contract. Pursuant to the Executive Order, the Department of Homeland Security (DHS) acted on June 9, 2008 to designate the E-Verify system as the electronic employment eligibility verification system to be used by federal contractors.

Pursuant to the Executive Order, the Councils issued a proposed rule on June 12, 2008, that would amend the FAR to require government contractors to use E-Verify in the manner required by the Executive Order. The comment period for this proposed rule expired on August 22, 2008. The majority of public comments were overwhelmingly negative. Nevertheless, the Councils issued the Final Rule on November 14, 2008, and it retains most of the key provisions from the proposed rule. In pertinent part, it provides as follows:

  • The Final Rule applies to all government contractors (regardless of size), who have been awarded a federal government contract on or after January 15, 2009, pursuant to FAR 1.108(d), that involves a period of performance longer than 120 days and a contract value in excess of $100,000.
  • The Final Rule applies to all federal government subcontractors who have contracts for services or construction with a value of more than $3,000.
  • The Final Rule also applies to indefinite-delivery/indefinite-quantity contracts modified after January 15, 2009. Pursuant to FAR 1.108(d)(3), the Final Rule requires inclusion of the E-Verify clause in the contract if the remaining period of performance will extend at least six months and the amount of work or number of orders expected under the remaining performance period is substantial.
  • The E-Verify requirement in the Final Rule does not apply to federal government contracts where all work will be performed outside the United States.
  • The Final Rule does not apply to federal government contracts for commercially available off-the-shelf items (COTS) and items that would be COTS but for minor modifications are exempted.
  • The Final Rule requires any contractor who wins a bid for a federal contract that contains the FAR E-Verify clause, plus any covered subcontractors, to enroll in E-Verify within 30 calendar days of the contract or subcontract award.
  • All federal government contractors and subcontractors covered by the Final Rule must use E-Verify to validate the employment eligibility of all existing employees who are performing work under a contract covered by the Final Rule.
  • The Final Rule gives contractors the option of verifying all employees, not just those employees assigned to a Government contract. A contractor that elects this option must notify DHS and commence verification of its complete workforce within 180 days of its notice to DHS.
  • The Final Rule allows first-time federal government contractors up to 90 days after enrollment to begin using the E-Verify system. The Final Rule also gives contractors up to 30 days following E-Verify enrollment to initiate verification of existing employees who have not previously been verified in the E-Verify system.
  • Federal contractors already enrolled in the E-Verify system will have the same time-frames, except that the start dates will be measured by the date the contract was awarded, not the date they enrolled in the E-Verify system. Those federal contractors already using the E-Verify system will have the standard three business days from the date of hire to verify new employees.
  • The Final Rule applies to Institutions of Higher Education, state and local governments, and federal Indian tribes but only to those employees assigned to a covered federal contract.
  • Sureties performing pursuant to a takeover agreement entered into with a Federal agency according to a performance bond need only verify employees allocated to the covered Federal contract.
  • Employees who hold an active security clearance of confidential, secret or top secret are exempt from the E-Verify requirements in the Final Rule. The Final Rule also exempts employees whose background investigations have been completed and credentials issued pursuant to the Homeland Security Presidential Directive, "Policy for a Common Identification Standard for Federal Employees and Contractors,'' which was issued by the President on August 27, 2004.
  • The Final Rule allows a head of the contracting activity to waive the requirement to include the E-Verify clause-in exceptional circumstances, but this authority cannot be delegated.

For a complete copy of the Final Rule, please see 73 Fed. Reg. 67651 (November 14, 2008).