In June 2008, the Bush administration took action that will affect all entities that contract with the federal government to provide goods or services, with the exception of micropurchase threshold contracts, which generally have a limit of $3,000, and off-the-shelf items commonly known as COTS items. Executive Order 12989 ("EO"), as amended on June 6, 2008, requires that all federal contractors verify the employment eligibility of their workforce through an electronic employment verification system approved by the Department of Homeland Security ("DHS"). It is no surprise that the DHS quickly designated the E-Verify program, operated by the U.S. Citizenship and Immigration Services, in partnership with the Social Security Administration, as the electronic employment eligibility verification system that all federal contractors must use, as required by the amended EO.
Under the amended EO, all federal contractors are required to verify all new employees hired during the contract term "to perform employment duties within the United States," not just employees hired to work on the subject federal contract worksite. Further, the amended EO also requires the federal contractor to use the DHS-approved system to verify the eligibility of "all persons assigned by the contractor to perform work within the United States" on the federal contract project. This language appears to include subcontractors and their employees who are "assigned by the contractor" to perform work on the jobsite. The amended EO will have unforeseen consequences for federal contractors, including increased costs of recruitment, potential loss of an otherwise qualified workforce, and increased risk of a worksite enforcement action.
The proposed rule implementing the amended EO was published in the Federal Register on June 12, 2008, and the public comment period closed on August 11, 2008. The final rule is expected to be issued very shortly; therefore, federal contractors and subcontractors should take the following action now to prepare for the new rules.
- Become familiar with the E-Verify Memorandum of Understanding ("MOU"). The MOU will require a change in how the I-9 process is completed. Consult competent legal counsel to understand the MOU terms and its application to any specific organization.
- Review present I-9 completion procedures. The MOU requires that copies be retained of the documents the employee submits for employment eligibility and verification. The MOU will also require that any List B document submitted by an employee contain a photograph of the individual. Reviewing the current procedures now and preparing for any necessary modifications as a result of the new rule will assist a company to avoid a mistake when the final rule is published and effective.
- Conduct an audit of all I-9 documents now. Ensure that every employee hired after November 6, 1986, has a properly completed I-9 form on file. Make required necessary corrections to deficient I-9 forms, and complete new I-9 forms if any are missing. Remember that an I-9 form is required for owners and officers of the company if they began work after November 6, 1986. Identify common errors and use them as the basis for appropriate training of personnel in charge of the I-9 process.
- Review all federal contracts to identify actual employees who are assigned to perform work on the federal contract project. Don't overlook accounting, financial, and administrative personnel who provide services related to the federal contract or whose compensation is allocated against the federal contract project.
- Review and identify all subcontractors or independent contractors that provide personnel or services to the federal contract project.
- Review all sub-contractor and independent contractor contracts to determine what, if any, modification to contract language will be necessary when the new rule is implemented. Consult legal counsel for assistance in drafting appropriate contract language that will be used in future contracts.
- Evaluate any additional costs or expenses that may be incurred in future contracts to determine whether to continue participating in federal contract projects, either as a contractor or subcontractor. Consider the increased cost of monitoring subcontractors or independent contractors for compliance with the new rule.
- Ensure that any appointment or selection process for employees on federal contract projects is nondiscriminatory. Do not base selection criteria on whether you believe any given employee or class of employees will pass the E-Verify verification process.
Taking the time to carefully review the effects of the new proposed rule will make compliance more manageable when the rule goes into effect.
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