September 8, 2009

Mandatory E-Verify Requirements Went into Effect for Federal Contractors

E-Verify FAR Rule Litigation

Since December of 2008, a coalition of Plaintiffs led by the U.S. Chamber of Commerce and a variety of business organizations had been fighting through litigation for injunctive and declaratory relief against several government defendants to prevent the implementation of a rule that would change the way federal contractors operate by requiring them to use the government’s E-Verify online employee verification system on its new hires and existing workforce, including covered subcontractors. After hearing oral arguments and reviewing motions filed by both sides, the Court has ruled in favor of the government Defendants, dismissing the Plaintiffs’ case and making the rule mandating the use of E-Verify by federal contractors effective beginning September 8, 2009. All emergency relief has been denied. This means big changes for the way that Federal Contractors do business moving immediately forward.

On August 25, 2009, Judge Alexander Williams, Jr. of the U.S. District Court for the District of Maryland, Southern Division, granted the Defendants’ Cross Motion for Summary Judgment in the case of Chamber of Commerce of The United States of America, et. al v. Janet Napolitano, et. al.. Given the imminent applicability of the new rule, it is imperative that all Federal contractors understand what the rule entails and what they must do to legally operate in the U.S.

Background on the Rule, the Litigation & the Court’s Decision

As detailed in the Court’s decision, the history of the rule can be traced back to Former President Bill Clinton, who in 1996 issued Executive Order 12989, which contained provisions to amend the Federal Acquisition Regulation law (the FAR) to, among other things, require the Attorney General to conduct investigations to ensure that federal contractors were in compliance with all provisions of the Immigration and Nationality Act (the INA), which included employing only individuals legally authorized to work in the U.S. Former President George W. Bush expanded this executive order on June 6, 2008 when he signed Executive Order 13465.

That order stated that federal contractors would be required to use an electronic employment eligibility verification system designated by the Secretary of Homeland Security to verify the employment eligibility 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.” On June 9, 2008, then-Secretary of Homeland Security Michael Chertoff designated E-Verify as the required electronic eligibility verification system to be used by the federal contractors in accordance with the executive order. E-Verify is an online database system of employment eligibility run by the Department of Homeland Security (DHS) in partnership with the Social Security Administration (SSA). It can currently be used voluntarily by any U.S. employer and is only mandatory for employers operating in states that have chosen to require it.

After Mr. Chertoff’s designation of E-Verify, the government moved quickly toward implementation. On June 10, 2008, a representative of a council made up of the Secretary of Defense, the Administrator of General Services, and the National Aeronautics and Space Administration (NASA) signed a Notice of Proposed Rulemaking to amend the FAR accordingly, which was published on June 12, 2008 in The Federal Register. At that time, several commentators challenged the legality of the rule while alleging an unfair burden on federal contractors. The council published a final rule in The Federal Register on November 14, 2008, stating that the rule would become effective on January 15, 2009.

Plaintiffs filed its law suit on December 23, 2008, after which both parties agreed to delay the effective date of the final rule to January 19, 2009 and several times after that in order to give the new administration under President Barack Obama time to review both the final rule and Executive Order 13465. While acknowledging that there were improvements that needed to be made to smooth out glitches in E-Verify, the Obama administration ultimately supported its use and began to move forward with the implementation of the final rule. Thus, the litigation continued.

Both parties argued for judgment in their favor as a matter of law, with the Plaintiffs filing a Motion for Summary Judgment and the Defendants filing a Cross Motion for Summary Judgment.

The Plaintiffs’ argued seven counts that including the Defendants’ violation of various statutes and the U.S. Constitution. Among others, the arguments set forth by the Plaintiffs included that the defendants violated the Illegal Immigration Reform and Immigrant Responsibility Act (IIRAIRA) by making E-Verify mandatory when the statute would have it be voluntary; that IIRAIRA only permits the use of E-Verify on new hires thus precluding its use as a reverification tool for current hires as would be required under the final rule; that the rule was unconstitutional based on the executive branch exceeding its power in an area properly belonging to the legislature; and that the defendants violated the Office of Federal Procurement Policy Act by failing to publish in The Federal Register the full text of the revised Memorandum of Understanding (MOU) that would be required to be executed by and between the government and the federal contractors moving forward under the rule.

The Court agreed with the Defendants’ reasoning against all seven of Plaintiffs’ counts, including that IIRAIRA was not violated given that nobody is required to be a federal contractor and therefore nobody was being required to use E-Verify; that there is nothing in the text of the IIRAIRA to indicate a prohibition on the use of E-Verify for reverification purposes; that the Executive branch is within its constitutional authority to implement the rule pursuant to its authority under the Procurement Act to promote efficiency and economy in government procurement, and that the Defendants had fulfilled its publication requirement by including a link in The Federal Register to the full text of the MOU.

On September 8, 2009 the FAR E-Verify Rule became effective, and Federal agencies have been directed to insert the clause into all current all new contracts as well amend certain existing ones. Basically contractors are now mandated to use the system to electronically verify the work eligibility of all employees assigned to contracts and all new employees (with limited exceptions).

Implementation will not be easy. Watch for upcoming GT Webinars and Alerts in this area or contact Dawn M. Lurie with questions at luried@gtlaw.com.