Beginning on January 15, 2009, certain federal contractors will be required to utilize the E-Verify system to assure that employees assigned to work on federal procurement contracts and all new employees are authorized to work in the United States.  E-Verify is an Internet-based employment verification system administered by the Department of Homeland Security (“DHS”) designed to ensure the legal employment status of employees working in the United States.

History & Background of E-Verify

In June 2008, President Bush amended Executive Order 12989 and established the requirement to utilize a DHS-approved “electronic employment eligibility verification system” to verify the work status of federal-contractor employees.  Accordingly, the Civil Agency Acquisition Council and the Defense Acquisition Regulations Council proposed a rule on June 12, 2008 to amend the Federal Acquisition Regulation (“FAR”). 73 Fed. Reg. 33374.  The rule became final on November 14.  73 Fed. Reg. 67651.  As a result, a new contract clause, FAR 52.222-54, Employment Eligibility Verification, will appear in all covered contracts awarded on or after January 15, 2009.

Key Provisions of the New Rule

The requirement to enroll in and utilize E-Verify applies to all FAR-covered contracts, but does not apply to contracts that are:

  • Performed outside the United States;
  • Below the simplified acquisition threshold ($100,000);
  • Less than 120 days in performance;
  • For commercial-off-the-shelf (“COTS”) items and related services;
  • For items that would be COTS items except that they contain “minor modifications;” or
  • For items that would be COTS items if they were not bulk cargo.

The new rule provides no exception for small businesses or small disadvantaged businesses.  “COTS” items are “commercial items,” as defined in FAR 2.101, that are sold in substantial quantities in the commercial marketplace and offered to the Government in the same form as sold commercially. The term “bulk cargo” is used as it is defined in the Shipping Act of 1984 (46 U.S.C. App. 1702) and includes products such as agricultural and petroleum products shipped in bulk.

Contractors that must utilize E-Verify, and are not already enrolled in the system, must enroll within 30 calendar days of the award of a covered contract.  Within 90 days of enrollment, the contractor must begin using the system to verify employment eligibility for new and existing employees.  For all new hires, initiation of employment eligibility corroboration through E-Verify must begin within 3 business days of hiring.  Existing employees (hired after November 6, 1986) who are assigned to work on a covered contract must be vetted within either 90 days following enrollment or 30 days from contract award, whichever is later.  An employee is “assigned to the contract” if (1) he or she is “directly performing work” on the contract; and (2) the work is not “support work” (such as indirect or overhead functions).  An employee “directly performing work” on a covered contract need not be vetted if the work does not involve “any substantial duties applicable to the contract.”  We understand this exception to apply to de minimis activities, either in terms of time or scope.

If a contractor is already enrolled in E-Verify at the time of the award of a covered contract, the timeframe for vetting new hires is essentially the same as above.  For existing employees assigned to the contract, employment verification must begin within 90 calendar days after contract award or 30 days after assignment to the contract, whichever is later.

Contractors may alternatively decide to use E-Verify for all its employees, which, after notification to DHS, must be initiated within 180 days.  Contractors that are institutions of higher education, state and local governments, and federal Indian tribes are required to use E-Verify only for new hire employees assigned to work directly on a covered contract.  Employees with active security clearances that are confidential, secret, or top secret are exempt from E-Verify requirements.

Subparagraph (e) of the new clause requires that the clause be included (including subparagraph (e)) in any subcontract (1) for commercial and noncommercial services (except COTS related services) or construction, (2) if the value of the contract is greater than $3,000, and (3) the work is to be performed in the United States.  The new clause does not flow down to subcontracts for supplies.

Pre-existing indefinite-delivery/indefinite-quantity (“IDIQ”) contracts may be modified on a bilateral basis to include the E-Verify requirements.  The comments to the new rule state that “[t]here can be no unilateral imposition of the clause on any pre-existing IDIQ contract without the contractor’s consent.”  If six months or more remain on the IDIQ contract following the effective date of January 15, 2009, and the work or number of orders remaining on the contract is substantial, the comments to the new rule recommend that the contract should be modified to include FAR 52.222-54.

Federal contractors may enroll in E-Verify by clicking here.

Authored by:

Louis D. Victorino

(202) 218-0038


Daniel J. Marcinak

(202) 772-5391