Are Financial Institutions Required to Comply with e-Verify?

Posted on September 21, 2009 by Mike Underwood

As a follow up to our recent post on e-Verify, many of our financial institution clients have been asking whether they are required to comply with the new federal e-Verify requirements for federal contractors.

Under federal affirmative action laws, many banks are considered federal contractors because they are issuing and paying agents for U.S. savings bonds or they are insured by FDIC. However, as explained below, issuance and payment of U.S. savings bonds and FDIC insurance do not trigger e-Verify obligations.

 

Clarifying language in the e-Verify regulations states that:

Agreements or activities performed by financial institutions that are not subject to the FAR (Federal Acquisition Regulation) are not required to comply with the e-Verify provisions and clauses of the FAR.

 

This statement in the e-Verify regulations is given in response to a specific question about whether banks and other financial institutions whose federal contracts are limited to serving as issuing and paying agents for U.S. savings bonds or being insured by the FDIC should be excluded from e-Verify requirements. Since issuance of or payment on U.S. savings bonds and FDIC insurance are not covered by FAR, they do not trigger e-Verify obligations. Similarly, the clarification notes that financial agency agreements (FAAs) between banks and the federal government are not subject to FAR and, therefore, do not trigger e-Verify obligations.

 

For all of these reasons, so long as the only federal contracts for your bank are of the sort described above, you can rest assured that you do not have to comply with the federal e-Verify requirements. 

 

The e-Verify regulations do not address specifically federal share insurance of the sort that credit unions have under the National Credit Union Insurance Fund.  However, the rationale for concluding that FDIC insurance does not trigger e-Verify requirements would  apply also to federal share insurance for credit unions. 

 

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E-Verify: What Does This Mean For My Company?

Posted on September 2, 2009 by John M. Stephen

You may have noticed a spate of recent articles and announcements indicating that “all federal contractors” will be required to begin using the federal government’s E-Verify system beginning September 8, 2009. Originally set to take effect on January 15, 2009, there have been three prior delays in implementing mandatory use of E-Verify for federal contractors. On August 26, however, a federal district judge rejected a request for further delay, so it appears the E-Verify regulations will actually go into effect on September 8. (See our recent blog post.) In light of this, current contractors should start thinking about how E-Verify will affect them – if at all.  

Even though many of the articles on this topic indicate that “all federal contractors” are required to start using the system on September 8, the reality is that not all contractors will be covered and that even covered contractors have time after September 8 to enroll and start using E-Verify. 

Is Your Company Covered By The E-Verify Regulations? 

When Does The Regulation Apply?

  • The rule affects only certain federal contractors that are awarded a new contract after September 8, 2009. Those contracts will include a clause requiring the contractor to use E-Verify. 
  • Generally, existing federal contracts will not be affected unless they are extended, renewed, or otherwise amended on or after September 8.
  • The regulation requires the government to renegotiate contracts to include an E-Verify provision in all contracts for an indefinite delivery or for an indefinite quantity (IDIQ).  This provision is limited to contracts for a substantial (not defined) amount of goods that extends for more than six months from the effective date (March 8, 2010).   

What Types Of Contracts Are Affected?

  • Prime contracts with a performance period of 120 days or more and a value of $100,000 or more.
  • Subcontracts over $3,000 for services or construction (and only if the prime contract requires E-Verify).
  • Contracts exempt from the rule include:
    • Contracts for less than $100,000;
    • Contracts for commercially available off-the-shelf items (COTS);
    • Contracts for less than 120 days; and
    • Contracts where all work is performed outside the United States. 

My Company Is Covered, Now What?     

When Do I Have To Enroll in E-Verify?

 

  • Enrollment within 30 days of award date: When a contractor wins a bid on a federal contract that contains the E-Verify clause, the contractor and covered subcontractors must enroll in E-Verify within 30 calendar days of the award date.
  • Verification of employees within 90 days from enrollment: Contractors have 90 days from the date they enroll in E-Verify to initiate verification for employees.
  • On-going obligation: After an employer has enrolled in the program, contractors and the new employees must complete the Form I-9 and employers must initiate verification within three business days after their start date. Verification may be initiated any time after the employee accepts the job offer and fills out the Form I-9. Pre-screening is not allowed.
  • Expiration: When its covered contract ends, a company is not required to continue using E-Verify. However, if the company wishes to terminate enrollment in E-Verify, there is an affirmative process to complete. Employers may not simply stop using the system. 

Which Employees Am I Required to Verify Using E-Verify

  • Employers are required to verify all new employees (following acceptance of job offer and completion of Form I-9) regardless of worksite and regardless of whether the employee will be assigned to a federal contract.
  • In addition, employers must verify all existing employees who are assigned to the contract. This is defined to mean any employee hired after November 6, 1986 who is directly performing work in the United States under a contract with an E-Verify Clause.
  • The rule does not exempt employees based on the intermittent nature of the work or the length of time spent performing the work. 
  • Existing employees who do not perform any substantial duties under the contract or who perform support work (i.e., administrative or clerical functions) are not required to be E-Verified. 
  • Contractors have an ongoing obligation to E-Verify. Any current employees assigned to work for a contract after the initial E-Verify process (in other words, current employees who have not yet been E-Verified) must be E-Verified if they are later assigned to a covered contract. 
  • Once an employee is E-Verified, that employee need not be re-verified if, for example, the employee was previously E-Verified but then moved to a different contract (for the same employer). 
  • An employer also has the option to E-Verify its entire workforce. To avoid a “rolling” process of E-Verification of existing employees, companies may choose to E-Verify all existing employees – even those not assigned to a federal contract. Employers that are not Federal Contractors are not permitted to E-Verify existing employees. 
  • Contractors cannot rely on E-Verification performed by a previous employer. 

Notice Obligations to Applicants and Employees
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Federal Contractor / E-Verify Executive Order and Regulation to Become Effective September 8, 2009

Posted on August 26, 2009 by Kyle Knapp

On August 26, 2009, a U.S. District Court in Maryland cleared the path for the E-Verify requirement applicable to certain federal contractors to go into effect on September 8, 2009. This decision follows several delays of the E-Verify requirement dating to earlier this year. Several plaintiffs, including the U.S. Chamber of Commerce, Associated Builders and Contractors, Inc., Society for Human Resource Management, the American Council on International Personnel and the HR Policy Association, filed suit against the Department of Homeland Security to block implementation of the E-Verify requirement under various constitutional and regulatory grounds. The court rejected the claims and essentially stated that employers that do not want to use the E-Verify system simply can choose not to do business with the federal government.

In light of this ruling, organizations that enter into certain federal contracts beginning on September 8, 2009 will be subject to the E-Verify requirement to ensure that their employees have authorization to work in the United States. Affected federal contracts include prime contracts greater than $100,000 and subcontracts greater than $3,000 for services or construction. The contract will contain a clause confirming the E-Verify requirement. For existing, indefinite-delivery/indefinite quantity contracts, the federal contracting officer is to prepare an amended contract to include an E-Verify clause. Exceptions to the E-Verify requirement are federal prime contracts with performance terms of less than 120 days and contracts for commercially available off-the-shelf (COTS) items.

 

For additional information on the E-Verify requirements for federal contracts, please see previous posts.
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U.S. Department of Homeland Security Rescinds Safe Harbor Regulation for Employers That Receive "No Match" Letters

Posted on August 20, 2009 by Kyle Knapp

On August 19, 2009, the Department of Homeland Security (DHS) announced that it was rescinding its August 2007 and October 2008 regulatory amendments concerning actions employers can take to benefit from "safe harbor" protection after receiving notification from DHS or the Social Security Administration that an employee's reported work authorization or Social Security information does not match government records. In October 2007 a U.S. District Court in California preliminarily enjoined implementation of the regulations. Under the revised regulations, if employers took certain actions within prescribed timeframes, they could shield themselves from liability for allegedly employing individuals who lacked authorization to work in the United States. For additional information on the revised regulation, please review prior blog postings on this topic. 

In its August 19, 2009 announcement, DHS now explains that it intends to pursue employment authorization enforcement actions through programs such as E-Verify and IMAGE. E-Verify is DHS' free online system employers can use to verify the employment authorization of newly-hired employees. Employers still must follow the I-9 requirements for reviewing and recording information from the documents new employees present to evidence their work authorization. The employer then enters certain information from the I-9 into the E-Verify system. In most cases, the employer should receive an instant response concerning the validity of the employee's work authorization status. In other cases, the employer must follow additional steps to verify the employee's work authorization status.
 

IMAGE refers to ICE [Immigration and Customs Enforcement] Mutual Agreement Between Government and Employer. IMAGE allows employers to enroll in the DHS-sponsored program to receive training in hiring practices, document examination and verification and anti-discrimination. It also involves enrolling in the E-Verify system and agreeing to DHS audits of I-9 records.  See our prior posts on E-verify.
 

Both E-Verify and IMAGE present advantages and disadvantages. The advantages include ensuring that an organization's employees have proper work authorization and limiting exposure in the event of a government investigation. The primary disadvantages include the additional administrative cost to implement the programs and opening up an employer's I-9 records to provide unfettered access to government officials in their quest to locate unauthorized workers and punish employers in the process. Therefore, in addition to evaluating the costs of implementation, enrolling in either program requires careful consideration of the employer's workforce, record keeping practices and potential exposure in the event of an investigation.
 

Regardless of whether employers choose to enroll in E-Verify or IMAGE, DHS's rescission of the No-Match regulation does not mean employers can ignore no-match letters. Under existing regulations, there still is an argument that receiving such a letter puts the employer on sufficient notice of a potential problem with the documents it accepted to verify employment eligibility. Prior cases have held that this notice requires further inquiry. Employers need to exercise caution in this area and work closely with counsel to ensure compliance with both work authorization verification procedures and anti-discrimination laws. Based upon statements of DHS Secretary Janet Napolitano, it appears enforcement actions will continue. The no-match letter often is the jumping off point for ICE investigations. And, as the DHS announced in rescinding the regulation, enforcement actions against employers will continue. Therefore, employers need to continue to exercise due caution in this area and promptly address allegations or notices concerning the work authorization status of their employees.
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Role of E-Verify Still Subject of Much Debate

Posted on June 3, 2009 by Robert Cohen

The Courts and the Obama Administration continue to struggle over the proper role of E-Verify, particularly the proposed rule mandating E-Verify for Federal contractors. The Government has agreed with the litigants challenging the rule to delay implementation of the proposed rule until September 8, 2009, with strong hints that it will be delayed further as that date approaches. The proposed rule will not apply to any government contracts before the effective date.

For a more comprehensive review of the proposed rule and E-Verify generally, please review our article: E-Verify: Coming Soon to a Theater Near You.

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E-Verify Bill Introduced in Ohio House

Posted on May 20, 2009 by Robert Cohen

Representative Courtney Combs, a Republican from District 54 in Butler County, has introduced H.B. 184 to the Ohio House of Representatives. The bill would require all employers in Ohio, both public and private, to register and participate in E-Verify, a voluntary, federal program designed to supplement the I-9 employment verification process for all new employees. We have written a more extensive article on E-Verify for interested employers. 

As introduced, H.B. 184 would require all employers to certify their participation in the E-Verify program on state income tax forms. As a result, although the bill does not provide direction to the Department of Taxation on the enforcement mechanisms for this provision, it would appear that some additional burden of enforcement would also be imposed upon the Department of Taxation. Presumably, failure to register for the E-Verify program would not excuse a non-compliant employer from its income tax obligations. Additional responsibilities for the administration of federal immigration laws are also assigned to local law enforcement agencies and the Department of Corrections in other parts of this bill. Congress is expected to address immigration reform over the next several months, so the future of State initiatives such as H.B. No. 184 is not clear. 

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