1099 Risk Blog

E-Verify for Contractors Upheld; Takes Effect September 8

Just one week after the Department of Homeland Security sent letters notifying over 650 companies of pending audits of their employment records, Secretary Janet Napolitano announced yesterday that the E-Verify rule for Federal contractors will take effect September 8, 2009, despite repeated delays and public speculation about the survival of the rule. [See our previous posts on E-Verify issues.]

The E-Verify initiative, along with the pending audits, is part of a larger immigration enforcement initiative intended to put more onus on hiring organizations to maintain a legal workforce. Meanwhile, the 2007 No-Match Rule, which has never taken effect and has remained locked up in court, is expected to be rescinded. While No-Match represented a paper process, where employers would receive a letter of a questionable SSN as late as a year from the date of hire, the free online E-Verify system is virtually instant, providing rapid verification of legal work status for new hires.

Although E-Verify will initially only apply to Federal government contractors and subcontractors, and remains purely voluntary for other employers, we might expect that in the long run, as E-Verify becomes the favored method of electronic I-9 verification and undergoes continuous improvement, that it will eventually be required for all employers. Several states already require E-Verify, so check your jurisdiction to be sure you are in compliance.

E-Verify is certainly a work in progress, and Secretary Napolitano described both the recent improvements to the system and coming advances. Unlike No-Match, E-Verify relies not just on records from the Social Security Administration’s database, but also checks DHS immigration records and naturalization data, helping to reduce the error rate for naturalized citizens, and cross references Department of State passport data to further reduce mismatches among foreign-born citizens. Other recent improvements to E-Verify include new processes to reduce errors and tools to reduce initial mismatches.

Westat, an independent research firm that sampled data from over 6 million E-Verify queries last fall, reported to DHS that as a result of recent improvements to the E-Verify system, 96.9 percent of workers who submitted identity information from October to December last year were immediately verified as eligible to work. Furthermore, an April 2009 American Customer Satisfaction Index Survey of over a thousand E-Verify participants, E-Verify scored 83 out of a possible 100 points—well above the latest federal government satisfaction index of 69 percent.

“E-Verify is a smart, simple and effective tool that reflects our continued commitment to working with employers to maintain a legal workforce,” said Secretary Napolitano. “Requiring those who seek federal contracts to use this system will create a more reliable and legal workforce. The rule complements our Department’s continued efforts to strengthen immigration law enforcement and protect critical employment opportunities. As Senator Schumer and others have recognized, we need to continue to work to improve E-Verify, and we will.”

The federal contractor rule extends use of the E-Verify system to covered federal contractors and subcontractors, including those who receive American Recovery and Reinvestment Act funds.  After a careful review, the Administration will push ahead with full implementation of the rule, which will apply to federal solicitations and contract awards Government-wide starting on September 8, 2009.

The rule indicates special considerations for organizations that engage independent contractors and small services vendors as sub-contractors. Increased audits of employment records also indicate increased risk of liability for the misclassification of employees as independent contractors. As legal work status verification via I-9 is only performed on employees and  not independent contractors, if workers have been misclassified, then hiring organizations are exposed to not just tax reclassification and co-employment risks, but immigration violations as well. Click here to read a legal opinion paper from Michael Best and Friedrich on the Impacts of E-Verify on Federal Contractors.

As Governor of Arizona, Secretary Napolitano signed legislation mandating all employers in the State use E-Verify. Implementation of this legislation has received high marks from employers across Arizona and the USCIS Ombudsman (in a December 2008 report).

For more information on E-Verify, visit http://www.uscis.gov/everify.

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