1099 Risk Blog

Double Trouble for Federal Government Contractors 1099 or W2

For any large organization, managing the risks of using independent contractors is a tremendous burden. The whole question of 1099 vs W-2 worker classification is perplexing, and the co-employment aspect of 1099 risk plus the fear of contractor lawsuits makes things even murkier. But for federal contractors the bar is set much higher, and the consequences for getting things wrong are far more worrisome. So what's so special about 1099 risk for federal contractors?

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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 employment records, Secretary Napolitano announced yesterday that E-Verify for Federal contractors will take effect September 8, 2009, despite delays and speculation about the survival of the rule. [See more E-Verify issues.] E-Verify is part of a larger immigration enforcement initiative intended to put more onus on hiring organizations to maintain a legal workforce. The 2007 No-Match Rule, which has never taken effect . . .

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Rumors of E-Verify's Demise Just That -- Despite More Delay

While we're shy of reporting on rumors, the word from Washington Technology today is that a representative from trade association TechAmerica has emailed their membership with the news that the deadline for Federal Contractors to comply with E-Verify will be delayed, yet again, this time to September 8. The ruling was most recently postponed to June 30th to allow the Obama administration . . .

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E-Verify: Now Pay Attention.

You’ve already heard that the White House has delayed the deadline for Federal contractors’ compliance with the E-Verify rule – again – until June 30th. There are those who would argue clearly and compellingly that E-Verify isn’t going to make it, that the forces against it are strong. I was discussing the issue just the other day with an attorney, and the controversial rule makes for a challenging debate topic because of how the lines are drawn. Both the left and the right are split down the middle . . .

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E-Verify Delayed; Written Into Stimulus Package

The effective date of the E-Verify requirement for federal contractors has been delayed yet again to May 21. While some business groups are hoping the Bush-era rule will be reviewed and rejected by the Obama administration, other signs promise that, delay or no, E-Verify is here to stay. The House version of the economic stimulus package requires E-Verify for recipients of federal assistance. E-Verify is a free online system via DHS that employers can use to electronically check the immigration status of workers. For federal contractors that sub-contract work or hire independent contractors, 1099s, and single person companies, E-Verify raises new compliance issues that will need to be addressed.   

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Latest E-Verify Legal Research

The latest legal update on E-Verify compliance for government contractors is now available. Jointly produced by Michael Best & Friedrich LLP and MBO, E-Verify Requirements for Contractors offers a groundbreaking preview of the shape of new regulations to come. In June, Bush signed an Executive Order mandating E-Verify I-9 checks for persons working on government contracts -- both new and existing workers. E-Verify raises sticky issues when it comes to sub-contractors, small vendors, and independent consultants performing work for federal contractors. Even more attention-getting is the risk of getting it wrong -- failure to comply can lead to penalties ranging from fines to debarment from federal contracting. As was revealed at our briefing on Friday, your E-Verify program is only as good as your contractor classification. If you're exposed to contractor reclassification risk, then for every misclassified contractor, you have a de facto employee working on a government contract who you have not E-Verified. But don't take my word for it -- check out the paper, run your own research, and send our your comments and feedback.

Stay tuned for the most up to date info regarding E-Verify. The comment period is closed, and detailed instruction is expected to be released as soon as November.

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MBO Hosts E-Verify Compliance Briefing

MBO to host executive briefing with leading contractor risk attorney Eric Rumbaugh from Michael Best LLP on E-Verify for Contractors this Friday August 15th. The meeting is now fully booked. To get on the waiting list or receive a copy of the White Paper, please contact us.

E-Verify is an online system that allows employers to check the work status of new hires by comparing information from an employee's Form I-9 against Social Security Administration and Department of Homeland Security databases.  Although initially a voluntary program, as a result of a Presidential Executive Order signed in June, all federal contractors will be required to use the system.

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States Adopt E-Verify

On July 7th, Missouri joined several other states like Colorado, Georgia, Rhode Island, Utah, and Oklahoma in requiring all state contractors to enroll in E-Verify. E-Verify is an online system administered by the Department of Homeland Security and the Social Security Administration whereby employers can verify employment eligibility of workers and vett their documents electronically.

Marketed by DHS as an essential tool for employers to ensure they employ only legal workers, the program is voluntary for most employers but required for Federal contractors -- including independent contractors and small services vendors hired to perform work for government agencies. With the states getting in on the act, compulsory enrollment will continue to grow.

Some critics of the program have asserted that there must be funds budgeted to improve the accuracy of the Social Security Administration's record systems, and that the program should be rolled out in phases. Others have pointed out privacy issues as a concern.

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