United States: Lawsuit By Business Groups Prompts Federal Government To Delay Effective Date Of Federal Contractor E-Verify Rule

On January 9, 2009, the U.S. Chamber of Commerce announced that the federal government has agreed to delay implementation of its controversial E-Verify rule until February 20, 2009. That rule, which was to become effective on January 15, 2009, requires federal contractors and subcontractors to confirm their employees' eligibility to work in the United States through the U.S. Citizenship and Immigration Services' pilot electronic verification program known as E-Verify.

The agreement came in response to a lawsuit brought against the United States, and specifically the Department of Homeland Security (DHS) and the Civil Agency Acquisition Council, by the Chamber and other business groups challenging the authority of the government to force federal contractors and subcontractors to participate in the program. The delay means that the incoming Obama Administration will have the opportunity to review, and possibly rescind, the Executive Order issued by President Bush on June 6, 2008, which created the mandate. The new administration also could simply refrain from taking any action on the matter until its legality is resolved by the courts.

As we previously reported, the Civil Agency Acquisition Council and the Defense Acquisition Regulations Council issued a final rule on November 13, 2008 implementing the Executive Order. The final rule would require companies that receive post-January 15 federal contracts of over $100,000 and those that receive subcontracts of over $3,000, use E-Verify. The rule would also apply to existing indefinite-delivery/indefinite-quantity contracts for future orders if the contract is to extend past July 15, 2009, and a substantial amount of the contract remains to be performed. Further, the rule would obligate covered federal contractors to confirm the employment eligibility of their current employees who are directly working under a federal contract. Prior to the issuance of the Executive Order and final rule, use of the E-Verify program was voluntary, although a few states have mandated that certain state contractors participate in the program.

After the final rule was issued last November, the U.S. Chamber of Commerce, along with other employer groups, filed a lawsuit in the U.S. District Court for the District of Maryland asking the court to declare the Executive Order and final rule illegal and to enjoin their enforcement. Specifically, the plaintiffs allege, among other things, that the E-Verify Rule is unconstitutional on the grounds that neither the President nor the DHS have the authority to mandate the use of E-verify for government contractors. The plaintiffs further contend that the rule violates Section 402(a) of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, which prohibits the federal government from mandating that "any person or other entity...participate in a pilot program" such as E-Verify. In public statements issued after the postponement agreement was announced, business group representatives also emphasized their hope that the new administration would consider the financial burden that compulsory compliance would impose on employers, especially during the current economic crisis.

Though the DHS maintains that the rule is lawful under the statute and within the President's authority to issue, the Department agreed to the delay after the court ordered the parties to try to reach a compromise before the January 15 deadline. Notwithstanding the new February 20 deadline, however, the legal proceedings will continue, which means that the court could decide the legality of the Executive Order and final rule before February 20.

Bottom Line

While the new deadline gives affected employers a reprieve, it is unclear what action, if any, the Obama Administration will take or how the court will rule. Accordingly, covered federal contractors and subcontractors should continue with their compliance efforts and be prepared to begin using the E-Verify system by February 20.

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