Copland and Brenner

Table of Contents

1. E-Verify: Mandatory for Federal Contractors on September 8?

1. E-Verify: Mandatory for Federal Contractors on September 8?

   As we reported in July, a final rule requiring that federal contractors use E-Verify to establish employee eligibility to work legally in the U.S.A. was finally to go into effect on September 8. On August 26, the U.S. District Court for the District of Maryland, Southern Division, entered its final order in Chamber of Commerce of the U.S.A., et al. v. Napolitano, et al. (Civil Action Nno. AW-08-3444) that the new date will stand. Despite that “final” order of the court, pertaining to a “final” rule published in the Federal Register, the saga is not yet over: the plaintiffs have filed an emergency motion for an injunction to prevent its implementation, pending appeal to the U.S. Court of Appeals for the Fourth Circuit. Therefore, on the cusp of the Labor Day weekend, with September 8 the next regular day of business, whether or not the rule will be in effect remains up in the air.

   The history of the rule is as follows: a federal acquisition regulation (“FAR”) - a joint effort by the Department of Defense, the General Services Administration (“GSA”) and the National Aeronautics and Space Administration (“NASA”) - was published in the Federal Register on November 14, 2008 (“Final Rule 1”). Under that rule, certain federal contracts awarded and solicitations issued after Jan. 15, 2009 would be required to include a clause committing government contractors to use E-Verify. Final Rule 1 was to go into effect on January 15, 2009. However, because Congress received Final Rule 1 only on November 19, 2008, a second “final” rule on January 14, 2009 delayed its effective date until January 19 (“Final Rule 2”).

   Meanwhile, the lawsuit in Maryland got under way on December 23, 2008, with the plaintiffs challenging the government’s use of an Executive Order and federal procurement law to make E-Verify mandatory for certain contractors and subcontractors. It also challenged the rule’s requirement that federal contractors use E-Verify to confirm the employment eligibility of all current employees (and not just new hires) who perform contract services for the federal government within the U.S.A., on grounds that this is barred by the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (“IIRIRA”). Citing the pending litigation, Final Rule 2 also extended the applicability date of the regulation until February 20.

   The inauguration of President Obama, with all the trappings of a new Administration, added yet another dimension to the saga. In a January 20 memorandum by President Obama’s Chief of Staff, Rahm Emanuel, all executive departments and agencies were asked to “consider extending for 60 days the effective date of regulations that have been published in the Federal Register but [have] not yet taken effect.” The Obama Administration got more than it asked for when a third regulation, an “amendment to final rule” was published in the Federal Register on January 30 (“Final Rule 3”). In Final Rule 3, the Defense Department, GSA and NASA delayed the applicability date of the FAR until May 21, 2009. The regulation was likewise “amended” (read: delayed) two more times: on April 17 the applicability date was delayed until June 30, and on June 5 it was delayed until September 8 (respectively, “Final Rule 4” and “Final Rule 5”). Meanwhile, the case churned forward in U.S. District Court.

   On August 21, the U.S. District Court in Maryland conducted a hearing regarding the plaintiffs’ motion for summary judgment and the defendants’ cross motion for summary judgment. On August 25, the Court came down decidedly on the side of the defendant government agencies. As noted above, the court entered its final order the following day. In doing so, the Court discussed developments in the statutory, regulatory and executive framework that gave rise to the case before it.

   As the Court noted, the Immigration and Nationality Act (“INA”) mandates employer compliance with Form I-9 requirements pursuant to the Immigration Reform and Control Act of 1996 (“IRCA”). Subsequently, IIRIRA required the Attorney General to establish and administer pilot programs to confirm employment eligibility. However, it is the Federal Property and Administrative Services Act of 1949 (“Procurement Act”), however, that gave rise to the FAR.

   As the Court also noted, “[t]he Federal Property and Administrative Services Act of 1949 (‘Procurement Act’), 40 U.S.C. §§ 101, et seq., allows the President to ‘prescribe policies and directives that the President considers necessary to carry out’ the Procurement Act’s provisions, so long as the President’s directives are ‘consistent’ with the Procurement Act. 40 U.S.C. §121. The Procurement Act thus permits Presidential directives so long as they are ‘reasonably related to the Procurement Act’s purpose of ensuring efficiency and economy in government procurement.’ Liberty Mut. Ins. Co. v. Friedman, 639 F.2d 164, 170 (4th Cir. 1981).”

   It was on February 15, 1996 that President Bill Clinton issued Executive Order 12989. Therein, he stated that “contractors that choose to employ unauthorized aliens inevitably will have a less stable and less dependable work force than contractors that do not employ such persons.” Noting that “[s]tability and dependability are important elements of economy and efficiency” in government procurement, he cited the Procurement Act as authority to establish a policy that “contracting agencies should not contract with employers that have not complied with …INA provisions…prohibiting the unlawful employment of aliens” and debarring violators. 62 Fed. Reg. 6092. It should be noted that his Executive Order preceded enactment of IIRIRA by more than seven months.

   President George W. Bush subsequently amended the Executive Order of his predecessor on June 11, 2008, mandating that, as a condition of each contract with federal agencies, contractors must “agree to use an electronic employment eligibility verification system designated by” the DHS Secretary. Executive Order 13,465, 73 Fed. Reg. 33,285 (June 11, 2008).

   It is largely to this premise that the plaintiffs object. In their motion for injunction, the plaintiffs’ attorneys state that “there is little doubt that many of the issues raised by this case present serious questions of first impression. For example, this Court is the first and only court to decide (1) the scope of IIRIRA §401(a) as it relates to the Federal Government and (2) whether Executive Order 13,465 is a proper exercise of the President’s Procurement Act authority. This Court’s opinion is also the first such ruling in the Fourth Circuit to interpret the meaning of the Procurement Policy’s Act notice-and-comment requirements. As such, this case presents serious questions of first impression and, as discussed below, the equities of the case suggest that the status quo should be maintained pending Plaintiffs’ appeal.”

   As the motion for an injunction points out, statutory authority for E-Verify is temporary and is currently set to expire on September 30, 2009. This means both houses of Congress must agree to extend the program, and the President must sign the associated bill into law, if it is to be extended. Otherwise, E-Verify will become obsolete.

   The motion also points out that the U.S. Department of Homeland Security (“DHS”) appropriations bill passed by the Senate for fiscal year 2010, which begins on October 1, “would require government contractors to participate in E-Verify.” However, the companion bill in the House of Representatives does not contain this language. Senate and House conferees must resolve differences in the two appropriations bills in order to present proposed legislation to the President. Since the House will return from its summer recess only on September 8, the plaintiffs argue that “[i]n all likelihood, congressional action [ ] will be completed prior to” the commencement of FY2010, giving Congress “the opportunity to address many of the core legal questions raised by this case.”

   Given the current climate regarding overall immigration enforcement, increased investigative and prosecutorial resources devoted to employers who violate I-9 requirements, and concerns regarding identity theft, it is very difficult to imagine that Congress will not extend the E-Verify program past September 30. Accordingly, the plaintiffs’ argument that the approaching sunset of E-Verify supports an injunction appears untenable. Stronger is the argument that Congress has competing appropriations bills as to any mandate that government contractors participate in E-Verify. If the DHS appropriations bill for FY2010 does include such a mandate, further litigation on the “final” rule would become moot, and its opponents would have a worse situation on their hands: actual legislation mandating federal contractors’ participation in E-Verify.

   Even if the FY2010 DHS appropriations bill does not mandate government contractor participation in E-Verify, and even if the plaintiffs win the court battle over presidential fiat, there may be other means by which such a requirement could be imposed. We point out the following:

   - E-Verify is the only one of three pilot programs established under Subtitle A to IIRIRA that is still in effect
   - Section 402(a)of IIRIRA states that no person or entity may be required to participate in a pilot program, except as set forth at subsection (e)
   - Section 402(e) of IIRIRA is titled “Select Entities Required to Participate in a Pilot Program,” and states that “each Department of the Federal Government shall elect to participate” in one of the three pilot programs established under that statute
   - Section 402(f) of IIRIRA states that “[t]his subtitle shall not affect the authority of the Attorney General [now the Secretary of DHS] under any other law…to conduct demonstration projects in relation to” the unlawful employment of aliens
   - Section 274A(a)(4) of the INA prohibits using a contract to obtain the labor of an alien, “knowing that the alien is an unauthorized alien”
   - Section 274A(a)(6) of the INA, added by Section 412(d) of IIRIRA, specifically applies the foregoing to “an entity in any branch of the Federal Government”

   It is Section 274A(b) of the INA that establishes requirements of the “employment verification system” as they relate to “a person or other entity hiring, recruiting, or referring an individual for employment in the United States. Section 274A(d) of the INA states that the “President shall provide for the monitoring and evaluation of the degree to which the employment verification system established under [Section 274A(b)] provides a secure system to determine employment eligibility in the United States and shall examine the suitability of existing Federal and State identification systems for use for this purpose.” In doing so, the President may undertake “demonstration projects” of changes in the requirements of Section 274A(b), with any such project authorized for no more than five years. The President may thereafter implement changes – “including additions to” – the employment verification system upon providing applicable statutory notice to Congress.

   The foregoing suggests that there is vast Executive authority to establish radically different requirements for an “employment verification system.” That this authority has not been utilized (or at least cited as the basis) to make changes to the employment verification system is baffling.

   Under all the circumstances, court action on the motion for an injunction may be expected quickly. However, at this writing - midday on September 4 - no published information from the Court is available. Therefore, until such time as any further court action delays its implementation, the final rule is effective September 8. As explained on the U.S. Citizenship and Immigration Services web site (www.uscis.gov), this means “[a]pplicable federal contracts awarded and solicitations issued [on or] after September 8 will include a clause committing government contractors to use E-Verify.” Accordingly, covered contractors and their subcontractors of any tier should be prepared to use E-Verify to confirm the eligibility of all subject employees - new hires and existing employees - to work legally in the U.S.A.

   Additional information concerning the requirement may be found at www.uscis.gov.