• When is a Financial Institution a Federal Contractor for Purposes of E-Verify?
  • December 12, 2009 | Author: Linda J. Cooley
  • Law Firms: Krieg DeVault LLP - Indianapolis Office; Krieg DeVault LLP - Carmel Office
  • E-Verify (formerly known as the Basic Pilot/Employment Eligibility Verification Program) is an Internet based system operated by the Department of Homeland Security (DHS) in partnership with the Social Security Administration (SSA) that allows participating employers to electronically verify the employment eligibility of their newly hired employees.  E-Verify is free and voluntary and is an effective way to determine employment eligibility of new hires and the validity of their Social Security Numbers.

    On June 6, 2008, President Bush issued Executive Order 13465 entitled "Economy and Efficiency in Government Procurement through Compliance with Certain Immigration and Nationality Act Provisions and the Use of an Electronic Employment Verification System" in which the new rules about E-Verify were announced.  Under Executive Order 13465, certain federal contractors and subcontractors will be required to begin using E-Verify on January 15, 2009, (unless the deadline is extended) to verify their employees' eligibility to legally work in the United States. 

    The question becomes whether a financial institution enrolled in the FDIC insurance program, or selling US savings bonds, or obtaining funds from a federal entity such as the Federal Home Loan Bank must begin using E-Verify to verify all new hires beginning January 15, 2009.  A representative from the US General Services Administration (GSA) which is responsible for policies relating to federal government contracts answered the question with a clear - NO.

    There has been confusion about the definition of "federal government contract" as it relates to the requirement to use E-Verify.  The Federal Acquisition Regulation which requires the use of E-Verify applies only to Federal procurement contracts or contracts in which the Federal Government is purchasing goods or services (e.g., check or other processing for a segment of the Federal Government; banks receiving compensation for having branches or ATMs on military bases, etc.).  It does not apply to situations where companies are purchasing goods or services from the Federal Government (e.g., the Troubled Asset Relief Program, Voluntary Capital Purchase Program, FDIC Temporary Liquidity Guarantee Program (debt guarantee or transaction account guarantee), etc.).  Therefore, a financial institution would only be required to begin using E-Verify on January 15, 2009, if they are a party to some type of procurement contract in which the Federal government is the procurer/purchaser.  Care should be taken to ensure that a financial institution does not have a "federal government contract" identified as a contract which subjects the financial institution to the E-Verify requirement under Executive Order 13465.

    Use of E-Verify is limited to the verification of the employment status of applicants and new hires in conjunction with the SSA.  It should not be used to verify information of other individuals such as financial institution customers. 

    Caution:    Other Executive Orders and regulations that define "federal government contract" differently than Executive Order 13465 require compliance with other requirements.  For example, Executive Order 11246 specifically defines "federal government contract" to include non-personal services such as  fund depository; and although it exempts transactions under $10,000, this exemption does not include financial institutions which are issuing and paying agents for US savings bonds and savings notes.  Additionally, financial institutions should be mindful of some obligations imposed on federal government contractors with 50 or more employees.  Specifically, the EEO responsibilities imposed upon a financial institution, i.e., a fund depository, to maintain affirmative action programs (if 50+ employees) or complete EEO-1 reporting are not impacted by these E-Verify requirements, and still apply under Executive Order 11246.