Privacy Law Blog : Privacy Lawyers & Attorneys : Proskauer Rose Law Firm : CAN-SPAM, FCRA, FACTA

E-Verify is a joint effort between the Department of Homeland Security and the Social Security Administration that provides an Internet-based verification system for employers to determine the work status of their employees. Concerns have been raised about the burdens on both employers and employees under the mandated use of E-Verify. Employers are concerned about the cost of yet one more obstacle to hiring and maintaining employees and about the possibility of losing qualified employees or potential employees as a result of E-Verify’s 5 percent error rate. Employees face losing current or potential jobs as a result of these false negatives, which are caused by either clerical errors or identity theft. And because E-Verify doesn’t screen against identity theft, some commentators have expressed concern that its increased use will incentivize illegal workers to engage in such theft as an alternative to using false or fabricated information.

On December 23, 2008, Proskauer filed a complaint—on behalf of the U.S. Chamber of Commerce; Associated Builders and Contractors, Inc.; the Society for Human Resource Management; the American Council on International Personnel; and HR Policy Association—in the United States District Court for the District of Maryland, claiming that the Federal Contractor Rule is an unconstitutional usurpation of Congress’s power and is in conflict with Congressional statutes. In response to this litigation, the federal government has delayed the implementation of the contractor rule several times. On January 28, 2009, the government moved for the district court to stay the proceedings until the Obama Administration could review the rule and determine whether it wanted to implement or abandon it. The court granted the motion and agreed to stay the proceedings, ultimately extending the stay until August 17, 2009.

Six months later, the Obama Administration has decided to move forward with the implementation of the rule. In a press release on July 8, 2009, Department of Homeland Security Secretary Janet Napolitano announced the Administration’s intent to implement the rule, praising its ability to aid in immigration law enforcement. The rule is scheduled to take effect on September 8, 2009. The press release also announced the Administration’s plans to propose a new regulation which would rescind the 2007 "No-Match" Rule, which requires employers to take action against employees who provide information on their W-2 form that does not match information in the Social Security Administration’s database.

Following Homeland Security’s official announcement, the government has reported to the district court its intentions to “retain the Final Rule and its current applicability date of September 8, 2009” and “defend this litigation as appropriate upon the termination of the stay.” In order to “facilitate a ruling on the pending motion prior to the Final Rule taking effect,” the court issued an order lifting the stay. Litigation is scheduled to resume with briefs to be filed this month and a summary judgment hearing on August 28, 2009.

Elsewhere in Washington, D.C., the United States Senate has also weighed in in favor of E-Verify. On July 8, 2009, Senator Jeff Sessions of Alabama succeeded in amending a Department of Homeland Security appropriations bill to make E-Verify a permanent program and to mandate federal contractors use the system. Senator David Vitter of Louisiana also successfully moved to amend the bill to forbid the Department of Homeland Security from rescinding the Federal Contractor Rule or the No-Match Rule. The Senate version of the bill with these two amendments was approved of by a vote of the Senate on July 9, 2009. Conferees from the House of Representatives and the Senate will determine whether these amendments remain in the final bill to be presented to President Obama for his signature.

The pending case is Chamber of Commerce of the U.S. v. Napolitano, No. AW-08-344 (D. Md. filed Dec. 23, 2008). The DHS appropriations bill is H.R. 2892, 111th Cong. (2009).

Proskauer summer associate Shawn Ledingham contributed to this post. 

By way of background, on June 6, 2008, then-President George W. Bush signed Executive Order 13,465, which instructs that “Executive departments and agencies that enter into contracts shall re-quire, as a condition of each contract, that the contractor agree to use an electronic employment eligibility verification system designated by the Secretary of Homeland Security to verify the employment eligibility of: (i) all persons hired during the contract term by the contractor to perform employment duties within the United States; and (ii) all persons assigned by the contractor to perform work within the United States on the Federal contract.” President Bush also commanded that the Federal Acquisition Regulation (“FAR”), which governs the acquisition of supplies and services by all federal agencies, be amended to incorporate the foregoing requirement. Three days later, then-Secretary of Homeland Security Michael Chertoff signed a notice designating E-Verify as the electronic employment eligibility verification system to be used by federal contractors and subcontractors.

On June 12, 2008, the agencies responsible for issuing the FAR published a proposed rule to implement Executive Order 13,465 and solicited comments on the proposed rule’s text. On November 14, 2008, a final rule was published in the Federal Register with an effective date of January 15, 2009.

In addition to responding to numerous comments attacking the legality of Executive Order 13,465 and the proposed rule, the final rule explained that “[s]everal commenters suggested that E-Verify has ongoing system security problems that jeopardize the privacy and security of individuals’ personal information.” The final rule also explained that “[m]any commenters stated a concern that E-Verify’s inability to prevent identity theft leaves employers that use E-Verify vulnerable to sanctions.” Ultimately, however, the final rule rejected these privacy-related concerns. For example, the final rule asserted that “security measures in place [to protect employees’ personal information transmitted though E-Verify] include among other things both strong and limited access controls, transmission encryption, and extensive audit logging.”

On December 23, 2008, the Chamber of Commerce of the United States of America—joined by the Associated Builders and Contractors, Inc.; the Society for Human Resource Management; the American Council on International Personnel; and the HR Policy Association—filed a Complaint for Declaratory and Injunctive Relief in the United States District Court for the District of Maryland. In addition to challenging the substance of the final rule, the plaintiffs contested the Executive Order, claiming it was unconstitutional and that it was an unlawful attempt to circumvent existing immigration laws. The plaintiffs also challenged the expansion of E-Verify to require the re-authorization of existing workers.

Shortly after the plaintiffs filed their complaint, the parties reached an agreement to delay implementation of the final rule until February 20, 2009, in order to allow expedited briefing on cross-motions for summary judgment. The plaintiffs’ motion for summary judgment was filed on January 14, 2009, the same day that a notice appeared in the Federal Register delaying the final rule’s enforcement until February 20, 2009.

On January 27, 2009—one day before the Federal Government’s deadline for responding to the plaintiffs’ motion for summary judgment—the parties reached an agreement delaying the applicability date of the final rule until May 21, 2009. A notice to this effect is scheduled to be published in the Federal Register on January 30, 2009. In addition, the Federal Government filed an emergency motion with the district court asking it to stay judicial proceedings for 90 days “in order to allow the newly-inaugurated Administration of President Barack Obama to review the [regulations] at issue in this case.” On January 28, 2009, the district court issued an order granting the Federal Government’s emergency motion.

Given the significant burdens the final rule would have imposed on federal contractors and subcontractors, this most recent delay in the final rule’s enforcement represents another intermediate victory for federal contractors and subcontractors throughout the United States. In addition, the Obama Administration’s pledge to review the final rule may mean that privacy concerns raised by commenters will be given greater weight.