State public works contractors and subcontractors involved in projects of more than $25,000 will be required to use E-Verify starting on January 1, 2013, or they will lose their right to contract with the Commonwealth of Pennsylvania.

On July 5, 2012, Pennsylvania Gov. Thomas Corbett signed into law S.B. 637, requiring state public works contractors and subcontractors involved in projects of more than $25,000 to use E-Verify starting on January 1, 2013, or they will lose their right to contract with the Commonwealth of Pennsylvania.

E-Verify is a free Internet-based system that is maintained and administered by the U.S. Department of Homeland Security (DHS). The system allows employers to input employee personal details and have that information compared to data from DHS and Social Security Administration records to confirm employment eligibility. In approximately 98 percent of their submissions, employers will receive a positive answer confirming employment eligibility from the system within seconds. However, for the remaining approximately 2 percent of submissions with a discrepancy in the data, it may take two to four weeks for resolution. During this time period, employers are not permitted to hire or take any adverse employment actions against employees. DHS statistics indicate that more than half of those approximately 2 percent of employees will later be found not authorized to work in the United States.

Under S.B. 637, the Pennsylvania Department of General Services is required to create an E-Verify usage certification form—which all contractors, subcontractors and staffing companies providing services on public works projects will be required to sign under penalty of perjury—verifying that they have enrolled and are using the system for all new hires starting on January 1, 2013. Under the new law, providing a false certification is punished by a civil fine ranging from $250 to $1,000.

S.B. 637 also penalizes employers for failing to enroll in E-Verify and for failing to use the system for each new employee after enrollment. The penalties for violators are as follows:

• First Offense: Warning to violator and posting on Pa.'s website
• Second Offense: 30-day debarment from state public works contracts
• Third Offense: 180 days or up to one year debarment from state public works contracts
• Willful violators may be debarred for up to three years.

Under the statute, a contractor may only be charged with one offense per contract, regardless of the number of employees the violator failed to process through the system. The statute also requires that each general contractor and subcontractor, no matter what its position in the contracting tier, sign its own certification—thereby making each independently liable and not responsible for the failure of any other contractor or subcontractor on a particular project.

The statute mandates an enforcement mechanism of random and complaint-based audits by the Department of General Services. The statute also provides protections for whistleblowers against retaliation, as well as for employees against discrimination.

Several open issues remain that the Department of General Services will need to answer with regulations. The largest of these open issues is which contracts will be covered by the E-Verify requirement. The definition of what constitutes a public work under S.B. 637 is found in Section 2 of the Pennsylvania Prevailing Wage Act:

"'Public work' means construction, reconstruction, demolition, alteration and/or repair work other than maintenance work, done under contract and paid for in whole or in part out of the funds of a public body where the estimated cost of the total project is in excess of twenty-five thousand dollars ($25,000), but shall not include work performed under a rehabilitation or manpower training program."

The definition above is broad and raises several questions to consider. Which funding bodies are public bodies? If a project is paid for in part by public funds, then how much of the project needs to be supported by public funds for the E-Verify requirement to apply? Which projects under rehabilitation and manpower training programs will be exempted and who will make that determination?

In addition, it can be anticipated that the Department of General Services will need to develop an audit process, a public complaint system and regulations to clarify the staffing-company participation requirement. The six-month time frame for implementation provides time for employers to prepare for the new requirement.Despite the many unknowns at this time, employers may want to consider taking the following steps to prepare for the new requirement:

1. Visit the E-Verify homepage and become familiar with the program;
2. Download a copy of the federally required E-Verify Memorandum of Understanding and review it with legal counsel to understand all that is required;
3. Attend a free webinar conducted by the Department of Homeland Security on E-Verify to learn how to enroll and how the system works; and
4. Attend a free seminar given by the Department of Homeland Security to learn more about immigration compliance requirements.

Duane Morris will be closely following the implementation of S.B. 637 and will provide periodic updates as more information becomes available.

For Further Information

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.