We believe that the rules requiring federal contractors to use the Department of Homeland Security’s employment eligibility verification program (E-Verify) generally would not apply to financial institutions unless a financial institution enters into a procurement contract with the federal government. Further, we do not believe that receiving FDIC insurance or accepting grant funds from the Federal Home Loan Bank would trigger the E-Verify obligations.

The final rule implementing Executive Order 12989 (as amended by Executive Order 13465), amended the Federal Acquisition Regulation (FAR) to require certain federal contractors to use the E-Verify system to ensure their employees are authorized to work in the United States. Under this amendment to the FAR, a government contracting officer generally must include in solicitations and contracts the requirement that the federal contractor enroll in E-Verify. Such contracts also must include an Employment Eligibility Verification clause, the text of which is linked in the resources below. Accordingly, if your contracts with the federal government do not include this clause and do not explicitly require enrollment in E-Verify, they are not covered by the E-Verify requirement.

Although the Department of Labor has classified financial institutions that receive federally-insured deposit insurance and sell U.S. savings bonds and notes as “federal contractors” with respect to affirmative action laws and the National Labor Relations Act, we do not believe this classification is applicable to the E-Verify requirement. In response to the proposed E-Verify regulations, several commenters recommended that financial institutions with contracts “limited to serving as issuing and paying agents for U.S. savings bonds and savings notes or being insured by the FDIC should be excluded from the e-verification requirement.” One commenter also requested similar treatment for financial institutions that are parties to federal agency agreements (FAAs) with the federal government since FAAs are not federal procurement contracts and therefore are not subject to the FAR.

The final rule implementing the E-Verify requirement addressed these concerns by clarifying that “[a]greements or activities performed by financial institutions that are not subject to the FAR are not required to comply with the E-Verify provisions and clauses of the FAR.” The final rule also clarifies that the E-Verify requirement applies to contracts in which a federal agency is purchasing goods or services, and not to contracts for the purchase of goods or services from the federal government — which are not subject to the FAR and therefore are not required to comply with the E-Verify provisions of the FAR.

Consequently, since receiving FDIC insurance and obtaining grants from the Federal Home Loan Bank do not involve contracts in which a federal agency is purchasing goods or services, we do not believe these activities are subject to the FAR and therefore do not trigger the E-Verify obligations. Similarly, FAAs are not subject to the FAR and do not trigger the E-Verify obligations.

For resources related to our guidance, please see:

• Executive Order 13465, Amending Executive Order 12989, as Amended (June 6, 2008)

• Federal Acquisition Regulation, 48 CFR 22.1800 (“Scope. This subpart prescribes policies and procedures requiring contractors to utilize the Department of Homeland Security (DHS), United States Citizenship and Immigration Service's employment eligibility verification program (E-Verify) as the means for verifying employment eligibility of certain employees.”)

• Federal Acquisition Regulation; FAR Case 2007-013, Employment Eligibility Verification, 73 Fed. Reg. 67651, 67653-67654 (November 14, 2008) (“In June 6, 2008, President Bush issued Executive Order 13465, amending Executive Order 12989 by adding an electronic employment eligibility verification requirement to strengthen the long-standing Executive branch policy of furthering economical and efficient contracting through only contracting with Federal contractors who employ persons in the United States who are authorized to work in the United States. . . . As amended, Executive Order 12989 now states: It is the policy of the Executive branch to use an electronic employment verification system because, among other reasons, it provides the best available means to confirm the identity and work eligibility of all employees that join the Federal workforce. * * * I find, therefore, that adherence to the general policy of contracting only with providers that do not knowingly employ unauthorized alien workers and that have agreed to utilize an electronic employment verification system designated by the Secretary of Homeland Security to confirm employment eligibility of their workforce will promote economy and efficiency in Federal procurement.”)

• Federal Acquisition Regulation, 48 CFR 22.1802(b) (“Contracting officers shall include in solicitations and contracts, as prescribed at 22.1803, requirements that Federal contractors must— (1) Enroll as Federal contractors in E-Verify; . . .”)

• Federal Acquisition Regulation, 48 CFR 22.1803 (“Insert the clause at 52.222-54, Employment Eligibility Verification, in all solicitations and contracts that exceed the simplified acquisition threshold, except those that— (a) Are only for work that will be performed outside the United States; (b) Are for a period of performance of less than 120 days; or (c) Are only for— (1) Commercially available off-the-shelf items; . . .”)

• Federal Acquisition Regulation, 48 CFR 52.222-54 (Employment Eligibility Verification clause.)

• Supplemental Guide for Federal Contractors, How to Determine Whether you are Affected by the Rule (“Your government contracting official, not the E-Verify program, determines whether your federal contract will include the FAR E-Verify clause. You should review your contract for the FAR E-Verify clause, and check with your government contracting official if you have questions.”)

• Office of Federal Contract Compliance Programs, Executive Order 13496 FAQs (“A bank or other financial institution is a covered contractor if it has an arrangement that meets the definition of a ‘government contract.’ In general, OFCCP interprets ‘government contract’ under Executive Order 13496 as it has under Executive Order 11246. Thus, a bank or other financial institution that obtains Federal deposit insurance, acts as an issuing and paying agent for U.S. savings bonds and notes, or is a Federal fund depository is a government contractor for purposes of both EO 11246 and EO 13496. In addition, these entities may be covered contractors if they have any other arrangement that meets the definition of a ‘government contract’ under the regulations. Such entities are subject to EO 13496 to the same extent as are other Federal contractors.”)

• Office of Federal Contract Compliance Programs, Jurisdiction FAQs (“Is a financial institution that is covered by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Association (NCUA) with deposit insurance subject to the Affirmative Actions Program (AAP) requirements under Executive Order 11246 . . .?  [Answer:] Yes. Financial institutions with federal share and deposit insurance are considered to be government contractors . . . .”)

• Office of Federal Contract Compliance Programs, Executive Order 13496 FAQs (“Executive Order 13496 (EO 13496 or Order), 74 FR 6407 (February 4, 2009), requires that Federal contractors provide notice to their employees of their rights under Federal labor laws. Specifically, the Order requires that covered contractors provide notice of employee rights under the National Labor Relations Act (NLRA), the law that governs relations between unions and employers in the private sector.”)

• Federal Acquisition Regulation; FAR Case 2007-013, Employment Eligibility Verification, 73 Fed. Reg. 67651, 67683 (November 14, 2008) (“Comment: Several commenters recommended that banks and other financial institutions whose contracts are limited to serving as issuing and paying agents for U.S. savings bonds and savings notes or being insured by the FDIC should be excluded from the e-verification requirement. One commenter requested similar treatment for financial institutions that are parties to financial agency agreements (FAAs) with the Federal Government because FAAs are not subject to the FAR. This commenter stated that FAAs explicitly state: ‘This FAA is not a Federal procurement contract and is therefore not subject to the provisions of the Federal Property and Administrative Services Act (41 U.S.C. Sections 251-260), the Federal Acquisition Regulations (48 CFR Chapter 1), or any other Federal procurement law.’ Response: Agreements or activities performed by financial institutions that are not subject to the FAR are not required to comply with the E-Verify provisions and clauses of the FAR.”)

• Federal Acquisition Regulation; FAR Case 2007-013, Employment Eligibility Verification, 73 Fed. Reg. 67651, 67683 (November 14, 2008) (“Comment: One commenter requested clarification that the rule applies to ‘contracts in which a Federal agency is purchasing goods or services, and does not apply to companies who purchase goods or services from the Federal Government.’ Response: Contracts for purchase of goods by companies from the Federal Government are not subject to the FAR and therefore are not required to comply with the E-Verify provisions and clauses in the FAR.”)
   
• Treasury website, Procurements (“The National Bank Acts of 1863 and 1864 grant Treasury the authority to retain financial agents to provide services on its behalf. Financial agents act on behalf of the Government during the performance of their duties under an agent-principal relationship with Treasury. Financial agents have the fiduciary obligation to protect the interests of the United States. Financial Agency Agreements (FAA) entered into by Treasury do not constitute procurement contracts under the purview of Federal Acquisition Regulations.”)