Subcontractors, Independent Contractors, and Affiliates

Subcontractors

The E-Verify Federal contractor rule requires certain Federal prime contractors to require their subcontractors to use E-Verify when:
1. The prime contract includes the FAR E-Verify clause;
2. The subcontract is for commercial or noncommercial services or construction;
3. The subcontract has a value of more than $3,000; and
4. The subcontract includes work performed in the United States
Subcontractors who are suppliers are not subject to the E-Verify Federal contractor rule.

Prime Contractor and Subcontractor Obligations

The prime contractor should provide general oversight to subcontractors to ensure that they meet the E-Verify requirement. The prime contractor may be subject to fines and penalties if it knowingly continues to work with a subcontractor who is in violation of the E-Verify requirement. As proof of enrollment, the subcontractor should provide the prime contractor a copy of its Maintain Company page, which can be printed directly from E-Verify.
Prime contractors are not responsible for verifying the subcontractors’ individual employees. However, the prime contractor must, by whatever means the contractor considers appropriate, ensure that all covered subcontracts at every tier incorporate the FAR E-Verify clause at FAR 52.222-54, Employment Eligibility Verification, and that all subcontractors use the E-Verify system.

Independent Contractors and Self-employed Individuals

I-9 form rules govern whether an individual is considered self-employed with respect to using E-Verify. Generally, self-employed individuals are not required to complete Forms I-9 on themselves, and therefore, are not required to use E-Verify. However, all employers, including sole proprietorships, are required to complete a I-9 form for each employee they hire. Employers will need to confirm the employment authorization in E-Verify of each employee working under a Federal contract that includes the FAR E-Verify clause.

Employers are not required to complete Forms I-9 and use E-Verify for their independent contractors. The I-9 form regulations use common-law understandings of employer-employee relationships to describe who is an independent contractor.

Employers are not required to verify employees of its independent contractor. However, if the independent contractor is a subcontractor under a Federal contract covered by the FAR E-Verify clause, the E-Verify requirement will flow down to the independent contractor, who must use E-Verify to verify its own employees.

For example: GWU enters into a Federal contract covered by the FAR E-Verify clause to conduct research and must verify its own employees in E-Verify.  GWU subcontracts with Don Techman, a self-employed individual, to provide some technical support.  GWU also subcontracts with Edwards Research Equipment to install some equipment. Both subcontracts are for more than $3,000 and are covered by the FAR E-Verify clause. Both companies carry on independent business, perform their work according to their own means and methods, and are subject to GWU’s control only as to results.

GWU does not use E-Verify to verify either Don Techman’s employment authorization or the employment authorization of Edwards Research Equipment’s employees. However, GWU is responsible under the E-Verify Federal contractor rule for ensuring that Edwards Research Equipment, as GWU’s subcontractor on a covered Federal contract, enrolls in E-Verify and verifies its new hires and its existing employees assigned to the Federal subcontract.

While GWU is also responsible for ensuring Don Techman’s compliance with the FAR E-Verify clause, as a self-employed individual, Don does not need to complete an I-9 form on himself nor enroll in E-Verify. Nor does GWU need to run Don through E-Verify. Under the employer sanction rules applicable to any employer, GWU cannot use an independent contractor if it knows that the independent contractor is an alien who is not authorized to work in the United States.

Subsidiaries and Affiliates

Only the legal entity (business) that signs the contract is considered the contractor, and is bound by the E-Verify obligation.
Whether certain subsidiaries and affiliates are a part of the legal contracting entity depends on the specific factual context.
As noted previously, The Federal Acquisition Regulation does not extend to contracts under which all work is exclusively performed outside the United States. The U.S. territories of American Samoa and the Commonwealth of the Northern Mariana Islands are not considered part of the United States as defined for purposes of the E-Verify Federal contractor rule.