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Citations for ILW.COM's Seminar
Emoployer Compliance For Experts
Session 3 held on March 11, 2010

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From Patrick Shen

Hypothetical Fact Patterns

1. Registration for the conglomerate:


Acme, Inc. is the nation's largest manufacturer of widgets. It is a conglomerate with five (5) subsidiary companies. Acme and the subsidiaries all have separate employer identification numbers (EIN). Acme has a contract with the Pentagon to make military grade widgetry not available to the public. One of Acme's subsidiaries, Wiley Widgets (WW), will be doing virtually all of the work on the contract. Acme itself has over 5,000 employees, but less than 20 will have any dealing with the contract at all. WW has about 100 employees, and all but five clerical staff will work on the contract in some capacity.


  • Which entity(ies) must enroll in E-Verify as federal contractor? What about the other four subsidiaries, each with a different EIN, which does not have anything to do with the contract?
  • If Acme is the entity that signs the contract, what authorizes WW to (a) do the work, and (b) to enroll as a federal contractor?
  • Changing the facts slightly, if Acme signed the contract, but in fact no one in Acme works on the contract and the Pentagon subsequently agrees to a contract novation, substituting WW as the contractor. What options does Acme have regarding its enrollment as a federal contractor?
  • Adding further facts to this scenario: WW merges with Bugs Buggy (BB), which had no government contract prior to the merger, to build the delivery system for the military widgets.
    • How much time would WW have to run E-Verify on the BB employees?
    • What if WW merges with BB, but in fact does not allow any of BB's employees to touch any aspect of the military widgetry. What are the E-Verify obligations with respect to BB's employees?
2. Prime and subcontractor relationship:


Adding to the hypothetical above, Roadrunner Rental (RR) is a supplier of office furniture for division in Acme that happens to work on the Pentagon contract. The lease specifies that the Acme agrees to keep the furniture for two years, at a total $1,500 per month. The furniture itself is the same as what the general public would rent. Wanting to enhance its reputation as a good corporate citizen, Acme inserted the E-Verify clause into the lease addendum in February of 2009. Not wanting to lose Acme's business, RR agreed to the addendum and enrolled in E-Verify as a subcontractor.


  • Given these facts, should RR be a subcontractor for E-Verify purposes?
  • If RR's furniture falls within the COTS exception, does RR, 13 months into the lease, have any recourse to revisit the question of their obligations under the FAR?
  • If RR chooses to abide by the terms of the addendum rather than to challenge Acme's determination, does RR have any liabilities?
  • RR uses a furniture repair shop in downtown Toontown to repair and maintain the furniture rented to Acme. RR decides not to impose the E-Verify requirement on the repair shop because it is a family run business and there is no chance of the shop hiring any unauthorized workers.
    • What are the liabilities to RR? To Acme?
      • Does it make a difference whether Acme's lease addendum includes any references to RR's flow-down obligations?
3. Implementation of the E-Verify Process:


Acme does not get the novation and remains on the contract. It now must continue with the implementation throughout its operations across the United States. Acme has a very de-centralized human resources system in that each field office does its own payroll and I-9.


  • Before Acme actually begins to run names through E-Verify, what do you suggest the HR professionals at each location do to minimize erroneous non-confirmations?
  • Some of Acme's locations, including Arizona and Colorado, had enrolled as non-federal contractors previously:
    • Could these locations go into the system and change their designation to federal contractor?
    • Do they have to terminate and allow Acme's corporate HR to enroll for everyone?
    • Does USCIS care so long as everyone who's supposed to be verified get verified through the system?
From Shannon Slattery