E-Verify and the Travel Industry

» Posted by on May 19, 2014 in Business Practices, Contracting for Travel Services, Electronic Travel Systems, Global Distribution Systems, Hotels, Travel Management Centers, Travel Professional Resources | 0 comments

On November 14, 2008, the General Services Administration (GSA), the Department of Defense (DOD), and the National Aeronautics and Space Administration (NASA) issued a final rule (73 FR 67651), amending 48 CFR Parts 2, 22, and 52, to change the rules on Employment Eligibility Verification.  These new rules require Government contractors to enter into a Memorandum of Understanding (MOU) with the Government to use the Federal E-Verify system to confirm the immigration status of employees working on Government contracts performed within the United States.  Prior to the effective date of the new regulation, January 15, 2009, the use of the E-Verify system was voluntary.

Government contractors, as well as businesses in general, have long been obligated to check the immigration status of employees. The E-Verify system, however, goes beyond the current requirement that employees provide ID evidence of immigration status. Instead, the system requires the electronic transmission of a Social Security Number and picture identification for comparison with Government data bases.  This could be costly, at least to start, be difficult given a 30-day start-up period, and could require the removal of well trained employees who do not meet the requirements.  On the other hand, this does provide employers with reduced likelihood of future problems involved in employing illegal aliens, who may have quality fake identification documents.

The interesting issue for the travel industry is one of coverage.  That is, which components of the industry will be required to E-Verify their employees.  The final rules increase certain limitations from the earlier proposed rules.  Under the final rules, in order to be required to E-Verify employees, a contract must exceed 120 days in performance and be for $100,000 or more.  However, it is not limited to the contractor, but covers subcontractors as well as subcontractors to subcontractors, and makes the prime contractor responsible for subcontractor compliance.  The regulation defines a subcontractor as “. . . any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime contractor or another subcontractor.”  A review of the commentary on the regulation indicates that the 120-day limitation applies to the prime contract, but does not apply to subcontracts (a 30-day rule arguably seem to apply).  This commentary further suggests that the $100,000 limitation is also not pushed down to the subcontractor level.  On the other hand, employees of the prime contractor or a subcontractor who normally perform support work, such as indirect or overhead functions and who do not perform any substantial duties applicable to the contract, are excluded from the E-Verify requirement.

It would appear that the CTOs and TMCs would be subject to E-Verify as the work involved in operating these offices, while tangential to the travel, would involve the direct work of the contract.  These functions would likely exceed 120 days and $100,000. An interesting question is how the GDS would be classified.  Arguably, the GDS could be considered a subcontractor as it provides services to the contractor, but the services could be considered indirect or overhead functions.  It is, therefore, likely that GDS employees would not be subject to E-Verify.

The primary issue that I see involves suppliers.  That is, are airlines, hotels, conference centers, and rental car companies subject to E-Verify.  If this is the case, every hotel employee, including chambermaids, reception staff, and waiters who might serve a Government employee could be covered.  Likewise, flight crews and check-in personnel and even ground crews could be covered. If so, E-Verify’s 30-day requirement to clear these employees would likely place a tremendous burden on airlines and large hotel chains.

Presumably, most conference centers would not be subject to E-Verify as the performance period involved would not exceed 120 days.  Some long term stay hotels would likely meet the 120 day requirement, but, except where a number of Government employees are located in a facility for an extended period, the $100,000 limit would not be met.  An employee will not be on a flight for 120 days and it would be rare for a car rental to exceed 120 days and $100,000.  Assuming that the limitations apply by purchase order, the impact would not be great.  However, it is unclear how these limitations will be calculated.  Car rental companies, airlines, and hotel are normally purchased off of a GSA schedule.  Therefore, if we look at the schedule as a contract, as opposed to each purchase order, the schedules for most hotel chains, rental companies and airlines surely exceed 120 days of service and $100,000.

The regulation commentary is confusing when dealing with the issue of determining what constitutes a contract for purposes of E-Verify.  On the one hand, the commentary, at 134, implies that the E-Verify requirements are applicable to indefinite delivery, indefinite quantity (IDIQ) contracts.  The GSA website FAQs on schedules states, in pertinent part, that:

GSA Multiple Award Schedule (MAS) contracts, also referred to as GSA Schedule and Federal Supply Schedule contracts, are indefinite delivery, indefinite quantity (IDIQ) contracts that are available for use by federal agencies worldwide. GSA awards and administers MAS contracts pursuant to 40 U.S.C. 501, Services for Executive Agencies.

It would appear, therefore, that schedule agreements with airlines, hotels, and car rental agencies are contracts for E-Verify purposes and, since purchases, under the schedules, in most cases exceed $100,000, and the schedule contracts all exceed 120 days, contracting with GSA to provide schedule services would, in most cases, require use of E-Verify.  In addition as it would be unclear where Federal employees would stay and what services they would use, most front-room employees would be subject to E-Verification.

However, the commentary addresses the issue of application to hotel employees at page 123 of the commentary.  The question addressed points out that compliance by hotels is likely to be a major problem as it is impossible for hotels to know which employees will react with which guests and Government employees are not segregated within hotels.  This was particularly problematic under the draft regulations which had a 30-day limit and which required E-Verify be used for all employees providing services to Government employees, but did not permit its use with other employees.  In responding to this question the regulation commentary states as follows:

First, the revision to the proposed rule that will make the clause inapplicable to contracts that will have a period of less than 120 days may eliminate almost all hotel contracts from being subject to the rule.  Second, the decision to allow contractors the option of using E-Verify for all existing employees, rather than just those assigned to the contract, will likely resolve any remaining issue.

The first part of this response indicates that almost all hotels will not meet the 120 day limitation, this suggests that each purchase order is viewed as a separate contract as it is difficult to see how they could say this if a GSA schedule contract was intended to be the “contract” for purposes of E-Verify.

In short, the regulation does not define what is a contract and the commentary is contradictory as to whether GSA schedule agreements constitute contracts for E-Verify.  It will be interesting to see whether GSA will be sending modification notices to those on the schedules requiring the signing of E-Verify MOUs.

by Scott Goldsmith

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