Public Works Employment Verification Act Impacts Certain Projects Awarded by State and Local Governments in 2013

by Saul Ewing Arnstein & Lehr LLP
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Summary

Pennsylvania's General Assembly recently enacted the Public Works Employment Verification Act (the "Act" or "Verification Act") (43 P.S. §§ 167.1 et seq.), aimed at ensuring that contractors and subcontractors on public works projects within the Commonwealth comply with federal employment eligibility requirements. The Department of General Services ("DGS") has recently issued guidelines for administering and enforcing the Act; the guidelines are located at Title 4, Chapter 66 of the Pennsylvania Administrative Code.1 The Verification Act requires verification of citizenship or lawful immigration status, and affects contractors and subcontractors working on all qualifying public works projects executed after January 1, 2013 by state and local government units―including counties, townships, boroughs, school districts, and authorities.

Discussion:

I. Applicability to Local Governments and Public School Districts

The Act defines "public body" to include the Commonwealth, all instrumentalities and agencies of the Commonwealth, all political subdivisions, and all authorities created by the General Assembly. The term, "political subdivisions" is defined as including counties, cities, boroughs, townships, and public school districts. 1 Pa.C.S. § 1991. Accordingly, local governments and school districts should be cognizant of any contracts that might meet the definition of "public work." For those qualifying projects, public bodies are required to collect and maintain prescribed "verification forms" for the duration of the project, and to comply with official requests in the event of an audit or enforcement proceeding.

II. Applicability to Contractors and Subcontractors

The Verification Act mandates that contractors and subcontractors involved in public works projects submit a verification form, as mentioned above, to the public entity issuing their contracts and specifies that the form be issued by DGS. Local governments and school districts can obtain a sample copy of the verification form, which is available on the DGS website here. A company performing public work is required by the verification form to identify itself as either a contractor or a subcontractor and to affirm that it has used the federal E-Verify program to verify the eligibility of its workforce. Contractors and subcontractors are also required to affirm that they have complied with the Verification Act and that all workers hired for a project, whether onsite or otherwise, are authorized to work in the United States. Companies governed by the Act also agree to verify the employment eligibility of any new employee within five days of hire.

The provisions of the Verification Act partially parallel provisions of the Prevailing Wage Act (43 P.S. §§ 165.1 et seq.), borrowing many but not all of its terminology and operative provisions. For example, the definition of "public work" within the Verification Act mirrors that of the Prevailing Wage Act, defining covered projects as:

[t]he construction, reconstruction, demolition, alteration and/or repair work other than maintenance work . . . paid for in whole or in part out of the funds of a public body when the estimated cost of the total project is in excess of $25,000.

The DGS guidelines indicate that the $25,000 threshold is to be calculated by aggregating the value of all prime contracts. Because of the definition of "subcontractor" within the Verification Act, materials suppliers are not subject to the new reporting requirements. Unlike the Prevailing Wage Act, the Verification Act includes no distinction for workers located offsite rather than onsite. The Verification Act additionally requires contractors to include information about the new reporting requirements in any agreements for subcontractor work on the project.

III. When Does the Act Take Effect?

As mentioned above, the Act applies to any qualifying public works contract executed after January 1, 2013, even if awarded in 2012.

IV. Significance

The Verification Act is significant in light of general controversy surrounding E-Verify and the federal government's own trepidation with the program. With known flaws in the E-Verify system, such as discrepancies about the system's ability to accurately detect ineligible workers, the federal government has not yet mandated broad use of the program. The stakes for workers screened via the system are rather high: a 2009 statistic released by the Government Accountability Office indicates that the average correction time for a "false ineligible" determination exceeds three months. Others have criticized the E-Verify program, characterizing it as creating a de facto national identification system. Nonetheless, the Act is law in Pennsylvania and government entities are required to comply.

V. Application to Projects Now Underway

For projects that have not yet been bid, public bodies are advised to review their project budgets and perhaps anticipate slightly elevated contractor pricing than would otherwise be the case, due to the additional requirements imposed by the Act. The new requirements will need to be set forth explicitly.2 Further, the bidding documents should identify an appropriate person to accept submitted verification forms and to maintain the files.

For projects that are currently out to bid without the inclusion of the Verification Act requirements, public bodies should expect to issue supplemental instructions to bring the new requirements to the attention of all bidders.

For projects already bid, but not yet awarded and for projects that have been awarded, public bodies should work with their project professionals (architect and construction manager) and may be required to issue change orders to compensate affected contractors for cost and any time implications created by the Verification Act and the new guidelines.3

Saul Ewing and its team of attorneys with significant experience in public procurement are available to further assist in advising affected entities to ensure compliance with the new requirements. Inquiries can be directed to William Warren, Jr., Esq. at wwarren@saul.com or (717) 238-7698.

1. The DGS guidelines were issued as a "Statement of Policy," and therefore lack the formal authority of a regulation or a statute. The guidelines, in our view, are not binding on local governments and school districts. Nonetheless, the guidelines stand as a resource to guide other public entities subject to the Act. The guidelines are available here.

2. While most bids require bidders to "comply with applicable laws," it is always a good idea to call out requirements that are new or that have special impact on pricing.

3. For many contractors and subcontractors there will be little or no cost impact, but the change orders should nonetheless be issued as a matter of formality.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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