A rule issued by the federal government requiring many employers to use the E-Verify employment verification system is scheduled to take effect on January 15. But a pending lawsuit claims the rule is against the law.

The rule, issued by the Department of Homeland Security (DHS), will require most employers with federal contracts to use E-Verify for new hires, as well as current employees assigned to work on new contracts.

Covered employees included those with contracts valued at more than $120,000, lasting longer than 120 days and involving work done in the U.S.

A coalition of business groups, including the Society for Human Resource Management and the U.S. Chamber of Commerce, filed a lawsuit at the end of last month to block the regulation. They claim E-Verify was enacted as a strictly voluntary program, and that requiring companies to use it violates the law Congress passed to authorize it.

We’ll keep you posted on the outcome of the suit. For now, though, the rule’s effective date has been pushed back to Feb. 20.

State mandates

E-Verify is already mandatory for some or all employers in 11 states:  Arizona, Arkansas, Colorado, Georgia, Mississippi, Missouri, North Carolina, Oklahoma, Rhode Island, South Carolina and Utah.

The laws vary from state to state: Some only apply to companies that contract with the state government, while the mandates in Arizona, Mississippi, Missouri and South Carolina apply to all companies.

Arizona’s rule was recently challenged by businesses and immigration advocacy groups, but it was upheld in court.

Will E-Verify last?

Meanwhile, the future of the E-Verify program itself is uncertain.

Funding was set to expire last November, before Congress extended it until March 6. That was after a five-year extension was passed by a wide margin in the House of Representatives but failed to make it through the Senate.

President-elect Obama has expressed support for E-Verify. We’ll keep you posted on whether that translates into another extension for the program.