Legal Series: E-Verify May Soon Be Mandatory for Federal Grant Recipients

This article is part of an ongoing legal series designed to provide insight and practical guidance on current and emerging workplace compliance issues. These insights shared by lawyers are based on their interpretation of existing regulations and proposed changes, and intended for informational purposes, not to be regarded as legal advice.  

E-Verify is an Internet-based system that compares information entered by an employer from an employee’s Form I-9, Employment Eligibility Verification, to records available to the U.S. Department of Homeland Security and the Social Security Administration to confirm employment eligibility.

Historically, E-Verify participation has been voluntary for employers that are neither federal contractors subject to an E-Verify clause nor required to participate under state law. However, on May 29, 2026, the Office of Management and Budget (OMB) proposed a regulation that would extend E-Verify requirements to recipients of certain federal grants.

Expanding E-Verify is part of the Trump administration’s increased efforts related to enforcing immigration law. Effectively, E-Verify participation means employers engage with the federal government to verify that employees have work authorization according to government records. OutSolve is here to help grant recipients understand your potential future E-Verify obligations.

How Does E-Verify for Employers Work Now?

Form I-9, Employment Eligibility Verification, is required for all newly hired employees in the United States. Through this process, employers verify an employee's identity and authorization to work in the U.S. in accordance with the Immigration Reform and Control Act (IRCA) of 1986. The E-Verify system uses information entered from Form I-9, including the employee's name, date of birth, Social Security number, and employment authorization information, to electronically compare those data points against records maintained by the Department of Homeland Security (DHS) and the Social Security Administration (SSA). This comparison helps confirm that the employee is authorized to work in the United States and that the information provided on the Form I-9 is consistent with federal government records.

E-Verify is currently optional, with exceptions:

• Federal contractors whose contracts include a Federal Acquisition Regulation (FAR) clause must participate.
• Contracts may include the FAR clause when the contractor is performing a project that will take 120 days or longer, the value of the contract exceeds $150,000, and the work occurs in the US. Subcontractors’ contracts may include the FAR clause when the prime contract includes the FAR E-Verify clause; the subcontract is for commercial or noncommercial services or construction; has a value of $3,500 or more; and the subcontract includes work performed in the United States..

• Certain states also require the use of E-Verify, whether it be for all employers, public employers, contractors, or more. Check out a list of states with E-Verify specific requirements here.
• Employers that choose to remotely examine Form I-9 documents using the DHS-authorized alternative procedure must be enrolled in E-Verify, remain in good standing, and create E-Verify cases for all newly hired employees at the hiring site using the alternative procedure.

What Does the Proposed OMB E-Verify Rule Do?

The proposed OMB E-Verify rule makes one sweeping change, along with many more particular adjustments. Broadly, it changes the regulations that apply to the E-Verify program from “guidance” into “regulation” or “policy.” As a result, the system becomes mandatory for many federal fund recipients.

Who Would New E-Verify Requirements Affect?

The OMB’s proposed E-Verify requirements apply to entities that receive federal funds, including:

• Government bodies,
• Educational institutions,
• Nonprofits,
• Grant recipients and sub-recipients, and
• Contractors and subcontractors.

How Can You Ensure E-Verify Compliance Going Forward?

If you receive federal funds, you can enroll in E-Verify at any time. Ensuring E-Verify compliance generally requires you to:

• Run every new employee’s Form I-9 through the system,
• Respond to notices in the system indicating someone lacks work authorization (tentative nonconfirmation or TNC), and
• Notify the government about any changes in an employee’s work authorization.

Complying with the E-Verify system may require you to update existing policies related to I-9s and new employee hiring.

For many businesses, the challenges of the OMB’s proposed rules may relate less to the requirement that they use E-Verify and more to the politicized requirements the proposals contain. The more impactful changes in the proposal relate to how agencies decide to award or end grants.

Staying Up to Date on Federal Regulations

The public comment period ended on July 13, 2026. After the public comment period ends, the OMB will review the comments and may either modify its proposal or transform the proposal into official law.

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