Federal Government Proposes Mandatory E-Verify Use for Grant Recipients
The federal government is moving to tighten employment eligibility verification requirements by proposing a rule that would mandate E-Verify participation for organizations that receive federal grant funding. According to the White House Office of Management and Budget (OMB), the new rule is intended to serve as an "additional safeguard" layered on top of existing employment eligibility requirements already in place across the country. If finalized, this proposal could significantly affect a broad range of employers — from universities and nonprofits to state agencies and private contractors — that depend on federal grant dollars to fund their operations and programs.
What Is E-Verify and How Does It Work?
E-Verify is a web-based system administered by the U.S. Department of Homeland Security (DHS) in partnership with the Social Security Administration (SSA). It allows employers to electronically verify the employment eligibility of newly hired employees by cross-referencing information from an employee's Form I-9 against federal government records. The system is designed to confirm that workers are legally authorized to be employed in the United States.
While E-Verify participation has historically been voluntary for most private-sector employers, certain groups are already required to use it. Federal contractors and subcontractors covered by the Federal Acquisition Regulation (FAR) E-Verify clause, for instance, must participate. Several states have also enacted their own laws requiring E-Verify use for public employers, state contractors, or even all employers within their borders. The new OMB proposal would extend mandatory participation to the much broader universe of federal grant recipients.
Why the OMB Is Pushing for This Rule
The OMB's framing of this rule as an "additional safeguard" signals the administration's intent to reinforce current Form I-9 requirements rather than replace them. Federal law already requires employers to complete and retain Form I-9 documentation for every employee hired after November 6, 1986. E-Verify would function as a complementary electronic check on top of that paper-based process, helping to catch documentation fraud or errors that might slip through traditional I-9 reviews.
Proponents of expanded E-Verify usage argue that the system strengthens national employment verification standards, deters the hiring of unauthorized workers, and ensures that taxpayer-funded grants are administered by organizations committed to legal compliance. From a policy perspective, the administration views mandatory E-Verify as consistent with broader efforts to enforce immigration law and protect American workers in the labor market.
Who Would Be Affected by the Proposed Rule?
The scope of this proposal is notably wide. Federal grants flow to an enormous range of entities across the United States, including:
- Public and private universities receiving research or student aid funding
- Nonprofit organizations operating social service, healthcare, or housing programs
- State and local government agencies administering federally funded initiatives
- Healthcare providers and hospital systems receiving Medicaid or Medicare grants
- Small businesses and startups awarded federal innovation or development grants
Any organization that falls into these categories and currently relies on federal grant funding could be required to register with E-Verify and use it for all new hires going forward. Compliance would likely require updating internal HR processes, training staff, and integrating E-Verify into existing onboarding workflows.
Potential Challenges and Criticism
Not everyone views expanded E-Verify mandates favorably. Critics of the system have raised several concerns that are likely to resurface as this rule moves through the public comment and regulatory review process.
System Accuracy and False Tentative Nonconfirmations
One persistent criticism of E-Verify is that it is not infallible. The system has historically issued Tentative Nonconfirmations (TNCs) — findings that an employee's information could not be immediately confirmed — for workers who are, in fact, fully authorized to work. U.S. citizens and lawful permanent residents have sometimes been flagged incorrectly, leading to delays, confusion, and potential employment disruptions. Critics argue that expanding mandatory use to grant recipients could amplify these errors and unfairly burden legally authorized workers.
Administrative and Financial Burden on Smaller Organizations
Smaller nonprofit organizations, community health centers, and local government agencies may lack the HR infrastructure to absorb new compliance requirements easily. Registering for E-Verify, training staff, and managing the verification process for every new hire represents a real operational cost — one that could divert resources away from the programmatic work that grants are meant to fund.
Privacy and Data Security Concerns
Some privacy advocates have raised concerns about the volume of sensitive personal data processed through E-Verify and the risk of data breaches or misuse. As participation expands to thousands of additional employers, these concerns may intensify.
What Happens Next
The proposed rule is expected to go through the standard federal rulemaking process, which typically includes a period for public comment during which affected organizations, advocacy groups, employers, and individuals can submit feedback. The OMB and relevant federal agencies will then review those comments before issuing a final rule.
Organizations that currently receive federal grant funding should begin monitoring this regulatory development closely. HR and compliance teams would be well-served by conducting an internal audit of current employment verification practices and assessing what changes might be required if the rule is finalized.
Key Takeaways for Employers and Grant Recipients
- The OMB has proposed making E-Verify participation mandatory for all federal grant recipients as a supplement to existing I-9 requirements.
- The rule would affect a wide range of organizations including nonprofits, universities, healthcare providers, and government agencies.
- Proponents argue the rule strengthens employment eligibility compliance and protects the integrity of federally funded programs.
- Critics point to concerns about system accuracy, administrative burden, and privacy risks.
- The rule has yet to be finalized; a public comment period will provide stakeholders an opportunity to weigh in.
As immigration enforcement and employment compliance remain high-priority policy areas, this proposed rule reflects a clear federal appetite for stronger verification standards across the entire ecosystem of federal funding recipients. Organizations that rely on grants should stay engaged with the rulemaking process and begin preparing for the possibility of mandatory E-Verify compliance in the near future.