E-Verify Proposal Could Create New Compliance Burden

A proposed federal rule could significantly expand the reach of E-Verify, creating new employment eligibility verification obligations for a wide range of organizations that receive federal funding, including colleges and universities, healthcare systems, nonprofits, and state and local governments.

The federal Office of Management and Budget (OMB) issued the proposal May 29 as part of broader revisions to policies and requirements related to the management of federal grants and other forms of assistance.

The proposed rule would require recipients and subrecipients of federal financial assistance to enroll in and use E-Verify for employees and, potentially, certain contractors working under federal awards. The proposal could affect far more organizations than the federal contractor requirements that currently apply to certain employers. Subrecipients could encompass contractors or other entities paid with grant funds.

“If adopted as written, the proposed rule would convert what has historically been a voluntary reporting framework for most private employers into a mandatory requirement for federal funding recipients,” said Jesi Carlson, an attorney in the Washington, D.C., office of Feldesman.

“Some employers are already subject to E-Verify requirements, specifically those with federal contracts or subcontracts containing the Federal Acquisition Regulation E-Verify clause, as well as employers in states that have enacted their own E-Verify mandates through legislation or court rulings. For many grant recipients, however, this would represent a new obligation,” Carlson said.

The breadth of the proposal is particularly important. It would cover federal grant recipients and subrecipients, potentially extending obligations well beyond the organization receiving the award, said John Mazzeo, an attorney in the Washington, D.C., office of Seyfarth.

That creates a potentially significant compliance issue for organizations that have never participated in E-Verify. “Organizations that are not already subject to the federal contractor E-Verify rule would need to stand up a new compliance program quickly,” Mazzeo said.

That would include establishing enrollment, policies, training, and oversight processes while also determining which employees and work activities fall within the rule.

“Noncompliance may result in remedies ranging from corrective action requirements and funding restrictions to suspension, termination of an award, or, in appropriate cases, debarment,” Mazzeo said. “For many organizations, the potential loss of federal funding presents a significant operational risk.”

Specialty Credential: U.S. Employment Immigration

Existing Employees Create a New Challenge

Perhaps the most consequential operational change is that the proposal would go beyond the traditional use of E-Verify for new hires. Organizations could be required to create cases for existing employees who perform work under federal awards.

Verifying existing employees could be considerably more complicated than integrating E-Verify into the onboarding process. That could require HR teams to revisit existing Form I-9 records and, in some cases, obtain updated documentation. Employers using electronic I-9 or E-Verify vendors will also need to determine whether their systems can accommodate the new requirements.

Tracking Who Is Covered

The proposal also presents a workforce-tracking challenge. “Many organizations have employees who move between projects, departments, grants, funding streams, or cost centers,” Mazzeo said. “Determining which employees are subject to the requirement, when coverage begins, and how to monitor changes in assignments may itself present a significant compliance and administrative challenge,” he said.

That means HR, legal, finance, and grants-management functions may need to work together rather than treating E-Verify as solely an immigration-compliance issue.

“If you issue subawards or contracts under a federal grant, your subrecipients and contractors must also comply,” Mazzeo said. “You may be responsible for monitoring compliance by subrecipients and other downstream entities, depending on the structure of the award and final implementing requirements. If a downstream partner fails to use E-Verify and it comes to light during an audit or agency review, it is your award, and your organization’s reputation, that is at risk.”

Reporting Raises the Stakes

The proposal would also require recipients to report final nonconfirmation results to the applicable awarding agency or pass-through entity. A final nonconfirmation occurs when E-Verify cannot confirm an individual’s employment authorization after the required process has been completed. The reporting requirement could create additional exposure because noncompliance could affect the underlying federal award.

Training: I-9 and E-Verify Made Simple

What Employers Should Do Now

The proposal is not yet final. The public comment period closed July 13 after nearly 500,000 comments were submitted, including more than 55,000 mentioning E-Verify. Organizations should not treat the proposed requirements as settled.

Still, the proposal provides an opportunity for HR leaders to assess readiness. Organizations receiving federal funds should determine whether they already participate in E-Verify, identify employees who could perform work under federal awards, and examine how workforce assignments are tracked.

They should also review I-9 and employment eligibility processes, assess their HR technology capabilities, and consider how E-Verify requirements could flow to subrecipients and other downstream entities.

“E-Verify is a useful compliance tool and is often viewed as a best practice for employers seeking to strengthen employment eligibility verification processes,” Mazzeo said. But he also emphasized that participation “requires thoughtful implementation and ongoing attention.”