E-Verify has historically been something universities, nonprofits, and other federally funded institutions dealt with only if they also held a federal contract carrying the specific FAR clause requiring it. A sweeping proposed rule from the Office of Management and Budget would change that, tying E-Verify participation directly to federal grant funding itself, not just contracts, for the first time.
Published May 29, 2026, the proposed rule would revise the Uniform Guidance, the government-wide framework at 2 C.F.R. Part 200 that governs how federal grants and cooperative agreements are administered. Buried inside a much larger overhaul of federal grant rules is a provision that would require recipients and subrecipients of federal financial assistance to enroll in and use E-Verify for employees performing work connected to a federally funded award. That requirement would reach far beyond the federal contractors who already comply with the existing FAR clause. Colleges and universities, hospitals and health systems, nonprofits, state and local governments, and tribal entities that receive federal grant money, but have never held a covered federal contract, would be brought into E-Verify’s scope for the first time.
The proposed rule also introduces a new reporting obligation tied to the verification process itself. When E-Verify cannot confirm an employee’s work authorization after completing every step available, the result is called a Final Nonconfirmation. Under the proposal, recipients would need to report FNCs to the relevant federal agency or pass-through entity, adding a compliance step institutions have not previously had to manage under grant funding alone. The stakes for getting this wrong are real: failing to comply with E-Verify obligations under a final rule could support termination of the underlying federal award, not just a narrower penalty tied to the individual hire.
The public comment period on the broader rule closed July 13, 2026, drawing an unusually large response, with nearly 500,000 comments submitted and tens of thousands specifically addressing the E-Verify provision. OMB has proposed an effective date of October 1, 2026, timed to the start of the federal fiscal year, though the scale and controversy of the overall rule could affect that timeline. Organizations should not assume the E-Verify requirement will be softened or dropped in a final version simply because it drew significant comment.
For institutions that receive federal grants but have never enrolled in E-Verify, this is worth getting ahead of now rather than after a final rule takes effect. Practical preparation includes identifying every federally funded position across the organization, confirming whether current hiring and onboarding processes could support E-Verify enrollment and use, and building internal reporting procedures for Final Nonconfirmations before they become a compliance requirement rather than a hypothetical one.
Frequently Asked Questions
Does my organization already have to use E-Verify if we receive federal grants?
Not necessarily. E-Verify has historically applied mainly to federal contractors and subcontractors under the FAR clause, or to employers in states with their own E-Verify mandates. Grant-only recipients have generally not been required to participate, which is exactly what this proposed rule would change.
Which organizations would be affected by this proposed rule?
The rule would apply broadly to recipients and subrecipients of federal financial assistance, including universities, nonprofits, health care systems, state and local governments, and tribal entities.
What is a Final Nonconfirmation, and why does it matter here?
It’s the notice issued when E-Verify cannot confirm an employee’s work authorization after completing the full verification process. The proposed rule would require recipients to report these to the relevant federal agency or pass-through entity.
What happens if an organization doesn’t comply?
Under a final rule, noncompliance with E-Verify requirements could result in enforcement action, up to and including termination of the federal award itself.
When would this take effect?
OMB has proposed an effective date of October 1, 2026, coinciding with the start of the federal fiscal year, though the scope and volume of comments on the broader rule could affect the final timeline.
If your organization receives federal grant funding and has questions about E-Verify compliance, our attorneys are available to help you prepare.
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