FAR E-Verify Clause & 1099 Contractors: What You Must Know

FAR E-Verify and 1099 Contractors: What Federal Contractors Need to Know

FAR E-Verify clause 1099 contractors—it’s one of the most misunderstood compliance topics among federal contractors. Do you need to complete Form I-9 or run E-Verify for your independent contractors working on a federal contract? The short answer: No, but there are critical nuances that, if missed, could put your organization at risk.

At i9 Intelligence, we’ve been helping federal contractors stay compliant with Form I-9 and E-Verify regulations since 1998. This is one of the most common questions we get, and the confusion is costly—in time, resources, and audit risk.

When Does the FAR E-Verify Clause Apply?

The FAR clause 52.222-54 requires E-Verify only when these four criteria are met:

1. The contract value exceeds $150,000
2. The period of performance is 120 days or more
3. The work is performed in the United States
4. The contract is not solely for COTS (Commercial Off-the-Shelf) items

In addition, the FAR clause must be explicitly included in the contract. It only applies to contracts awarded after September 8, 2009.

Who Is a “Contractor”? Legal Definitions Matter

Under federal regulations:

• Employees are individuals who perform services for wages under employer control (8 CFR 274a.1)
• Independent contractors (1099) operate under their own control and are not subject to the same verification rules

FAR E-Verify applies to employees only — not independent contractors.

Common-law factors that help distinguish an independent contractor:

• Controls how, when, and where work is done
• Uses their own tools and resources
• Offers services to multiple clients
• Bears risk of profit/loss
• Provides services to the public

1099 Independent Contracts: No I-9 or E-Verify Required

If you engage a true 1099 contractor, you:

• Do NOT complete Form I-9
• Do NOT run E-Verify

In fact, E-Verify will not allow you to create a case for a non-employee. What you do need:

• A completed Form W-9
• Written documentation of independent contractor status
• FAR clause language in contracts when required
• Evidence of due diligence (e.g., you’re not knowingly hiring unauthorized workers)

Subcontractor Companies: When FAR E-Verify Does Apply

If you're working with a business entity (not an individual), and:

• The subcontract is for services or construction
• The subcontract exceeds $3,500

...then the subcontractor must enroll in E-Verify and verify their own employees.

Your responsibilities as the prime contractor:

• Include the FAR clause in all qualifying subcontracts
• Request documentation that the subcontractor is enrolled (e.g., a screenshot of their Maintain Company page in E-Verify)
• Do not run E-Verify for their employees—that’s their responsibility

Federal Funding vs. Federal Contracting: Know the Difference

Not all federal dollars trigger FAR E-Verify.

FAR E-Verify applies only to federal contracts. It does not automatically apply to:

• Federal grants
• State/local projects with pass-through federal funding
• Cooperative agreements

Always check the specific language in the contract. If the FAR clause isn’t there, E-Verify may not apply—even if the funding is federal.

Common Mistakes Federal Contractors Make

• Mistakenly running E-Verify on 1099 contractors (system blocks it)
• Treating all workers on federal contracts as needing I-9s
• Assuming federal funding = federal contracting
• Failing to distinguish between individual contractors and subcontractor companies
• Misclassifying employees as contractors to avoid I-9/E-Verify

The last is especially risky—if you classify someone as a contractor who meets employee criteria, you're non-compliant.

State E-Verify Laws: Another Layer

Several states have separate E-Verify mandates—even beyond federal FAR rules:

• Examples: Alabama, Arizona, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Utah
• State laws may require E-Verify for public contracts, state-funded work, or even private employers

When you’re operating in multiple states, you must comply with both state and federal E-Verify requirements. Need a deeper dive into E-Verify program rules? Visit our E-Verify compliance resource center for tools, state-specific guidance, and FAQs.

Best Practices for Compliance

For 1099 contractors:

• Use a written independent contractor agreement
• Collect and retain Form W-9
• Maintain documentation supporting contractor classification
• Reassess contractor relationships annually

For subcontractor companies:

• Include the FAR clause in subcontracts
• Keep records of E-Verify enrollment
• Monitor subcontractor compliance (especially on high-risk contracts)

For employees:

• Complete Form I-9 within 3 business days of hire
• Run E-Verify case if applicable
• Reverify existing employees assigned to FAR-covered contract within 90 days

How i9 Intelligence Supports Federal Contractors

For over 25 years, i9 Intelligence has helped federal contractors:

• Automate error-free Form I-9s with patented compliance software
• Seamlessly integrate with E-Verify, including for FAR clause contracts
• Manage remote I-9s across multiple locations
• Prepare for ICE audits and avoid costly fines
• Stay on top of federal and state laws with real expert support

FAR E-Verify compliance isn't just about ticking a box—it's about understanding who counts as an employee, when verification is required, and how to protect your organization from costly missteps.

Independent contractors don't require I-9s or E-Verify, but they do require documentation. Misclassify them and you're in dangerous territory—especially under an ICE audit.

To learn more about employee classification and enforcement risks, read our article on the ICE arrest of the Iowa superintendent, which helped catalyze major compliance reforms.

Want to ensure your internal I-9 process is airtight? Review our I-9 Compliance Best Practices article for proactive tips.

If you’re unsure if your contractors are properly classified, you’re preparing for an ICE audit, or you want to avoid misclassification penalties, talk to an I-9 and E-Verify compliance expert today.