The U.S. Chamber of Commerce (U.S. Chamber) filed a legal challenge against the June 6, 2008 Executive Order authorizing the E-Verify rule and the rule itself in December 2008. In an August 25, 2009 decision the U.S. District Court in the Southern District of Maryland rejected this challenge. This development (in addition to the current Administration's July 2009 statement supporting the rule) means the E-Verify rule, which will require federal contractors to use the E-Verify system, is on track for implementation beginning September 8, 2009.

The U.S. Chamber's challenge had several components, but among the counts alleged the U.S. Chamber argued that because the underlying immigration statute established E-Verify as a voluntary program the E-Verify rule (and the Executive Order authorizing the rule) could not make participation in this program mandatory for federal contractors. The Court relying on American Federation of Labor & Congress of Industrial Organization v. Kahn , 618 F.2d 784 (D.C. Cir. 1979) rejected this challenge saying, "the decision to be a government contractor is voluntary and that no one has a right to be a government contractor." Further, while government contracts will be required to have the E-Verify clause in the contract, "potential government contractors have the option not to contract with the government;" thus the E-Verify rule "do[es] not require any person or entity to use E-Verify."

The U.S. Chamber also said the Executive Order and the E-Verify rule were not authorized by the Federal Property and Administrative Services Act of 1949 (Procurement Act) because there was an insufficiently close nexus between the rule and the Procurement Act's goal of promoting efficiency and economy in government procurement. The Court rejected this challenge deferring to the Administration and saying the President made sufficient findings in the June 6, 2008 Executive Order that "use of E-Verify would promote efficiency and economy in procurement." The U.S. Chamber also argued that the underlying immigration statute authorizing E-Verify limited the use of E-Verify to new hires and did not authorize verification of existing employees as required in the E-Verify rule. The Court rejected this challenge saying nothing in the immigration statute "explicitly prohibits the Executive Branch from using E-Verify for current employees." Ultimately, the Court granted the Government's motion for summary judgment on all counts and denied the U.S. Chamber's motion for summary judgment.

Beginning September 8, 2009, contracting officers will be required to include the E-Verify clause in most new federal contracts. Contracts that will not have the E-Verify clause are contracts under $100,000, contracts for less than 120 days, contracts for services outside the United States or contracts for commercially-available-off-the-shelf (COTS) items and COTS items related services. The E-Verify clause is expected to be in federal contracts for commercial services. Federal contractors will have 30 days after award to sign up for E-Verify and sign the E-Verify Memorandum of Understanding (MOU); and after phase-in periods will have to verify the work status of new hires and employees assigned to the contract. Ultimately, new hires will have to be verified three days after hire and assigned employees will have to be verified within 30 days of assignment. If employees are not verified immediately, there is a process to resolve these issues that involves employees initiating contact with the Department of Homeland Security or Social Security Administration within eight days of the tentative non-confirmation notice from E-Verify.

E-Verify was originally established as a voluntary program for all U.S. employers and provides an Internet based system designed to enable employers to verify electronically newly hired employees' work status (typically the information provided on I-9 forms). E-Verify has been embraced by a number of states to varying degrees whereby states may require all state contractors to use E-Verify or states may require public employers to use E-Verify. Use of E-Verify may also be considered a mitigating factor by the Department of Homeland Security's Immigration and Customs Enforcement if there are allegations of immigration law violations.