What Is the Status of Social Security No-Match Notices?

New immigration rules that were scheduled to go into effect in the fall of 2007 would have required all U.S. employers to resolve Social Security Employer Correction Requests, commonly known as "no-match" letters or notices, according to set guidelines and timetables. Under the new rules, employers who failed to fire workers who were unable or unwilling to resolve Social Security discrepancies would have faced liability for employing unauthorized foreign workers.

But these rules were challenged in a lawsuit filed by the AFL-CIO, the American Civil Liberties Union (ACLU) and other organizations. On Oct. 10, 2007, the U.S. District Court for the Northern District of California issued a preliminary injunction in AFL-CIO, et al. v. Chertoff, et al. that enjoined the Department of Homeland Security (DHS) and the Social Security Administration (SSA) from implementing the final rule, entitled "Safe-Harbor Procedures for Employers Who Receive a No-Match Letter."

The new rule was designed to establish a clear national policy stating what is expected of employers once they receive a no-match letter. Labor unions and business groups argued that it would have a catastrophic effect on companies across the country and lead to the dismissal of thousands of legal immigrants who would be unfairly flagged by the SSA because of small documentation errors, such as differences in how their names were entered in separate databases.

The government, in turn, has argued that the new rule is necessary for employers who want to comply with the law. Justice Department attorneys, speaking on behalf of the DHS and ICE, refuted claims that legal immigrants would be unfairly impacted, pointing to legal protections already available under federal law.

The October 10 ruling was a major setback to the efforts of DHS and ICE to use social security no-match letters as a way to curtail the employment of hundreds of thousands of illegal aliens who are using false documents.

If fully implemented and enforced, this new rule is expected to lead to the dismissal of hundreds of thousands—and, by some estimates, even millions—of workers, assuming that the SSA issues no-match letters on all name and Social Security number discrepancies in its database.

No-Match Letters
When employers send Social Security information on employees to the SSA in the form of W-2 earnings reports, the SSA confirms that the names and Social Security numbers match information in the SSA database. If the name associated with a Social Security number in the database does not match the name submitted by the employer, the agency notifies the employer of the discrepancy through a no-match letter.

Previous federal rules have not provided a clear standard for an employer's responsibility to respond to no-match letters, and many employers have not responded at all. In an attempt to compel employers to resolve no-match issues, ICE first published a proposed regulation in June 2006, with the final version, drafted after extensive public comment, being scheduled to go into effect on Sept. 14, 2007.

Opposition to the new rule was swift and well organized. Just weeks after it was published, a business coalition that included the U.S. Chamber of Commerce, the National Restaurant Association, the National Retail Federation and other trade groups asked DHS and the SSA to wait at least six months before implementing the new rule. Additionally, various labor and immigrant rights groups—including the AFL-CIO, the ACLU and the National Immigration Law Center—filed a lawsuit just two weeks before the rule was to go into effect in an attempt to block its implementation. Much to the government's surprise, a federal district court judge in San Francisco issued a temporary restraining order based on that lawsuit, barring the SSA from sending out no-match letters and at least temporarily blocking ICE from seeking sanctions under the new rule.

Expanded Definition of "Constructive Knowledge"
Under the Immigration and Nationality Act, employers may not "knowingly" hire or employ any individual who does not have authorization to work in the United States. The term "knowingly" is not limited, however, to an employer's actual knowledge of an employee's lack of authorization to work. The government can charge an employer with having "constructive knowledge" of an employee's unauthorized status when the employee's Employment Eligibility Verification Form (I-9) is missing or improperly completed, simply because the employer failed to comply with regulations governing employment eligibility verification.

The new regulation expands the situations under which an employer will be found to have constructive knowledge of illegal employment of unauthorized workers. Under the regulation, if it were to go into effect, if an employer receives a Social Security no-match letter and fails to take "reasonable steps" within a prescribed period of time, and the employee identified in the letter is found to lack work authorization, the employer will be deemed to have constructive knowledge of the employee's unauthorized status.

Safe Harbor Provision
The safe harbor provision of the new rule describes "reasonable steps" that an employer can take upon receipt of a Social Security no-match letter to avoid a finding of constructive knowledge. After receipt of a no-match letter, the employer must take affirmative steps to resolve the discrepancy identified by the SSA.

• First, within 30 days after receiving the letter, the employer must check its internal records and transmissions to the SSA for clerical errors, such as misspelled names or typographical errors. If clerical errors are discovered, the employer must correct the error, inform the SSA of the corrected information, and verify with the SSA that the corrected name and/or Social Security number match the information in the SSA's database.
• If the first step does not resolve the discrepancy, the employer must, within that same 30-day period, ask the employee to confirm that the name and Social Security number in the employer's records are correct. If the employee identifies errors, the employer must correct its records and inform the SSA of the corrected information. The employee has 90 days from the date the letter was originally received to address the discrepancy.
• If the employee insists that the employer's records are correct, the employer must ask the employee to deal with the SSA directly to resolve the discrepancy. The employee must then return to the employer with evidence that the discrepancy has been resolved.
• If the employer has resolved the error through its own efforts or with the employee's cooperation, the employer should follow the instructions in the no-match letter to provide the SSA with an update. The employer must also verify that the error has been corrected by using the Social Security Number Verification Service (SSNVS) and retain a record of the date and time of verification.

If, within 90 days of receipt of the no-match letter, the employer has not successfully verified with the SSA that the employee's name matches a valid Social Security number, and that the number is valid for work authorization, the employer will need to ask the employee to complete a new I-9 in order for that person to be able to continue his or her employment. The new I-9 must be completed by the 93rd day after receipt of the no-match letter. If the employee chooses this option, the employer must verify the employee's eligibility for employment as if the employee was a new hire, with the following restrictions on the documents that may be presented:

• The employee may not present a document containing the Social Security number that triggered the no-match letter to establish identity or employment authorization.
• The employee may not present a document without a photograph to establish identity.

The employer must examine those new documents to determine whether they appear genuine and establish that the employee is authorized to work in the United States. If the employee is unable to present genuine evidence of employment eligibility within 93 days of receipt of the no-match letter, the employer is required to terminate the employee. Failure to terminate the employee in this situation will expose the company to sanctions for the illegal employment of unauthorized workers.

Whether the employer's final decision is to accept the employee's new evidence of work authorization or to terminate the employee for failure to resolve the Social Security number discrepancy, it will be essential for all companies to establish a set procedure for responding to Social Security no-match letters that directly follows the safe harbor rules, should they go into effect. It will also be critical to apply those procedures consistently in every case, and to keep meticulous records of the entire employment eligibility verification process.

Where Things Stand in 2008
Employers were given a reprieve from the deluge of thousands of no-match notices that was expected in the last quarter of 2007. After taking an initial beating in federal court, DHS filed a motion with the federal judge asking that the litigation be continued until March 2008. The court agreed, and as things stand now the terms of the temporary order (which prohibits DHS from seeking legal sanctions on the new constructive knowledge standard pursuant to a no-match notice) remain in effect.

To secure more time, DHS voluntarily agreed to go back to the drawing board on the regulation itself. Specifically, DHS must prepare a report that details the impact the new regulation will have on small businesses. DHS is also expected to fine-tune other aspects of the rule and the no-match notification process to further address objections noted by the plaintiffs and questions raised by the federal judge who issued the restraining order.

The court case has been formally put on hold until March 28, 2008. DHS has committed to issuing a new federal regulation on this issue, complete with the business impact analysis, on or before that date.

What Employers Can Expect by March 2008
The Social Security Administration, meanwhile, is preparing to send an ever-increasing number of no-match letters as soon as the redrawn regulation goes into effect. In fact, the SSA is expected to have notices ready to send out to over 140,000 companies across the country.

DHS has reiterated its intention to issue new regulations and push them through to full implementation, thereby permitting ICE to proceed with investigations for possible sanctions against employers who fail to act on the notices.

But employers can also expect the parties that brought suit against the SSA and DHS last August (namely, the AFL-CIO, the ACLU, the National Immigration Law Center, the U.S. Chamber of Commerce and other groups) to join with an even broader alliance of organizations to continue litigation to keep these rules from ever being implemented.