Employer Ordered to Reinstate Employees Discharged After Receiving No-Match Letters

On June 16, 2008, the Ninth Circuit U.S. Court of Appeals upheld an arbitration award ordering Aramark to reinstate 33 employees it discharged after receiving no-match letters from the Social Security Administration (SSA). In April 2003, after it received the no-match letters, Aramark sent letters to 48 employees stating they had three working days from the postmark date of Aramark's letter to provide to Aramark either a new social security card or a verification form from the SSA showing a new card was being processed. Aramark's letter further stated that failure to comply would result in termination of employment. Thirty-three employees did not comply within the requested time frame and were discharged.

The Service Employees International Union (SEIU) filed a grievance on behalf of the employees, claiming Aramark violated the collective bargaining agreement by discharging them without just cause. The arbitrator concluded that there was no convincing information that any of the discharged employees were ineligible to work in the United States and that Aramark did not have just cause to discharge them, and therefore ordered reinstatement with back pay. A federal district court vacated the award, concluding Aramark had constructive knowledge that the employees were ineligible to work in the United States and therefore the award violated public policy because it would require Aramark to violate immigration laws. SEIU appealed to the Ninth Circuit.

The Ninth Circuit addressed whether Aramark had constructive knowledge that the discharged employees were ineligible to work in the United States. The Court stated the no-match letters did not automatically put Aramark on constructive notice that the employees were ineligible to work in the United States, but rather indicated a discrepancy between the employer's records and the SSA's records with respect to the employees' social security numbers, which could be the result of typographical errors, name changes, compound last names, or inaccurate or incomplete employer records.

Aramark also argued that it provided the employees a reasonable time to correct their social security number discrepancies and that their failure to do so put Aramark on constructive notice that they were ineligible to work in the United States. The Court noted that Aramark gave the employees an extremely short turnaround time, three days, to comply with its letter, and that it was likely that many of them concluded they could not meet the deadline and therefore did not attempt to comply. The Court also noted that Aramark's three-day deadline was significantly more accelerated than the 90-day deadline in the DHS safe harbor regulations (which are not yet in effect), under which the DHS will not charge an employer with having constructive knowledge if the employer takes certain actions. The Court concluded that Aramark did not have constructive knowledge that the employees were ineligible to work in the United States, held that reinstating them would not violate the public policy of not employing persons ineligible to work in the United States, and upheld the arbitration award.

This case shows that employers should exercise caution before discharging employees for whom they receive no-match letters. On one hand, employers want to avoid prosecution by the DHS on the grounds that they continue to employ persons after having constructive knowledge that they were ineligible to work in the United States. On the other hand, employers also want to avoid wrongful discharge and similar claims from employees on the grounds that the employees were discharged even though they were eligible to work in the United States. Although the DHS safe harbor regulations are not yet in effect, following them may be the safest approach. Under the regulations, within 30 days of receiving the no-match letter, the employer must verify whether the discrepancy is the result of an error in its own records. If so, the employer must correct its records and verify the new information with the SSA. If not, the employer must ask the employee to resolve the discrepancy with the SSA within 90 days of the receipt of the no-match letter. If the employee does so, the employer must verify the resolution with the SSA. If the employee is unable to do so, the employer and employee must execute a new I-9 form within 93 days of the receipt of the no-match letter, except the employee may not use any Section 2 documents that contain the disputed social security number and the employee must provide a document containing a photo to establish identity. If the employee is unable to execute such a new I-9 form, the employer could discharge the employee to avoid a constructive knowledge charge from the DHS, although it could face a wrongful discharge or similar claim from the employee if the employee is eligible to work in the United States. Accordingly, until the law is better established, employers would be well advised to consult with legal counsel upon receiving no-match letters.