DHS Tests Authority in Regulating Social Security No-Match Letters

By Rebecca L. Sigmund, Ogletree Deakins (Atlanta)

The Department of Homeland Security (DHS) published its final rule making employers accountable for resolving mismatched social security numbers of employees. The regulation, “Safe Harbor Procedures for Employers who Receive a No-Match Letter,” describes the legal obligations of an employer when the employer receives a no-match letter from the Social Security Administration (SSA) or notice from the Immigration and Customs Enforcement (ICE), the internal investigative arm of DHS. It establishes “safe-harbor” procedures that the employer can follow in response to such a letter or notice to avoid being imputed with constructive knowledge that an employee targeted in a no-match letter is a person not authorized to work in the United States.

At this time, there is a Temporary Restraining Order issued by a U.S. District Court enjoining the DHS from taking any action to enforce this regulation. Recently, DHS published a Supplement Proposed Rulemaking to the original regulation. This Rulemaking makes no substantial changes. Instead, it merely addresses the issues cited in the Courts’ decision. The regulation is not yet in force and the lawsuit remains pending. However, DHS has asked the Court to lift the injunction based on its supplement response.  Therefore, we still await final word on the outcome of this case.

As background, employers annually send SSA millions of earnings reports (W-2 Forms) in which the combination of employee name and social security number does not match SSA records.  In some of these cases, SSA sends a letter that informs the employer of this fact (no-match letter).  There are many causes for such a no-match, but one of the causes is the submission of information for a person who is not authorized to work in the United States and who is using a false social security number or a social security number assigned to someone else.  There are no policing mechanisms in the law with regard to these no-match letters, but employers will face IRS penalties as a consequence of providing incorrect information.  SSA specifically states in no-match letter:

This letter does not imply that you or your employee intentionally gave the government wrong information about the employee’s name or Social Security number. Nor does it, by itself  make any statement about an employee’s immigration status.

As a result, the new DHS regulations place employers in a no-win situation of balancing concerns about work eligibility and discrimination. It is very important, therefore, to follow the regulatory instructions carefully and document the reasons for any termination that result.

The regulation expands the definition of “constructive knowledge.” The term “constructive knowledge” is defined as “that which may be inferred through notice of
certain facts or circumstances which would lead a reasonable person through an exercise of reasonable care, to know a certain condition.” Through case law, it has also been defined as deliberately failing to investigate suspicious circumstances.” According to current regulations, such knowledge will be imputed under the following circumstances:

• Failing to complete an 1-9 form;
• Improperly completing an 1-9 form;
• Failing to re-verify employment that expires;
• Possessing information that indicates the person is not authorized to work; and 5. Using contract workers with reckless and wanton disregard.

The definition now will include three additional situations that will impute constructive knowledge to an employer that an employee could be an unauthorized worker:

• An employee’s request for the employer’s sponsorship of the employee for a labor certification or visa petition;
• Receipt of a no-match letter from SSA; and
• Receipt of written notice from ICE regarding a suspect document of an employee.

If an employer fails to take reasonable steps after receiving such information, and if the employee is in fact an unauthorized alien, the employer may be found to have constructive knowledge of that fact. Such constructive knowledge could lead to criminal and civil penalties against the employer.

It is important that employers understand that the regulation provides “safe¬harbor” only in regard to constructive knowledge. The regulation would not preclude DHS from finding that an employer had actual knowledge that an employee was an unauthorized worker. An employer with actual knowledge that one of its employees is unauthorized could not avoid liability by following the procedures set forth in the regulation. Further, even though employers may take other reasonable steps that could be considered in the “totality of the circumstances” test by ICE, employers who do not follow the stated protocol still may not have the “safe harbor” from a finding of constructive knowledge in the event of an investigation.

Accordingly, the “safe harbor” instructions provided in the new regulation are set forth below. Although timeframes are specified, it is recommended that action be taken as soon as possible after receipt of any notice or letter.

Within 30 days of Receipt of No-Match Letter from SSA or notice from ICE

SSA No-Match letter: Upon receipt of a no-match letter, the employer must check its records to determine whether the discrepancy was caused by a clerical error, and if so, correct the error with SSA, and verify that the corrected name and social security number now match SSA’s records. Take any further notification steps if indicated in the letter. The rule advises employers to retain a record of the manner, date, and time of such verification. The employer may correct its 1-9 records by updating the 1-9 form on file for the employee or completing a new 1-9 (retaining the original), but should not perform a new 1-9 verification.

If the employer determines that the SSA no-match is not a result of an error in the employer’s records, the employer must promptly request that the employee confirm that the name and social security account number in the employer’s records are correct. If the information is incorrect, the employer must make corrections, inform the SSA of the correction and verify a match on the corrected information, and make a record of its actions.

If the employee confirms that the employer’s record information is correct, the employer must promptly advise the employee (1) of the date of receipt of the no-match letter and (2) to resolve the discrepancy with the SSA no later than ninety (90) days after the receipt date. The employer is under no legal obligation to advise the employee regarding the means or manner of resolving the discrepancy with the agency.

Notice of discrepancy from DHS: If an employer is informed about a discrepancy with the immigration document, the employer must contact the local DHS office (which will be the local ICE or CIS office) in accordance with the written notice’s instructions and attempt to resolve the question raised by DHS about the immigration status document or employment authorization document. Note that the specific instructions in the notice may provide less than 30 days for the employer to respond.

Within 93 days of Receipt of Notification From the Government

If the discrepancy cannot be resolved with either SSA or DHS within 90 days of receipt of the written communication from either agency, the employer must attempt to re-verify the worker’s employment eligibility by completing a new 1-9 employment verification form. Companies should use the same procedures as when completing an 1-9 form at the time of hire (with a few exceptions):

• The employee must complete section one and the employer must complete section two of the new 1-9 form within 93 days of receipt of the notice from either SSA or DHS. (93 days covers the 90 days provided plus 3 days to complete the 1-9 as if it is a new hire.)
• The employer cannot accept any document (or receipt for such a document) referenced in the DHS notification or any document (or receipt) that contains a social security number that is the subject of the SSA no-match letter to establish employment authorization or identity.
• The employee must present a document that contains a photograph in order to establish identity or both identity and employment authorization.
• The new 1-9 form should be retained with the original 1-9 form(s).

If the employer cannot verify the employee’s work eligibility through completion of a new 1-9 form, the employer must decide whether to terminate the employee, or face the risk of being held to have constructive knowledge and being penalized criminally or civilly for the continuing employment of an unauthorized alien. Even so, the final rule provides that whether an employer would be found to have constructive knowledge in any particular case will depend on the “totality of relevant circumstances.” Every case will differ, so it is important to review the individual circumstances in each case.

An employer should not terminate an employee until this process is completed, unless the employer obtains actual knowledge that the employee is not eligible for employment in the United States. For example, if an employee requests employer sponsorship for a labor certification (first step of permanent residency) or a work visa petition and the employee is determined to be unauthorized during the process, or where the request is inconsistent with information provided by the employee in connection with the employment verification process (i.e., a claim of U.S. citizenship or permanent resident status is marked in Part I of the 1-9 form), the employer may be charged with actual or constructive knowledge of unauthorized status if the employer permits the employee to continue working for the employer after such knowledge is conferred. Under these circumstances, the “safe harbor” provisions will not apply and serious penalties will be assessed in an investigation.

An employer’s consistency of policy and procedure will be essential to comply with this new regulation, and at the same time, avoid liability for unlawful discrimination on the basis of national origin or citizenship status. The Courts may determine the fate of this particular regulation, but it may still serve employers well to follow in case the government comes knocking.