Social Security "No-Match" Regulations In Flux

On October 10, 2007, a San Francisco district court judge granted an order preventing the implementation of the new Social Security no-match regulations. U.S. District Judge Charles Breyer halted over 140,000 no-match letters from being issued by the Social Security Administration (SSA) to employers relating to approximately 8 million employees. This order was granted in connection with a lawsuit filed against the Department of Homeland Security (DHS) by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). The order is in effect until a final decision can be reached in the case.

“No-Match” Letters

According to the SSA, their office receives millions of earning reports, also referred to as W-2 Forms, in which the combination of the employee name and social security number (SSN) does not match SSA records. In some of these cases, the SSA sends an “Employer Correction Request,” which is also referred to as a “no-match letter.” There can be many causes for the no-match letter, including clerical errors and name changes. Another reason may be that the employee is using a fraudulent SSN and is not authorized to work in the United States.

Of the approximately 250 million wage reports the SSA receives each year, as many as four percent belong to employees whose names and corresponding SSNs do not match the SSA’s records. According to the SSA, it is not changing their procedures for issuing employer no-match letters. No-match letters are sent to employers with more than 10 no-matches that represent 0.5% of the Form W-2’s submitted by that employer.

The New Regulations

The DHS implemented new rules regarding Social Security no-match letters, which were scheduled to take effect on September 14, 2007. Under the regulations, an employer may be subject to fines and possible criminal sanctions if found to have “constructive knowledge” of employing an unauthorized worker. Historically, a no-match letter to an employer from SSA has not been sufficient notice alone that the employer’s employee is working without authorization. It is one of the factors to consider in the “totality of the circumstances” when determining whether the employer has “constructive knowledge” of the employee’s unauthorized employment for purposes of employer sanctions.

According to established Immigration Regulations: “The term knowing includes not only actual knowledge but also knowledge which may fairly be inferred through notice of certain facts and circumstances which would lead a person, through the exercise of reasonable care, to know about a certain condition.” Constructive knowledge may include, but is not limited to, situations where an employer:

• Fails to complete or improperly completes the Employment Eligibility Verification Form, I-9;
• Has information available to it that would indicate that the alien is not authorized to work, such as Labor Certification and/or an Application for Prospective Employer; or
• Acts with reckless and wanton disregard for the legal consequences of permitting another individual to introduce an unauthorized alien into its work force or to act on its behalf.”

The new rules add two specific examples of when an employer may be deemed to have “constructive knowledge” regarding illegal employment. These include:

• Receiving written notice from the SSA that the combination of the name and SSN submitted for an employee does not match SSA records.
• Receiving written notice from DHS that an immigration status document or employment authorization document presented by an employee as proof of work authorization is assigned to another person or that there is no DHS record of the status document or EAD being issued to that employee.

Employers may take certain steps under the “safe-harbor” procedures to protect against the DHS using the no-match letter as evidence that the employer has constructive knowledge of employing an illegal worker. To be eligible for the “safe harbor” under the regulations, an employer must take action within 30 days of receipt of the no-match letter by either correcting clerical errors or requesting the employee to correct the error directly with SSA or DHS. In the event that the discrepancy cannot be clarified within 90 days, the employer must choose between terminating the employee or face the risk that DHS will determine that the employer has constructive knowledge that it is employing an illegal worker.

The Judge’s Order

In his order, Judge Breyer criticized the federal government for not fully researching the impact that the regulations could have on businesses across the United States in the form of unlawful terminations and compliance costs. According to the decision, the rate of error in the SSA database, which is acknowledged by the federal government, could lead to the firing of numerous workers legally in the United States. Additionally, according to Judge Breyer, the federal government did not provide a reasoned analysis for the agency’s new position. For these reasons, the regulations are currently suspended.

Conclusion

Despite the judge’s order to block implementation of the new regulations, it is important for employers to have a policy to uniformly deal with all employees that may be included in a “no-match” letter. Employers should implement and execute company policies in a non-arbitrary, consistent and non-discriminatory manner. If they do not do so, they may violate immigration anti-discrimination laws.

Note: This article was published in the August – December 2007 “Double Issue” of The Employment Law Authority.