New Obligations Imposed on Employers Receiving Social Security “No-Match” Letters

On August 10, 2007, the Department of Homeland Security (“DHS”) issued new rules, which dramatically change how employers must respond after receiving Social Security “no-match” letters.  Under the new regulations, employers may be held liable for criminal and civil penalties if they ignore “no-match” problems by failing to take specified steps within 90 days of receiving the letter.  These new rules are set to go into effect on September 14, 2007, although a business coalition has requested they be delayed for six months and immigration rights groups have threatened to file a lawsuit to block their implementation.  

What are “No-Match” Letters?

Each year, the Social Security Administration (“SSA”) processes W-2 forms and credits social security earnings to workers.  If a name or a Social Security Number (“SSN”) on a W-2 form submitted by an employer does not match SSA records, the agency issues an “Employer Correction Request” letter, commonly referred to as an employer “no-match” letter, informing the employer of the mismatch.  There can be many “benign” causes for a no-match, including clerical errors and name changes.  Although the purpose of the no-match letter is to properly credit earning records for future Social Security benefits, a no-match letter also may be an indicator that an employee is an unauthorized alien using a false SSN or a SSN assigned to someone else.  The DHS also issues no-match letters to employers when it finds discrepancies following an inspection of the employer’s I-9 (employment eligibility) forms.

Employer Obligations Prior to the New Regulations

Under 8 U.S.C. 1324a(a)(2) of the Immigration and Nationality Act (“INA”), it is unlawful for an employer to continue to employ an alien in the United States knowing that the alien is (or has become) an unauthorized alien with respect to such employment.  Violation of this law, either through actual or constructive knowledge, can subject employers to both criminal penalties and civil fines. 

The former regulations imposed few requirements on employers that received no-match letters.  For example, the DHS did not use no-match letters from the SSA as evidence to establish that the employer had constructive knowledge that it employed an unauthorized alien.  Employers typically responded to a no-match letter by: (1) notifying the employee listed; and (2) asking the listed employee to verify his or her SSN, contact the SSA to resolve the discrepancy and notify the employer of the outcome. 

While the employer was advised to document its efforts to solicit the corrected information, the employer was not authorized to take adverse action (such as laying off, suspending, firing, or discriminating) against a listed employee, even if the employee failed to respond at all to the employer’s efforts.  In fact, taking adverse action against the listed employee based solely on the no-match letter was not only prohibited but could also subject the employer to state and federal claims.  Employers could only terminate a listed employee if the listed employee admitted submitting a false social security number in connection with the I-9 form and if he or she could not submit valid employment authorization documents as required by the form I-9.   

Employer Obligations Under the New Regulations

The new regulations add the receipt of a DHS or SSA no-match letter to the list of specific examples in the INA supporting a finding that the employer had constructive knowledge that it employed unauthorized aliens.  Such a finding subjects an employer to criminal and civil penalties.  For example, the DHS may issue and serve a Warning Notice or may commence administrative proceedings against the employer by issuing and serving a Notice of Intent to Fine. 

To avoid this outcome, the employer must take the following steps under the “safe-harbor” procedures of the new regulations:

• Within 30 days of receipt of the no-match letter, the employer must take action by either correcting clerical errors or requesting the employee to correct the error directly with the SSA or the DHS and so advise the employer.  If an employer receives a notice of discrepancy from the DHS, it must contact the local DHS office in accordance with the notice’s instructions.
• If the discrepancy is not clarified within 90 days of receipt of the no-match letter, the employer must attempt to re-verify the employee’s employment eligibility by completing a new I-9 employment verification form.  If the employer cannot verify the employee’s work eligibility through the completion of a new I-9 form, the employer may terminate employment or risk a DHS determination that the employer had constructive knowledge it employed an unauthorized alien.

Complying with the New Regulations

Employers should take the following steps to protect themselves from liability:

• Ensure all employees are legally eligible to work in the United States by timely and accurately completing I-9 forms for all new hires;
• Ensure company policies are implemented and executed in a non-arbitrary, consistent, and non-discriminatory manner;
• Determine immediately after receiving a no-match letter whether the discrepancy is a clerical error in the employer’s records;
• If the discrepancy is not the result of a clerical error, re-verify the employee’s eligibility with a new I-9 form as soon as possible;
• Implement policies to ensure that the employer meets the above “safe harbor” requirements and deadlines.