Articles

Controversial Regulations Regarding "No-Match" Letters Put On Hold

Carol G. Schley,
Kupelian Ormond & Magy, P.C.

Controversial regulations recently issued by the Department of Homeland Security ("DHS") concerning social security number "no-match" letters have been put on hold by a federal court concerned about their impact on employers and employees.

In August 2007, the DHS issued the regulations, which were originally set to take effect in mid-September 2007. The regulations impose obligations on an employer who receives a letter from the Social Security Administration ("SSA") identifying employees of the employer whose social security numbers do not match government records (commonly referred to as "no-match" letters). While the SSA has sent "no-match" letters to employers for many years, the DHS regulations impose possible penalties on employers who fail to take certain steps in response to a "no-match" letter. Among other things, the regulations require an employer in receipt of a "no-match" letter to do the following:

1. verify within 30 days whether the "no-match" problem is due to a recordkeeping error by the employer;
2. if the social security number reflected in the employer's records is correct, ask the employee to resolve the discrepancy with the SSA;
3. if the number in the employer's records is incorrect and the employee can provide a correct social security number, the employer must inform the SSA in accordance with the directions on the "no-match" letter and maintain a copy of such corrective documentation.

In addition, under the regulations, if the issues raised in a "no-match" letter cannot be resolved within 90 days by taking the above steps, and the employer continues to employ an employee with a problematic social security number, the employer may be subject to civil and criminal penalties. As the DHS states on its website with respect to the regulations, "Employers unable to confirm employment through these procedures risk liability for violating the law by knowingly continuing to employ unauthorized persons."

In August 2007, a lawsuit was filed against the government in federal court in California seeking to prevent the DHS regulations from taking effect. AFL v. Chertoff, No. 07-04472 (N.D. Cal., filed August 29, 2007). While the lawsuit was filed by the AFL and other labor-related groups, entities representing business and employer interests have also become involved in the lawsuit. Upon filing, the court immediately issued an order temporarily preventing the regulations from taking effect, and in early October 2007, the court extended this order.

In its opinion, the court acknowledged that the SSA has been sending "no-match" letters to employers since 1994, but took issue with new language on this year's letters batch of 140,000 "no-match" letters the SSA intended to send, which informed recipients that they could be subject to criminal and civil sanctions if they failed to respond to the letter in compliance with the DHS regulations. The court further held that temporarily preventing the regulations from taking effect was warranted as "altering the status quo would subject employers to greater compliance costs and employees to an increased risk of termination, while imposing significantly less burdens on government." The impact on employers would include developing "costly human resources systems capable of resolving problems within the new time frame." With respect to employees, "there is a strong likelihood that employers may simply fire employees who are unable to resolve the discrepancy within 90 days, even if the employees are actually authorized to work." The court also held that the evidence indicated that the DHS failed to adequately assess the costs that would be imposed on small businesses in complying with the regulations.

The federal court's order preventing the DHS regulations from taking effect is a temporary measure until a trial in the lawsuit (which had yet to be scheduled as of the writing of this article) or pending a possible reversal of the order by an appeals court if the government appeals the decision. Therefore, while employers currently have no increased obligations with respect to "no-match" letters, they should prepare themselves for the possibility of the regulation eventually taking effect by ensuring they have adequate systems in place to verify and correct social security number issues that may arise with their employees.

Further information on the DHS regulations and "no-match" letters is available on the SSA website at  www.ssa.gov/legislation/nomatch2.htm and the DHS website at www.ice.gov/partners/employers/safeharbor/index.htm.

Carol G. Schley is a shareholder of the Southfield law firm Kupelian Ormond & Magy, P.C. and a member of the HRAGD Legal Affairs Committee. She can be reached at cgs@kompc.com or 248-357-0000.