July, 2006

Department of Homeland Security Proposes Employer Safe-Harbor Response to No-Match Letters

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By Laurie A. Petersen, Esq.

While the political and socio-economic debate continues over how to treat the millions of illegal immigrants present and working in this country, employers must balance their obligation not to discriminate against individuals on the basis of national origin and/or immigration status, with their obligation not to "knowingly" hire illegal aliens. This is more difficult than it appears. Private interest groups on both sides of the immigration debate exert conflicting political and legal pressure on employers - one to ignore undocumented workers and the other to actively uncover and discharge them. The legal climate is also tenuous. Employers are limited in their rights to "recheck" documents presented to them in completing an I-9, but if an employer ignores facts or circumstances that call into question the work authorization of an employee, that employer can be found to have "constructive knowledge" of the employee's illegal status.

Over the past several years, the Social Security Administration (SSA) has received millions of earnings reports (W-2 forms) from employers in which the combination of employee name and Social Security Number do not match the SSA's records. In a fraction of these cases, the SSA sends a letter that informs the employer that the combination of employee name and Social Security Number does not match its records. The letter is commonly referred to as a "No-Match Letter." Employers who receive these letters find themselves in a quandary pulled between the competing laws and interest groups. Some interest groups blatantly assert that since the government does not have enough resources to pursue all employers, the employer can and should blatantly ignore the law. This is not a wise or acceptable course of behavior. The Agency has been more active in pursuing employers; especially those it deems are violating the law flagrantly. Employers who have tried to balance their competing legal obligations irrespective of the government's ability to enforce those laws against all offenders, have at times found themselves in lawsuits asserting discriminatory treatment on the basis of national origin or immigration status.

In early June 2006, the Department of Homeland Security published proposed rules subject to 60-day comment setting forth some safe harbor procedures for employers who receive No-Match Letters to assure that they will not be accused of knowingly continuing to employee unauthorized employees.

As the No-Match Letters from the SSA assert, a conflict in the records does not necessarily indicate unauthorized work status or that the employee is using a false Social Security Number. However, that is a possibility. Other reasons for the No-Match Letter could include clerical errors and/or name changes either on the part of the employer, the employee, or the SSA. The proposed regulation specifies steps an employer can take that will be considered by the Department of Homeland Security to be a reasonable response to receiving a No-Match Letter and reduce the possibility that the Department will seek civil penalties against an employer for constructive knowledge that it continued to employ an unauthorized alien.

Historically, the Immigration and Nationality Act makes it unlawful for a company to hire or continue to employ an alien in the United States knowing that the alien is unauthorized to work. The regulation and case law define knowing as "having constructive rather than actual knowledge." According to the regulations, knowing may fairly be inferred through notice of certain facts and circumstances that would lead a person with reasonable care to know about unauthorized employment. In finding an employer liable for employing unauthorized aliens, the Ninth Circuit Court of Appeals explained that a deliberate failure to investigate suspicious circumstances imputes knowledge on behalf of an employer. The proposed regulation adds to the definition of constructive knowledge an employer's receipt of written notice from the SSA that a combination of name and Social Security number submitted does not match their records, and written notice from the Department of Homeland Security that the immigration status document or employment authorization document presented by the employee is assigned to another person or there is no Agency record of the document. Under the proposed regulations, if an employer fails to take reasonable steps after receiving such written notice and an employee is in fact an unauthorized alien, the employer may be found to have constructive knowledge of that fact.

The Department of Homeland Security has detailed the following reasonable steps an employer may take to prevent a determination of construction knowledge. The employer may take other appropriate actions, but these are actions that the Department of Homeland Security deems appropriate.

1. Within 14 days of receipt of the No-Match Letter, the reasonable employer must promptly check its records to determine if the discrepancy results from a typographical, transcription, or similar clerical error in the employer's records, or communication of its records to the SSA or Department of Homeland Security. If there is an error, the employer must correct its records and inform the relevant agencies of the corrected information.
2. If such a check does not resolve the discrepancy, within 14 days of receipt of the No-Match Letter, the employer must request that the employee confirm that the employer's records are correct. If they are not correct, the employer must take the necessary action to correct the records and inform the relevant agency. If, despite the No-Match letter, the employee contends that the records are correct, the employer should require the employee to pursue the matter personally with the relevant agency and verify the correction with the employer. Employers may verify Social Security Numbers by calling 1-800-772-6270 or using SSA's online verification procedure at www.ssa.gov/ employer/ssnv.htm. Employers must make a record of the manner, date, and time of any verification.
3. If the discrepancy is not resolved within 60 days from the receipt of the No-Match Letter and if the employee's identity and work authorization cannot be verified using a verification procedure requiring the completion of a new I-9 form within 63 days, the employer must choose between taking action to terminate the employment or face the risk that the Department of Homeland Security may find the employer to have constructive knowledge that the employee was an unauthorized alien.

To verify an employee's identity with a new I-9 form, the employer must have the employee complete the new I-9 form as if the employee was a new hire; however, no document containing the Social Security Number or Alien Number that is the subject of the No-Match Letter may be used to establish employment authorization or identity or both. Any document used to establish identity must contain a photograph. The new I-9 form must be kept attached to the original I-9 form.

Aside from the Department of Homeland Security's prohibitions, many employers have policies providing that falsification of information or documentation provided to the employer either at the time of employment or thereafter subjects the employee to discharge. If an employer has such a rule that is administered uniformly and the employer determines that the employee submitted false information during the employment process or thereafter, the employer may reasonably enforce its falsification rule. However, there is no express safe harbor in the proposed regulation absolving the employer from any liability for doing so. As with any other discharge for falsification, this decision would be subject to the same challenges that would normally apply.

Employers are always counseled to follow the law to the best of their ability. Reconciling the requirement of non-discrimination based on national origin and immigration status with not employing unauthorized aliens is possible with reasonable human resource procedures, including those outlined as safe harbor procedures by the Department of Homeland Security. Other suggested practices may include:

1. Upon receiving a No-Match Letter, employers should not to assume that the employee is an unauthorized alien.
2. Within at least 14 days of receiving a No-Match letter, an employer should first check its records to determine if it was somehow responsible for the discrepancy.
3. After confirming that it has properly recorded and communicated the information received by it from the employee, the employer should inform the employee, within at least 14 days of receipt of the No-Match Letter, of the receipt of the No-Match Letter, describe the steps it has taken to assure that it has not made an error, show the employee the information it has submitted, and ask the employee to verify whether in fact the employer has recorded the correct information. The employer should not ask to again see the social security card or work authorization document.
4. If the employee confirms the employer has recorded the correct information, refer the employee to the Social Security Administration and/or the Department of Homeland Security and ask the employee to correct the discrepancy and to provide the company verification that he or she has done so. The time period given the employee should be no longer than 60 days from the date of receipt of the No-Match Letter.
5. Follow-up with the employee as to any actions the employee has taken.
6. If the employee fails to take any actions, consult the employer's uniformly applied policies and work rules and determine how they are applicable to the situation including rules regarding falsification and insubordination.

Lindner & Marsack, S.C. advises employers on immigration issues relating to employment including employment of foreign nationals through H1B and L status and permanent residency through employment. Issues regarding the firm's immigration practice can be addressed to lpetersen@lindner-marsack.com.

If you have any questions about the issues raised by this e-alert, please feel free to contact Laurie Petersen at (414) 273-3910 or by e-mail at lpetersen@lindner-marsack.com

Lindner & Marsack, S.C. represents management exclusively in labor, employment, and employee benefits law, including the administration of employee health and retirement programs. Established in 1908, Lindner & Marsack, S.C. is consistently rated among the top labor and employment law firms in the nation. We are located at 411 East Wisconsin Avenue, Suite 1800, Milwaukee, Wisconsin, 53202. Call us at (414) 273-3910 or visit our website, lindnermarsack.cert-mhcrm.com, to learn more about our firm and its talented and innovative legal professionals.

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This update is intended for general informational purposes and is not a substitute for legal advice.