The federal Department of Homeland Security issued new regulations today that significantly impact the manner in which employers must respond to “no-match letters” that they receive from the Social Security Administration or from the DHS concerning current employees. Under the new rules, an employer’s failure to take certain investigative steps upon receipt of a no-match letter will mean that the employer is knowingly employing an unauthorized alien in violation of federal and state law.

Using “No-Match Letters” as an Immigration Enforcement Tool
American employers annually send the Social Security Administration millions of W-2 forms in which the combination of employee name and Social Security Number does not match SSA records. In many of these cases, the SSA sends the pertinent employer a “no-match letter,” informing the employer of the mismatch. Similarly, the DHS’s Immigrations and Customs Enforcement division often sends a “Notice of Suspect Documents” if it detects similar discrepancies after an audit of an employer’s I-9 forms.

A mismatch can arise from a variety of innocent and legitimate factors, such as clerical errors, transposed numbers, transposed middle and last names, misspelled names, or changed names. But a mismatch obviously also can occur when an individual who does not have the legal right to work in the U.S. gives his or her employer a false name or SSN.

Up until now, employers’ obligations upon receipt of a no-match letter have been fairly minimal. The primary purpose of a no-match letter simply has been to advise the employer and worker that the worker’s earnings might not be credited to the correct SSA account, and to encourage the employer and the worker to clear up any discrepancy.

The new DHS regulations, however, significantly alter the impact of no-match letters, and create a dramatic new tool for the enforcement of federal immigration laws. Specifically, the new rules provide that if an employer fails to take certain investigative and corrective steps upon receipt of a no-match letter, and the particular worker referenced in the letter turns out to be an unauthorized alien, then the employer is “knowingly” employing the worker in violation of federal law. (With the passage last month of the “Legal Arizona Workers Act,” of course, Arizona state law similarly penalizes employers who “intentionally” or “knowingly” employ unauthorized aliens.)

“Safe Harbor” to Reduce Risk of Liability
The new regulations create a “safe harbor,” laying out specific steps that employers may take to reduce the risk of liability upon receipt of a no-match letter.

First, the employer must check its records to determine whether the discrepancy is due to the employer’s own error (such as a typographical, transcription, or similar clerical error made in entering the information that the worker provided when he or she was hired). If the employer determines that the discrepancy is due to such an error, the employer must correct the error and inform the SSA of the correct information. The employer also must verify with the SSA that the worker’s name and SSN, as corrected, match SSA records. The employer must complete those steps within 30 days of receiving the no-match letter. The employer also must document its actions.

Second, if the employer determines that the discrepancy is not due to its own error, then the employer must promptly request that the worker confirm whether the name and SSN in the employer’s records (which the worker provided when he or she was hired) are accurate.

If the worker says that the employer’s records of his or her name or SSN are incorrect, the employer must correct its records, inform the SSA, and verify with the SSA that the worker’s name and SSN, as corrected, match SSA records.

If the worker states that the employer’s records of his or her name or SSN are accurate, then the employer must promptly request that the worker resolve the discrepancy with the SSA. The employer must advise the worker that he or she has 90 days from the employer’s receipt of the no-match letter to resolve the discrepancy with the SSA. Upon receipt of whatever records the employer then receives from the worker resolving the discrepancy, the employer must correct its records, inform the SSA, and verify with the SSA that the worker’s name and SSN, as corrected, match SSA records.

Third, if the employer is unable to verify the worker’s corrected information with the SSA or the DHS within 90 days, then the employer must either terminate the worker, or go through a modified I-9 verification procedure. Under the modified I-9 procedure, the employer and worker would fill out a new I-9 form, just as they did when the worker was first hired. In completing the form, however, the employer cannot accept any document that was referenced in the no-match letter. Nor may the employer accept any document that contains a disputed SSN or a disputed alien number. The employer must utilize at least one document that contains a photograph to establish identity (or both identity and employment authorization).

Employers who follow these “safe harbor” provisions are not necessarily immune from liability if the worker turns out to be an unauthorized alien. For example, if other evidence (such as an admission to the employer by the employee himself that he is illegal) indicates that the employer actually knew that the worker was unauthorized, the employer still would be liable for a violation of the immigration law. But if the employer did follow these “safe harbor” procedures (and documents its efforts), then the mere fact that the employer received a no-match letter, standing alone, will not mean that the employer was “knowingly” violating the law.

Anti-Discrimination Provisions
Some employers may be tempted to skip the “verification” and “modified I-9” steps discussed above, and simply terminate workers upon receipt of a no-match letter. The availability of the “safe harbor” provisions does not prohibit employers from terminating workers. But the new regulations do reiterate that immigration and civil rights laws prohibit employers from discriminating against applicants or employees on the basis of national origin, and the DHS reminds employers that they should administer their employment practices in a consistent manner: “[I]t is important that employers not administer the [verification process] on a discriminatory basis. Thus, an employer who wishes to follow the safe-harbor procedure should require a Form I-9 verification of all employees who fail to resolve SSA discrepancies, and apply a uniform policy to all employees who refuse to participate or whose Form I-9 verification is unsuccessful.”

Effective Date
The new regulations are not retroactive; they do not apply to any no-match letters that employers may have received in the past. The new rules take effect in 30 days, on September 14, 2007. Employers must be alert for any no-match letters that they receive on or after that date, and must make sure that they respond appropriately.

In light of the significant civil and potential criminal penalties that can arise under both federal and state law from “knowingly” employing unauthorized aliens, employers now must be particularly watchful for any no-match letters that they receive from the SSA or the DHS. Failure to respond properly to such letters will mean that the employer did, in fact, knowingly employ an unauthorized worker in violation of federal and state law.

For a copy of the DHS regulations, for a sample “Notice to Employee Concerning No-Match Letter,” or for more information about any of these topics, feel free to contact any of the following members of Gallagher & Kennedy’s Employment & Labor Law Group: