On September 14, 2007, new regulations were scheduled to go into effect that would directly impact many employers throughout the United States. These regulations define when an employer has “constructive knowledge” that an employee lacks authorization to work legally in the United States. Immigration and Customs Enforcement (ICE) has stated that employers who fail to comply with the new rule may be found to have constructive knowledge of hiring an unauthorized worker and may face substantial penalties.

On August 31, 2007, the U.S. District Court for the Northern District of California issued an order delaying implementation of these regulations until at least October 1, 2007. The order also stops the Social Security Administration (SSA) temporarily from sending notices to approximately 140,000 employers across the country.

For over twenty years, it has been unlawful for an employer to employ a foreign national while having knowledge that the employee is an unauthorized worker. Penalties range from civil to criminal fines, as well as imprisonment. The term “knowledge” includes not only actual knowledge but also constructive knowledge: knowledge that may fairly be inferred through notice of certain facts and circumstances. Prior to the issuance of these regulations, there was no clear guidance from the U.S. Department of Homeland Security (DHS) to employers about what constitutes constructive knowledge and, more specifi cally, an employer’s obligations when it receives a Social Security “no-match” letter.

What Is a “No-Match” Letter?

Every year, SSA informs thousands of employers, via a “no-match” letter, that certain employees’ names and corresponding Social Security numbers provided on Forms W-2 do not match SSA’s records. Out of approximately 250 million wage reports the SSA receives each year, as many as 4 percent belong to employees whose names and corresponding Social Security numbers do not match SSA’s records.

There are many reasons for a mismatch between employer and SSA records, including transcription errors and name changes due to marriage that are not reported to SSA. Employers should not assume the mismatch is the result of any wrongdoing on the part of the employee. Moreover, an employer who takes action against an employee based on nothing more substantial than a mismatch letter may, in fact, violate the law. SSA indicated it will send approximately 140,000 “no match” letters to employers in the next three months, affecting nearly 8 million workers.

What Does the New Rule Require?

The new rule identifies a “safe harbor” from prosecution for employers who take specifi ed action upon receipt of a no-match letter from SSA or a letter from DHS regarding the validity of immigration documents. In order to qualify for safe harbor protection, the employer must take certain steps within a specifi ed time frame after receiving such a letter.

Within 30 Days of Receipt of the Letter

  • The employer must check its records to determine whether the discrepancy is a result of the employer’s typographical, transcription or similar clerical error. If it is, the employer should correct the records; inform the relevant agencies; verify that the corrected information matches agency records; and make a record of the manner, date and time of the verifi cation to be kept with the employee’s I-9 Form.
  • If the discrepancy cannot be clarifi ed through the employer’s records alone, the employer must ask the employee to confi rm the correct information. If the employee is able to correct the records, the employer should make the correction; inform the relevant agencies; verify that the corrected information matches agency records; and make a record of the manner, date and time of the verifi cation to be kept with the employee’s I-9 Form.

Within 90 days of Receipt of the Letter

  • If clarification cannot be obtained through verifi cation of records, the employer must advise the employee to contact the appropriate agency directly in order to resolve the discrepancy. The discrepancy will only be resolved upon SSA’s verifi cation that the employee’s name matches the social security number in the agency’s records, or upon DHS’s verifi cation that the immigration status or employment authorization document is assigned to that employee. The employer should make a record of the manner, date and time of the verifi cation, to be kept with the employee’s I-9 Form.

Day 90

  • If the discrepancy cannot be resolved within 90 days, the employer must complete a new I-9 Form for the employee by the 93rd day. When completing this new I-9 Form, the employer may not accept any document containing the social security number that could not be reconciled, nor may the employer accept any DHS-issued document that was in question.

Additionally, the employer may not accept any identity document unless it has a photograph.

Day 93

  • If the employer is unable to verify the employment authorization of the employee through completion of the new I-9 Form, the employer should terminate the employee. Failure to terminate may lead to a fi nding by DHS that the employer had constructive knowledge of the employee’s lack of employment authorization.
  • The new regulations state that “constructive knowledge” may exist under the following circumstances:

(1) The employer fails to complete or improperly completes the I-9 Form;

(2) The employer acts with reckless and wanton disregard for the legal consequences of permitting another individual to introduce an unauthorized alien into its workforce or act on its behalf; or

(3) The employer fails to take reasonable steps after receiving information from the employee that is inconsistent with information provided during the Form I-9 verification process. For example, the employer receives a request to fi le a labor certification or employmentbased visa petition and the employee indicated citizenship or permanent resident status on the I-9 Form.

DHS takes the position that applying the safe harbor rule in a uniform manner for all employees whose account numbers or work authorization documents are challenged by the SSA or DHS should not subject an employer to liability for document abuse and/or unlawful discrimination on the basis of national origin and citizenship.

Please note that the safe harbor exists ONLY with regard to correspondence from SSA or DHS. SSA is not changing its procedures for issuing employer no-match letters, and SSA guidance on how to correct Social Security records is unchanged. However, future no-match letters issued by the SSA will be accompanied by a letter from ICE informing employers on how to respond to the employer no-match letter in a manner consistent with obligations under U.S. immigration laws.

Other Proposed Immigration and Workforce Enforcement Measures

Below is a summary of related immigration and enforcement initiatives:

  • DHS will issue a proposed rule requiring all federal contractors to participate in the agency’s electronic employment verifi cation system, now called E-Verify (a re-branding of the voluntary Basic Pilot program now used by approximately 19,000 employers).
  • To minimize confusion during the Form I-9 verifi cation process, DHS will publish a regulation reducing the number of acceptable documents.
  • DHS will raise civil fines imposed on employers who knowingly hire unauthorized workers by approximately 25 percent.
  • The Administration is continuing to expand criminal investigations against employers who knowingly hire large numbers of unauthorized workers.
  • DHS will extend the authorized period of stay for professional TN workers from Canada and Mexico under NAFTA from one year to three years, in order to attract more of these talented workers to the U.S.

Recommendations for Employers

Integrate the procedures outlined in the fi nal rule as soon as possible.

  • Review your Immigration Compliance Policy, or ensure that your company has a written Immigration Compliance Policy.
  • Amend your Immigration Compliance Policy to include a written “No-Match Letter Policy” consistent with the final rule (or adopt such a Policy).
  • Do not take any adverse employment action solely on the basis of receiving an SSA no-match letter.
  • Conduct an internal audit of your I-9 Forms and processes to ensure that your Policy and applicable laws are being followed.
  • If you are in a high-risk industry (hospitality, construction, food processing, agriculture, manufacturing, agriculture, critical infrastructure), consider enrolling in the DHS Basic Pilot (now E-Verify) program.
  • Review all agreements with temporary agencies and subcontractors to ensure that they are in compliance with the law, and that they will indemnify you for any costs/damages that may arise from unauthorized workers on your job site.