On October 10, 2007, a San Francisco district court judge granted an order preventing the implementation of the new Social Security No-Match regulations. U.S. District Judge Charles R. Breyer halted over 140,000 no-match letters from being issued by the Social Security Administration (SSA) to employers relating to approximately 8 million employees. This order was granted in connection with a lawsuit filed against the Department of Homeland Security (DHS) by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) and other organizations on the grounds that the new regulations could lead to mass layoffs in low-wage industries. The order is in effect until a final decision can be reached in the case (which could be many months).

The DHS implemented new rules regarding Social Security No-Match Letters, which were scheduled to take effect on September 14, 2007. Under the regulations, new specific legal obligations are imposed on employers that receive the so-called “no-match” letter from the SSA. A no-match letter may be issued when an employee’s social security number does not match the employee’s name in the SSA database. Under the regulations, employers may take specific steps under the “safe-harbor” procedures to protect against the DHS using the no-match letter as evidence that the employer has constructive knowledge of employing an illegal worker. These steps include correcting clerical errors and involving the employee in correcting discrepancies. However, if a discrepancy cannot be clarified within 90 days then the employer must choose between terminating the employee or face the risk that DHS will determine they have constructive knowledge of employing an illegal worker.

In the order, Judge Breyer criticizes the federal government for not fully researching the impact that the regulations could have on businesses across the United States in the form of unlawful terminations and compliance costs. According to the decision, the rate of error in the SSA database, which is acknowledged by the federal government, could lead to the firing of numerous legal workers in the United States. Additionally, according to Judge Breyer, the federal government did not provide a reasoned analysis for the agency’s new position. For these reasons, the regulations are currently suspended. We will keep you informed of the progress of this case and provide updated information on the regulations.