When an employer submits an employee’s name and social security number to the Social Security Administration (“SSA”) and that information does not match SSA’s records, SSA issues a letter, commonly known as a “no-match letter,” to notify the employer of the issue. The original purpose of these letters was to correct errors in the database of social security numbers and to properly credit employees’ earnings to their social security accounts. However, in June 2006, the Department of Homeland Security (“DHS”) proposed new regulations intended to turn no-match letters into an enforcement mechanism for Immigration and Customs Enforcement (“ICE”), the federal agency charged with enforcing U.S. immigration laws. (ICE sends out its own version of a no-match letter, called a “notice of suspect document letter,” when it is unable to confirm that an immigration-status document or employment-authorization document referenced by an employee completing a Form I-9 was actually assigned to that person.) DHS issued a final rule regarding no-match letters on August 10, 2007 (discussed in Kilpatrick Stockton's August 13, 2007 Legal Alert). That rule provides that any employer continuing to employ a worker who is the subject of a no-match letter can be charged with constructive knowledge of that worker’s undocumented status, thus exposing the employer to prosecution under the Immigration and Nationality Act (“INA”) for knowingly employing an undocumented alien. The rule also outlines procedures employers can follow to avoid liability for such illegal employment (the so-called “safe harbor” provisions) after receiving an SSA no-match letter or the DHS equivalent. Employers were to be notified of these new procedures with an ICE “insert” to the SSA no-match letters, and SSA intended to send packets containing no-match letters and guidance inserts to approximately 140,000 employers beginning in September 2007. 

However, before the final rule could take effect, it was blocked by an injunction issued by the U.S. District Court for the Northern District of California. The judge barred DHS from issuing the new no-match packets including the guidance insert, citing concerns that the rule was arbitrary and capricious under the Administrative Procedure Act, that DHS had exceeded its authority, and that the rule was promulgated in violation of the Regulatory Flexibility Act. In response to this injunction, DHS published a supplemental proposed rule in March 2008 that purported to address the court’s concerns and invited comments regarding the rule.

Supplemental Final Rule

On October 23, 2008, the Department of Homeland Security (“DHS”) issued a supplemental final rule on no-match letters that provides additional background and analysis, but leaves the previous rule virtually unchanged. Homeland Security Secretary Michael Chertoff stated, “The additional information in this supplemental rule addresses the specific items raised by the Court, and we expect to be able to quickly implement it.” However, many business leaders and civil rights organizations have reacted to the rule with disappointment.

One small change with respect to the rule concerns the “safe harbor” provisions intended to provide a defense to liability under the INA for employers who follow the steps laid out in the final rule. The preamble published with the August 2007 rule stated that employers complying with the “safe harbor” provisions would also not be found to have engaged in national origin or citizenship discrimination in violation of the Immigration Reform and Control Act (“IRCA”) for employment terminations stemming from issues identified in a no-match letter that could not be resolved through the "safe harbour" procedures. This guarantee was removed from the preamble of the supplemental rule in response to the district court’s point that DHS does not have enforcement authority for IRCA’s antidiscrimination provisions.

The final rule became effective on October 28, 2008. However, it cannot be implemented until the California district court’s injunction is lifted. DHS has indicated that it intends to ask the district court to lift the injunction quickly in response to the issuance of the supplemental final rule. In the meantime, SSA has abstained from sending no-match letters to employers for tax years 2006 and 2007, although the district court did not bar the agency from sending the letters. The agency will determine whether to send 2007 letters to employers following the conclusion of the pending no-match litigation.

Practical Implications

If and when the supplemental rule takes full effect, employers following the "safe harbor" procedures set forth in the rule will have a window period of up to 93 days during which they may attempt to resolve a work-authorization issue disclosed in a no-match letter without exposing themselves to liability for knowingly employing an undocumented worker. While the “safe harbor” provisions will not necessarily protect an employer from liability under IRCA’s antidiscrimination provisions, employers would be wise to follow those procedures rather than simply discharging an employee based on a no-match letter. 

However, until the rule takes effect, employers should continue to follow the presumption that a no-match letter does not make any statement about an employee’s immigration status and is not a basis for taking adverse action against any employee. To assume otherwise could subject the employer to antidiscrimination or labor law sanctions.