A new Department of Homeland Security (DHS) regulation imposes new, specific legal obligations on employers who receive a so-called “No-Match letter” (this letter can also be called an “Employer Correction Request”, among other things) from the Social Security Administration (SSA). These letters may soon begin flowing from the SSA. According to DHS Secretary Michael Chertoff, SSA “will not send all of them out at once, they’ll probably send about 15,000 out a week, over a period of probably about eight to 10 weeks.”

By way of background, employers are required to report employee wages annually on W-2 forms. SSA processes these forms, or wage reports, as an agent of the Internal Revenue Service (IRS), and uses such earnings information to determine the amount of Social Security benefits to which an employee is entitled. If an employee’s name and Social Security number (SSN) on a W-2 do not “match” an SSA record, SSA sends a No-Match letter to the employer. The letter’s purpose is to obtain corrected information to assist the SSA with identifying the employee to whom the earnings belong so that such earnings may be credited to the employee’s earnings record. A mismatch, or discrepancy, may occur for any number of innocuous reasons (e.g., clerical or typographical errors); however, one reason that DHS is involved is to address a situation where an employee obtains a false SSN (or one belonging to someone else) in order to convince the employer that the employee is authorized to work in the United States.

Under the new regulation, an employer, upon receiving a No-Match letter, will face potential liability for having “constructive knowledge” (i.e., knowledge that may fairly be inferred) of the existence of an unauthorized employee unless the employer takes “reasonable steps” to resolve any discrepancy. In order to provide employers with “safe-harbor” from DHS’s use of a No-Match letter as evidence that an employer has “constructive knowledge” of employing an illegal worker, DHS has outlined specific steps it considers reasonable. From the date a No-Match letter is received, these steps that should be undertaken by employers include:

1. Within 30 days, employer should check its records to verify whether the discrepancy was the result of a typographical, transcription, or similar clerical error in the employer’s records. If an error is found, the employer should verify the corrected information with the relevant agencies.
2. If no error is found within 30 days of receiving the No-Match letter, the employer should ask the employee to confirm the accuracy of the employer’s records. If such records are accurate, the employer should ask the employee to resolve the discrepancy with the SSA directly.
   
   If the employee is able to resolve the discrepancy successfully, then, within 90 days, the employer should ensure that all instructions in the No-Match letter are followed; verify with the relevant agencies that the mismatch has been corrected; and, document the time, date and necessary steps taken to complete the verification process.
3. (3) If the discrepancy is not resolved within 90 days, three additional days are afforded the employer so that it may complete a new Form I-9 as if the employee was newly hired. Here, the employer may not accept any document that uses the questionable SSN to verify the employee’s authorization to work. If the employer is unable to confirm the employee’s authorization to work, the employer must terminate the employee’s employment or risk liability for violating the law by “knowingly” continuing to hire an unauthorized employee.

The new “safe-harbor” procedures are not mandatory. There may be other procedures an employer could follow in response to a No-Match letter that DHS would consider reasonable and inconsistent with a finding that an employer had “constructive knowledge” of illegal employment. Employers should heed these “safe-harbor” procedures, however, because, as stated by DHS, “[a]n employer that followed a procedure other than the ‘safe-harbor’ procedures described in the regulation would face the risk that DHS may not agree.”

The new regulation was set to take effect on Friday, September 14, 2007. Recently, however, a federal judge has issued a Temporary Restraining Order that precludes DHS from enforcing the regulation. The Order is in effect until October 1st; at a hearing set for that date the Court will determine whether the Order should be extended or whether the regulation should be permitted to go into effect.This delay will provide employers with more time to understand this significant regulation prepare for its enforcement.