Social Security "No-Match" Letters - What's an Employer to do?
August 1, 2006
The Immigration Reform and Control Act of 1986 put in place regulations relating to an employer’s mandatory verification of each employee’s identity and the prohibition from knowingly granting employment to an unauthorized person. Media coverage of immigration events and politics over recent years have heightened both awareness and concern among most employers as to how they can ensure compliance with this Act.
These requirements are often confusing, particularly when they seemingly conflict with other government requirements. One such situation arises when an employer receives notification from the Social Security Administration (SSA) that the name or social security number listed on the individual’s W-2 form does not match SSA records. Employers may become understandably concerned that the government will use these “No-Match” letters as notice that an individual is not authorized to work in the United States. Yet, the discrepancy that resulted in the letter may be wholly unrelated to any immigration issues. So, what’s an employer to do?
Understanding the enforcement structure of the federal government is a useful place to start in grappling with this issue. For example, older versions of the “No Match” letters from the SSA contained language that some employers mistook as a notice that they were being fined. But, only the IRS has the responsibility to enforce tax laws — the SSA does not. With regard to social security numbers, the IRS may impose a fine of $50 per violation (or higher) against anyone filing incorrect information returns. Should a fine be assessed, the employer will receive a separate notice from the IRS, and also will have the opportunity to correct the information. If simply correcting the information resolves the issue, the penalty can be reduced, or even waived, upon a determination that the failure was due to “reasonable cause.”
Another federal agency involved is Immigration and Customs Enforcement (ICE). ICE is the largest investigative sector of the U.S. Department of Homeland Security. Among other things, ICE looks for violations of employment verification procedures, as well as the knowing employment of unauthorized workers. While currently ICE officials are not informed when a “No-Match” notification is issued by the SSA, proposed immigration reform could provide for the future exchange of this information between these agencies.
While a “No-Match” notification on its own is not grounds for termination of the employee, it requires decisions as to the steps an employer should take in response. A good first step is to notify the employee in writing about the SSA letter and provide him/her an opportunity to resolve it. Current practice varies as to whether the employer gives a specified period of time to resolve the issue before being terminated, or adopts a less rigid policy whereby the employer can “wait and see” if another No-Match letter is received the following year for the same individual. When the latter approach is taken, the employer must again notify the employee of the discrepancy following receipt of the second “No-Match” letter. This time, however, the employer should also give the individual a specified period of time to resolve the issue, or else face termination. Under either approach, determining the appropriate amount of time to allow for correction is uncertain, and could range from a matter of days to weeks or months.
The right strategy can vary depending upon the type of business. For example, sometimes an employer’s clients regularly require indemnity agreements, whereby the employer promises not to hire undocumented workers. In that context, a more rigid policy may be advisable.
Recently proposed changes to the regulations provide some guidance on the approach an employer should take. The proposed changes define a procedure that, if followed, should prevent a finding that the employer knew a foreign individual lacked authorization to work in the U.S. In a nutshell, this procedure would require that the employer give the employee a specific period of time following receipt of the “No-Match” letter to resolve the discrepancy. If the employee is unable to do so within that timeframe, the employer would be permitted to re-verify employment eligibility, and can then become more selective about the documents used to provide verification. Such an elevated review at this point would not risk running afoul of immigration discrimination laws.
This proposed safe harbor procedure would not be mandatory, and may not necessarily be advisable in all circumstances. However, the proposed regulations do give employers a helpful glimpse at “good faith compliance” from the government’s point of view. This information should, therefore, cause those employers who have adopted the more lenient, “wait and see” approach to consider significantly tightening their policy.
Whatever policy is adopted, it is important that it be applied uniformly to all employees, thereby helping to preclude the occurrence, or even the appearance, of discrimination.
In establishing an appropriate strategy, each employer must weigh the risks, including that of fines for tax reporting and/or immigration violations, the potential for a hiring discrimination lawsuit, and the possibility of defending an indemnification claim by a client corporation that has been sanctioned for the use of contracted labor (such as occurred in the recent highly-publicized Wal-Mart case).
Businesses may not always find it easy to identify compliant hiring practices, and a qualified attorney can help determine the best approach.