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0109 PD: Keep in the safe harbor, follow no-match letter regulations

Ben Yale Published on 23 December 2008

Last August, Immigration and Customs Enforcement (ICE) issued regulations regarding “No-Match Letters” from the Social Security Administration (SSA). The regulations said that for an employer to maintain the safe harbor protection of the I-9 form, the employer had to follow these regulations when it received a no-match letter from the SSA or ICE.

A number of organizations brought suit against the Department of Homeland Security (DHS) in San Francisco and got an order staying implementation of the rules.

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In response to some of the concerns of the court, DHS issued a supplemental final rule entitled “Safe Harbor Procedures for Employers Who Receive a No-Match Letter: Clarification; Final Regulatory Flexibility Analysis.”

It provides additional arguments for its decision to remove employers who receive no-match letters from the safe harbor provisions of the Immigration and Nationality Act (INA) unless they perform these additional steps.

Under the INA, it is illegal to hire an alien who is not authorized to be employed in the U.S. Employers are protected from this if they comply with the paperwork requirements of the Form I-9. Simply stated, the Form I-9 requires that the worker fill out name, address, social security number and other information.

In addition, the worker is to supply the employer an original document that provides proof of the person’s identity and proof of the individual’s right to be employed.

The employer is to note the document numbers and return the documents. Both the employer and worker must sign the form and the employer is to keep the form. If the employer does that, then if it turns out the documents were fraudulent and the person is here illegally, the employer has no liability under the law.

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As is the case with everything, especially if lawyers or Congress gets involved, there are loopholes.

In this case, the loopholes are loopholes for the government to remove employers from the safe harbor. The biggest such loophole or exception to the safe harbor is that it does not apply if the employer has knowledge independent of the I-9 that the worker is not authorized to be employed.

If that is the case, following the I-9 is not a defense. There are two kinds of knowledge – actual and constructive.

Actual knowledge is that the employer directly knows the worker is illegal, not thinks or surmises, but knows as a matter of fact.

An example is this: The farmer learns that a court or administrative body has adjudicated the worker is here unlawfully. This can happen in the course of criminal cases against the worker or, in some cases, when the worker has applied for, and been denied, workers’ compensation because of the illegal status.

Constructive knowledge is knowledge that comes indirectly. Having constructive knowledge is the same as actual knowledge. Constructive knowledge that a worker is illegally in the U.S. means the employer cannot hire the worker.

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Finally, knowledge by other owners or members of the management team can in many cases be considered knowledge of the employer even if the person in charge of the business has no personal knowledge.

The new rule will consider “no-match” letters constructive knowledge to the employer that the worker is unauthorized. To avoid that result, the employer must handle such notice in a specific way.

There are two kinds of “no-match” letters. One comes from the SSA and is sent to employers when the information on the annual W-2 form does not match SSA records. It is called an “Employer Correction Request.”

According to the SSA this is only sent to employers when 11 or more W-2s have incorrect match of name and SS numbers.

ICE considers this an indication that the number of unauthorized workers at this employer is high and thus justifies the employer having knowledge that some of the I-9s are false. The other form of no match comes from ICE itself.

After an audit of I-9s at an employer’s office, ICE compares the names and numbers of the documents such as visas and passports with its records. If the names and numbers do not match, ICE sends out a “Notice of Suspect Documents.”

To overcome the presumption that the employer has knowledge of illegal workers and lose the protection of the safe harbor, the new regulation requires employers to go through a specific process within a specific time to maintain the safe harbor.

Otherwise, if after receiving no-match letters to which no response is made, ICE will take the position that the employer knows the worker is not authorized and the exemption under the safe harbor will be lost. But the court could change its mind even though it is continuing the stay for now.

These court rules have the potential of changing at any time, and while producers can benefit from the stay, they cannot depend on it never taking effect. Also, SSA announced it would not send out no-match letters in 2008 for the 2006 W-2s.

But in 2009, no-match letters for 2007 W-2s are still a possibility. As a result, each employer must have a plan in place if it receives a social security “Employer Correction Request” or “Notice of Suspect Documents” no-match letter.

The procedure, as with all employment policies, should be put in writing ahead of time and implementation should follow the procedure. The policy should cover how to handle the letters from receipt until response and how to maintain records of responses and communications with affected workers.

If the employer applies a reasonable policy in response to no-match letters, termination of employees who are unable to satisfy the requirements of the I-9 will not be considered an act of discrimination against a person because of his or her immigration status.

This procedure applies if you as an employer receive notice that the immigration status or employment-authorization documentation presented or referenced by the worker in completing Form I-9 was not assigned to the worker according to DHS records. Both of these are “No-Match Letters.”

Here is a sample procedure. As with all things, having your own personal legal adviser review this and its implementation is important.

Make and identify a folder to hold all correspondence documents regarding no-match letters. Keep in it all correspondence between you and SSA, workers and DHS regarding any and all mismatches. Also, make notes of all phone calls, conversations, e-mails and other communications with anyone regarding the no-match letters.

These notes should include no less than the date, approximate time, those present, nature of the conversation and any promises made. Keep the folder in a safe and secure location that is easily accessible.

Establish a notification procedure within the office as to which managers or owners are to be notified of the receipt of any no-match letters. Make sure that any such letter is made available immediately to them.

In addition, make sure the letter is immediately copied to your accountant, bookkeeper, attorney or other professional members of your team. In a calendar or other method you rely upon for appointments, note the date the letter was received and 90 days later as deadline to re-verify employment.

Promptly compare the worker’s SSN and name with a photocopy of the Social Security card in the employee file, if you keep such a copy, with the numbers in the W-4 form submitted to make sure that the no-match letter was not the result of a typographical, transcription or other similar clerical error.

If the W-4 is in error, then:
a. Correct the W-4 form and file it with the IRS according to instructions.
b. Verify with either the DHS or SSA that the corrections match agency records.
c. Separately, report the correction to the SSA at the address provided for response in the no-match letter.
d. Maintain copies of all correspondence when you are submitting and verifying corrected information.

If the number or name on the W-4 form agrees with the Social Security number provided by the worker:
a. Notify the worker immediately, both orally (note it in the file) and in writing that the SSA has notified you that the number he or she reported does not match the SSA records.
b. Have the worker verify that the information held by the employer is correct. If the information held by the employer is not correct according to the worker records, correct the information as stated above.
c. If the worker cannot show that your information is incorrect, then notify the worker that it is his or her responsibility to resolve the dispute with the SSA, not yours.
d. Tell the worker to report immediately to you any response by the SSA.
e. If corrected information is received, then change your records.
f. Remember: Keep a copy of the letter to the worker, and write notes regarding any communication for your records.

If the discrepancy is still not resolved, then the employer should verify the worker’s identity and work authorization as if it is a new hire. That means filling out a new I-9 Employment Eligibility Verification Form like when you hire in the first place.

There are some differences, however.
a. It must be completed within 93 days of receipt of the no-match letter
b. No document containing the SSN or Alien Number subject to the discrepancy can be used nor a receipt for an application for a replacement of such a document. However, documents sent to SSA such as birth certificates can be used.
c. No document without a photograph can be used to establish identity.

Continue to deduct and pay taxes as you would otherwise do. A no-match letter is not notice to stop payroll taxes. If the worker returns with information that could indicate a lack of work authorization (i.e., a new name and/or SSN), then you may need to follow up further to avoid having “constructive knowledge” of the lack of authorization.

If a person comes up with an entirely new identity, then the employer must demand an explanation. If the explanation is reasonable, then the employer can accept it and should re-verify the I-9.

One such explanation is that the person has gone by one name his or her life, but it does not match the birth certificate of SS records because they did not formally have their name changed. If the worker does not return with corrected information, determine what steps he or she has taken to correct the problem (like proof of a request for a new social security card) and re-verify their authorization to work in the U.S. If no efforts have been made, then termination is required.

Do not accept any document with the challenged SSN until the mismatch is resolved with the SSA. Inform the SSA in writing of all the steps you took to resolve the SSN conflict for each affected worker, including those you no longer employ. Put a copy of this letter in the folder.

Now here are some “don’ts.”
• Never assume a worker with a reported mismatch is an undocumented alien.
• Never fire a worker solely because you received a no-match letter.
• Never ignore information and commonsense when reviewing new information in response to mismatches.
• Do not play favorites and treat one worker one way and another a different way in how you respond to no-match letters.

Immigration law prohibits employers from continuing to employ workers that they know to be undocumented. The worker must be terminated immediately if he or she fails to timely respond to a no-match by filing either proper information or filling out a new I-9.

To do otherwise, places the employer at risk of being in violation of the law with the accompanying fines or even jail. PD

Ben Yale
Attorney at Yale Law Office

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