Social security no-match letters: A trap for the unwary employer
September, 2007
The U.S. Department of Homeland Security (DHS) recently announced significant new regulations designed to deter employers from employing illegal aliens. Under the new regulations, which go into effect September 14, 2007, employers that are notified of a mismatch in an employee's name and Social Security number and that are unable to resolve the discrepancy within 90 days will face a choice: Terminate the employee or risk civil and criminal penalties.
No-Match Letters
Employers annually send their employees' names and Social Security numbers to the Social Security Administration (SSA) on W-2 forms. Discrepancies in the Social Security records can occur for several different reasons, including, but not limited to, clerical mistakes, name changes, or the use of fake Social Security cards. When a discrepancy arises between the information submitted and the government's records, the SSA will send a letter to employers informing them of the mismatch. The letter is commonly referred to as a "No-Match" letter.
Since the No-Match letters also stated that the SSA was not making a determination of the employees' immigration status, the conventional wisdom for employers was to refrain from taking any adverse action against the identified employees. As a result, employers often ignored the No-Match letters year after year. Additionally, many employers were unwilling to undermine their business by terminating a sizeable percentage of their workforce or an excellent employee.
Constructive Knowledge & Liability
Immigration laws prohibit employers from hiring or continuing to employ a worker "knowing" that he or she is unauthorized to work. The term "knowing" includes both actual and constructive knowledge. Under the new regulations, DHS may now specifically use an unresolved No-Match letter as evidence that an employer had "constructive knowledge" of an employee's unauthorized status. Consequently, the regulations clarify the previous confusion employers had regarding the significance of No-Match letters.
Civil penalties for first time offenders can range up to $2,750 per illegal employee. However, employers, including officers and HR managers, need to be aware of the possible harsh criminal penalties that DHS may impose. Depending on the circumstances, criminal penalties can range from a misdemeanor to a felony. For example, Social Security fraud carries up to five years imprisonment and a $250,000 fine. When DHS Secretary Michael Chertoff announced the new regulations at the press conference, he said that they have 742 criminal arrests in worksite enforcements this fiscal year and that they were moving ahead aggressively.
Employer Tips
Fortunately, the regulations provide employers a "safe harbor" from a finding that they had constructive knowledge of an employee's unauthorized work status. To receive this protection, however, employers must follow specific remedial steps within set time periods detailed in the regulations and in the No-Match letter. By carefully complying with the regulations, an employer that decides to terminate an employee because of an unresolved No-Match letter can avoid the risk that DHS will use the letter as evidence of the employer's constructive knowledge.
With the regulations going into effect in September, employers can expect to receive No-Match letters from the SSA in the coming weeks. Unlike previous years, prudent employers will not ignore the No-Match letter this year.
Please contact your Bullivant employment attorney for further information.