USDHS Issues New Safe Harbor Rule for Employers
C. Matthew Schulz and Ute Krudewagen
650 856 5528 / 650 856 5577
matthew.schulz@bakernet.com / ute.krudewagen@bakernet.com
Employers who follow the new Department of Homeland Security procedures after receiving a "no match letter" from the Social Security Administration will benefit from a "safe harbor" from liability on the charge of employing a foreign national in the US with knowledge that they are unauthorized for such employment.
Perspective
Readers of past Alerts on this topic will recognize this as another chapter in a long running saga:
The action by the government today is intended to correct those deficiencies and properly issue the final rule. The rule issued today is the rule issued last year, but with a more detailed analysis of the impact of the rule provided in the commentary. Therefore, the guidance we provided in our November 14, 2007, is unchanged. In pertinent part:
Finding Mismatches
U.S. employers file employee earning reports on Form W-2 annually with the Social Security Administration. If the employee name and Social Security number fail to match government records, the agency notifies employers with a "no-match" letter.
The government has sent no-match letters since 1994. This is a common problem, with $255 million in unallocated earnings created by mismatches. A letter may be generated by incorrect information in the government's database, an error by the employer in transmitting the data, an honest mistake by the employee, or the employee submitting false information. A no-match letter also may be generated by an employee who gives a false name or a false Social Security number.
Traditionally, no-match letters expressly stated that receipt of the letter did not make "any statement about an employee's immigration status." The new DHS regulations tie the SSA no-match letters to immigration enforcement. The revised 8 C.F.R. Section 274a.1(l)(1) is one of the central measures in the government's campaign to crack down on employers engaging undocumented workers.
That section makes it unlawful to hire an alien for employment in the US while knowing that the alien is unauthorized for such employment.
The old regulation defined "knowing" to include both actual and constructive knowledge. Constructive knowledge was defined broadly in the old regulation and included situations in which the employer had information that would indicate the alien was not authorized to work. The government could use the old regulation to take the position that receipt of a no-match letter gave an employer constructive knowledge and subjected an employer to penalties if employment did not cease immediately.
The new regulation redefines constructive knowledge expressly to include situations in which the employer fails "to take reasonable steps after receiving information that the employee may be an alien who is not employment authorized." The receipt of a no-match letter is cited in the regulation as an example.
Safe Harbor
The new regulations also create safe harbor protection for employers who receive the no match letter, if the employer follows DHS procedures outlined in the new regulations.
The route that leads an employer to the safe harbor is detailed at Section 274a.1(l). The employer has 30 days to check its records for the source of the mismatch. If the mismatch is not because of an error in the employer's records, then the employer must request that the employee confirm his or her name and Social Security number, and the employer must advise the employee to resolve the discrepancy with the government within 90 days of the date the employer received the no-match letter. If the discrepancy is not resolved within 90 days, the employer must complete a new form I-9. The employer cannot rely on any document that contains a disputed Social Security number or Department of Homeland Security-issued alien registration number listed in the no-match notice.
After the new regulation was published last year, the Social Security Administration revised its no-match letter, attached a Department of Homeland Security letter with information about the new regulation and prepared to send out a mass mailing to 140,000 employers regarding 8 million employees. That process halted with the court injunction. Now that the new regulations have been issued, it seems only a matter of time before employers will start to receive a new mass mailing.
Practical Solutions
Employers should anticipate Immigration and Customs Enforcement actions and conduct semi annual affirmative audits of their I-9 practices. Attorneys can provide training on how to complete the I-9, follow record-retention requirements, conduct independent audits and explain how to respond in the event of an audit. Attorneys can help employers identify errors. Any defects should be corrected promptly. Records of regular audits should be retained as evidence of the employer's good-faith compliance efforts.
Employers also should be aware of Immigration and Customs Enforcement's "best practices." These include implementation of internal I-9 compliance policies, internal trainings on how to complete the I-9 and detect fraudulent use of documents, semi annual I-9 audits by an external auditing firm or trained employee, and enrollment in E-Verify (formerly "Basic Pilot"). A full description is available at www.ice.gov/partners/employers/worksite/besthire.htm.
Finally, employers should consider carefully enrollment in IMAGE, the Immigration and Customs Enforcement Mutual Agreement between Government and Employers program. IMAGE is not for the faint of heart. IMAGE requires participating employers first to submit to an I-9 audit by Immigration and Customs Enforcement, then to verify the Social Security numbers of their employees by using the Social Security number verification system.
Baker & McKenzie provides trainings to employers on how to comply with these rules. The scope of our practice encompasses a wide range of legal disciplines to meet client needs in this area, including immigration, employment and litigation capabilities. We offer affirmative audit services to review existing records and make recommendations on corrective action and best practices. The firm represents employers in Social Security Administration, Department of Labor, and Immigration and Customs Enforcement agency audits and raids, as well as any litigation that may ensue. We help employers and employer organizations shape public policy through the legislative and regulatory process.
In the Quick Links section of the left column, there are links to previous Alerts regarding the Safe Harbor Rule and No Match letters, as well as the government press release and the text of the new regulation and comments published in the Federal Register today.