National Clothesline

Last year, I wrote about proposed regulations for dealing with no-match letters sent to employers by the IRS or Social Security Administration ( “SSA”).

No-match letters are sent when the social security number used by the employer for withholding does not match the name of the employee. While a no-match letter can result from typographical errors, it frequently means that the employee is an illegal alien not authorized to work in the United States.

In 2006, the SSA sent more than 138,000 no-match letters to employers. In the past, most of these no-match letters were sent directly to the employees, and their employers were not notified.

In most cases, no follow up to these letters occurred. With the introduction of new rules by the Department of Homeland Security, however, these no-match letters can place business owners in a difficult legal position.

Beginning in September 2007, the new rules require SSA to notify employers who submit more than ten non-matching Social Security numbers on their W-2 forms.

From the point the employer receives the no-match letter, it must adhere to strict timelines to avoid substantial fines and possibly criminal prosecution. The new rules outline a step-by-step process employers are required to go through in order to avoid penalties.

First, employers must verify that the mismatch was not the result of a record-keeping or clerical error on the employer ’s part. The employer has 30 days to complete this step. If an error is found, the no-match letter contains instructions on how to correct the clerical error. If no clerical error is found, the employer must go on to the second step.

The second step is to ask the employee to confirm the accuracy of the employer’s records. It is possible that the error was due to a handwriting mistake or other simple mistake amounting to a clerical error on the part of the employee. If no such error exists, the employer must ask the employee to resolve the issue directly with SSA.

The sooner the employer gets to this step the better, because the employee may have difficulty scheduling an appointment with SSA, or the error may lie with the SSA ’s own records, which could take time to correct.

The employer has 90 days from the date it received the no-match letter to resolve the issue. If, on day 90, the no-match issue is not resolved, the employer is required to complete a new I-9 form within three days, just as if the employee in question were newly hired. This new I-9 form has to be completed without the use of the questionable Social Security number, and the employee must present a document that contains a photograph to establish identity. In other words, in completing the I-9, the List C document cannot be a Social Security card, and either the List B or C document must contain a photograph.

If the employer is able to resolve the no-match issue, the employer must then follow all the instructions contained in the SSA no-match letter. DHS also requires that employers verify that the error has been corrected by using the Social Security Number Verification Service (SSNVS) administered by the SSA, retaining a record of the date and time of verification. This system may be accessed through www.socialsecurity.gov/employer/ssnv.htm.

If the employer is not able to resolve the issue or properly complete a new I-9, the employer is required to terminate the employee or risk criminal and civil charges resulting in severe fines and possible imprisonment.

It is important to note that just because an employer does not receive a no-match letter does not mean the employer is safe from civil and criminal action. The no-match letters are only going out to employers who meet the ten no-match letter threshold. Employers are still responsible for verifying the work authorization of employees. The best way to do this is to be familiar with the proper procedures for completing the I-9 form and to conduct an annual internal audit.

Employers also should be cautious in how they react to these no-match letters. Employees should be presumed to be legal absent clear evidence to the contrary until all the steps listed have been exhausted. If an employer acts contrary to this presumption, it risks being charged with discrimination both by the employee and by the government, which can also result in severe fines and civil liability.

To manage this new system, employers are required to establish clear policies and procedures. They will need to be able to act immediately upon receipt of the no-match letter and will need to establish some type of tracking system to be able to act within the 30-, 90-, and three-day deadlines established by the rules.

Finally, I want to thank Ken Gauvey for contributing most of the information contained in this month ’s article. Ken, who concentrates in the area of immigration law, was hired by my firm because of the increased role immigration issues play in employment law. For more information on Ken, consult our website.