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On August 10, 2007, the Department of Homeland Security ("DHS") issued final regulations for employers who receive "no match" letters from the Social Security Administration ("SSA") - letters which indicate that an employee's social security number provided on a W-2 does not match SSA's records. (These "no matches" are estimated to be up to 4% of all new hires.)
While there are many reasons for a mismatch between the W-2 and SSA records (including transcription errors and name changes that are not reported to SSA), DHS has determined that an employer's receipt of a "no match" letter from SSA is evidence that the employer has constructive notice of an employee's lack of employment authorization unless the employer takes reasonable steps to resolve the "no match." Failure to take reasonable steps to resolve the "no match" could result in a determination that an employer knowingly hired an illegal worker, which subjects an employer to civil penalties (up to $10,000 per incident) as well as possible criminal sanctions.
Fortunately, the DHS has created a "safe harbor" procedure for employers who receive a SSA "no match" letter. If this procedure is followed by employers, DHS will deem the employer to have taken reasonable steps to resolve the "no match" letter. The safe harbor procedure is set forth below.
Upon receipt of an SSA "no match" letter, the employer must take the following action:
- Within 30 days of receipt, the employer must review its own records to determine if the discrepancy results from a clerical error. If an error is discovered, the employer must correct the error and notify SSA of the correct information. If no error is discovered, the employer must notify the employee and request that the employee resolve the discrepancy with SSA. The discrepancy must be resolved with SSA within 90 days.
- If the discrepancy is not resolved within 90 days, then the employer must complete a new I-9 form for the employee within an additional 3 days with new proof of employment authorization, but the employee cannot use any document that contains a disputed social security number. If the employee cannot provide proof of employment authorization at this point, the employee must be terminated (otherwise the employer risks liability for knowingly continuing to employ an unauthorized worker).
The employer must document its actions taken under this procedure to prevent any claim that it failed to comply with the safe harbor procedure.
Under the safe harbor procedure, any employee who cannot correct a SSA "no match" letter within the required time frame should be terminated immediately. However, employers should be careful not to terminate an employee solely because the employer receives a "no match" letter from SSA - this could result in a claim of wrongful termination.
If you have any questions about these new regulations, or for more information on how to ensure compliance with the law, please contact Robert Murphy at rmurphy@gordonrees.com or Daniel Berkley at dberkley@gordonrees.com.
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