Beware Of "No-match" Letters And Criminal Liability

LAURA A. BALSON

Partner

What Is The Social Security Administration (SSA) Trying To Say?
Beware Of "No-match" Letters And Criminal Liability

The Social Security Administration (SSA) recently started mailing “no-match letters” which inform employers that the social security number and name of one or more of their employees do not match the SSA’s records. While the letters do not look threatening, no-match letters have formed the basis for multiple criminal investigations by U.S. Immigration and Customs Enforcement (ICE) and prosecutions on charges of harboring or knowingly hiring unauthorized workers. The SSA stopped sending these letters in 2008 (for tax year 2007) in response to litigation surrounding a proposed Department of Homeland Security (DHS) regulation, “Safe Harbor Procedures for Employers Who Receive a No-Match Letter.” DHS later rescinded the proposed regulation.

The SSA will not send the letters they held for tax years 2007 through 2009, but they are sending no-match letters for tax year 2010.

All employers are required to report wages annually for each employee on Form W-2. In the SSA’s system, a reported wage may fail validation if there is no social security number (SSN) or name, or the SSN or name submitted does not match information in SSA records. There are a number of explanations, including typographical errors, unreported name changes, inaccurate or incomplete employer records, or misuse of an SSN. When the wage can’t be validated, SSA cannot post the earnings to a worker’s record.

SSA attempts to resolve this problem by sending letters to employees, employers, and self-employed workers to inform them that a reported name or SSN does not match SSA’s records. The SSA refers to these as no-match letters and their purpose is to obtain corrected information to help SSA identify the worker to whom the earnings belong so that it can post the earnings to the correct worker.

How an employer responds to the letter can subject the company, its owners, and its human resources executives to severe civil and criminal liability. Upon receipt of a no-match letter, an employer should check their records to determine if its information matches the records submitted; ask the employee to check his or her records to ensure that the name and social security number were accurately reported to the employer; and instruct the employee to contact a local SSA office, if appropriate. It may take days, weeks or even a couple of months to get a new social security card that reflects accurate information, so employers shouldn’t take adverse action against the employee without obtaining the guidance of a knowledgeable lawyer.

Many employers wonder whether enrolling in the federal government’s E-Verify program eliminates this problem. The E-Verify system has been through a lot of controversy over the past several years. Currently, about 11% of all private employers across the country use E-Verify. Some states, including Arizona, Mississippi and South Carolina actually require employers to use it. All employers with significant federal government contracts, no matter what state they are in, are also required to use it.

Illinois enacted a law in 2007 that would have prohibited private employers from using E-Verify due to its inaccuracy or “false negatives”. The federal government challenged the Illinois law in court and eventually won. Thus, the provisions of the Illinois law prohibiting employers from using E-Verify was struck down, but the rest of the statute survived. An amended version of the law went into effect on January 1, 2010. Once an employer registers for E-Verify, they must sign a Memorandum of Understanding legally obligating them to use the system for all new employees, and to use it in a manner that is nondiscriminatory and protective of employee privacy. The Illinois law imposes additional obligations in the areas of employee nondiscrimination and privacy, including ensuring that all employees with access to the company’s E-Verify account have completed mandatory online E-Verify tutorials and posting notice regarding its enrollment in E-Verify and certain non-discrimination procedures.

There are pros and cons to signing up for E-Verify. On the pro side, the accuracy of the system has improved, and the most recent statistics show that roughly 0.3% of those receiving a negative result were later confirmed as authorized to work in the U.S. Another pro is that by following the specific steps in the Memorandum of Understanding when an employee receives a negative result, the company is protected from liability. It is also rumored that the federal government plans to eventually require all private employers to use E-Verify, so some employers are signing up now before there are any penalties for failing to use it.

On the con side, you still need to fill out the I-9 forms, so it doesn’t save any work at the time of hire, and in fact it creates an additional step. Another negative is that the process for resolving a negative result is very similar to what you have to do after receiving a no-match letter. Also, an employer may only use E-Verify for new hires, so it would not help resolve any issues with current employees.