Resumption of Social Security No Match Letters

Tuesday, April 19th, 2011

On April 6, 2011, the Social Security Administration’s Commissioner directed the agency to resume sending employer “no-match letters.”  It is imperative that employers understand – how an employer responds to the letter can subject the company, its owners, and its human resources executives to severe civil and criminal liability.

The new version of the Social Security Administration (SSA) no-match letter may appear deceptively benign.  It omits the old ICE insert that cautioned the employer that failure to act upon receipt of the SSA no-match letter could be construed as constructive knowledge of knowingly continuing to employ unauthorized workers, based on the totality of the circumstances.  Also, the letter advises that there may be many reasons for the no-match letter, such as typographical errors, name changes, and incomplete information. It also states that, “[t]he letter does not imply that you or your employee intentionally provided incorrect information about the employee’s name or SSN. It is not a basis, in and of itself, for you to take any adverse action against the employee, such as laying off, suspending, firing, or discriminating against the individual.”

However, do not be unimpressed by the absence of the ICE insert letter or any language that may dissuade you from taking affirmative action.  Historically, the letter has been a prelude to criminal sanctions in numerous instances.   Indeed, the Social Security Administration (SSA) no-match letters have formed the basis for multiple criminal investigations by ICE and prosecutions on charges of harboring or knowingly hiring unauthorized aliens including, “United States v. Gonzales, 2008 WL 160636 (N.D. Miss. No. 4:07-CR- 140, Jan. 18, 2008) (final order of forfeiture of $310,511.75, as to Gonzalez and Tarrasco Steel Company, Inc.); United States v. Insolia, No. 1:07-CR-10251 (D. Mass), (Insolia plead guilty to harboring and submitting false social security numbers; to serve 13 to 18 months, fined $30,000; MBI plead guilty to 18 counts of knowingly hiring unauthorized workers between early 2004 and late 2006; harboring and shielding from 2004-2007; social security and mail fraud from 2005-2007; fine approximately $1,500,000, including $476,000 in restitution to employees; managers also plead guilty); United States v. Rice, No. 1:07-CR-109 (N.D.N.Y) (IFCO Systems reached corporate settlement of $2,600,000 in back pay for overtime violations and $18,100,000 in civil forfeitures. Nine IFCO managers previously plead guilty (including Rice) (indictment of seven managers for illegal immigration and employment-related practices filed).” 74 Fed. Reg. 159 at 41804.  

Now more than ever, the SSA no-match letter is a wolf in sheep’s clothing.  Indeed, the number of I-9 sanctions, criminal prosecutions, and discrimination investigations under the Obama administration are greater than ever thereby increasing the liklihood that adverse consequences will flow from the SSA no-match letter.

Unfortunately, an aggressive response will not necessarily suffice to get the employer out of the hot seat.  In fact, such action could make things worse for the employer.  You will be between a rock and a hard place.  

On the one hand, the letter alone is not evidence that the employee is using fraudulent documents or is unauthorized for employment.  It is unlawful for you to take any adverse action against the employee, such as laying off, suspending, firing, or discriminating against the individual based on this letter alone. 

On the other hand, the employer should not ignore the letter; history tells us that this is not advisable!  ICE I-9 auditors and Office of Special Counsel investigators will demand the surrender of these letter(s) in any investigative effort when one is initiated.  Clearly, an employer’s conduct, or lack thereof, upon receipt of a no-match letter can lead to criminal investigation.  Since a no-match letter can become the basis for a finding of constructive knowledge thereby imposing serious civil and criminal sanctions, certain actions are required.  The only question then is what actions to take and not take.

Examples of conduct that have triggered criminal prosecutions and/or civil sanctions include, but are not limited to, terminating a worker based solely on the receipt of the no-match letter, continuing to employ the worker without any action, and taking the wrong action by attempting to re-verify work authorization or by requesting completion of a new I-9 form with other documentation.  The right approach will depend upon the actual facts of the situation and the totality of the circumstances.  For example, although the following may be advisable, it is not always enough: employer should check their records to determine if their information matches the records submitted; ask the employee to check their records to ensure that they have accurately reported their name and social security number to the employer; and instruct the employee to contact a local SSA office when appropriate.  It may take days, weeks or even a couple of months to get a new social security card that reflects accurate information; so don’t take adverse action against the employee without obtaining the guidance of a knowledgeable immigration lawyer.  Even if the employee self-terminates, there may be liability issues; thus the employer should seek the guidance of a knowledgeable attorney at the very outset — in every situation.

Consult with a knowledgeable immigration attorney to navigate the fine line between unlawful termination or discrimination on the one hand and a finding of knowingly employing an unauthorized worker on the other. 

To avoid running afoul of the law, a policy that is executed systematically and consistently among all workers is essential.  By definition, this cannot be done effectively on an ad hoc basis.  Therefore, although the receipt of a new DECOR employer no-match letter should prompt the employer to seek out a  knowledgeable immigration attorney – even before an employer receives such a letter – the employer should take it upon themselves to begin working with counsel now to develop strategies to effectively balance their obligations to follow-up while treating their employees in a manner that does not run afoul of the anti-discrimination laws or constructive knowledge issues. 

The Commissioner has directed the SSA to resume sending employer decentralized correspondence (DECOR) and to discontinue “Code V” educational correspondence (EDCOR).  The SSA stopped sending both types of employer correspondence in 2008 and 2007 (tax years 2007 and 2006), respectively, in response to  litigation surrounding a proposed Department of Homeland Security (DHS) regulation, “Safe Harbor Procedures for Employers Who Receive a No-Match Letter.”  Secretary Napolitano of the Department of Homeland Security (DHS) later rescinded the proposed regulation.   Now, the SSA plans to resume sending employer no-match letters in April 2011, for tax year 2010.  They will not send the letters they held for tax years 2007 through 2009.

By way of background, Title II of the Social Security Act requires the Social Security Administration (SSA) to maintain earnings records for covered workers. Employers are required to report wages annually for each employee on Form W-2 (Wage and Tax Statement).  During the Annual Wage Reporting Process, a wage report may fail validation because it does not have a social security number (SSN) or name, or the SSN or name submitted does not match information on SSA records. For a number of reasons, reported earnings information may not agree with SSA records. These include typographical errors, unreported name changes, inaccurate or incomplete employer records, or misuse of an SSN. In these cases, SSA places the earnings information in the Earnings Suspense File (ESF) instead of posting the earnings to a worker’s record.

SSA attempts to resolve items placed in the ESF by sending no-match letters to employees, employers, and self-employed workers to inform them that a reported name or SSN does not match SSA’s records.  The Social Security Administration refers to these as “no-match letters” or decentralized correspondence (DECOR) notices, 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 correctly identified worker’s earnings record. SSA sends DECOR notices to individual employees (SSA-L3365-C1 (Request to Employee for Social Security Information)) and self-employed workers (Form SSA-L2765-C1 (Request for Self-Employment Information)) to inform them of name and SSN no-matches.  The SSA derives the address of the employee from the Form W-2 and the self-employed worker’s address from the data provided by the IRS.

If an employee’s address is available and the address does not exist in the United States Postal Service database, or if an employee’s address is unavailable, the SSA sends a notice (SSA- L4002-C1 (Request for Employer Information)) to the employer. This notice requests information about the earnings reported by the employer for the employee and placed in the ESF.

The SSA did not send employer no-match/DECOR notices for tax years 2007 through 2009 because of litigation surrounding a proposed Department of Homeland Security (DHS) regulation involving a related correspondence process. DHS later rescinded the proposed regulation and now SSA is choosing to resume sending employer no-match/DECOR notices in April 2011 (for tax year 2010).

On April 6, 2011, the Social Security Administration’s Commissioner directed the agency to resume sending employer “no-match letters.”  It is imperative that employers understand – how an employer responds to the letter can subject the company, its owners, and its human resources executives to severe civil and criminal liability.

The new version of the Social Security Administration (SSA) no-match letter may appear deceptively benign.  It omits the old ICE insert that cautioned the employer that failure to act upon receipt of the SSA no-match letter could be construed as constructive knowledge of knowingly continuing to employ unauthorized workers, based on the totality of the circumstances.  Also, the letter advises that there may be many reasons for the no-match letter, such as typographical errors, name changes, and incomplete information. It also states that, “[t]he letter does not imply that you or your employee intentionally provided incorrect information about the employee’s name or SSN. It is not a basis, in and of itself, for you to take any adverse action against the employee, such as laying off, suspending, firing, or discriminating against the individual.”

However, do not be unimpressed by the absence of the ICE insert letter or any language that may dissuade you from taking affirmative action.  Historically, the letter has been a prelude to criminal sanctions in numerous instances.   Indeed, the Social Security Administration (SSA) no-match letters have formed the basis for multiple criminal investigations by ICE and prosecutions on charges of harboring or knowingly hiring unauthorized aliens including, “United States v. Gonzales, 2008 WL 160636 (N.D. Miss. No. 4:07-CR- 140, Jan. 18, 2008) (final order of forfeiture of $310,511.75, as to Gonzalez and Tarrasco Steel Company, Inc.); United States v. Insolia, No. 1:07-CR-10251 (D. Mass), (Insolia plead guilty to harboring and submitting false social security numbers; to serve 13 to 18 months, fined $30,000; MBI plead guilty to 18 counts of knowingly hiring unauthorized workers between early 2004 and late 2006; harboring and shielding from 2004-2007; social security and mail fraud from 2005-2007; fine approximately $1,500,000, including $476,000 in restitution to employees; managers also plead guilty); United States v. Rice, No. 1:07-CR-109 (N.D.N.Y) (IFCO Systems reached corporate settlement of $2,600,000 in back pay for overtime violations and $18,100,000 in civil forfeitures. Nine IFCO managers previously plead guilty (including Rice) (indictment of seven managers for illegal immigration and employment-related practices filed).” 74 Fed. Reg. 159 at 41804.  

Now more than ever, the SSA no-match letter is a wolf in sheep’s clothing.  Indeed, the number of I-9 sanctions, criminal prosecutions, and discrimination investigations under the Obama administration are greater than ever thereby increasing the liklihood that adverse consequences will flow from the SSA no-match letter.

Unfortunately, an aggressive response will not necessarily suffice to get the employer out of the hot seat.  In fact, such action could make things worse for the employer.  You will be between a rock and a hard place.  

On the one hand, the letter alone is not evidence that the employee is using fraudulent documents or is unauthorized for employment.  It is unlawful for you to take any adverse action against the employee, such as laying off, suspending, firing, or discriminating against the individual based on this letter alone. 

On the other hand, the employer should not ignore the letter; history tells us that this is not advisable!  ICE I-9 auditors and Office of Special Counsel investigators will demand the surrender of these letter(s) in any investigative effort when one is initiated.  Clearly, an employer’s conduct, or lack thereof, upon receipt of a no-match letter can lead to criminal investigation.  Since a no-match letter can become the basis for a finding of constructive knowledge thereby imposing serious civil and criminal sanctions, certain actions are required.  The only question then is what actions to take and not take.

Examples of conduct that have triggered criminal prosecutions and or civil sanctions include, but are not limited to, terminating a worker based solely on the receipt of the no-match letter, continuing to employ the worker without any action, and taking the wrong action by attempting to re-verify work authorization or by requesting completion of a new I-9 form with other documentation.  The right approach will depend upon the actual facts of the situation and the totality of the circumstances.  For example, although the following may be advisable, it is not always enough: employer should check their records to determine if their information matches the records submitted; ask the employee to check their records to ensure that they have accurately reported their name and social security number to the employer; and instruct the employee to contact a local SSA office when appropriate.  It may take days, weeks or even a couple of months to get a new social security card that reflects accurate information; so don’t take adverse action against the employee without obtaining the guidance of a knowledgeable immigration lawyer.  Even if the employee self-terminates, there may be liability issues; thus the employer should seek the guidance of a knowledgeable attorney at the very outset — in every situation.

Consult with a knowledgeable immigration attorney to navigate the fine line between unlawful termination or discrimination on the one hand and a finding of knowingly employing an unauthorized worker on the other. 

To avoid running afoul of the law, a policy that is executed systematically and consistently among all workers is essential.  By definition, this cannot be done effectively on an ad hoc basis.  Therefore, although the receipt of a new DECOR employer no-match letter should prompt the employer to seek out a  knowledgeable immigration attorney – even before an employer receives such a letter – the employer should take it upon themselves to begin working with counsel now to develop strategies to effectively balance their obligations to follow-up while treating their employees in a manner that does not run afoul of the anti-discrimination laws or constructive knowledge issues. 

The Commissioner has directed the SSA to resume sending employer decentralized correspondence (DECOR) and to discontinue “Code V” educational correspondence (EDCOR).  The SSA stopped sending both types of employer correspondence in 2008 and 2007 (tax years 2007 and 2006), respectively, in response to  litigation surrounding a proposed Department of Homeland Security (DHS) regulation, “Safe Harbor Procedures for Employers Who Receive a No-Match Letter.”  Secretary Napolitano of the Department of Homeland Security (DHS) later rescinded the proposed regulation.   Now, the SSA plans to resume sending employer no-match letters in April 2011, for tax year 2010.  They will not send the letters they held for tax years 2007 through 2009.

By way of background, Title II of the Social Security Act requires the Social Security Administration (SSA) to maintain earnings records for covered workers. Employers are required to report wages annually for each employee on Form W-2 (Wage and Tax Statement).  During the Annual Wage Reporting Process, a wage report may fail validation because it does not have a social security number (SSN) or name, or the SSN or name submitted does not match information on SSA records. For a number of reasons, reported earnings information may not agree with SSA records. These include typographical errors, unreported name changes, inaccurate or incomplete employer records, or misuse of an SSN. In these cases, SSA places the earnings information in the Earnings Suspense File (ESF) instead of posting the earnings to a worker’s record.

SSA attempts to resolve items placed in the ESF by sending no-match letters to employees, employers, and self-employed workers to inform them that a reported name or SSN does not match SSA’s records.  The Social Security Administration refers to these as “no-match letters” or decentralized correspondence (DECOR) notices, 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 correctly identified worker’s earnings record. SSA sends DECOR notices to individual employees (SSA-L3365-C1 (Request to Employee for Social Security Information)) and self-employed workers (Form SSA-L2765-C1 (Request for Self-Employment Information)) to inform them of name and SSN no-matches.  The SSA derives the address of the employee from the Form W-2 and the self-employed worker’s address from the data provided by the IRS.

If an employee’s address is available and the address does not exist in the United States Postal Service database, or if an employee’s address is unavailable, the SSA sends a notice (SSA- L4002-C1 (Request for Employer Information)) to the employer. This notice requests information about the earnings reported by the employer for the employee and placed in the ESF.

The SSA did not send employer no-match/DECOR notices for tax years 2007 through 2009 because of litigation surrounding a proposed Department of Homeland Security (DHS) regulation involving a related correspondence process. DHS later rescinded the proposed regulation and now SSA is choosing to resume sending employer no-match/DECOR notices in April 2011 (for tax year 2010).

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