An employer’s response after receiving a no-match letter can make the difference between no penalty and significant legal liability. Fortunately, there is some guidance for employers.

The recent raids on the Swift & Co. processing plants in six states which resulted in the arrests of almost 1,300 suspected illegal aliens who had either purchased or stolen the identities and social security numbers they used to obtain employment should have set off warning bells for U.S. employers who hire unskilled and semi-skilled labor. Companies that knowingly hire workers who are not authorized to work in the United States can face civil and criminal penalties. The U.S. Department of Justice recently indicted three executives of Rosenbaum-Cunningham International Inc. (RCI) with harboring illegal aliens, tax fraud and evasion of over $18 million in federal employment taxes.

Employers are commonly notified of potential problems with the employment eligibility of their employees through “no-match” letters from the Social Security Administration (SSA) and/or the Department of Homeland Security (DHS). The SSA sends these letters to employers when the names submitted in connection with the payment of employment taxes do not match the social security numbers assigned them by the SSA. An employer’s response after receiving a no-match letter can make the difference between no penalty and significant legal liability. Fortunately, there is some guidance for employers.

Immigration Control and Enforcement (ICE) of the U.S. Department of Homeland Security has proposed regulations which outline an employer’s obligation in response to a no-match letter from the Social Security Administration or from the DHS. The proposed regulations also set forth “safe harbor” procedures to be followed by employers to avoid liability. The ICE proposal specifies the steps an employer must take that will be considered by DHS to be a reasonable response to a no-match letter and that will foreclose a DHS allegation under immigration laws that an employer has “constructive knowledge” that an employee lacks work authorization. Constructive knowledge that an employee is illegal will be imputed to an employer if a reasonable person would infer it from the facts of a given situation. Such knowledge has been found where (1) the employee’s I-9 Employment Verification Form was not completed properly; (2) the employer became aware that the employee is not eligible to work in the United States; and (3) the employer recklessly disregards the consequences of allowing another entity to bring an illegal worker into the employer’s company. Federal laws and regulations do not require federal agencies to prove the employer has actual knowledge of possible violations.

The proposed rule provides two situations where an employer has “constructive knowledge,” which include (1) written notice from SSA that the combination of name and SSN submitted for an employee does not match SSA records; and (2) written notice from DHS that documentation presented by an employee in a completed Form I-9 is invalid. Under the proposed rule, an employer would have only 14 days from the receipt of the letter to begin to take certain steps to attempt to resolve the discrepancy. First, the employer must determine if the discrepancy resulted from a clerical or data-entry error in its own records, or was committed in its communications to the SSA or DHS. If so, the employer should correct the error and verify resolution with the agency that sent the letter. Clearly this would be a best-case scenario for most employers. Unfortunately, most of these cases are not resolved so simply.

If this step does not resolve the discrepancy, the employer is required to confirm its records with the employee and make any necessary corrections to its records. Following this, the employer must verify that the discrepancy has been resolved with the relevant federal agency. However, if the employee states that the original information is correct, the employer must ask the employee to go to the local SSA or DHS office and resolve the matter in person. The employer should require the employee to provide written verification from the SSA of DHS that he or she has, in fact, resolved the issue and is eligible to work in the United States. At this point, the employer must then confirm this with the SSA or DHS. The discrepancy will only be considered resolved if the employer takes this final step and verifies that the employee’s name has a match in the SSA’s or DHS’s records.

The number assigned to the employee’s name (1) must be valid for work; or (2) is valid for work with DHS authorization; or (3) DHS records indicate that the immigration status document or employment authorization document provided by the employee was assigned to the same employee.

Employers must be aware there are strict timelines that must be met in taking these steps. If the discrepancy is not resolved within 60 days of receiving the no-match letter, the employer must complete a new Form I-9 (Employment Verification Form) and re-verify that the employee is eligible to work in the United States. The re-verification must be completed within 63 days of receipt of the no-match letter (i.e., three days beyond the 60 allowed to resolve the discrepancy). In completing the new Form I-9, the employer may not use a document containing the social security number or alien number that is the subject of the no-match letter. In addition, no receipt for an application for a replacement of such document may be used to establish employment authorization or identity. Further, no document without a photograph may be used to establish identify or employment authorization when completing the new I-9.

If, after following these procedures, the discrepancies remain, the employer must terminate the employee or risk a finding of constructive knowledge that the employee did not have work authorization. The fines and other penalties for hiring and retaining illegal aliens can be staggering and liability can extend beyond a company’s employees to its subcontractors. In 2005, Wal-Mart was fined $11 million for knowingly allowing its cleaning contractors to hire and employ illegal workers (there were no criminal charges filed against it). In that case there was no finding Wal-Mart itself had employed any illegal aliens. In addition, Wal-Mart was required to create an internal program to ensure future compliance with U.S. immigration laws by its contractors.

Civil penalties for employing illegal aliens range from $250 to $2,000 per illegal employee for a first offense; $2,000 to $5,000 per alien for a second offense and $3,000 to $10,000 per alien for each subsequent offense.

In addition to these civil penalties, the federal government has been stepping up its criminal indictments in these situations. Charges can range from simply employing illegal aliens to harboring them to smuggling them. A smuggling conviction can result in up to a life sentence (in addition to criminal fines) if any person dies as a result. Any person who, during any 12-month period, knowingly hires 10 or more individuals with actual knowledge that they are illegal aliens could face imprisonment of up to five years. The Rosenbaum-Cunningham indictments are a clear sign the US government is no longer satisfied with going after illegal employees; it has targeted the employers of those workers.

In this current environment, employers must be prepared to quickly address any indication their employees might not be authorized to work in the United States - or be prepared for serious consequences.