October 2007 Franchising World
Firing workers required under immigration “no-match” rule.
By David French
The International Franchise Association has joined a group of national trade associations to intervene in an AFL-CIO lawsuit in the Northern District of California over the new Department of Homeland Security “No-Match” Rule. On Aug. 31, a federal judge blocked the agency from mailing Social Security “no-match letters” to an estimated 140,000 employers until following an Oct. 1 preliminary hearing. The letters were the first wave of notices for businesses that workers failing to resolve discrepancies in their records within 90 days must be fired, or else employers face potential fines and even criminal liability for hiring illegal immigrants.
The lawsuit challenges the federal government under the Administrative Procedures Act and the Regulatory Flexibility Act. These laws generally require federal agencies to contemplate the impact of regulation on small businesses before new rules can take effect and prove that there was no less burdensome alternative available. This review did not take place in the development of the “No-Match” Rule.
A “no-match” occurs whenever there is a discrepancy between an employee’s name and Social Security Number in the SSA database. The SSA has acknowledged that its database contains more than 17 million errors, and up to 10 percent of the U.S. workforce might be burdened with a “no-match” letter. Many are due to benign causes such as change of name following marriage or clerical error. Failure by an employer to follow these procedures outlined by the DHS when a Social Security “no-match” letter is received could result in the assumption by DHS that the employer had “constructive knowledge” that an employee was an undocumented worker.
The IFA is concerned that the new Department of Homeland Security regulation on Social Security “no-match” letters will impose a significant cost on employers, particularly small businesses, through training costs, lost productivity and reductions in the available workforce. DHS did not adequately or realistically consider the impact on small business which is required by the Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act.
Under the regulation, employers will be required to act promptly upon receipt of a no-match notice. While the rules provide for a safe harbor procedure for employers, there is no doubt that the new requirements will greatly expand legal uncertainty for employers. Employers will also need to shoulder the cost of compliance for training and new paperwork obligations related to inquiries from federal agencies. Employers additionally will also suffer productivity losses because employees will be required to take time off to try to rectify the no-match discrepancy.
IFA has been critical of the new rule, which also contains other notable immigration reforms, including a proposed increase in civil fines by approximately 25 percent, the expansion of criminal investigations and the broadening of the E-Verify program to all federal government contractors.
“The immigration problems this nation faces today cannot be solved simply by changing the rules that employers have to follow,” IFA Pres. Matthew Shay said. “What we need is comprehensive reform. Without it, the franchising industry will suffer as will the entire U.S. economy.”
IFA and a number of national business and trade associations have joined efforts for comprehensive reform through the Essential Worker Immigration Coalition, a broad-based group concerned with the shortage of both semi-skilled and unskilled “essential worker” labor. It supports policies that facilitate the employment of essential workers by U.S. companies that are unable to find American workers.
David French is vice president of government relations of the International Franchise Association. He can be reached at 202-662-0768 or dfrench@franchise.org. The complete regulation is available for viewing on the IFA’s Web site, www.franchise.org.