December 2007 Franchising World  

IFA believes Congress has a mandate and an obligation to address immigration reform at the federal level, in a fair, comprehensive way.

By Jessica Bonanno

Recently, a U.S. District Court blocked the federal government from implementing its new “final rule” requiring increased employer action in response to “no match” letters. In August, the International Franchise Association joined a lawsuit against the federal government to stop the mailing of 140,000 “no match” letters to America’s employers. IFA joined the AFL-CIO, the U.S. Chamber of Commerce and others in the suit against the U.S. Department of Homeland Security after the agency published a new rule that would increase employer burdens and penalties in responding to DHS letters. The federal court issued the preliminary injunction against DHS after conducting a hearing on the lawsuit in October.

DHS Fails to Examine Impact
The lawsuit alleges that DHS exceeded its authority to enforce immigration laws and was misusing a Social Security database in a way that could lead to workplace discrimination against countless law-abiding workers. The Social Security Administration has long emphasized that a “no match” letter “does not imply that the employer or the employee intentionally provided incorrect information. These letters do not make any statement about an employee’s immigration status and are not a basis, in and of themselves, for taking any adverse action against an employee.”

By charging all employers with increased enforcement obligations, lest they risk criminal penalties, the government has a duty to consider the effect of these increased burdens on small employers. DHS failed to adequately or realistically examine the impact on small business as is required by the Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act. The DHS rule harms law abiding small-business owners, such as the many small business-franchises IFA represents.

Office of Advocacy Says DHS “in error”
Even the U.S. Small Business Administration’s Office of Advocacy weighed in on the rule. Sending a letter to the DHS, Advocacy stated that DHS’s Final Rule was “… in error because the rule imposes some thus-far unquantified costs on employers that DHS should have assessed in its Regulatory Flexibility Act analysis. Specifically, the rule requires employers to take certain actions in response to receiving “no match” letters that they were previously not required to take. Those requirements represent costs that should have been quantified by the agency in compliance with the Regulatory Flexibility Act.”

Agreeing that the federal government had not considered the affect of their new rule on small businesses, U.S. District Judge Charles R. Breyer of San Francisco granted a preliminary injunction against the government’s plan to force employers to fire as many as 8.7 million workers with suspect Social Security numbers, beginning this fall. Breyer wrote, “There can be no doubt that the effects of the rule’s implementation will be severe,” resulting in “irreparable harm to innocent workers and employers.” 
Judge Breyer also wrote, “The government’s proposal to disseminate no-match letters affecting more than eight million workers will, under the mandated time line, result in the termination of employment to lawfully employed workers. Moreover the threat of criminal prosecution … reflects a major change in DHS policy.”

“No match” letters are sent from DHS to indicate that an employee’s Social Security number does not match his or her name in the government’s database, and therefore he or she is ineligible for employment. The government’s final rule would require that an employer must fire the employee within 90 days of receiving the letter, if the mismatch cannot be resolved, or else the employer faces increased fines and possible criminal penalties for employing illegal workers.

Presently, if an employer sends 10 or more erroneous W-2 forms to the Social Security Administration within a year, the government sends a “no match” letter listing the employees whose names and numbers are mismatched. The discrepancy can usually be remedied by correcting typographical errors or noting legally-changed names. If the employee is unauthorized to work, the employer must terminate the employee, or risk being subject to penalty should the federal government engage in an enforcement action against the employer.

SSA Database Contains Errors
Every year, the Social Security Administration receives about 250 million W-2 wage reports, of which approximately 4 percent are mismatches. In fact, as previously reported in this magazine, the SSA has acknowledged that its database contains more than 17 million errors, and up to 10 percent of the workforce could be the subject of a “no match” letter. 

DHS may appeal the decision, which will take at least nine months. After the ruling against his agency, DHS Secretary Michael Chertoff voiced frustration, as well as support for an idea that IFA has long held: This decision further demonstrates the need for Congress to approve comprehensive immigration reform. 

IFA and other national business and trade groups have joined together to form the Essential Worker Immigration Coalition, to support comprehensive approaches to immigration reform. For nearly a decade, EWIC has been concerned with the shortage of semi-skilled and skilled “essential worker” labor. The group shares the belief that comprehensively approaching the immigration policies in the United States is the only way to ensure balanced treatment of all stakeholders, including workers and employers.

Without congressionally-enacted comprehensive reform, U.S. employers, particularly America’s small employers, will continue to be subject to federal, state and local governments’ attempts to increase enforcement against undocumented workers. IFA believes Congress has a mandate and an obligation to address immigration reform at the federal level, in a fair, comprehensive way.

Jessica Bonanno is director of government relations of the International Franchise Association. She can be reached at 202-662-0775 or jbonanno@franchise.org.