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November 2007 — Vol. 85, No. 9
Court temporarily bans new
‘no match’ rule
A federal court in October issued a preliminary injunction barring the Department of Homeland Security (DHS) from implementing its new “no match” rule until a lawsuit concerning the rule is resolved.
The rule would have subjected employers to criminal prosecution and civil fines if they did not take certain steps to reconcile mismatched employee identification information on Social Security (SSA) records and IRS tax records within 90 days of receiving a no-match letter from the SSA. Employers who couldn’t verify the employees’ identities or work authorization within the 90 days might have had to fire the employees in question, even if they were legal workers.
According to the court, the rule would result in irreparable harm to innocent workers and employers.
The case was brought against DHS and the Social Security Administration by the American Civil Liberties Union, the AFL-CIO and several San Francisco labor organizations. They were later joined by the U.S. Chamber of Commerce, the National Federation of Independent Business (NFIB) Legal Foundation and other business associations.
The final decision came following two temporary bans on the DHS proposal, which was to have gone into effect Sept. 14.
The plaintiffs argued that the impact on employers in complying with the new rule — in terms of hiring and training staff to correct discrepancies within the allotted time frame, and firing workers whose discrepancies were not resolved in time — would be substantial and irreparable. They also pointed out that numerous errors in the SSA database could result in many legal workers, including American citizens, being fired unjustly.
Besides agreeing with those arguments, the court said that the new rule’s threat of criminal prosecution for employers who did not comply was a change in DHS policy, and that the DHS did not adopt this change in accordance with the requirements of the Regulatory Flexibility Act. Under that act, government agencies must analyze the impact of proposed regulations on small entities. If the impact on a “substantial number” of small entities would be “significant,” the agency has to find less burdensome alternatives.
“The court’s decision is encouraging for small-business owners,” says Karen Harned, executive director of the NFIB Legal Foundation. “The court seriously questions whether the Department of Homeland Security violated the Regulatory Flexibility Act when the agency issued the final no-match letter procedures.” The court’s opinion, she says, “raises serious doubt over the validity of DHS’ argument that the agency was not required to conduct an RFA analysis because this rule will not have a significant economic impact on small firms.”
“The court was quite concerned with the magnitude of the consequences if this rule was implemented,” says Mark Soycher, CBIA counsel. Employers receiving no-match letters would have found themselves in a very difficult position.
“If employers received a no-match letter for an employee they knew was legally employed but they couldn’t prove that in the 90-day time frame, those employers would face a dilemma: keep the employee on staff and risk fines and criminal prosecution, or fire the person to avoid possible legal action but suffer the loss
of a skilled worker, disruption to the business and a possible discrimination lawsuit later on. It would have been an impossible situation.”
At this point, DHS can appeal the injunction; rewrite the new rule following change-in-policy requirements; drop the program; or wait for the judge to decide, after the trail, if the rule is legal.
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