The ACLU, AFL-CIO, UNITE HERE, U.S. Chamber of Commerce and trade associations representing small business owners rarely find themselves all together on the same side of an issue.

But that’s exactly the scenario that developed over the past few months in the Federal District Court for the Northern District of California. By leveraging its collective might, the business/labor/civil liberties coalition hopes to overturn the powerful Department of Homeland Security’s (DHS) latest attempt to pressure employers to fire undocumented workers.

The fight began Aug. 29 when the AFL-CIO, joined by several California labor federations and the ACLU, filed suit against DHS and the Social Security Administration (SSA) to block implementation of a new DHS rule designed to use Social Security “no-match” letters as an immigration enforcement tool. DHS wants employers who receive the letters, sent when 10 or more workers’ Social Security numbers on tax reporting forms don’t match names in the SSA’s database, to follow a tight timetable to either resolve the discrepancies or fire the workers within 93 days.

While its immediate goal is to block the no-match rule, AFL-CIO v. Chertoff is a focal point for the broader immigration debate. With Congress unwilling to act on legislation that would create a path to citizenship for undocumented workers, the DHS and its immigration arm have turned up the heat on both illegal workers and their employers. That has given business and labor a common opponent–the United States government.

“Politics makes strange bedfellows,” says Jorge Lopez, a shareholder in Littler Mendelson’s Miami office. “Everybody’s found a bigger dragon to slay.”

Ominous Implications
Issued Aug. 15, the new rule purportedly helps employers by clarifying their responsibility for dealing with no-match letters. But business interests joined the legal battle because the regulation puts a new paperwork burden on employers and threatens criminal prosecution against those who don’t comply.

In the past the government gave no clear guidance on the employer’s responsibility to resolve no-matches and even warned that a no-match investigation could result in a discrimination claim. The new rule changes that policy by linking SSA information with DHS’s immigration enforcement role. DHS may view employers that receive no-match letters and fail to follow a four-step timetable as having constructive knowledge that they are illegally employing workers, subjecting them to possible criminal prosecution.

The new regulation offers employers that do follow the timetable a safe harbor and assures them they won’t be subject to a federal discrimination claim for investigating employees whose names and numbers don’t match, as long as they treat all employees equally.

“This is a step to clarify what you are required to do under the law, and that ought to be a benefit to people who are following the law,” says Phillip Perry, former general counsel at DHS and now a partner in Latham & Watkins.

Defective Database
But in a declaration filed in support of the plaintiffs, Kenneth Apfel, the commissioner of the SSA from 1997 to 2001, said no-match letters should not be used to enforce immigration policy.

Apfel said most no matches are a result of administrative errors, employees’ failure to report name changes after marriage or divorce, transcription errors or discrepancies created because the employee uses multiple or compound names, common in Latin America.

“As a result, a significant number of employees who are the subject of a no-match letter are likely to be U.S. citizens and work-authorized aliens,” he wrote.

Apfel cited a 2006 GAO report that found most no matches involve legal workers. That is a central focus of the AFL-CIO lawsuit, which contends that many U.S. citizens and legal immigrants will lose their jobs because their names appear on no-match letters.

The business groups that intervened advanced a different argument. They said that when DHS published the proposed rule in 2006, it certified there would be no significant adverse impact on small business, as required under the Regulatory Flexibility Act. But the intervenors claim small businesses will be impacted by the cost of meeting the specifications of the regulations, lost productivity from workers who are dealing with the SSA and increased unemployment insurance costs.

In industries heavily dependent on immigrant workers, even bigger harm may befall employers that may have to fire large numbers of employees without having a source of replacements.

“There is panic in some industries–especially construction and agriculture,” says David Whitlock, partner in Fisher & Phillips. “A lot of Florida citrus growers are nervous because they have gotten mismatch letters in the past for up to 75 percent of their work force, and there aren’t enough U.S. workers to replace them.”

On Hold
For now, the new rule–and this year’s batch of no-match letters–is on hold. The SSA had delayed sending out the notices–usually mailed in early summer–pending implementation of the regulation, which originally was scheduled for Sept. 14. The SSA had planned to mail no-match letters to 140,000 employers, pertaining to about 8 million employees, between September and November, according to Apfel. The notices would have included a letter from DHS explaining the new timetable.

But the court granted a temporary restraining order Aug. 31, barring implementation of the rule pending an Oct. 1 hearing, when it heard arguments on a preliminary injunction motion and extended for up to 10 days the restraining order pending a final ruling. At press time, no decision had been announced. Court observers predict that regardless of how the court rules, appeals could drag on for years. But although the specific regulation may be in limbo, employers can’t let down their guard–they are still liable for I-9 violations or for hiring an illegal worker.

The DHS also has signaled its intention of increasing civil fines for the “knowing” employment of illegal immigrants and of expanding its aggressive program of investigating employers for possible criminal charges.

“Do your due diligence, because the government is not going to back down,” Lopez says.