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Since the mid-1980s, with the passage of the Immigration Reform and Control Act of 1986 (IRCA), employers have been prohibited from knowingly hiring or continuing to employ individuals who lack the legal right to work in the United States. Since U.S. citizens and lawful permanent residents (green card holders) are inherently authorized to work, the true target of the verification program are nonimmigrants possessing limited work authorization. The IRCA requires that employers verify a new hire’s ability to work by examining documents that establish the worker’s identity and employment authorization; employers must also complete, in collaboration with the employee, Form I-9, the employment eligibility verification document. Although the goals of the IRCA � to curb employment of undocumented immigrants and reduce the incentives for illegal immigration � were laudable, the I-9 system quickly proved to be unworkable. Not long after its inception, the program was recognized as severely flawed for the primary reason that fraudulent identity and work authorization documents were widespread and easily obtainable. Immigration Reform Bills Congress, too, has long recognized the shortcomings of the current system. The immigration reform bills currently under consideration in the federal legislature contain extensive provisions that would overhaul the current program by putting in place an electronic system that would more affirmatively verify a worker’s eligibility. 1But, as has been reported widely, other contentious immigration issues have stalled the progress of reform. While the House and Senate continue to debate, the Department of Homeland Security (DHS) has recently introduced two rules that aim to improve the current system. The new rules, issued by DHS’s Immigration and Customs Enforcement (ICE) bureau, help clarify several important employer responsibilities under IRCA. A long-awaited interim rule, which became effective on June 15, implements a 2004 law that permits employers to electronically complete, sign and store I-9 forms, reducing some of the administrative burdens on compliant employers. In addition, a second rule proposes to provide immigration compliance guidance to employers who receive a communication from the Social Security Administration (SSA) that a Social Security number reported for a specific employee does not match agency records. These “no-match” letters have long been a subject of concern for employers because they raise the possibility that an employee may have offered a fraudulent Social Security number and may thus be unauthorized to work in the United States. This article will discuss the two rules and their effect on the current employment eligibility verification system. Electronic I-9 Program As noted above, IRCA requires U.S. employers to verify the identity and employment eligibility of all new hires (including U.S. citizens) using Form I-9. Completed I-9 forms are not filed with the government. Rather, employers are required to retain them in their own files for three years after the employee’s date of hire or one year after the date that employment is terminated, whichever is later. Under prior regulations, employers were required to retain the forms in paper, microfilm or microfiche. Most elected to retain paper forms. Since the I-9 requirement went into effect in 1987, employers’ accumulation of these paper documents reached nearly unmanageable levels, particularly for large employers in industries with high turnover. The huge volume of forms also made I-9 enforcement unwieldy, as ICE officers were required to negotiate massive archives of documents to conduct their investigations. To alleviate these problems, in 2004 Congress passed and President George W. Bush signed into law legislation that authorized employers to not only store, but complete and sign electronic versions of the I-9 form. Pub. L. 108-390. Though the law has been in effect since April 2005, ICE did not immediately issue implementing regulations and employers have been unable to benefit from the administrative relief promised by the new law. In June 2006, ICE at last issued its long-awaited electronic I-9 regulation. 71 FedReg 34510 (June 15, 2006). Though the rule does not require employers to implement any one particular electronic system, it does set forth the minimum requirements that any system adopted by an employer must have, basing its guidelines on the electronic storage and signature protocols used by other federal agencies � particularly the Internal Revenue Service (IRS). These requirements include adequate security features that limit access to authorized personnel and insure data integrity, means for producing hard copies of stored documents, and, importantly, search and indexing mechanisms to allow for easy access to specific I-9 documents. With respect to electronic signatures, the rule does not prescribe a specific signature method, but allows employees to “sign” the forms through a number of electronic means such as clicking dialog boxes or using a digital signature pad. The rule also permits employers to electronically store copies of identity and work authorization documents presented if, at the employer’s option, they choose to do so for all hires, as well as the employer’s existing archive of I-9 documents. ‘No-Match’ Letters, Safe-Harbor Rule � Social Security ‘No-Match’ Letters and the Proposed Safe-Harbor Rule. In a related development, the ICE bureau also issued a proposed rule that sets forth employers’ IRCA compliance responsibilities upon receipt of a Social Security Administration “no match” letter, or a similar letter from DHS informing the employer that documents used by an employee to establish identity and work authorization do not match DHS records. 71 FedReg 34281 (June 14, 2006). ‘No-Match’ Letters In 1994, the SSA began issuing no-match letters to inform employers that a Social Security number reported to the agency for a specific employee did not match the SSA’s own records. The purpose of the letters was to assist the agency in reducing unclaimed Social Security earnings � known as the Earnings Suspense File (ESF) � which now totals over $520 billion, and is growing at the rate of about $7 billion a year. 2The no-match letters request that the mismatched information be corrected within 60 days so that Social Security earnings may be properly credited by the agency. Though the letters are sent out by the SSA in an effort to reduce the ESF, employers have long been concerned that they also raised an IRCA liability issue � specifically, that an employee who is the subject of a mismatch may have provided a false Social Security number and may be unauthorized to work in the United States. In fact, undocumented workers form the largest portion of mismatched SSNs and the government has acknowledged that the primary source of the increased ESF in recent years has been unauthorized workers. 3Though the no-match letter states that it is not a comment on an employee’s immigration status, the former Immigration and Naturalization Service (INS) and the Department of Justice (DOJ) have stated that no-match letters do create IRCA compliance responsibilities for employers. But despite the agencies’ pronouncements, they did not offer specific guidance on the appropriate course of action after receipt of the no-match letter. It was also unclear whether receipt of a no-match letter constituted constructive knowledge that an employee was not authorized to work. As noted above, IRCA prohibits knowingly hiring or continuing to employ an unauthorized worker and includes situations in which an employer does not have actual knowledge, but rather has constructive knowledge � i.e., sufficient information to reasonably conclude that the employee was not authorized to work. Years after the former-INS and the DOJ first addressed the issue, the ICE bureau’s new proposed rule finally provides much-needed guidance. The rule outlines the steps a reasonable employer should take to ensure that it is in compliance with IRCA upon receipt of a no-match letter, while making clear that receipt of such a letter may indeed be grounds for IRCA liability if an employer does not properly follow up on it. Indeed, the proposed rule specifically adds the receipt of a no-match letter to the regulatory definition of “constructive knowledge” of an employee’s lack of work authorization. ‘Safe Harbor’ Provisions Though the rule expands an employer’s potential liability under IRCA, it offers detailed “safe harbor” provisions that, if followed, will shield the employer from a finding of knowing employment in violation of the law. The rule sets forth a three-step process for handling a no-match letter. The ICE bureau recommends that the employer should first check its own records to ensure that no clerical error was reported to the government, recognizing that there are many reasons unrelated to immigration why an employee’s Social Security number may not match the information the SSA has on file. Typographical or transcription errors are common, as are failures to report a name change to the SSA (such as in the event of a marriage or divorce). If such a clerical error is found, the SSA is to be notified and the records corrected within 14 days of receipt of the no-match letter. If a check of the employer’s records does not resolve the discrepancy, the employer should ask the employee to confirm the employer’s information. If the employer’s records are incorrect according to the employee, then the employer should make the necessary adjustments and notify the SSA. If the employer’s records are correct according to the employee, then the employee should be asked to pursue the matter at a local Social Security office � for example, to resolve an error in the Social Security database. This step must also occur within 14 days of the no-match letter. In both cases, the ICE bureau will not consider the matter resolved until the employer receives confirmation of the Social Security number’s validity from the SSA. Finally, if the matter has not been resolved within 60 days of the no-match letter, the employer must repeat the I-9 employment eligibility verification process, requesting that the employee provide documentation of his or her identity and work authorization. This repeat process is similar to that conducted initially for new hires, with one exception: A document that is the subject of the SSA or DHS mismatch notification would not be acceptable in the repeated process. In addition, identity documents offered by the employee (or documents that establish both identity and employment authorization documents) would be required to contain a photograph. If the repeated I-9 process is not successful and the employee’s identity and work authorization still cannot be verified, the employer would be required take action to terminate the employee or risk a finding that it had constructive knowledge that the employee was not authorized to work. Note that the above steps are the ICE bureau’s suggested reasonable no-match procedures. In its commentary to the proposed rule, the ICE bureau acknowledges that other procedures could be deemed reasonable responses to an SSA or DHS notification. The ICE bureau would consider the totality of circumstances in determining whether such alternate procedures would yield a finding of no constructive knowledge. Whatever the method used to respond to the letter, employers must take care to formulate and implement a consistent response to avoid the possibility of a discrimination claim. As noted above, the no-match provisions are at the proposal stage only and are not yet effective. The DHS will be accepting public comment on the proposed rule until Aug. 14, 2006, after which the rule may be altered. But whether or not the rule ultimately takes effect, it provides invaluable insight into what the ICE bureau believes is a reasonable response to no-match letters for IRCA compliance purposes (though it is important to note that the rule will not shield an employer who has actual knowledge that an employee is unauthorized to work). Employers encountering a no-match situation are urged to follow the reasonable steps set forth in the proposed rule. Conclusion The electronic I-9 and no-match rules go a long way towards clarifying and streamlining an employer’s IRCA responsibilities. But the gaps in the current system � the lack of affirmative verification of identity and work authorization and strong prohibitions against information sharing between the SSA and immigration enforcement agencies � cannot be cured by interim measures. A truly effective employment eligibility verification system will require congressional intervention. Although there is little consensus on many of the most prominent issues in the ongoing immigration reform debate, there is broad agreement on the features that such a system must have. The Senate and House bills now under consideration contain remarkably similar provisions on verification systems, featuring: (1) tamper-proof, secure employment eligibility documents; (2) a database of employment-authorized individuals; and (3) means for comparing the eligibility documents to the database. In addition, some, including DHS Secretary Michael Chertoff, have also called for a lifting of the restrictions on information sharing between the SSA and DHS as another means of increasing the effectiveness of worksite enforcement programs. 4The Government Accountability Office has concurred, with some reservations. 5 These proposals would go far to improve the system, but even they leave many questions, both logistical and theoretical, unresolved. How would the secure-document system be implemented? How long would it take to build a meaningful database? How would the database be protected against intrusion or misuse? Would this be a step towards the controversial concept of a national identity card? If a national identity card program is not implemented, how would U.S. citizens adequately “document” their status, given that the majority of Americans do not possess a passport? 6These questions will ensure that employment eligibility verification remains at the center of the national debate on immigration. Michael D. Patrick is a partner at Fragomen, Del Rey, Bernsen & Loewy. Nancy H. Morowitz, an associate, and Marc A. Wolfe, a law clerk at the firm, assisted in the preparation of this article. Endnotes: 1. For an analysis of the I-9 verification system and congressional proposals for change, see Michael D. Patrick, “Employment Eligibility Verification: Outlook for Change,” New York Law Journal, March 27, 2006. 2. Patrick P. O’Carroll Jr., Inspector General of the SSA, U.S. Senate Committee on Finance, “Statement for the Record: Administrative Challenges Facing Social Security Administration,” www.ssa.gov/oig/communications/testimony_speeches/03142006testimony.htm . This $520 billion, which has accrued since the program’s inception in 1934, represents about the same amount as contributions paid to Social Security last year. Total Contributions paid to Social Security in tax year 2005 was just over $500 billion. “Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds,” http://www.ssa.gov/OACT/TR/TR06/III_cyoper.html . The $7 billion amount has held relatively steady in recent years and represents about 1.3 percent of total payroll taxes credited to the trust fund in recent years. Kathleen Pender, “Losing Out on a Huge Cash Stash”, The San Francisco Chronicle, April 11, 2006, C1. 3. This is illustrated by the heavy concentration of mismatches in the few states and industries in which undocumented workers are predominantly located, for example, more than half of the 100 employers filing the most mismatched SSNs came from Illinois, California and Texas. Furthermore, the Government Accountability Office found that about 17 percent of the businesses with inaccurate SSNs were restaurants, 20 percent construction companies and 7 percent farm operators. Id. In fact, in 2002, then-SSA Inspector General James G. Huse Jr. stated that illegal work was the primary cause of the growth in the ESF. Statement of James G. Huse Jr., Inspector General, Social Security Administration, Testimony Before the Subcommittee on Social Security of the House Committee on Ways and Means and Subcommittee on Immigration, Border Security and Claims Committee on the Judiciary, “Hearing on Preserving the Integrity of Social Security Numbers and Preventing Their Misuse by Terrorists and Identity Thieves” Sept. 19, 2002. http://waysandmeans.house.gov/legacy/socsec/107cong/9-19-02/9-19huse.htm . 4. Secretary Chertoff has called on Congress to increase the SSA’s ability to share information with DHS in order to pursue those who violate the proposed rule and to allow DHS to investigate companies with unduly high rates of no-match letters. DHS Press Release “DHS Announces Federal Regulations to Improve Worksite Enforcement and Asks Congress to Approve Social Security ‘No Match’ Data Sharing,” June 9, 2006. 5. United States Government Accountability Office, “Immigration Enforcement: Benefits and Limitations to Using Earnings Data to Identify Unauthorized Work,” July 11, 2006. http://www.gao.gov/new.items/d06814r.pdf . The report notes that information-sharing between the Department of Homeland Security, Internal Revenue Service and Social Security Administration could promote IRCA enforcement, but notes that the advantages of such information-sharing must be weighed against privacy concerns. Such information-sharing might also discourage undocumented workers � many of whom voluntarily pay income taxes and make Social Security contributions � from complying with U.S. tax laws. 6. Department of State statistics indicate that approximately 70 million U.S. passports have been issued in the last 10 years. See http://travel.state.gov/passport/services/stats/stats_890.html . According to the U.S. Census Bureau, the current U.S. population is just under 300 million. http://www.census.gov/main/www/popclock.html .

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