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Small Business Digest


Businesses Face Harsher Rules If Employee Social Security Numbers Are Not Verified

Business managers are faced with a requirement that they resolve social security number discrepancies within 93 days or face penalties if they have not discharged the employee involved.

Essentially, employers are being asked to verify and update social security numbers of employees whose original submission is incorrect, according to the Social Security Agency.

This program is being administered under the Department of Homeland Security. Faced with strong opposition to a more stringent regulation regarding these efforts, the department is seeking comments on the changes after a court stayed implementation.

The Homeland Security Department's Supplemental Proposed Rule on Safe-Harbor Procedures for Employers centers on companies who receive a No-Match Letter. This is more commonly known as DHS’ “no-match” rule.

Under current law, “no-match” letters are sent from the Social Security Administration to employers indicating that a social security number provided for an employee does not match the SSA’s records. However, no immediate action is required of employers upon receipt of a “no-match” letter at this time.

In August of 2007, DHS proposed a “no-match” rule, which requires employers who receive a “no-match” letter to fire the employee, or risk civil or criminal penalties, unless the discrepancy can be resolved between the SSA and the employee within 93 days.

This rule was proposed despite the fact that DHS failed to conduct a small business economic impact assessment of the rule as required by the Regulatory Flexibility Act.

Business and labor organizations quickly challenged the legality of this rule, and the Federal District Court for Northern California suspended enforcement of the rule until the court resolved this case. In response to this injunction, DHS requested public comments be submitted on the “no-match” rule.

Some interest groups believe that due to the numerous mismatched records in SSA’s records that the costs associated with enforcing DHS’ “no-match” rule will be significant.

In a labor force of roughly 132 million,[according to one governmental study, SSA now maintains 17.8 million mismatched records that could result in a “no-match” letter to employers.

According to Office of the Inspector General, Social Security Administration of these, 12.7 million, or more than 70 percent, belong to U.S.-born citizens. (see

“The unfortunate fact is that the ‘no-match’ rule will likely result in the firing of many legal employees and will cost employers and employees enormous amounts of time, frustration and panic as the try to rectify discrepancies with the Social Security Administration in just 93 days,” said Karen Harned, executive director, National Federation of Indepnendent Businesses' Small Business Legal Center.

“This is especially true for small employers that do not have HR personnel on staff to help an employee work with the Social Security Administration to resolve a mismatched record. In these companies, all employment decisions are made by the principles of the firm, who must take time off from managerial duties in order to search for, interview, hire, and train new employees, to say nothing of the cost in time and money of processing the associated paperwork. In many industries, this can take weeks, if not months.”

To help make this rule less burdensome to small employers, NFIB recommends that under certain circumstances, businesses should be given an optional extension period beyond the 93 days that the rule provides.

Other proponents argue that businesses should be offered this extension if they can demonstrate, by showing correspondence or signing an affidavit, that they have:

  • Contacted SSA and are awaiting further action from that agency;
  • In the process of obtaining necessary documents from foreign governments or other U.S. government agencies;
  • The employee is temporarily unavailable to aid in the resolution of the mismatch; or
  • any other reasonable limitation on an employer’s ability to resolve the issue within the 93 days. 

“Adopting these provisions will drastically reduce the number of authorized employees who would otherwise be terminated due to erroneous Social Security Administration records,” said Harned. “Using the Social Security Administration’s flawed record system as a backhanded way to enforce immigration laws is bad public policy. However, if the Department of Homeland Security goes forward with this rule, we strongly hope the agency will give employers that act in good faith and try to resolve discrepancies in the system more time to comply with the rule.” 

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