Last week, small business owners were let off the hook, at least temporarily, when a federal judge in San Francisco blocked the implementation of a recent Bush administration initiative that would have used the Social Security system to go after employers of illegal immigrants.

As you probably know, employers and employees are required to prepare and file a form I-9 within 3 days of a new hire.  If the social security number reported does not match government records, the Social Security Administration sends a “no-match” letter to the employer, informing them of the discrepancy, but , by itself, until recently, imposing no significant affirmative duty on the employer.

However, under the Department of Homeland Security's (DHS) recent "no match" policy, employers would have 90 days after receiving the letter to verify the immigration status of an employee whose social security number did not match official records.  The DHS regulations outlined a so-called “safe harbor”, imposing a significant administrative burden on employers.  Any employer who ignored the letters could have faced criminal charges and fines. To avoid penalties, employers would have to confirm the status of their workers and ultimately fire any who proved to be illegal.

Opponents said the plan's fatal flaw is its reliance on error-filled Social Security records that could lead to the firings of hundreds of thousands of citizens and legal residents.   

Since August, the DHS has sent out 140,000 no match letters to employers. But Judge Charles R. Breyer of the Northern District of California put those letters on ice until the court resolves whether or not the rules are legal, a blow to the administration's ongoing efforts to crack down on illegal immigration.  Saying the administration's plan "would result in irreparable harm to innocent workers and employers," U.S. District Judge Charles Breyer barred authorities from threatening to prosecute businesses that fail to fire employees whose Social Security numbers don't match government records. 

Breyer's ruling is likely to keep the proposal on hold until sometime next year.  The injunction is binding until the case goes to trial, a proceeding that is many months away. But the administration is virtually certain to appeal, asking to let the new system take effect while it is being challenged. The appellate court might act on such a request by the end of this year.

At the time of this writing, it is not know what the administration will do about interim “no-matches,”  but a few things seem clear if you receive a no-match letter:

·         Determine whether the mistake was on your part or the employee’s (the form could have been mistakenly filed out)—if there was an innocent mistake, send in a revised W-2c

·         Do not take any adverse employment action against the employee, since that could be characterized as discrimination, and could also interfere with your business

·         Document a clear record in your files

·         Continue to monitor the situation through the Chamber of Commerce, which will attempt to keep you abreast of further developments.

(Jay Strauss is a practicing attorney, a former Chamber of Commerce President (1994) and former Mayor of Lafayette (2000).  He can be reached at jstrauss31@yahoo.com.)