Court ruling addresses ‘No-Match’ letters as grounds for discharge

June 20, 2008 - - By Michael C. Saqui and Anthony P. Raimondo, Saqui & Raimondo
On April 10, 2008, the Ninth Circuit Court of Appeals held that Aramark Facility Services, a corporation that provides labor for the Staples Center in Los Angeles, could not fire 33 employees after receiving “no-match” letters for the Social Security Administration (“SSA”), which said that the employees’ information did not match the SSA’s database. Aramark received the letters from the SSA; notified the employees that they needed to solve the problem within three days or face termination; and, approximately ten days later, terminated the 33 employees who did not comply.
The decision by the Ninth Circuit Court of Appeals in Aramark Facility Services v. Service Employees International Union came after the District Court vacated the ruling by an arbitrator who had previously reinstated all the employees and awarded them back-pay, finding that they were terminated without just cause in violation of a collective bargaining agreement with the union. The Court of Appeals, while giving extreme deference to the arbitrator’s previous decision that Aramark did not have any “convincing information” of its employees’ undocumented immigration status, concluded that the SSA’s no-match letter, and lack of employee responses to it, did not put Aramark on “constructive notice” that the company was employing undocumented workers. Under the Immigration Reform and Control Act of 1986 (“IRCA”), employers are subject to civil and criminal liability if they employ undocumented workers “knowing” of their undocumented status. The term “knowing” includes constructive knowledge.
The Court of Appeals defines constructive knowledge as “positive information” that the employee was undocumented. The Court continues by stating that the no-match letter itself cannot provide Aramark with constructive knowledge that its employees were undocumented because the main purpose of the SSA in providing these letters, according to the court, is to indicate to workers that their earnings are not being properly credited by social security, as opposed to preventing illegal immigration. (The SSA will not penalize an employer for ignoring a no-match letter, but there may be tax consequences for ignoring them.) The Court of Appeals, as a result, holds that a no-match letter does not automatically mean that an employer has knowledge that a worker lacks proper authorization.
According to the Court of Appeals, the lack of an employee’s response to the letters in this case also did not provide Aramark with constructive knowledge of their immigration status. The court, while again relying heavily on the arbitrator’s decision, declares that because the company only gave the employees three days to respond to the SSA, many of the workers may have simply decided they could not meet the deadline and, therefore, did not attempt to solve the problem. Such a decision by employees would not provide employers with constructive knowledge of their undocumented status.
Moreover, the court stresses that even under safe harbor regulations, a new regulation that may take effect which would effectively give an employer constructive knowledge of the undocumented status of an employee after the employer receives a no-match letter, an employer would not have constructive knowledge unless they fail to ask the employee to take action with the SSA before 90 days. Even in the event that the employee cannot resolve the issue in 90 days, the employer can still avoid constructive knowledge under the safe harbor regulations if, within three days, the employer completes a new I-9 for the employee without using the mismatched Social Security Number.

COUNSEL TO MANAGEMENT:
Even though the court holds that a no-match letter itself cannot lead to constructive knowledge of an employee’s undocumented status, employers should not ignore the letters and should still take the following steps in the event that they receive a no-match letter from the SSA:
1. Verify your records
2. Notify the employee of the discrepancy
3. Confirm your instructions in writing
4. Write a letter to the SSA
5. Establish company policy and apply it consistently
6. Do no terminate the employee
Moreover, employers should not overreact to the court’s decision that a no-match letter cannot provide constructive knowledge to an employer. Courts are generally reluctant to overrule an arbitrator’s decision when the parties had previously agreed to such procedures, and the court here explicitly states that it relied heavily on the decision of the arbitrator in this case. If a court sees this case as a matter of first impression, there is a possibility that the holding could change.
Finally, it is important to note that, although the court mentions that the safe harbor regulations are “currently subject to an injunction”, the court carries a seemingly positive attitude towards these regulations and even mentions that Aramark could have easily complied with them had they been in effect. Employers should be aware that such statements from the Court of Appeals may be illustrative of how the courts will view the safe harbor regulations, and employers’ ability to comply with these regulations, in the future. For further details on how to handle a no-match letter see: http://www.srlaborlaw.com/immigration/social-security-mismatch-protocol.html

The goal of this article is to provide employers with current labor and employment law information. The contents should not be interpreted or construed as legal advice or opinion. For individual responses to questions or concerns regarding any given situation, the reader should consult with Saqui & Raimondo at (831) 443-7100 in Salinas, or (916) 782-8555 in Sacramento.