[Federal Register Volume 73, Number 59 (Wednesday, March 26, 2008)]
[Proposed Rules]
[Pages 15944-15955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-6168]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 73, No. 59 / Wednesday, March 26, 2008 /
Proposed Rules
[[Page 15944]]
DEPARTMENT OF HOMELAND SECURITY
8 CFR Part 274a
[DHS Docket No. ICEB-2006-0004; ICE 2377-06]
[RIN 1653-AA50]
Safe-Harbor Procedures for Employers Who Receive a No-Match
Letter: Clarification; Initial Regulatory Flexibility Analysis
AGENCY: U.S. Immigration and Customs Enforcement, DHS.
ACTION: Supplemental proposed rule.
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SUMMARY: The Department of Homeland Security (DHS) is proposing to
amend its regulations that provide a ``safe harbor'' from liability
under section 274A of the Immigration and Nationality Act for employers
who follow certain procedures after receiving a notice--from the Social
Security Administration (SSA), called a ``no-match letter,'' or from
DHS, called a ``notice of suspect document''--that casts doubt on the
employment eligibility of their employees. The prior final rule was
published on August 15, 2007 (the August 2007 Final Rule).
Implementation of that rule was preliminarily enjoined by the
United States District Court for the Northern District of California on
October 10, 2007. The district court based its preliminary injunction
on three findings. This supplemental proposed rule clarifies certain
aspects of the August 2007 Final Rule and responds to the three
findings underlying the district court's injunction.
DATES: Comments must be submitted not later than April 25, 2008.
ADDRESSES: You may submit comments, identified by DHS Docket No. ICEB
2006-0004, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Marissa Hernandez, U.S. Immigration and Customs
Enforcement, 425 I St., NW., Suite 1000, Washington, DC 20536. To
ensure proper handling, please reference DHS Docket No. ICEB-2006-0004
on your correspondence. This mailing address may also be used for
paper, disk, or CD-ROM submissions.
Hand Delivery/Courier: Marissa Hernandez, U.S. Immigration
and Customs Enforcement, 425 I St., NW., Suite 1000, Washington, DC
20536.
FOR FURTHER INFORMATION CONTACT: Marissa Hernandez, U.S. Immigration
and Customs Enforcement, 425 I St., NW., Suite 1000, Washington, DC
20536. Telephone: 202-307-0071 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Public Participation
II. Background
A. History of the Rulemaking
B. Purpose of the Rulemaking
C. Authority To Amend the Regulation
D. Clarification of DHS Policy on the Use of No-Match Letters
E. Anti-Discrimination Provisions of the INA
F. Regulatory Flexibility Analysis
G. Further Interpretation in the August 2007 Final Rule
III. Statutory and Regulatory Reviews
A. Administrative Procedure Act
B. Regulatory Flexibility Act
(1) Reasons why the rule is being considered
(2) Objectives of, and legal basis for, the proposed rule
(3) Description of, and where feasible, an estimate of the
numbers of small entities to which the rule would apply
(4) Proposed reporting, recordkeeping, and other compliance
requirements
(5) Significant alternatives considered
(6) Duplicate, overlapping or conflicting rules
C. Unfunded Mandates Reform Act of 1995
D. Small Business Regulatory Enforcement Fairness Act of 1996
E. Executive Order 12,866 (Regulatory Planning and Review)
F. Executive Order 13,132 (Federalism)
G. Executive Order 12,988 (Civil Justice Reform).
H. Paperwork Reduction Act
I. Public Participation
Interested persons are invited to comment on this rulemaking by
submitting written data, views, or arguments on all aspects of the
rule. DHS invites comments related to the Initial Regulatory
Flexibility Analysis for this rule, including comments suggesting
significant alternatives that might limit any significant economic
impact the rule might have on small entities or comments related to the
Small Entity Impact Analysis underlying the rule, available on the
docket at ICEB-2006-0004-0232. Comments that will most assist DHS will
reference a specific portion of this analysis and explain the reason
for any recommended change. Include data, information, and the
authority that supports the recommended change. Comments previously
submitted to this docket do not need to be submitted again.
Instructions for filing comments: All submissions received must
include the agency name and DHS docket number ICEB-2006-0004. All
comments received (including any personal information provided) will be
posted without change to http://www.regulations.gov. See ADDRESSES
above, for methods to submit comments. Mailed submissions may be paper,
disk, or CD-ROM.
Reviewing comments: The Small Entity Impact Analysis and public
comments may be viewed online at http://www.regulations.gov or in
person at U.S Immigration and Customs Enforcement, Department of
Homeland Security, 425 I St., NW., Room 1000, Washington, DC 20536, by
appointment. To make an appointment to review the docket you must call
telephone number 202-307-0071.
II. Background
A. History of the Rulemaking
DHS first published a proposed rule in June 2006 that would have
provided means for employers to limit the risk of being found to have
knowingly employed unauthorized aliens after receiving a letter from
the SSA--known as a ``no-match letter''--notifying them of mismatches
between names and social security numbers provided by their employees
and the information in SSA's database or after receiving a letter from
DHS--called a ``notice of suspect document,'' that casts doubt on the
employment eligibility of their employees. 71 FR 34281 (June 14, 2006).
A sixty-day public comment period ended on August 14, 2006.
DHS received approximately 5,000 comments in response to the
proposed rule from a variety of sources, including labor unions, not-
for-profit advocacy organizations, industry trade groups,
[[Page 15945]]
private attorneys, businesses, and other interested organizations and
individuals. The comments varied considerably; some commenters strongly
supported the rule as proposed, while others were critical of the
proposed rule and suggested changes. See www.regulations.gov, docket
number ICEB-2006-0004.
DHS published a final rule on August 15, 2007, setting out safe
harbor procedures for employers who receive SSA no-match letters or
notices from DHS calling into question the information previously
provided by their employees when establishing their work eligibility.
72 FR 45611 (Aug. 15, 2007). Each comment received was reviewed and
considered in the preparation of the August 2007 Final Rule. The August
2007 Final Rule addressed the comments by issue rather than by
referring to specific commenters or comments.
On August 29, 2007, the American Federation of Labor and Congress
of Industrial Organizations, and others, filed suit seeking declaratory
and injunctive relief in the United States District Court for the
Northern District of California. AFL-CIO, et al. v. Chertoff, et al.,
No. 07-4472-CRB, D.E. 1 (N.D. Cal. Aug. 29, 2007). The district court
granted plaintiffs' initial motion for a temporary restraining order
against implementation of the August 2007 Final Rule. AFL-CIO v.
Chertoff, D.E. 21 (N.D. Cal. Aug. 31, 2007) (order granting motion for
temporary restraining order and setting schedule for briefing and
hearing on preliminary injunction). On October 10, 2007, the district
court granted the plaintiffs' motion for preliminary injunction. AFL-
CIO v. Chertoff, D.E. 135 (N.D. Cal. 2007) (order granting motion for
preliminary injunction).
The district court concluded that the plaintiffs had raised serious
questions about three aspects of the August 2007 Final Rule.
Specifically, the court questioned whether DHS had: (1) Supplied a
reasoned analysis to justify what the court viewed as a change in the
Department's position--that a no-match letter may be sufficient, by
itself, to put an employer on notice, and thus impart constructive
knowledge, that employees referenced in the letter may not be work-
authorized; (2) exceeded its authority (and encroached on the authority
of the Department of Justice (DOJ)) by interpreting the anti-
discrimination provisions of the Immigration Reform and Control Act of
1986 (IRCA), Public Law 99-603, 100 Stat. 3359 (1986), 8 U.S.C. 1324b;
and (3) violated the Regulatory Flexibility Act, 5 U.S.C. 601 et seq.,
by not conducting a regulatory flexibility analysis. See AFL-CIO v.
Chertoff, D.E. 135 (N.D. Cal. Oct. 10, 2007) (order granting motion for
preliminary injunction) at 8.
DHS proposes this supplemental rule to address the issues raised by
the court in the preliminary injunction order. After addressing these
three issues, DHS will seek to have the preliminary injunction
dissolved. DHS continues its defense of the case, and this simultaneous
rulemaking--which is intended to lead to the rule becoming effective as
quickly as possible--is not a concession of any issue pending in the
litigation.
In developing this supplemental proposed rule, DHS has considered
the administrative record of the August 2007 Final Rule and the record
of proceedings in the pending litigation. AFL-CIO v. Chertoff, D.E. 129
(N.D. Cal. Oct. 1, 2007) (certified administrative record); D.E. 146-2
(N.D. Cal. Dec. 4, 2007 (errata)) (hereafter AFL-CIO v. Chertoff, D.E.
129). Accordingly, DHS provides the following clarification to the
August 2007 Final Rule and publishes an initial regulatory flexibility
analysis.
B. Purpose of the Rulemaking
DHS, and its predecessor agencies, has been aware for many years
that employment in the United States is a magnet for illegal
immigration, and that a comparison of names and social security numbers
submitted by employers against SSA's data provides an indicator of
possible illegal employment:
Reducing the employment magnet is the linchpin of a
comprehensive strategy to deter unlawful immigration. Economic
opportunity and the prospect of employment remain the most important
draw[s] for illegal migration to this country. Strategies to deter
unlawful entries and visa overstays require both a reliable process
for verifying authorization to work and an enforcement capacity to
ensure that employers adhere to all immigration-related labor
standards.
* * * * *
The Commission concluded that the most promising option for
verifying work authorization is a computerized registry based on the
social security number; it unanimously recommended that such a
system be tested not only for its effectiveness in deterring the
employment of illegal aliens, but also for its protections against
discrimination and infringements on civil liberties and privacy.
* * * * *
The federal government does not have the capacity to match
social security numbers with [Immigration and Naturalization Service
(INS)] work authorization data without some of the information
captured on the I-9. Congress should provide sufficient time,
resources, and authorities to permit development of this capability.
U.S. Commission on Immigration Reform, Becoming an American:
Immigration and Immigrant Policy 113-14, 117 (1997) (emphasis in
original); AFL-CIO v. Chertoff, D.E. 129 at 139-140, 143.
Similarly, DHS has been aware of the potential for abuse of social
security numbers by aliens who are not authorized to work in the United
States. The abuse of social security numbers has been the subject of
numerous public reports of the Government Accountability Office and the
Inspector General of the Social Security Administration, as well as
congressional hearings. See, e.g., AFL-CIO v. Chertoff, D.E. 129, at
35-661; Government Accountability Office, Report to the Subcommittee on
Terrorism, Technology and Homeland Security, Committee on the
Judiciary, U.S. Senate, Estimating the Undocumented Population: A
``Grouped Answers'' Approach to Surveying Foreign-Born Respondents (GAO
Rept. No. GAO-06-775, Sept. 2006) (describes alternative means of
gathering interview data from undocumented aliens to reduce the
``question threat'' to some respondents because they fear that a
truthful answer could result in negative consequences); Subcommittee on
Oversight and Subcommittee on Social Security, Committee on Ways and
Means, U.S. House of Representatives, Social Security Number and
Individual Taxpayers Identification Number Mismatches and Misuse, 108th
Cong., 2nd Sess., Serial No. 108-53 (March 10, 2004).
The illegal alien population in the United States and the number of
unauthorized workers employed in the United States are both
substantial. See, e.g., J. Passel, Pew Hispanic Center, The Size and
Characteristics of the Unauthorized Migrant Population in the U.S.
(March 2006), found at http://pewhispanic.org/files/factsheets/17.pdf
(approximately 11.2 million illegal aliens in the United States;
approximately 7.2 million illegal aliens in the workforce); with M.
Hoefer, N. Rytina & C. Campbell, Office of Immigration Statistics,
Policy Directorate, U.S. Department of Homeland Security, Estimates of
the Unauthorized Immigrant Population Residing in the United States:
January 2006 (August 2007) found at http://www.dhs.gov/xlibrary/assets/statistics/publications/ill_pe_2006.pdf (estimating unauthorized
population of 11,550,000 as of January 2006).
[[Page 15946]]
The scale of the problem the rule seeks to address--employment of
aliens not authorized to work in the United States--has become more
well-defined through the course of the rulemaking and related
litigation. The comments submitted in response to the initial proposed
rule in 2006 by organizations such as Western Growers, and the public
statements by representatives of such organizations, have been
bracingly frank:
In the midst of the combustive debate over immigration reform,
we in agriculture have been forthright about the elephant in
America's living room: Much of our workforce is in the country
illegally--as much as 70%.
T. Nassif, ``Food for Thought,'' The Wall Street Journal, Nov. 20,
2007, at A19. See also, Docket ICEB-2006-0004-0145 (August 14, 2006),
AFL-CIO v. Chertoff, D.E. 129 at 1306 (comments of the National Council
of Agricultural Employers, suggesting over 76% of agricultural workers
are not authorized to work in the United States). DHS recognizes this
critical fact--that many employers are aware that large proportions of
their workforce are illegal--and has therefore taken steps within the
Department's existing authorities to assist employers in complying with
the law.
Public and private studies in the administrative record of this
rulemaking make clear that social security no-match letters identify
some portion of the population of aliens without work authorization who
are illegally employed in the United States. One private study
concluded that ``most workers with unmatched SSNs are undocumented
immigrants.'' C. Mehta, N. Theodore & M. Hincapie, Social Security
Administration's No-Match Letter Program: Implications for Immigration
Enforcement and Workers' Rights (2003) at i; AFL-CIO v. Chertoff, D.E.
129 at 309, 313.
Based on the rulemaking record and the Department's law enforcement
expertise, DHS finds that there is a clear connection between social
security no-match letters and the lack of work authorization by some
employees whose SSNs are listed in those letters. DHS's (and legacy-
INS's) interactions with employers who receive no-match letters have
consistently shown that employers are also aware that an employee's
appearance on a no-match letter may indicate the employee lacks work
authorization. Nevertheless, as Mehta, Theodore & Hincapie found, SSA's
no-match letters currently ``do[] not substantially deter employers
from retaining or hiring undocumented immigrants. Twenty-three percent
of employers retained workers with unmatched SSNs who failed to correct
their information with the SSA.'' C. Mehta, N. Theodore & M. Hincapie,
supra at ii; AFL-CIO v. Chertoff, D.E. 129 at 314.
Some employers may fail to respond to no-match letters because they
have consciously made the illegal employment of unauthorized aliens a
key part of their business model or because they conclude that the risk
of an immigration enforcement action is outweighed by the cost of
complying with the immigration laws by hiring only legal workers. See
C. Mehta, N. Theodore & M. Hincapie, supra at 2, 20-30; AFL-CIO v.
Chertoff, D.E. 129 at 314, 316, 334-44 (noting employer ``complaints''
over loss of their illegal workforce when employees are asked to
correct their SSN mismatches, as well as the practice by some employers
of encouraging workers to procure new fraudulent documents to provide
cover for their continued employment). DHS's interactions with
employers have also shown, however, that many law-abiding employers are
unsure what their obligations are under current immigration law when
they receive an SSA employer no-match letter, and that some employers
fear accused of having violated anti-discrimination laws if they react
inappropriately to no-match letters.
In light of these facts, DHS has concluded that additional employer
guidance on how to respond to SSA no-match letters will help law-
abiding employers to comply with the immigration laws.\1\ Accordingly,
in the August 2007 Final Rule and in this supplemental proposed
rulemaking, DHS outlines specific steps that reasonable employers may
take in response to SSA no-match letters, and offers employers who
follow those steps a safe harbor from ICE's use of SSA no-match letters
in any future enforcement action to show that an employer has knowingly
employed unauthorized aliens in violation of INA section 274A, 8 U.S.C.
1324a.
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\1\ United States citizens and aliens authorized to work in the
United States would also receive an ancillary benefit from improved
employer compliance with the bar to employment of aliens not
authorized to work in the United States and of correction of records
with the Social Security Administration. Correction of the SSA's
records to properly credit wages to a citizen or alien authorized to
work may increase authorized workers' benefits under the Social
Security Act and other laws, and improved employer compliance with
the laws barring employment of unauthorized alien workers will
likely expand the employment opportunities of those authorized to
work in the United States.
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C. Authority To Amend the Regulation
The supplemental proposed rule responds to the district court's
injunction while remaining true to the agency's rulemaking powers. In
enacting section 103(a) of the Immigration and Nationality Act of 1952,
as amended, 8 U.S.C. 1103(a), and section 102(a)(3), (b)(1), and (e) of
the Homeland Security Act of 2002, Public Law 107-296, 110 Stat. 2135
(Nov. 25, 2002) (HSA), as amended, 6 U.S.C. 112(a)(3), (b)(1), and (e),
Congress has delegated to the Department of Homeland Security the
authority to promulgate rules that interpret and fill in the
administrative details of the immigration laws. Under Chevron U.S.A.
Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-45 (1983),
the courts afford due deference to agency interpretations of these laws
as reflected in DHS's rules. The Executive may, as appropriate,
announce or change its policies and statutory interpretations through
rulemaking actions, so long as the agency's decisions rest on a
``rational connection between the facts found and the choice made.''
Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 43 (1983).
DHS's authority to investigate and pursue sanctions against
employers who knowingly hire or continue to employ unauthorized aliens
necessarily includes the authority to decide what evidence it will rely
upon in such enforcement efforts. It also includes the authority to
decide the probative value of the available evidence, and the
conditions under which DHS will commit not to rely on certain evidence.
Under the prior regulations, an employer who had received an SSA no-
match letter or DHS letter and was charged with knowing employment of
unauthorized aliens could defend against an inference that the employer
had constructive knowledge of the workers' illegal status by showing
that the employer had concluded, after exercising reasonable care in
response to the SSA no-match letter or DHS letter, that the workers
were in fact work authorized. 8 CFR 274a.1(l)(1) (2007). Those
regulations, however, provided no detailed guidance on what steps by
the employer would constitute the exercise of reasonable care. In the
August 2007 Final Rule--as supplemented by this proposed rule--DHS
limits its law enforcement discretion by committing not to use an
employer's receipt of and response to an SSA no-match letter or DHS
letter as evidence of constructive knowledge for those employers who
follow the
[[Page 15947]]
procedures outlined in the rule. This limitation on DHS's enforcement
discretion is well within the rulemaking powers of the Secretary of
Homeland Security. See, e.g., Lopez v. Davis, 531 U.S. 230, 240-41
(2001) (upholding categorical limitation of agency discretion through
rulemaking). The rule does not affect the authority of the SSA to issue
no-match letters, or the authority of the Internal Revenue Service
(IRS) to impose and collect taxes, or the authority of DOJ to enforce
the anti-discrimination provisions of the INA or adjudicate notices of
intent to fine employers.
The ongoing litigation involving the August 2007 Final Rule does
not constrain DHS's power to amend the rule. The Executive's amendment
to regulations in litigation is a natural evolution in the process of
governance. As the United States Court of Appeals for the District of
Columbia has noted:
It is both logical and precedented that an agency can engage in
new rulemaking to correct a prior rule which a court has found
defective. See Center for Science in the Public Interest v. Regan,
727 F.2d 1161, 1164-65 (D.C. Cir. 1984); Action on Smoking and
Health v. CAB, 713 F.2d 795, 802 (D.C. Cir. 1983). Where an
injunction is based on an interpretation of a prior regulation, the
agency need not seek modification of that injunction before it
initiates new rulemaking to change the regulation.
NAACP, Jefferson County Branch v. Donovan, 737 F.2d 67, 72 (D.C. Cir.
1984). See generally Thorpe v. Housing Auth. of Durham, 393 U.S. 268,
281-82 (1969).
Finally, the district court enjoined implementation of the August
2007 Final Rule and the issuance of SSA no-match letters containing an
insert drafted by DHS. AFL-CIO v. Chertoff, D.E. 137 (N.D. Cal. 2007)
(preliminary injunction). The injunction did not prohibit further
rulemaking by DHS, and indeed the district court subsequently stayed
further proceedings in the litigation to allow for further rulemaking.
AFL-CIO v. Chertoff, D.E. 142 (motion for stay); 144 (statement of non-
opposition); 149 (minute order staying proceedings pending new
rulemaking) (N.D. Cal. 2007).
D. Clarification of DHS Policy on the Use of SSA No-Match Letters
As indicated in the preamble of the August 2007 Final Rule,
employers annually send the Social Security Administration (SSA)
millions of earnings reports (W-2 Forms) in which the combinations of
employee name and social security number (SSN) do not match SSA
records. 72 FR 45612. In certain cases, SSA sends a letter that informs
the employer of the combinations that cannot be matched. SSA sends such
letters, commonly referred to as employer ``no-match letters,'' to
employers whose wage report contains more than ten no-matches and where
the no-matches represent more than 0.5% of the total W-2s included in
the employer's wage report.
There can be many causes for a mismatch, including clerical error
and name changes. One potential cause may be the submission of
information for an alien who is not authorized to work in the United
States and who may be using a false SSN or an SSN assigned to someone
else. Because an SSA no-match letter calls into question the accuracy
of the identifying information an employer received and submitted for
employees, a no-match letter places an employer on notice of the
possibility that some of its employees whose SSNs are listed in the
letter may not be who they claimed, and may be unauthorized to work in
the United States.
U.S. Immigration and Customs Enforcement (ICE) sends a similar
letter (currently called a ``notice of suspect documents'') after it
has inspected an employer's Employment Eligibility Verification forms
(Forms I-9) during an investigation audit and has been unable to
confirm the validity of an immigration status document or employment
authorization document presented or referenced by the employee in
completing the Form I-9. Like an SSA no-match letter, a ``notice of
suspect documents'' calls into question the validity of an employee's
identifying information, and thus places employers on notice that the
subject employees might be unauthorized to work in the United States.
Because a ``notice of suspect documents'' is issued upon ICE's
investigation and review of the specific employment authorization
documents, receipt of such a notice provides an employer with clear
cause to investigate the work authorization status of the employees
identified in the notice.
Section 274A(a)(2) of the Immigration and Nationality Act (INA), 8
U.S.C. 1324a(a)(2), states:
It is unlawful for a person or other entity * * * to continue to
employ [an] alien in the United States knowing the alien is (or has
become) an unauthorized alien with respect to such employment.
[Emphasis added.]
The interaction between SSA's no-match letters and the INA's
prohibition on ``knowing'' employment of unauthorized aliens--and the
statement in DHS's (and legacy INS's) regulations that employers may be
found to have ``constructive notice'' of their workers' unauthorized
status--has been the subject of repeated inquiries from employers and
other interested parties over the past decade. Prior to the release of
the August 2007 Final Rule, legacy INS responded through private
correspondence to questions about the responsibilities of employers who
receive SSA no-match letters by explaining that the INS:
would not consider notice of this discrepancy [between the name and
SSN reported by an employee and SSA's records] from SSA to an
employer by itself to put the employer on notice that the employee
is unauthorized to work, or to require reverification of documents
or further inquiry as to the employee's work authorization. Whether
an employer has been put on notice of an unauthorized employment
situation is, however, an individualized determination that depends
on all the relevant facts, and there may be specific situations in
which SSA notice of an SSN irregularity would either cause, or
contribute to, such a determination.
Letter to Littler Mendelson, from D. Martin, General Counsel,
Immigration and Naturalization Service (Dec. 23, 1997) (emphasis
added), AFL-CIO v. Chertoff, D.E. 129 at 3.
This early recorded interpretation was followed by a series of
further non-public and non-binding letters. For example, the agency was
asked about the significance of an employee's presentation of documents
bearing a different name and social security number from that offered
during the initial employment verification process, accompanied by a
request that the employer correct the employer's records. In response,
an attorney for the INS noted that such behavior is ``not necessarily''
an indication that the employee is not authorized to work in the United
States, but that it ``constitutes notice to the employer that requires
further inquiry by the employer before the employer can accept'' the
new documentation and make changes in the employment verification
record. Letter to Alston & Bird, LLP, from D. Carpenter, Chief,
Employer Sanctions and Civil Document Fraud Division, Office of the
General Counsel, INS (date illegible), AFL-CIO v. Chertoff, D.E. 129 at
6. The letter further advised the employer to inquire further when
faced with material changes affecting the core employment verification
information, such as the social security number, and noted that the
extent of the inquiry would depend on the nature of the change.
Because a complete change in name and number calls into question the
identity of the individual presenting the document to be
[[Page 15948]]
verified by the employer at the initial completion of the Form I-9,
the employer may need to make additional inquiries of the employee
in order to make its determination as to the card's genuineness and
whether it appears to relate to the employee.
Id. at 7. The letter also pointed out that questions regarding the
anti-discrimination provisions of the INA should be addressed to the
DOJ Office of Special Counsel. Id.
Because such guidance was provided in response to specific
questions or to address particular circumstances, the advice offered by
DHS and INS officials over the years has varied somewhat in tone and
emphasis. Thus, in one letter, the INS Acting General Counsel indicated
that mere receipt of a Social Security no-match letter, without any
``additional evidence that an employee may not be work authorized,''
``does not impose any affirmative duty upon the employer to investigate
further into the employee's eligibility to work in the United States.''
Letter to California Farm Bureau Federation, from Michael J. Creppy for
Paul W. Virtue, Acting General Counsel, INS, February 17, [illegible],
AFL-CIO v. Chertoff, D.E. 129 at 9. And in a 1998 letter to a Member of
Congress the INS General Counsel noted that there are ``many reasons''
for mismatches and observed that a ``SSA notice of a mismatch does not
trigger by itself an obligation to reverify work authorization,'' while
at the same time emphasizing that employers ``should take [steps] to
reconcile the mismatch with respect to SSA and IRS reporting.'' Letter
to Hon. Robert F. Smith, United States House of Representatives, from
Paul W. Virtue, General Counsel, INS, Nov. 19, 1998, AFL-CIO v.
Chertoff, D.E. 129 at 11.
More recently, one employer sought clarification from DHS on the
appropriate course of action in response to a no-match letter. The
employer had established a policy instructing their employees to
correct mismatches directly with SSA and terminated employees who
failed to do so, but had faced objections from ``third party
organizations'' who asked the employer to change this policy and to
instead leave any correction of mismatches to the discretion of the
employee, See Letter from Tyson Foods, Inc. to Hon. Tom Ridge,
Secretary, DHS, Dec. 30, 2004, AFL-CIO v. Chertoff, D.E. 129 at 21. In
response, DHS reiterated the same core points from prior
correspondence, and suggested that employer should take ``reasonable
steps'' such as reverification if an employee was unable to resolve a
discrepancy to the employer's satisfaction, and that ``[i]f the
employer remains unsatisfied that the employee is authorized to work,
termination may be appropriate.'' Letter to Tyson Foods, Inc. from
Daniel Brown, Deputy Associate General Counsel, DHS, March 16, 2005,
AFL-CIO v. Chertoff, D.E. 129 at 23. See also Letter to W.E. Welch &
Associates, Inc. from Daniel R. Brown, Deputy Associate General
Counsel, DHS, March 30, 2005, AFL-CIO v. Chertoff, D.E. 129 at 25
(suggesting that employers could take steps similar to those set forth
in the safe harbor rule in response to no-match letters).
The common theme running through the agency's correspondence is
that while the mere receipt of an SSA no-match letter may not obligate
employers to repeat the full I-9 employment verification process,
employers cannot turn a blind eye to SSA no-match letters and should
perform reasonable due diligence. See Redacted letter from Paul W.
Virtue, General Counsel, INS, April 12, 1999, AFL-CIO v. Chertoff, D.E.
129 at 16, 17 (``We emphasize that although it is incorrect to assume
that an SSA discrepancy necessarily indicates unauthorized status, it
would be equally incorrect for an employer to assume that in all cases
it may safely ignore any possible INA relevance or consequence of SSA
discrepancies. * * *. [A]n employer who discovers that its employee has
lied on a Form I-9 about any fact is fully entitled to take reasonable
steps * * * to ensure that the employee has not also lied about his or
her work authorization or anything else on the form, and * * * if it
continues the employment without doing so, it is taking a risk that it
may be held liable if in fact the employee is not authorized.''). The
view that (1) SSA no match letters do not, by themselves, establish
that an employee is unauthorized, (2) there are both innocent and non-
innocent reasons for no-match letters, but (3) an employer may not
safely ignore SSA no-match letters, and (4) an employer must be aware
of and comply with the anti-discrimination provisions of the INA,
remained the government's position after the reorganization of the
functions of the INS into DHS. See, e.g., Letter to Hon. John N.
Hostettler, from Pamela J. Turner, Assistant Secretary for Legislative
Affairs, DHS, August 9, 2004, AFL-CIO v. Chertoff, D.E. 129 at 19.
In light of this history, and of the continuing inquiries regarding
employers' obligations under current immigration law upon receipt of
SSA no-match letters, DHS decided to provide a more comprehensive and
public statement of its interpretation of the INA, and to offer a safe
harbor for employers who took specific reasonable steps in response to
no-match letters. The August 2007 Final Rule describes an employer's
existing obligations under the immigration laws, and the evidentiary
use that DHS will make of such letters found in employers' files from
either SSA or DHS. The August 2007 Final Rule also specifies step-by-
step actions that can be taken by the employer that will always be
considered by DHS to be a reasonable response to receiving an SSA no-
match letter or DHS letter--a response that will eliminate the
possibility that either letter can be used as any part of an allegation
that an employer had constructive knowledge that it was employing an
alien not authorized to work in the United States.
In entering its injunction against the August 2007 Final Rule,
however, the district court found that DHS had changed its position on
the significance of SSA no-match letters when promulgating that August
2007 Final Rule. While the court acknowledged that the preamble to the
August 2007 Final Rule remained consistent with DHS's and INS's prior
informal guidance by ``assur[ing] employers that `an SSA no-match
letter by itself does not impart knowledge that the identified
employees are unauthorized aliens,' '' AFL-CIO v. Chertoff, D.E. 135 at
13 (N.D. Cal. Oct. 10, 2007) (quoting 72 Fed. Reg. 45616), the court
nevertheless concluded that ``DHS decided to change course'' in the
text of the August 2007 Final Rule by ``provid[ing] that constructive
knowledge may be inferred if an employer fails to take reasonable steps
after receiving nothing more than a no-match letter.'' Id. Having
identified what it believed to be a change in agency position, the
court found the prior August 2007 Final Rule to be arbitrary and
capricious for failing to provide a ``reasoned analysis'' supporting
that change.
DHS disagrees with the district court's interpretation of both the
correspondence from INS and DHS and the August 2007 Final Rule. DHS
also believes the legal test applied by the district court was
incorrect. Assuming, however, that the court correctly identified a
change in the agency's formal position and that the Administrative
Procedure Act imposes a ``reasoned analysis'' requirement on such
changes in agency position above and beyond the ordinary requirements
that agency rulemaking reflect a rational connection between the facts
found and the agency's decision, DHS has strong reasons for adopting
the change in agency policy found by the district court.
[[Page 15949]]
The most basic justification for issuance of this rule--and for the
``change'' in policy found by the district court--is to eliminate
ambiguity regarding an employer's responsibilities upon receipt of a
no-match letter. As one organization with nationwide membership
commented in response to the initial publication of the proposed rule
in 2006:
[d]isagreement and confusion [of an employer's obligations upon
receipt of a no-match letter] are rampant and well-intended
employers are left without a clear understanding of their compliance
responsibilities. [Organization] members have had substantial
concerns regarding whether mismatch letters put them on notice that
they may be in violation of the employment authorization provisions
of the immigration law, since the Social Security card is one of the
most commonly used employment authorization documents.
AFL-CIO v. Chertoff, D.E. 129 at 1295, (comment from National Council
of Agricultural Employers, Aug 14, 2006). See also, id. at 849 (comment
by the National Federation of Independent Business: ``Clarification of
the employer's obligation on receiving a no-match letter and the safe
harbor provided for in the proposed rule is critical.'').
As noted above, all previous agency guidance took the form of
letters responding to individual queries from employers, Members of
Congress, or other interested parties; neither the INS nor DHS had ever
released any formal statement of agency policy on the issue. In
addition, the agency's correspondence over the years had been heavily
caveated, at times even equivocal, and although more recent letters
from DHS had more clearly articulated employers' obligations upon
receiving a no-match letter, those letters did not purport to supplant
prior statements by legacy INS. In the absence of a clear,
authoritative agency position on the significance of no-match letters,
employers and labor organizations had been left free to stake out
positions on the question that best served their parochial interests,
in some cases misconstruing statements in the SSA employer no-match
letter aimed at preventing summary firings or discriminatory practices
as instead commanding employers to turn a blind eye to the widely-known
fact that unauthorized alien workers would often appear on SSA no-match
letters. In the face of this ambiguity, well-meaning employers'
responses to SSA no-match letters were also affected by concern about
falling afoul of the antidiscrimination provisions of the INA. Thus,
employers concluded that the risks of inaction in the face of no-match
letters--with the possibility of being found to have knowingly employed
unauthorized workers in violation of INA 274A--was outweighed by the
risks of embarking on an investigation after receiving a no-match
letter only to face charges of discrimination.
The August 2007 Final Rule was designed to remedy this confused
situation, by reminding employers of their obligation under the INA to
conduct due diligence upon receipt of SSA no-match letters and by
formally announcing DHS's view that employers that fail to perform
reasonable due diligence upon receipt of SSA no-match letters or DHS
suspect document notices risk being found to have constructive
knowledge of listed employees' illegal work status. Furthermore,
because the constructive knowledge standard applies a ``totality of the
circumstances'' analysis to the facts of a particular case, and so is
not reducible to bright-line rules, the August 2007 Final Rule sought
to provide greater predictability through a clear set of recommended
actions for employers to take, and assured employers that they would
not face charges of constructive knowledge based on SSA no-match
letters or DHS letters that had been handled according to DHS's
guidelines.
DHS's position on the evidentiary value of SSA no-match letters in
the August 2007 Final Rule, and in this supplemental proposed
rulemaking, is also justified by the growing evidence and consensus
within and outside government that SSN no-matches are a legitimate
indicator of possible illegal work by unauthorized aliens. The SSA
Office of the Inspector General (SSA IG) noted that fraud was a
significant cause of SSA no-matches, after reviewing earnings suspense
file data for tax years 1999-2000:
[OIG] identified various types of reporting irregularities, such
as invalid, unassigned and duplicate SSNs and SSNs belonging to
young children and deceased individuals. While * * * there are
legitimate reasons why a worker's name and SSN may not match SSA
files * * * the magnitude of incorrect wage reporting is indicative
of SSN misuse * * * SSA's ability to combat SSN misuse is hampered
because employers do not routinely use the Agency's Employee
Verification Service (EVS) * * *
Office of the Inspector General, Social Security Administration, Social
Security Number Misuse in the Service, Restaurant, and Agriculture
Industries, Report A-08-05-25-23, at 2-3 (April 2005), AFL-CIO v.
Chertoff, D.E. 129 at 453. See generally id. at 35-661.
DHS's view--that no-match letters regularly identify unauthorized
alien workers--was also overwhelmingly affirmed by those who submitted
comments on the proposed rule in 2006. See, e.g., AFL-CIO v. Chertoff,
D.E. 129 at 866 (comment by U.S. Chamber of Commerce: ``It is estimated
that annually 500,000 essential workers enter the U.S. to perform much
needed labor without work authorization. * * * The proposed regulation
will strip needed workers from employers without providing employers
with an alternative legal channel by which to recruit to fill the gaps
* * *.''); Id., at 874 (comment by Essential Workers Immigration
Coalition including same statement); Id., at 850 (comment by National
Federation of Independent Business: ``a substantial number of workers
identified by no-match letters are undocumented immigrants who are
unable to provide legitimate social security numbers''); Id., at 858
(comment by Western Growers opposing the rule on grounds that ``it
would have a most devastating effect on California and Arizona
agriculture, where an estimated 50 to 80 percent of the workers who
harvest fruit, vegetables and other crops are illegal immigrants'');
Id., at 887 (comment by American Immigration Lawyers Association:
``[T]he proposed regulation admittedly will `smoke out' many
unauthorized workers.''); Id., at 1306 (comment by National Council of
Agricultural Employers suggesting that, as a conservative estimate, 76%
of agricultural workers are not authorized to work in the United
States, that ``employers would likely lose a significant part of their
workforces,'' and that ``a substantial number of workers would not
return to work'' when faced with the requirement to verify work
authorization ``because they would be unable to do so''). See also AFL-
CIO v. Chertoff, D.E. 135 at 12 (N.D. Cal., Oct. 10, 2007) (preliminary
injunction order, noting that ``th[e] Court cannot agree with
plaintiffs' fundamental premise that a no-match letter can never
trigger constructive knowledge, regardless of the circumstances'').
SSA's criteria for sending employer no-match letters also inform
DHS's position in the August 2007 Final Rule and in this supplementary
rulemaking. The SSA does not send employer no-match letters to all
employers whose tax filings turn up employees with SSN no-matches.
Rather, these letters are only sent to employers whose wage reports
reveal at least 11 workers with no-matches, and where the total number
of no-matches represents more than 0.5%
[[Page 15950]]
of the employer's total Forms W-2 in the report. These criteria were
adopted by SSA in an effort to balance the efforts to improve the wage
reporting process with available agency resources. Taken together,
however, DHS believes these criteria limit the recipients of employer
no-match letters to employers who have potentially significant problems
with their employees' work authorization. Employers with stray mistakes
or de minimis inaccuracies in their records do not receive employer no-
match letters. As a result, DHS finds that employers who receive no-
match letters cannot reasonably assume the problems with their payrolls
are merely trivial clerical errors, and therefore cannot reasonably
simply ignore those letters.
Both pre-existing regulations and consistent case law demonstrate
that an employer can be found to have violated INA section 274A(a)(2),
8 U.S.C. 1324a(a)(2), by having constructive rather than actual
knowledge that an employee is unauthorized to work. The concept of
constructive knowledge appeared in the first regulation that defined
``knowing'' for purposes of INA section 274a, 8 CFR 274A.1(l)(1)
(1990); 55 FR 25,928. As noted in the preamble to that original
regulation, that definition of knowledge is consistent with the Ninth
Circuit's holding in Mester Mfg. Co. v. INS, 879 F.2d 561, 567 (9th
Cir. 1989) (holding that when an employer who received information that
some employees were suspected of having presented a false document to
show work authorization, such employer had constructive knowledge of
their unauthorized status when the employer failed to make any
inquiries or take appropriate corrective action). See also New El Rey
Sausage Co. v. INS, 925 F.2d 1153, 1158 (9th Cir. 1991).
Here, the rulemaking record demonstrates that it is widely
understood by employers that the appearance of employees' SSNs on an
SSA no-match letter may indicate that the employees lack work
authorization, the SSA's practice of generating no-match letters
focuses those letters on employers that DHS believes have non-trivial
error levels in their payrolls, and existing law clearly establishes
that employers may be charged with constructive knowledge when they
fail to conduct further inquiries in the face of information that would
lead a person exercising reasonable care to learn of an employee's
unauthorized status. In light of this record, the position DHS
articulated in the August 2007 Final Rule--that an employer's failure
to conduct reasonable due diligence upon receipt of an SSA no-match
letter can, in the totality of the circumstances, establish
constructive knowledge of an employee's unauthorized status--was a
reasonable ``change'' from the statements in prior informal agency
correspondence.
E. Anti-Discrimination Provisions of the INA
The preamble to the August 2007 Final Rule explains that employers
who adopt the safe-harbor procedures to verify the employee's identity
and work authorization must apply them uniformly to all of their
employees who appear on employer no-match letters. Failure to do so,
the preamble warns, may violate the anti-discrimination provisions of
the INA. The preamble further notes that employers who follow the safe
harbor procedures set forth in the August 2007 Final Rule uniformly and
without regard to perceived national origin or citizenship status will
not be found to have engaged in unlawful discrimination. 72 FR 45613-
14. The DHS insert prepared to accompany the no-match letter had
similar language. AFL-CIO v. Chertoff, D.E.7, Exh. C. (N.D. Cal. Aug.
29, 2007).
The district court questioned DHS authority to offer what the court
viewed as interpretations--rather than mere restatements--of settled
anti-discrimination law, noting that authority for interpretation and
enforcement of the INA's anti-discrimination provisions has been
entrusted not to DHS but to the DOJ, and concluded that DHS appeared to
have exceeded its authority. See AFL-CIO v. Chertoff, D.E. 135 at 16
(N.D. Cal. Oct. 10, 2007) (order granting motion for preliminary
injunction).
DHS recognizes the jurisdiction of DOJ over enforcement of the
anti-discrimination provisions in section 274B of the INA (8 U.S.C.
1324b). As stated in the preamble to the August 2007 Final Rule,
``DOJ--through its Office of Special Counsel for Immigration-Related
Unfair Employment Practices--is responsible for enforcing the anti-
discrimination provisions of section 274B of the INA, 8 U.S.C. 1324b.''
72 FR 45,614. The August 2007 Final Rule also stated that DHS's rule
``does not affect * * * the authority of DOJ to enforce the anti-
discrimination provisions of the INA or adjudicate notices of intent to
fine employers.'' Id. DHS does not have the authority to obligate the
DOJ or its Office of Special Counsel for Immigration-Related Unfair
Employment Practices to a course of action and the August 2007 Final
Rule did not purport to make any such obligation. Whether an employer
has engaged in unlawful discrimination in violation of INA 274B is a
determination that is made by DOJ through the Office of Special
Counsel.
A statement by one agency about the authority of another agency
does not, in and of itself, encroach on the authority of that other
agency, and DHS's statements in the August 2007 Final Rule were
reviewed through an interagency process that was created to improve the
internal management of the Executive Branch. Executive Order 12866, 58
FR 51735 (Oct. 4, 1993), as amended by Executive Order 13258, 67 FR
9385 (Feb. 28, 2002), as amended by Executive Order 13422, 72 FR 2763
(Jan. 23, 2007). Nevertheless, in light of the district court's
concerns about DHS's possible encroachment into the authority of DOJ,
DHS hereby rescinds the statements in the preamble of the August 2007
Final Rule describing employers' obligations under anti-discrimination
law or discussing the potential for anti-discrimination liability faced
by employers that follow the safe-harbor procedures set forth in the
August 2007 Final Rule. For example, DHS is rescinding conclusive
statements from the preamble of the August 2007 Final Rule such as
``employers who follow the safe harbor procedures * * * will not be
found to have engaged in unlawful discrimination.'' 72 FR 45613-14. DHS
will also revisit the language in its insert letter after this rule is
finalized. These rescissions do not change existing law or require any
change to the rule text. The language added by the August 2007 Final
Rule to 8 CFR 274a.1(l)(3) clarifies that a written notice from SSA or
DHS calls into question the validity of an employee's identity or work
authorization documents, such that those documents may not any longer,
``on their face reasonably appear to be genuine and to relate to the
individual.'' That assessment of the presumptive reliability of
documents associated with SSA no-match letters or with DHS notices of
suspect documents is squarely within the regulatory expertise and
authority of DHS.
Employers seeking guidance regarding their anti-discrimination
obligations in following the safe harbor procedures in the August 2007
Final Rule, as modified by this supplemental rule, should follow the
direction provided by DOJ on the Web site of the Office of Special
Counsel for Immigration-Related Unfair Employment Practices. See http://www.usdoj.gov/crt/osc/index.html. Employers may also seek advice on a
case-by-case basis through OSC's toll-free employer hotline at: 1-800-
255-8155. DOJ's public guidance on employers' anti-discrimination
[[Page 15951]]
obligations will also be published in a Federal Register notice when
DHS promulgates this rule as a final rule.
F. Regulatory Flexibility Analysis
As discussed in the preamble of the August 2007 Final Rule, a
number of commenters suggested that the rule would have a substantial
economic impact on the economy, and on small entities in particular.
The preamble indicated, however, that the suggested impact was
speculative and that there was no evidence in the record to
substantially support the conclusion that the rule would impose
significant compliance costs on small entities. This conclusion was
based on DHS's view of the August 2007 Final Rule as one that clarified
DHS's interpretation of the INA, described how DHS would exercise its
prosecutorial discretion, and set forth a voluntary safe harbor--not as
a rule that would create any new duties, mandate any new burdens, or
impose any new or additional compliance costs on employers.
Accordingly, DHS certified that the August 2007 Final Rule would not
have a significant economic impact on a substantial number of small
entities, and therefore declined to provide a Regulatory Flexibility
Analysis. See 72 FR at 45,621 and 45,623.
The district court nevertheless concluded that the safe harbor in
the rule amounted to a mandate that effectively created compliance
obligations for employers that received no-match letters. Having found
the rule to be a mandate rather than a voluntary safe harbor rule, the
court found it likely that small businesses would incur significant
costs associated with complying with the safe harbor rule:
Because failure to comply subjects employers to the threat of
civil and criminal liability, the regulation is the practical
equivalent of a rule that obliges an employer to comply or to suffer
the consequences; the voluntary form of the rule is but a veil for
the threat it obscures. The rule as good as mandates costly
compliance with a new 90-day timeframe for resolving mismatches.
Accordingly, there are serious questions whether DHS violated the
RFA by refusing to conduct a final flexibility analysis.
See AFL-CIO v. Chertoff, D.E. 135 at 19 (N.D. Cal., Oct. 10, 2007)
(order granting preliminary injunction) (internal quotations and
citations omitted). In light of the district court's conclusion that a
regulatory flexibility analysis would be required, DHS is providing an
initial regulatory flexibility analysis (IRFA) in this supplemental
proposed rule, based on economic analysis that is being published in
the docket of this rulemaking (ICEB-2007-00xx-0002), and which is
summarized below in section III.B.
DHS's decision to publish an IRFA in this supplemental rulemaking
is not a concession that the rulemaking is a ``legislative rule.'' DHS
continues to view the August 2007 Final Rule and this supplemental rule
as interpretive rules, and does not believe that these rulemakings bear
any of the hallmarks of a legislative rule. See Hemp Industries Ass'n
v. Drug Enforcement Admin., 333 F.3d 1082, 1087 (9th Cir. 2003)
(identifying three circumstances in which a rule is legislative);
Syncore Int'l Corp. v. Shalala, 127 F.3d 90, 94 (DC Cir. 1997)
(interpretive rule ``typically reflects an agency's construction of a
statute that has been entrusted to the agency to administer'' and a
statement of policy ``represents an agency position with respect to how
it will treat--typically enforce--the governing legal norm. By issuing
a policy statement, an agency simply lets the public know its current
enforcement or adjudicatory approach''). DHS is not invoking its
legislative rulemaking authority to mandate a specific action upon a
certain event; rather this rulemaking informs the public of DHS's
interpretation of Section 274A of the INA and describes how DHS will
exercise its discretion in enforcing the INA's prohibition on knowing
employment of unauthorized aliens. Moreover, although the district
court questioned whether DHS has changed its position on the
evidentiary force of no-match letters in enforcement proceedings
against employers, neither the August 2007 Final Rule nor this
supplemental rulemaking departs from any prior legislative rule. See
Oregon v. Ashcroft, 368 F.3d 1118, 1134 (9th Cir. 2004). As noted
above, the only record of the agency's previous position lies in
correspondence between the agency and individuals and employers seeking
advice on their specific questions.
Thus, although DHS continues to believe that the Regulatory
Flexibility Act does not mandate the analysis that has been undertaken
here, see Central Texas Tel. Coop. Inc. v. FCC, 402 F.3d 205, 214 (D.C.
Cir. 2005), the Department has decided to publish the IRFA and its
supporting economic analysis, in response to the preliminary injunction
entered by the Northern District of California and in order to allow
for public review and comment on the costs that may be incurred by
employers who choose to adopt the safe harbor procedures set forth in
this rule.
G. Further Interpretation in the August 2007 Final Rule
DHS is proposing to further clarify two aspects of the August 2007
Final Rule. First, the rule instructs employers seeking the safe harbor
that they must ``promptly'' notify an affected employee after the
employer has completed its internal records checks and has been unable
to resolve the mismatch. After reviewing the history of the rulemaking,
DHS believes that this obligation for prompt notice would ordinarily be
satisfied if the employer contacts the employee within five business
days after the employer has completed its internal records review. DHS
emphasizes that an employer does not need to wait until after
completing this internal review to advise affected employees that the
employer has received the no-match letter and request that the
employees seek to resolve the mismatch. Immediately notifying an
employee of the mismatch upon receipt of the letter may be the most
expeditious means of resolving the mismatch.
Second, plaintiffs in the litigation before the Northern District
of California raised a question as to whether under the August 2007
Final Rule an employer could be found liable on a constructive
knowledge theory for failing to conduct due diligence in response to
the appearance of an employee hired before November 6, 1986 in an SSA
no-match letter. When Congress enacted INA section 274A as part of the
1986 Immigration Reform and Control Act, it included a grandfather
clause in that legislation exempting workers hired before IRCA's date
of enactment from the provisions of section 274A(a)(1) and (a)(2). See
Public Law 99-603, section 101(a)(3), 100 Stat. 3359 (1986). Because
those statutory bars against hiring or continuing to employ individuals
without work authorization do not apply to workers within that
grandfather clause, the August 2007 Final Rule, as published and as
supplemented by this rulemaking, does not apply to any such workers
that may be listed in an SSA no-match letter.
III. Statutory and Regulatory Reviews
A. Administrative Procedure Act
DHS is publishing this proposed rule as a proposed rule in the
Federal Register as a discretionary request for public comment. The
rule is not a legislative rule governed by the notice and comment, or
by the delayed effective date provisions of 5 U.S.C. 553.
[[Page 15952]]
B. Regulatory Flexibility Act
On the basis of the analysis in section II.F of this preamble, DHS
provides below its Initial Regulatory Flexibility Analysis, as
described under the Regulatory Flexibility Act, 5 U.S.C. 603(b), (c). A
small entity impact analysis is included in the docket and summarized
here. This section also describes the alternatives to the proposed rule
that DHS has identified and considered in this supplemental rulemaking.
As noted above, DHS invites comments related to this Initial Regulatory
Flexibility Analysis and the accompanying Small Entity Impact Analysis,
including comments on the assumptions underlying that analysis.
(1) Reasons Why the Rule Is Being Considered
As discussed more fully in section I.D, DHS, as well as private
employers in general, have become increasingly aware of the potential
for abuse of social security numbers by aliens who are not authorized
to work in the United States. DHS is responsible for the enforcement of
the statutory prohibition against the hiring or continued employment of
aliens who are not authorized to work in the United States. INA section
274A(a)(1), (2), 8 U.S.C. 1324a(a)(1), (2); HSA section 101, 6 U.S.C.
111. Given employers' evident confusion regarding how to respond to SSA
no-match letters, DHS has concluded that it needs to clarify employers'
duties under the immigration laws, and set forth guidance for employers
who seek to fulfill their obligation not to hire or employ aliens who
are not authorized to work in the United States.
(2) Objectives of, and Legal Basis for, the Proposed Rule
The objective of the August 2007 Final Rule and this supplemental
proposed rule is to provide clear guidance for employers on how to
comply with the statutory bar against hiring or continuing employment
of aliens who are not authorized to work in the United States. INA
section 274A(a)(1), (2), 8 U.S.C. 1324a(a)(1), (2). The objective of
this statute is to eliminate the ``magnet'' effect of employment
opportunities that induces aliens to enter or remain in the United
States illegally. DHS exercises investigative and prosecutorial
discretion in enforcing this statute, and this interpretive rule
explains how DHS will exercise that discretion, and provides guidance
to employers who wish to limit their risk of liability under the
immigration laws.
(3) Description of, and Where Feasible, an Estimate of the Numbers of
Small Entities to Which the Rule Would Apply
To estimate the small entities affected, DHS uses the generally
accepted Office of Management and Budget, Economic Classification
Policy Committee, North American Industrial Classification (NAIC),
pursuant to 44 U.S.C. 3504(e), and the size determinations by the Small
Business Administration (SBA) for SBA and other programs. 13 CFR
121.101(a); 121.201; 121.902 (size standards promulgated for SBA
programs and applicable to other agency programs). The definition of
what constitutes a small business varies from industry to industry and
generally depends on either the number of employees working for a
business or the amount of annual revenue a business earns.
DHS requested information from SSA to assist in better identifying
the number of small entities that could be expected to establish safe-
harbor procedures. Specifically, DHS requested that SSA provide the
names and addresses of the companies already identified by SSA in its
preparation to release no-match letters in September 2007. This raw
data would have permitted DHS to conduct research to determine the
North American Industry Classification System industry to which the
specific companies belonged, to research the annual revenue and/or the
number of employees of these companies through standard sources, and
thus to apply the appropriate small business size standards. With these
analyses, DHS anticipated that it would be able to provide a rough
estimate of the number of employers expected to receive a no-match
letter that met the SBA's definitions of small businesses.
However, SSA informed DHS that it was unable to provide DHS with
the names and addresses of the employers expected to receive a no-match
letter, citing the general legal restrictions on disclosure of taxpayer
return information under section 6103 of the Internal Revenue Code of
1986, 26 U.S.C. 6103. DHS also approached the Government Accountability
Office (GAO) and the Small Business Administration, Office of Advocacy,
to seek any data that these agencies might be able to provide, and to
consult about the analysis to be included in this IRFA. GAO supplied
some additional data, but SBA informed DHS that it had no data--other
than general small business census data--that was relevant to this
rulemaking and that could assist in our analysis for purposes of this
IRFA. Consequently, DHS does not have the data necessary to determine
the precise number of small entities expected to receive a no-match
letter.
Nevertheless, SSA was able to provide some general information. SSA
provided a table showing a distribution of the number of employers that
were slated to receive a no-match letter for Tax Year 2006, according
to the number of Form W-2s filed by the employer. As this data did not
exclude small entities, DHS believes that the universe of small
entities that would have received a no-match letter for Tax Year 2006
is contained within the table that SSA provided. Even though this data
did not provide the number of small entities, this data was useful to
DHS while conducting the small entity impact analysis contained in the
docket. See ICEB-2006-0004-0232, Exhibit A.5. DHS was not able to
determine whether the affected small entities will include small
businesses, small non-profit organizations, and/or small governmental
jurisdictions. Unless there is reason to believe small non-profits or
public employers might implement the rule's safe harbor procedures
differently from private employers, the cost structure for such
entities would be no different from small firms. DHS is unaware of any
data to suggest there would be a difference.
(4) Proposed Reporting, Recordkeeping, and Other Compliance
Requirements
The proposed rule suggests, but does not require, that employers
retain records of their efforts to resolve SSA no-match letters. This
suggestion is based on the possible need of an employer to demonstrate
the actions taken to resolve a Social Security no match if and when ICE
agents audit or investigate that employer's compliance with INA section
274A, 8 U.S.C. 1324a. While the rule encourages employers seeking to
establish eligibility for the safe-harbor to keep a record of their
actions, the rule does not impose any requirement for an employer to
make or retain any new documentation or records.
Companies that choose to adopt the safe-harbor procedures in the
rule would reasonably be expected to incur costs related to
administering and implementing those procedures. Company-level costs
could include the labor cost for human resources personnel, certain
training costs, legal services, and lost productivity. A detailed
analysis of safe-harbor-related costs that companies may incur is
available in the docket of this rulemaking. While several commenters to
the rule proposed in 2006 expressed concerns about the costs to
businesses
[[Page 15953]]
relating to the termination and replacement of unauthorized workers,
DHS finds that those costs cannot properly be considered costs of this
rule. The INA expressly prohibits employers from knowingly hiring or
knowingly continuing to employ an alien who is not authorized to work
in the United States. If an employer performs the due diligence
described in the rule, and loses the services of unauthorized employees
as a result, those costs of terminating and/or replacing illegal
workers are attributable to the INA, not to this rule.
Table 1 below, summarizes the average cost per firm that DHS
estimates will be incurred by businesses that receive a no-match letter
and choose to adopt the safe harbor procedures set forth in this rule.
Because DHS does not have adequate data to estimate the percentage of
unauthorized employees whose SSNs are listed on no-match letters, for
the purpose of this analysis, DHS estimated costs based on various
ratios of authorized to unauthorized workers (i.e. 20% unauthorized--
80% authorized). As Table 1 shows, the expected costs of adopting the
safe harbor procedures in this rule are relatively small on an average
cost per firm basis. In interpreting these costs, these estimates were
based on a series of assumptions which are explained in detail in the
small entity impact analysis included in the docket. Consequently, the
costs a specific firm incurs may be higher or lower than the average
firm costs estimated in Table 1.
Table 1.--Total Costs per Firm by Employment Size Class
----------------------------------------------------------------------------------------------------------------
Percentage of current no-match employees assumed to
be unauthorized
Employment size class ------------------------------------------------------
10% 20% 40% 60% 80%
----------------------------------------------------------------------------------------------------------------
5-9...................................................... $3,737 $3,633 $3,425 $3,217 $3,009
10-19.................................................... 4,020 3,891 3,634 3,376 3,119
20-49.................................................... 5,786 5,568 5,132 4,695 4,259
50-99.................................................... 7,517 7,214 6,606 5,998 5,391
100-499.................................................. 22,488 21,148 18,469 15,789 13,110
500+..................................................... 33,759 31,660 27,462 23,265 19,067
----------------------------------------------------------------------------------------------------------------
Table 1 does not reflect the termination or replacement costs of
unauthorized workers. The termination and replacement of unauthorized
employees will impose a burden on employers, but INA section
274A(a)(1), (2), 8 U.S.C. 1324a(a)(1), (2), expressly prohibits
employers from knowingly hiring or knowingly continuing to employ an
alien who is not authorized to work in the United States. Accordingly,
costs that result from employers' knowledge of their workers' illegal
status are attributable to the Immigration and Nationality Act, not to
the August 2007 Final Rule or this supplemental proposed rule, and its
provision of a safe harbor. Similarly, any costs incurred by seasonal
employers who face difficulties in hiring new employees in the place of
unauthorized workers whose SSNs were previously listed on SSA no-match
letters are attributable to the Immigration and Nationality Act bar to
knowingly hiring workers who are not authorized to work in the United
States.
In summary, DHS does not believe that this safe harbor rule imposes
any mandate that forces employers to incur ``compliance'' costs for
purposes of the Regulatory Flexibility Act. Even assuming that the safe
harbor rule requires certain action on the part of employers that
receive no-match letters, DHS does not believe that the direct costs
incurred by employers who choose to adopt the safe harbor procedures
set forth in this rule would create a significant economic impact when
considered on an average cost per firm basis. To the extent that some
small entities incur direct costs that are higher than the average
estimated costs, however, those employers could reasonably be expected
to face a significant economic impact. As discussed above, DHS does not
consider the cost of complying with preexisting immigration statutes to
be a direct cost of this rulemaking. Thus, while some employers may
find the costs incurred in replacing employees that are not authorized
to work in the United States to be economically significant, those
costs of complying with the Immigration and Nationality Act are not
direct costs attributable to this rule.
(5) Significant Alternatives Considered
DHS has considered several alternatives to the proposed rule. For
the most part, however, the alternatives would not provide employers
with necessary guidance and assurances against liability under the INA,
nor would the alternatives improve employers' compliance with INA
section 274A, 8 U.S.C. 1274a.
(a) No action. Taking no action to clarify employers'
responsibilities under INA section 274A, 8 U.S.C. 1324a, was
considered. Taking no action, however, would not resolve any of the
problems identified and addressed by this proposed rule. Employers will
remain confused and unlikely to act to resolve no-match letters in a
manner consistent with their responsibilities under current immigration
law, and will continue to face possible liability based in part on
their failure to respond to no-match letters. Employers would continue
to employ unauthorized aliens in violation of the INA.
(b) Specific industry or sector limitations. DHS considered
limiting the proposed rule to specific industries previously noted to
be at high-risk of abuse of social security numbers in employment,
including agriculture, services and construction. See, e.g., Social
Security Number Misuse in the Service, Restaurant, and Agriculture
Industries, supra; AFL-CIO v. Chertoff, D.E. 129 at 400 (GAO analysis
of SSA data noting 17% of ESF filings by eating and drinking places;
10% by construction, and 7% by agriculture), and industry comments,
supra. DHS also considered promulgating a rule that applied only to
critical infrastructure employers because of the increased need to
prevent identify fraud by employees in high-risk facilities. None of
these alternatives were acceptable because none addresses the larger
population of aliens working without authorization. These alternatives
would also offer unfairly selective assurances to employers in certain
sectors against liability under INA section 274A, while depriving other
employers of the same protection. Nor would any of these alternatives
reduce the impact specifically on small businesses.
Focusing on the three economic sectors with the most egregious
violators of the INA might have had an impact on a significant portion
of the alien
[[Page 15954]]
population that comes to the United States to work. As discussed more
fully in the small entity impact analysis in the docket, the degree to
which specific industry sectors violate the bar to employment of
unauthorized aliens is, however, speculative. DHS does not have access
to the data files indicating the number of employers by industry sector
who would receive no-match letters under current SSA policies. DHS
requested industry sector specific data from SSA but was informed that
SSA does not possess this data. Non-empirical, anecdotal evidence, such
as the admissions of the President of the Western Growers' Association,
supra, that between 50 to 80% of their employees are unauthorized
aliens serves as a less reliable indicator than empirical evidence.
Even if such anecdotal evidence is sufficient to guide decisions about
investigation and enforcement priorities, it is not an adequate basis
for limiting the effect of formal agency guidance to a specific sector
of the economy.
Partial enforcement tends, moreover, as a matter of experience, to
have the effect of redirecting unauthorized workers into un-enforced or
under-enforced sectors. And limiting the applicability of the rule to
specific industries or sectors would not mitigate the rule's impact on
small business. Accordingly, DHS rejected the industry-specific
approach as insufficient to accomplish the goal of improving overall
employer compliance and reducing the population of aliens illegally
working in the United States.
A critical-infrastructure approach provided other benefits,
focusing on high-risk facilities and organizations. Critical
infrastructure encompasses, however, segments of industries that are
not entirely discrete. Focusing on critical infrastructure would have
had salutary effects in certain areas, but not overall. Moreover, DHS
has already taken, and continues to take, other steps in working with
critical infrastructure partners to improve employer compliance with
the INA and reduce the employment of aliens not authorized to work in
the United States.
(c) Phased implementation for small employers. DHS considered
phasing in the implementation of the rule by delaying its applicability
to small entities, but concluded that such an approach would harm, not
help, small employers. Because employers' obligation not to knowingly
employ unauthorized workers and the constructive knowledge standard for
employer liability flow from the INA, all employers, including small
entities, are already subject to those legal requirements. DHS cannot
exempt small entities from the INA, and so delaying the applicability
of this rule for small entities would not excuse small employers from
their existing legal obligations. Instead, delaying implementation of
this rule for small entities would deny them access to the safe harbor
protection offered to employers who follow the procedures set forth in
this rule, effectively leaving small employers exposed to greater
liability risk while offering protection to larger employers.
(d) Extended time allowance for small employers. DHS also
considered extending the time periods in the rule for employers who
wish to obtain the protection of the safe harbor to check their
internal records to confirm the no-matches were not the result of some
administrative error by the employer. The time allotted for this
procedure was extended from 14 days to 30 days in the August 2007 Final
Rule, in response to comments from large and small employers. DHS is
unaware of any evidence that small businesses, with smaller payrolls,
would need more time to review their records than would large
organizations with thousands of employees, and DHS concluded that a
further extension would not provide small employers with a meaningful
benefit.
(e) Mandatory steps without assurances of safe harbor. DHS also
considered requiring all employers to take specific actions whenever
they received a no-match letter and their records indicated that a
social security number was used as a verification document in Form I-9
processing. Requiring employers to take affirmative steps to resolve
social security no-match letters (as outlined as discretionary steps in
the proposed rule) could result in fuller compliance with the bar to
employment of aliens who are not authorized to work in the United
States. But such a mandatory scheme implies that the steps set forth in
the rule are the only reasonable response to a SSA no-match letter, a
conclusion that cannot be supported by the evidence currently before
DHS. Furthermore, the relative gains from a mandatory scheme, in the
absence of additional statutory authority to impose sanctions for
violations of that mandate, are likely to be very small. Employers that
consciously or recklessly violate the INA will not alter their behavior
under either a mandatory or voluntary safe-harbor regime, while
responsible employers who want to comply with the INA will benefit from
the guidance provided in the proposed safe harbor rule and will improve
their hiring and employment practices to ensure compliance with the
INA.
(6) Duplicate, overlapping or conflicting rules.
DHS is unaware of any duplicate, overlapping, or conflicting
Federal regulations on this subject. DHS would welcome specific
comments identifying any such regulations, including specific citations
to provisions of Federal regulations that are duplicative, overlap or
conflict, with reasons why the commenter believes that such
duplication, overlap or conflict exists.
C. Unfunded Mandates Reform Act of 1995
This rule will not result in the expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in one year, and it would not significantly or uniquely
affect small governments. Therefore, no actions were deemed necessary
under the provisions of the Unfunded Mandates Reform Act of 1995,
Public Law 104-4, 109 Stat. 48 (1995), 2 U.S.C. 1501 et seq.
D. Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule as defined by section 804 of the
Small Business Regulatory Enforcement Act of 1996, Public Law 104-121,
804, 110 Stat. 847, 872 (1996), 5 U.S.C. 804(2). This rule has not been
found to be likely to result in an annual effect on the economy of $100
million or more; a major increase in costs or prices; or significant
adverse effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based companies to
compete with foreign-based companies in domestic or foreign markets.
E. Executive Order 12,866 (Regulatory Planning and Review)
Because this rule affected a number of different agencies and
provides guidance to the public as a statement of policy or
interpretive rule, the final rule was referred to the Office of
Management and Budget pursuant to Executive Order 12866, as amended.
Multiple agencies reviewed and considered the draft and substantial
consultation between agencies occurring during that process. This
supplemental proposed rule reflects that consultation.
F. Executive Order 13,132 (Federalism)
This rule does not have substantial direct effects on the States,
on the relationship between the National Government and the States, or
on the distribution of power and
[[Page 15955]]
responsibilities among the various levels of government. Therefore, in
accordance with section 6 of Executive Order No. 13,132, 64 FR 43,255
(Aug. 4, 1999), this rule does not have sufficient federalism
implications to warrant the preparation of a federalism summary impact
statement.
G. Executive Order 12,988 (Civil Justice Reform)
This rule meets the applicable standards set forth in sections 3(a)
and 3(b)(2) of Executive Order No.12,988, 61 FR 4729 (Feb. 5, 1996).
H. Paperwork Reduction Act.
Under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501, et seq.,
all Departments are required to submit to OMB, for review and approval,
any reporting requirements inherent in a rule. While employers seeking
to establish eligibility for the safe-harbor are encouraged to keep a
record of their actions, this rule does not impose any additional
information collection burden or affect information currently collected
by ICE.
List of Subjects in 8 CFR Part 274a
Administrative practice and procedure, Aliens, Employment,
Penalties, Reporting and recordkeeping requirements.
Accordingly, for the reasons stated in the preamble to the proposed
rule at 71 FR 34281 (June 14, 2006) and the preamble to the final rule
at 72 FR 45611 (Aug. 15, 2007), and as further explained in the
preamble to this supplemental proposed rule, the Department of Homeland
Security proposes to repromulgate, without change, the regulations
published at 72 FR 45611, as 8 CFR 274a.1(l).
Michael Chertoff,
Secretary.
[FR Doc. E8-6168 Filed 3-25-08; 8:45 am]
BILLING CODE 4410-10-P