Also in this issue:

MoFo News: Recent Wage and Hour Victories
California Supreme Court Issues Important Pro-Employer Decisions

---

A Social Security "NoMatch" Letter: Now What?

The Social Security Administration ("SSA") recently announced an important policy change regarding how many "nomatch" letters it will be sending to employers. It is now likely that most employers will receive one because beginning with year 2002 W2 reports, it plans to send no-match letters to all employers whose W2 data contains any mismatches. Briefly, in an effort to update its database, the SSA sends "no-match" letters to employers when employee names or Social Security numbers listed on the employer's W2 forms do not agree with SSA records. It had been the SSA's policy in the past to send no-match letters only when the employer report generated a 10 percent or greater mismatch rate.

The Problems Faced by Employers Who Receive No-Match Letters

The purpose of the nomatch letters is to inform employers that employees' wages are not being properly credited to their Social Security accounts. A large proportion of employers who receive the SSA notices employ low-wage immigrant workers; many no-match names are Latino, Asian, or other names frequently misspelled by employers. By sending the nomatch letters to employers, SSA aims to correct its records so that employees' earnings are accurately tracked. Many employers are confused about what these letters mean in terms of their obligations to verify employees' employment eligibility and may incorrectly believe they mean a worker is undocumented. Furthermore, many companies are receiving letters from unions and other immigrant rights groups informing them that they are under no obligation to respond to such letters and warning employers that taking adverse action against their employees or reverifying employees' immigration status based upon receipt of such letters is illegal. This Commentary discusses the difficult issues faced by employers who receive SSA nomatch letters and addresses what actions employers should, and should not, take in response to such letters.

Employer's Inquiries Regarding a Worker's Status: The Dilemma

An employer who receives a nomatch letter is instructed by the SSA to take steps to provide corrected data to the SSA. The employer must also ensure that its corrective actions comply with the wide range of laws protecting workers from employment discrimination. Under the Immigration Reform and Control Act of 1986 ("IRCA"), an employer is liable for "knowingly" hiring unauthorized aliens, or for continuing to employ such aliens after learning that they are not authorized to work in the United States. INS rules define "knowledge" to include "not only actual knowledge but also knowledge which may fairly be inferred through notice of certain facts and circumstances which would lead a person, through the exercise of reasonable care, to know about a certain condition." 8 C.F.R. § 274a.1(l). As such, it is possible that in attempting to rectify the discrepancy between a nomatch letter and an employer's records, the employer will become aware of facts that create actual or constructive notice that the employee is not legally authorized to work in the United States. If new information contradicts facts or documents provided by the employee on Form I9 at the time of hire, the employer is obligated to correct or reverify that information. If the employer receives actual knowledge that the employee is not legally authorized to work in the United States, it may not continue to employ him or her.

The dilemma confronting employers is that in many situations, a further inquiry into an employee's work status runs the risk of violating IRCA's "document abuse" prohibition. 8 U.S.C. § 1324B(a)(6). Under IRCA's current anti-discrimination law, an employer's request for additional documents to evidence employment authorization or refusal to honor tendered documents is unlawful if it is made for the purpose or with the intent of discriminating against an individual on the basis of national origin or citizenship status. As such, an employer could be held liable for an unfair immigration-related employment practice if it requests inspection of specific documentation or more documentation than required by law during verification or reverification without a legitimate basis for doing so. The law does not justify employers making further inquiries based on mere rumor or hearsay from workplace sources. Deciding what constitutes a legitimate basis as opposed to mere rumor or hearsay, and what further steps can be taken by the employer, can cause the employer to cross the line from meeting the INS "duty to inquire" rules to violating the rules on further inquiries constituting unfair immigration-related employment practices.

Recommendations to Employers Who Receive NoMatch Letters

NoMatch Letters Standing Alone

Receipt of a nomatch letter from the SSA by itself does not put the employer on notice that a listed employee is unauthorized to work, and therefore does not require the employer to conduct reverification of the right to work in the United States (i.e., a new I9 form) or to make further inquiries of the employee. Furthermore, retaliating against employees based solely on receipt of a nomatch letter may subject an employer to potential liability under the antidiscrimination provisions of IRCA. The nomatch letter sent by the Social Security Administration states specifically that receipt of the letter "is not a basis, in and of itself, for you [the employer] to take any adverse action against the employee" and that "any employer that uses the information in this letter to justify taking adverse action against an employee may violate state or federal law and be subject to legal consequences." There are many reasons for computer nomatches, including record transcriptions, typographical errors, incomplete or blank names or Social Security numbers reported, and name changes. As such, the nomatch letter itself does not prove any wrongdoing by either the employer or the employee. As a result, employers should work with their employees to give them sufficient time to correct the misinformation, including time off from work for employees who need to visit the Social Security office to correct misinformation. The nomatch letter directly outlines the specific steps an employer should take when it receives such a letter, including:

• Compare your employment records to the Forms W2 you reported for the SSNs included on the attached list.
• If your employment records and Forms W2 do not match, prepare Forms W2c with the corrected information from your employment records.
• If your employment records and Forms W2 match, ask your employee to check his/her Social Security card and inform you of any name or SSN difference between your records and his/her card. If your employment records are incorrect, correct your records.
• If your records match the employee's Social Security card, have the employee contact any Social Security office to resolve the issue. Tell the employee that once he/she has visited the Social Security office he/she should inform you of any changes, and correct your records accordingly.
• SSA may also send the employee a notice regarding this issue. You should discuss with the employee any action you take and any changes you make to your employment records.

NoMatch Letters plus Additional Evidence of Unauthorized Work Status

Constructive knowledge of unauthorized work status might be imparted, however, where the employer, in addition to receiving the SSA nomatch letter, received information from some other source indicating that an employment is unauthorized. For instance, if an employee has been given the opportunity for wage reporting purposes to explain and reconcile a reported discrepancy with SSA records and has failed to do so satisfactorily, then the employer could be found to have violated the Immigration and Nationality Act if it continues the employment of such individual without taking appropriate steps to reverify work authorization, and the employee is in fact unauthorized. However, if an employee presents facially genuine documentation (even if it does not include a Social Security card), the employer should not take adverse action against the employee.

Furthermore, employers should be aware that in some cases, the SSA letter does alert employers that certain Social Security numbers may be invalid. These include: (1) numbers with more or less than nine digits, (2) numbers whose first three digits are 000 or are in the 800 or 900 series, (3) numbers whose middle two digits are 00, and (4) numbers whose last four digits are 0000. If one of these cases exists, an employer's failure to follow up on this knowledge with further inquiry could constitute knowing employment of an unauthorized alien. If the employee used his/her Social Security card in completing his/her I-9 form as proof of his/her right to work in the United States, the employer should not continue to rely on that form as a verification of employment eligibility, and should require that the employee complete a new Form I9. If the employee insists on providing only the same invalid Social Security card to document employment eligibility, the employer would have reason to know that the documents were not genuine, and could legitimately terminate the employment without violating IRCA's anti-discrimination provision.

However, a more difficult case is presented if the employer pursues its duty to inquire, asks an employee to reverify his/her right to work in the United States, and the employee presents facially genuine documents (either a new Social Security card or some other acceptable form of documentation). Under IRCA, an employer cannot request specific documentation as proof of the right to work even when under obligation to make further inquiry, nor can the employer insist on more than IRCA requires in terms of verification. In fact, the employer is obligated to accept documents that on their face appear genuine, provided the documents are on the list of acceptable documents set forth on Form I9 (i.e., either one document from "List A" or one document each from "List B" and "List C".) Failure to accept those facially genuine documents could result in an unfair immigration-related employment practice. If the employee provides facially genuine documents, in the event of follow-up investigation by the INS, the employer should have a sufficient defense against a charge that the employer knowingly continued to employ an unauthorized alien. The employer will have met its burden of inquiring further by conducting reverification of the employee's work status. The employer may want to retain a copy of the documents submitted on reverification to evidence its good faith in accepting facially genuine documents.

What Consequences Do Employers Face by Doing Nothing?

Many immigrant workers' advocates are advising employers that under no circumstances should they take adverse action against their employees who appear on nomatch letters and that to do so subjects them to liability. The advocacy groups state that the only duty imposed on the employer by such a letter is a duty to notify the employee of the letter and attempt to correct misinformation. Although the advocacy groups are correct that the SSA does not track responses or report such information to the INS, an employer who takes no action under certain circumstances runs the risk of being held liable for knowingly continuing to employ an unauthorized worker. The INS may not investigate a particular worksite, but if it did, it is possible that the employer would be considered to have constructive knowledge of an employee's unauthorized work status if it fails to clarify the reported discrepancy in the SSA nomatch letter. Furthermore, although the advocacy groups are correct that employees or their unions may file unfair document abuse charges against employers who terminate employees for failure to reverify their employment status, such suits are unlikely to be successful if the employer has grounds to seek reverification. As discussed above, as long as the employer does not have an intent to discriminate against its employees when it requests further documentation, it should not be held liable.

Special Considerations for Union Employees

Special rules may apply to union employees who are covered by collective bargaining agreements. Employers should be aware that two recent arbitration decisions have held that an employer violated the collective bargaining agreement when it terminated employees for failure to provide corrected Social Security numbers after they received no-match letters. The arbitrators held that an employee's failure to correct misinformation reported in the no-match letter did not rise to the level of "just cause" sufficient to justify his/her termination under the collective bargaining agreement. In one of the decisions the arbitrator based her decision on the fact that the employer required the employees to obtain a letter from the SSA verifying that the information had been corrected. The employees did not obtain the letter, but the arbitrator ruled that there was no evidence that the SSA would issue such a letter and therefore the dismissals were unjust.

Furthermore, employers should be aware that many unions are writing employers and requesting that employers provide them with the names of employees who are listed in the SSA no-match letters. Employers will probably want to confer with counsel before doing so, but because of the broad obligation to provide information to their employees' unions and the fact that the SSA nomatch letter may affect the administration of the collective bargaining agreement, some form of the information will probably have to be supplied.

Employers must exercise caution in handling these issues as there is a fine line between meeting the INS "duty to inquire" rules and violating the rules on further inquiries constituting unfair immigration-related employment practices. Hopefully, courts will address these issues in the near future and provide additional insight as to how employers should handle such situations.

 

MoFo News: Recent Wage and Hour Victories

Employers often perceive a pro-employee bias when it comes to wage claim hearings conducted by the California Labor Commissioner's office. The Labor Commissioner, however, does not necessarily have the last word: the decision may be appealed to the Superior Court for a de novo trial. In two recent cases, Morrison & Foerster attorneys successfully convinced Superior Court judges that the Labor Commissioner was wrong and that the employees at issue were not entitled to any overtime compensation.

In the first, Scott Silverman and Michael Chamberlin of Morrison & Foerster's Los Angeles office appealed a Labor Commissioner determination awarding more than $100,000 in unpaid overtime to "Family Teachers" formerly employed by a residential youth care facility. Following a three-day trial, the Superior Court judge agreed with Morrison & Foerster's argument that the Family Teachers were exempt administrative employees and therefore not entitled to overtime compensation.

In the second, Jo Tucker of Morrison & Foerster's Orange County office appealed a determination granting nearly $40,000 to a contracts administration employee who claimed that all of her tasks were "ministerial" in nature. She had also claimed that her average workweek was 60 to 70 hours, even in weeks when she had taken two to three days of sick leave! The Court determined that the employee was properly classified as exempt, the employee took nothing by her claim, and the employer was awarded costs.

 

California Supreme Court Issues Important Pro-Employer Decisions

by Lloyd Aubry

In Jefferson v. California Department of Youth Authority, 2 C.D.O.S. 5945 (July 2, 2002), the court ruled that a worker's compensation Compromise and Release barred a subsequent claim by the employee under the Fair Employment and Housing Act. In February of 1994, Mary Jefferson filed a worker's compensation claim alleging psychological injuries based on sexual harassment. Later that year she filed a sex discrimination claim with the California Department of Fair Employment and Housing, alleging essentially the same underlying facts and injuries that supported her worker's compensation claim. She settled her worker's compensation claim for over $40,000 and signed the pre-printed Compromise and Release form used by the Worker's Compensation Appeal Board to settle such claims.

The Supreme Court reviewed the language in the pre-printed form and the attached language from Civil Code section 1542 -- releasing and forever discharging the Youth Authority from all claims and causes of action, whether now known or ascertained or which may hereafter arise or develop as a result of the claimed injury -- as well as the circumstances of the release, finding that the plaintiff could have had no doubt when she signed the release that she was releasing all claims, including her DFEH claim. The court pointed out that in another case circumstances might exist where a release would not be a complete bar but, under the circumstances of this case, there was no doubt that the plaintiff's claim under the Fair Employment and Housing Act was barred.

Claims involving sexual harassment often occur under both worker's compensation and the Fair Employment and Housing Act, and this case makes it clear that employers can settle all claims at once but need to ensure that whatever documents purport to do so meet the requirements of this case.

In Esberg v. Union Oil Company of California, 2 C.D.O.S. 5609 (June 25, 2002), the California Supreme Court held that the age discrimination provisions of the Fair Employment and Housing Act (FEHA) do not bar an employer from refusing to provide educational assistance to an employee over the age of forty. The plaintiff in this case was a fifty-six-year-old telecommunications specialist who joined the company when he was forty-two years old and had been reimbursed for his educational expenses in obtaining an undergraduate degree. He subsequently discussed with his supervisor the possibility of obtaining a Master of Business Administration degree and company reimbursement for that. The company denied him entry into the program: his supervisor stated, "You're too old to invest in."

Esberg sued the company on a number of theories, including breach of contract and violation of the age discrimination provisions of the Fair Employment and Housing Act. The court held that the FEHA's prohibition against age discrimination in employment extends only to hiring, discharging, suspension, and demotion. It does not, however, prohibit discrimination in the "terms, conditions or privileges of employment," which is language that appears in the FEHA applicable to the other protected classes including race, creed, color, national origin, disability, sex, etc. Since the provision of educational assistance is a privilege of employment not protected under the state's age discrimination statute, Unocal did not violate the FEHA when it refused to provide educational assistance benefits to Esberg.

The jury did, however, award $51,000 in economic damages for breach of contract. Evidently Unocal had a provision in its employee handbook that it did not discriminate on the basis of the various protected classifications listed in the FEHA, including age. Unocal's policy did not make the distinction between age and the other protected classes that the court found existed in the Fair Employment and Housing Act. Accordingly, the jury could reasonably find a breach of contract as set forth in the employer's non-discrimination policies. This was significant for the employer because breach-of-contract claims do not carry the potential for an award of emotional distress damages or punitive damages that are available under the Fair Employment and Housing Act.

In 1998, the Legislature attempted to amend the Fair Employment and Housing Act to make the protections for age discrimination similar to those for the other protected classes. The bill was vetoed by Governor Wilson, but, with this decision, it is likely that the Legislature will attempt to amend the statute again. In the meantime, employers should determine whether any of their practices that do not violate the FEHA do violate their non-discrimination policies and further decide whether appropriate amendments should be considered.