Sued For Firing Employees with Bad Social Security Numbers - PhoenixCEOCFO.com

Sued For Firing Employees with Bad Social Security Numbers

By Mike King

The Ninth Circuit Court of Appeals recently upheld an award of back-pay and reinstatement for workers with bad social security numbers. Most employers are justifiably nervous about penalties for employing unauthorized alien workers. Many state and local statutes and ordinances have been directed at employers with undocumented workers on their payrolls. In addition, the federal government has become much more aggressive in enforcing criminal penalties against those who conspire to "conceal, harbor, and shield" illegal aliens from detection or encourage and induce unauthorized aliens to reside in the United States.

So your company has probably been struggling to make sure that you are properly using the United States Citizenship and Immigration Services Form I-9, Employment Eligibility Verification document and figuring out what records to review and what records to keep. Your company has probably also been struggling to figure out how to use the E-Verify system from the Social Security Administration and the Department of Homeland Security to verify the work authorization of all newly hired employees. After all, using the E-Verify system for new hires became mandatory in Arizona on January 1, 2008 and was recently made applicable to all federal contractors by President Bush. Sure, your human resources department hated the sign-up process, but at least you feel like your company is safe from criminal and civil penalties. So, to make sure that you don't knowingly employ unauthorized aliens, what would you do if you received a letter from the Social Security Administration telling you that your workers' social security numbers do not match the numbers in the Social Security Administration's database?

Don't answer that question too quickly! Remember there are still laws against discrimination and wrongful termination of employees. For example, if you specify which documents must be provided to verify employment eligibility, you may be guilty of discrimination or "document abuse" in your zealous enforcement of your I-9 Employment Eligibility Verification process. Or, you just might find an arbitrator and then a court telling you that the terminations you made in reaction to the "no-match" letters from the Social Security Administration were without just cause and in breach of the collective bargaining agreement with the Union. Yes, you might find an arbitrator and then a court telling you that you have to reinstate these workers and provide them with back pay.

Let's take a look at what happened to Aramark Facilities Services and its employees at the Staples Center in Los Angeles. Aramark received a "no-match letter" from the Social Security Administration saying that the social security numbers it turned in for 48 of its employees did not match the Social Security Administration's database. (Later in another federal case, a judge enjoined the Social Security Administration from sending out "no-match" letters this way.) Aramark did not want to be in violation of the immigration laws, so it told those 48 employees that they had three days to correct the mismatches or begin the process of applying for new social security cards. A week or ten days after that, Aramark fired 33 employees who did not apply for new social security cards or fix the mismatches. In light of the trouble you can get into for having illegal aliens on the payroll, such a reaction would seem reasonable.

Unfortunately for Aramark, Local 1877 of the Service Employees International Union filed a grievance on behalf of the fired workers saying that the firings were without just cause and in breach of the collective bargaining agreement. The arbitrator ruled in favor of the Union and awarded the terminated workers back-pay and reinstatement based on a finding that "there was no convincing information that any of the fired workers were undocumented."

The Ninth Circuit Court of Appeals said that the "case boils down to a single issue." The issue was whether the Social Security Administration's no-match letters and the responses by the fired employees put Aramark on constructive notice that it was employing undocumented workers. Well, one might think that getting a letter from the government telling you that your employees' social security numbers were bogus would put you on constructive notice that they might be unauthorized alien workers. And surely when the employees failed to fix the situation, you might think the employer has even more than "constructive notice that it was employing undocumented workers." The court said if these things would provide such constructive notice to the employer, then the arbitrator's award of reinstatement and back-pay would force the employer to violate federal immigration law and would have to be vacated as contrary to public policy.
These facts would seem to indicate more than constructive knowledge that an employer was employing undocumented workers. When the government tells you that the social security numbers don't match and the workers fail to fix the problem, that would seem like actual knowledge. The court didn't think so, however. The court stated:

Aramark has not established constructive knowledge of any immigration violations. Constructive knowledge is to be narrowly construed in the immigration context and requires positive information of a worker's undocumented status.

The court seemed to think that Aramark gave the employees with invalid social security numbers too little time to return with better documents. Therefore, the employer had no "convincing information" about immigration violations when it fired them.

The irony is that Aramark seemed to be trying to do the right thing. It employs about 170,000 workers in the United States. It received letters in early 2003 from the Social Security Administration notifying it that the social security numbers of about 3,300 of its employees nationwide did not match the government's database. So Aramark asked all of its regional managers to make sure that the information the company provided to the Social Security Administration matched the information the employees had provided. If the problem was not a company mistake, then the employees were told to correct the problem with the Social Security Administration and provide the company with either a new social security card or verification that a new card was being processed. The employees were told that if they did not do so by the deadline, they would be terminated. Employees were given between a week and ten days to provide the required paperwork.

The court stated, however:

Though it suspected immigration violations, Aramark did not know for sure why the terminated employees did not provide additional documents and even argued to the arbitrator that they could have had "valid" work eligibility. Each of the fired employees had, at the time they were hired, properly completed the federal Employee Eligibility Verification Form ("Form I-9") and provided Aramark with facially valid documents establishing their identity and eligibility to work in the United States. Moreover, Aramark was not notified by any federal agency that its workers were suspected of being undocumented.

Does that seem like splitting hairs to you? When the government tells you that somebody has an invalid social security number, don't you think the federal government might suspect your workers of being undocumented? Is that unreasonable? After all, the federal government can throw you in jail for knowingly hiring an unauthorized alien. Federal regulations say that:

The term knowing includes 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. Part 1274a.1(1)(1). That same regulation says that an employer has "constructive knowledge" of the illegal situation if it has information indicating that the alien is not authorized to work, or acts with "reckless and wanton disregard for the legal consequences of permitting another individual to introduce an unauthorized alien into its workforce or to act on its behalf." So it's hard to see under the circumstances why Aramark was not on constructive notice that it was possibly violating the immigration laws.

The court said, however, that nothing in the law requires the employer to demand action of any kind before ninety (90) days after it receives "no-match" letters from the Social Security Administration. The court also said that "even if the employee cannot resolve the discrepancy within ninety days, the employer can still qualify for the safe-harbor if it completes a new Form I-9 for the employee (using documents that do not depend on the disputed social security number)." Of course, if the employee gave you a bogus social security number, do you really think these new documents being provided with the new I-9 will be accurate? Nevertheless, the court seemed to say that employers should wait longer for employees to fix the problems with the social security numbers and should re-verify eligibility with new I-9 forms and documents.

By now, you may have concluded that you are "damned if you do and damned if you don't" with regard to trying to make sure that all of your workers are legally eligible to be employed in the United States. Maybe so, but if you obtain good legal and human resources advice and very carefully follow all of the intricate procedures applying to verifying eligibility to work and hiring and firing employees, you can stay out of trouble most days.

If your business needs advice concerning compliance with federal, state and municipal laws as to hiring and retention practices, please call me.

Michael R. King is a Partner with the law firm of Gammage and Burnham which is a sponsor of the Phoenix CEO-CFO Group.