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[Federal Register: October 28, 2008 (Volume 73, Number 209)]
[Rules and Regulations]
[Page 63843-63867]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28oc08-1]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
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[[Page 63843]]
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; Final Regulatory Flexibility Analysis
AGENCY: U.S. Immigration and Customs Enforcement, DHS.
ACTION: Supplemental final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of Homeland Security (DHS) is finalizing the
Supplemental Proposed Rule published on March 26, 2008 and reaffirming
regulations providing a ``safe harbor'' from liability under section
274A of the Immigration and Nationality Act for employers that follow
certain procedures after receiving a notice--either a ``no-match
letter'' from the Social Security Administration (SSA), or a ``notice
of suspect document'' from DHS--that casts doubt on the employment
eligibility of their employees. DHS is also correcting a typographical
error in the rule text promulgated in August 2007.
DATES: This final rule is effective as of October 28, 2008.
ADDRESSES: The comments on the supplemental proposed rule and the
proposed rule on docket DHS Docket No. ICEB-2006-0004, may be reviewed
by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
In person at U.S. Immigration and Customs Enforcement, 500
12th St., SW., 5th Floor, Washington DC 20024. Contact Joe Jeronimo,
U.S. Immigration and Customs Enforcement, Telephone: 202-732-3978 (not
a toll-free number) for an appointment.
FOR FURTHER INFORMATION CONTACT: Joe Jeronimo, U.S. Immigration and
Customs Enforcement, 500 12th St., SW., 5th Floor, Washington DC 20024.
Telephone: 202-732-3978 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Docket
II. Background
A. History of the Rulemaking
B. Purpose of the Rulemaking
C. Supplemental Final Rule
1. Authority to Promulgate the Rule
2. ``Reasoned Analysis'' Supporting Perceived Change in Policy
Reflected in the Final Rule
3. Anti-Discrimination Provisions of the INA
4. Regulatory Flexibility Analysis
III. Public Comments and Responses
A. Authority To Promulgate the Rule
B. ``Reasoned Analysis'' Supporting Perceived Change in Policy
Reflected in the Final Rule
C. Anti-Discrimination Provisions of the INA
D. Regulatory Flexibility Analysis
1. Scope of Regulatory Flexibility Act Review
2. Direct and Indirect Impact
3. Baseline Costs, Unauthorized Alien Workers, and the
Immigration Reform and Control Act of 1986
4. Variability of SSA Criteria for Issuing No-Match Letters
5. Base Assumptions Made in the IRFA and SEIA
6. Opportunity and Productivity Costs
7. Human Resources and Employee Tracking
8. Other Costs
9. Rehiring Seasonal Employees
10. Conclusions
E. Further Interpretation of the August 2007 Final Rule
F. Other Comments Received
IV. Changes Made in Republishing the Final Rule
V. Statutory and Regulatory Reviews
A. Administrative Procedure Act
B. Regulatory Flexibility Act
1. Need for, Objectives of, and Reasons Why the Rule is Being
Considered
2. Significant Issues Raised in Public Comments
3. Description of and 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. Minimization of Impact
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
PART 274a--CONTROL OF EMPLOYMENT OF ALIENS
I. Docket
Comments on the supplemental proposed rule, the proposed rule, and
the Small Entity Impact Analysis may be viewed online at http://
www.regulations.gov (docket ICEB-2006-0004), or in person at U.S.
Immigration and Customs Enforcement, Department of Homeland Security,
500 12th St., SW., 5th Floor, Washington, DC 20024, by appointment. To
make an appointment to review the docket, call telephone number 202-
732-3979 (not a toll-free number).
II. Background
A. History of the Rulemaking
DHS published a proposed rule in June 2006 that proposed a method
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 their
employees' eligibility to work. 71 FR 34281 (June 14, 2006). A sixty-
day public comment period ended on August 14, 2006.
DHS received approximately 5,000 comments on the proposed rule from
a variety of sources, including labor unions, not-for-profit advocacy
organizations, industry trade groups, private attorneys, businesses,
and other interested organizations and individuals. The comments varied
considerably; some commenters strongly supported the rule as proposed,
and others were critical of the proposed rule and suggested changes.
See http://www.regulations.gov, docket number ICEB-2006-0004.
DHS published a final rule on August 15, 2007, setting out safe
harbor procedures for employers that receive SSA no-match letters or
DHS notices. 72 FR 45611 (Aug. 15, 2007). Each comment received was
reviewed and considered in the preparation of the August 2007 Final
Rule. The August
[[Page 63844]]
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 to enjoin
implementation of the August 2007 Final Rule in the United States
District Court for the Northern District of California. AFL-CIO v.
Chertoff, 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, 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),
and on October 10, 2007 granted plaintiffs' motion for preliminary
injunction. AFL-CIO v. Chertoff, 552 F.Supp.2d 999 (N.D. Cal. 2007)
(order granting motion for preliminary injunction).
The district court concluded that 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. 552 F.Supp.2d at
1006. Following its entry of the preliminary injunction, the district
court stayed proceedings in the litigation. See AFL-CIO v. Chertoff,
D.E. 149 (N.D. Cal. Dec. 14, 2007) (minute entry).
DHS published a supplemental notice of proposed rulemaking in March
2008 to address the specific issues raised by the court in the
preliminary injunction order. 73 FR 15944, 45, 46-47 (March 26, 2008).
In the supplemental proposed rulemaking, DHS reviewed past government
communications about SSA no-match letters to clarify the history of the
Department's policy on the significance of those letters, and supplied
additional ``reasoned analysis'' in support of the policy set forth in
the rule. 73 FR at 15947-50. DHS also clarified that the authority to
interpret and enforce the anti-discrimination provisions of the IRCA
rests with DOJ, 73 FR at 15950-51, and provided an initial regulatory
flexibility analysis, 73 FR at 15951, 52-54, including a small entities
analysis. Docket ICEB-2006-0004-0233.
The public comment period on the supplemental proposed rule ended
on April 25, 2008. DHS received approximately 2,950 comments on the
supplemental proposed rule from a variety of sources, including labor
unions, not-for-profit advocacy organizations, industry trade groups,
private attorneys, businesses, and other interested organizations and
individuals.
A number of public comments were the product of mass-mailing
campaigns, resulting in DHS receiving identical or nearly identical
electronic filings during the comment period. Other comments included
multiple-signature petition drives that presented a specific point of
view. Many comments expressed opinions on immigration policy generally
but provided little substantive information or supporting documentation
that DHS could use to refine its judgment on the efficacy of the
rulemaking or that was pertinent to the issues raised by the
supplemental proposed rulemaking.
DHS viewed every comment received from a different source as a
separate comment, notwithstanding similarities in wording. When
multiple comments were received from the same source but via different
media (e.g. electronic and mail), DHS attempted to identify and
correlate the comments. DHS reviewed the substance of every comment and
considered the substance of the comments in formulating this final
rule. We summarize the substance of the comments received below.
During the public comment period, DHS received requests that the
comment period be extended. DHS reviewed these requests and concluded
that they presented no novel or difficult issues justifying an
extension of the comment period, particularly in light of the
rulemaking's extensive history, as well as the limited number of issues
raised by the district court and addressed in the supplemental proposed
rule. Accordingly, DHS declines to extend the comment period.
In developing this supplemental final rule, DHS has considered the
entire administrative record of the August 2007 Final Rule, as well as
the record of proceedings in the pending litigation, including
arguments made in the various motions and briefs, and orders of the
district court, that were relevant to the issues addressed in this
action. 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)) (hereinafter ``Administrative Record''). The docket of the
United States District Court for the Northern District of California is
a public record and the documents contained therein are available from
the court clerk's office.
After considering the full record, including the comments received
in response to the supplemental notice of proposed rulemaking, DHS has
made adjustments to the cost calculations in the Initial Regulatory
Flexibility Analysis (IRFA) and prepared a Final Regulatory Flexibility
Analysis (FRFA), finalized the additional legal analysis set out in the
supplemental notice of proposed rulemaking, and determined that the
rule should issue without change. Therefore this final rule reaffirms
the text of the August 2007 Final Rule without substantive change and
makes one typographical correction.
B. Purpose of the Rulemaking
The Federal Government 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. In 1997, the U.S. Commission on Immigration Reform found
the following:
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. Comm'n on Immigration Reform, Becoming an American: Immigration
[[Page 63845]]
and Immigrant Policy 113-14, 117 (1997) (emphasis in original);
Administrative Record at 139-140, 143.
Similarly, the Federal Government has been long aware of the
potential for abuse of social security numbers by aliens who are not
authorized to work in the United States. Such abuse has been the
subject of numerous public reports by the Government Accountability
Office and the SSA's Inspector General, as well as congressional
hearings. See, e.g., Administrative Record, 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.,
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
(estimating approximately 11.2 million illegal aliens in the United
States; approximately 7.2 million illegal aliens in the workforce); 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).
The scale of the problem that this rule seeks to address--that is,
the unlawful employment of aliens not authorized to work in the United
States--has become more well-defined through 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),
Administrative Record 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 a substantial portion
of their workforce is unauthorized--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 unauthorized aliens 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; Administrative Record at 309, 313.
Based on the rulemaking record and the Department's law enforcement
expertise, DHS finds that there is a substantial connection between
social security no-match letters and the lack of work authorization by
some employees whose SSNs are listed in those letters. While social
security no-match letters do not, by themselves, conclusively establish
that an employee is unauthorized, DHS's (and legacy INS's) interactions
with employers that 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; Administrative Record 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; Administrative
Record at 314, 316, 334-44 (noting employer ``complaints'' over loss of
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 that many law-abiding employers are unsure of their obligations
under current immigration law after they receive a no-match letter, and
that some employers fear allegations of anti-discrimination law
violations 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. Accordingly, in
this final rule, DHS outlines specific steps that reasonable employers
may take in response to SSA no-match letters, and offers employers that
follow those steps a safe harbor from ICE's use of SSA no-match letters
in any future enforcement action to demonstrate that an employer has
knowingly employed unauthorized aliens in violation of section 274A of
the Immigration and Nationality Act (INA), 8 U.S.C. 1324a.
C. Supplemental Final Rule
1. Authority to Promulgate the Rule
Congress has delegated to the Secretary of Homeland Security the
authority to promulgate regulations that implement, interpret and fill
in the administrative details of the immigration laws. INA section
103(a), 8 U.S.C. 1103(a); Homeland Security Act of 2002, Public Law
107-296, sections 102(a)(3), (b)(1), and (e), 110 Stat. 2135 (Nov. 25,
2002) (HSA), as amended, 6 U.S.C. 112(a)(3), (b)(1), and (e). Under
Chevron U.S.A. Inc. v. Natural Resources Defense 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 Branch may, as appropriate, announce or change its policies
and statutory
[[Page 63846]]
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. Ass'n v. State Farm Mut. Auto.
Ins., 463 U.S. 29, 43 (1983).
DHS is authorized by the HSA and the INA to investigate and pursue
sanctions against employers that knowingly hire or continue to employ
unauthorized aliens or do not properly verify their employees'
employment eligibility. HSA sections 102(a)(3), 202(3), 441, 442, 6
U.S.C. 112(a)(3), 251, 252; INA section 274A(e), 8 U.S.C. 1324a(e). All
persons or entities that hire, recruit or refer persons for a fee for
employment in the United States must verify the identity and employment
eligibility of all employees hired to work in the United States. INA
section 274A(a)(1)(B), (b)(1), (b)(2) 8 U.S.C. 1324a(a)(1)(B), (b)(1),
(b)(2). Under the INA, this verification is performed by completing an
Employment Eligibility Verification form (Form I-9) for all employees,
including United States citizens. INA section 274A(b)(1), (b)(2), 8
U.S.C. 1324a (b)(1), (b)(2); 8 CFR 274a.2. An employer, or a recruiter
or referrer for a fee, must retain the completed Form I-9 for three
years after hiring, recruiting or referral, or, where the employment
extends longer, for the life of the individual's employment and for one
year following the employee's departure. INA section 274A(b)(3), 8
U.S.C. 1324a(b)(3). These forms are not routinely filed with any
government agency; employers are responsible for maintaining these
records, and they may be requested and reviewed by DHS Immigration and
Customs Enforcement (ICE). See 71 FR 34510 (June 15, 2006).
DHS's authority to investigate and pursue sanctions against
employers that knowingly hire or continue to employ unauthorized aliens
necessarily includes the authority to decide the evidence on which it
will rely 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 would
constitute ``reasonable care.'' In the August 2007 Final Rule--as
supplemented by this final rule--DHS announces its interpretation of
INA section 274A and 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, if
the employer follows the procedures outlined in the rule. This
limitation on DHS's enforcement discretion--this safe harbor--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). This
rule does not affect the authority of 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 authority to amend and reissue the rule. The
Executive Branch's amendment of 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).
As noted in the supplemental notice of proposed rulemaking, 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); 73 FR at 15947. The preliminary injunction did not
prohibit further rulemaking by DHS. The district court subsequently
stayed proceedings in the litigation to allow for further rulemaking.
AFL-CIO v. Chertoff, D.E. 142 (stay motion); 144 (statement of non-
opposition); 149 (minute order staying proceedings pending new
rulemaking) (N.D. Cal. 2007). Accordingly, not only does DHS continue
to have the authority to revise and finalize this rulemaking but the
orders of the district court contemplate such rulemaking action.
2. ``Reasoned Analysis'' Supporting Perceived Change in Policy
Reflected in the Final Rule
An agency action is arbitrary and capricious if the agency fails to
examine relevant data and articulate a satisfactory explanation for its
action including a ``rational connection between the facts found and
the choice made.'' Motor Vehicle Mfrs. Ass'n v. State Farm Mutual Auto.
Ins., 463 U.S. 29, 43 (1983). In its order granting the preliminary
injunction, the district court found that ``DHS has sufficiently
articulated a rational connection between the facts found and the
choice made.'' 552 F.Supp.2d at 1010. The district court expressed
concerns, however, that DHS had not sufficiently articulated a
rationale for what the court saw as DHS's ``change'' in position on the
significance of SSA no-match letters when promulgating that August 2007
Final Rule. While the district court acknowledged that the preamble to
the August 2007 Final Rule remained consistent with DHS's and legacy
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,' '' 559 F.Supp.2d at 1009 (quoting
72 FR 45616), the court 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 DHS's
position, the court concluded that ``DHS may well have the authority to
change its position, but because DHS did so without a reasoned
analysis, there is at least a serious question whether the agency has
`casually ignored' prior precedent in violation of the APA.'' 552
F.Supp.2d at 1010.
DHS provided in the supplemental proposed rule an extensive review
of the non-precedential correspondence and public reports relating to
the value of SSA no-match letters as an indicator that individuals
listed in a letter may not be authorized to work in the United States
and the obligations of employers to respond to such letters. 73 FR at
15947-48. That review showed that neither the former INS nor DHS had
issued a formal or precedential
[[Page 63847]]
statement of agency policy regarding the significance of SSA no-match
letters, and that, therefore, there was no agency precedent that had
been ``casually ignored'' in DHS's promulgation of the August 2007
Final Rule. It also showed that DHS's consistent, if informal, view of
SSA no-match letters has been 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. The position reflected in the August 2007 Final
Rule--that a no-match letter, and an employer's response to such a
letter could, in the totality of the circumstances, constitute proof of
an employer's constructive knowledge that an employee is not authorized
to work in the United States--was consistent with the informal agency
interpretations offered to employers over the past decade.
Nevertheless, in light of the court's concerns that DHS had changed
its position on these issues in the August 2007 Final Rule, the
supplemental notice of proposed rulemaking set forth the ``reasoned
analysis'' sought by the court and identified four significant reasons
for the issuance of this rule: (1) The need to resolve ambiguity and
confusion among employers regarding their obligations under the INA
following receipt of an SSA no-match letter; (2) the growing evidence
and consensus within and outside government that SSA no-match letters
are a legitimate indicator of possible illegal work by unauthorized
aliens; (3) DHS's view that SSA's criteria for sending employee no-
match letters helps to focus those letters on employers that have
potentially significant problems with their employees' work
authorization; and (4) the established legal principle that employers
may be found to have knowingly employed unauthorized alien workers in
violation of INA section 274A based on a constructive knowledge theory.
73 F.R. 15949-50.
a. Need for Clear Guidance Regarding No-Match Letters
As was noted in the supplemental notice of proposed rulemaking, one
key justification for issuance of this rule is to eliminate ambiguity
regarding an employer's responsibilities under the INA upon receipt of
a no-match letter. As one business organization with nationwide
membership commented in response to the initial publication of the
proposed rule in 2006:
Disagreement 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.
Administrative Record 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 was in 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, agency
correspondence over the years was heavily caveated, at times even
equivocal, and although more recent letters from DHS had articulated
more clearly 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
were left free to stake out positions that best served their parochial
interests, by in some cases misconstruing language in the 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 be listed in those
letters. In the face of this ambiguity, well-meaning employers'
responses to SSA no-match letters were also affected by concern about
running afoul of the INA's antidiscrimination provisions. 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 the illegal work status of employees whose names or SSNs
are listed. Further, because the constructive knowledge standard
applies a ``totality of the circumstances'' test to the facts of a
particular case, and is therefore 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.
b. No-Match Letters Are Legitimate Indicators of Possible Illegal Work
by Unauthorized Aliens
DHS's reasoned analysis on the evidentiary value of SSA no-match
letters in the August 2007 Final Rule, and in this supplemental
rulemaking, also includes 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) has reported, after reviewing earnings
suspense file data for tax years 1999-2001, that fraudulent use of SSNs
\1\ was widespread in the service, restaurant, and agriculture
industries and that such fraud was a significant cause of SSA no-
matches:
---------------------------------------------------------------------------
\1\ See INA Section 274C, 8 U.S.C. 1324c.
[OIG] identified various types of reporting irregularities, such
as invalid, unassigned and duplicate SSNs and SSNs belonging to
young children and deceased individuals. While we recognize there
are legitimate reasons why a worker's name and SSN may not match SSA
files, such as a legal name change, we believe the magnitude of
incorrect wage reporting is indicative of SSN misuse. Employees and
industry association representatives acknowledged that unauthorized
---------------------------------------------------------------------------
noncitizens contribute to SSN misuse.
Office of the Inspector General, Social Security Administration, Social
Security Number Misuse in the Service, Restaurant, and Agriculture
Industries, Report A-08-05-25023, at 2 (April 2005), Administrative
Record at 456. See generally Administrative Record at 35-661.
[[Page 63848]]
SSA no-match letters have also formed a basis for multiple criminal
investigations by ICE and prosecutions on charges of harboring or
knowingly hiring unauthorized aliens.\2\
---------------------------------------------------------------------------
\2\ See, e.g., United States v. Gonzales, 2008 WL 160636 (N.D.
Miss. No. 4:07-CR-140, Jan. 18, 2008) (finding no-match letters
admissible at trial, and upholding a search warrant obtained on the
basis of information, including copies of social security no-match
letters, received from a confidential informant, treating no-match
letters as ``documentary evidence supporting the allegation'' of the
confidential informant); United States v. Fenceworks, Inc., No.
3:06-CR-2604 (S.D. Cal.), D.E. 16 (judgment of probation and
forfeiture of $4,700,000 in case involving multiple Social Security
no-match letters) (related cases Nos. 3:06-CR-2605 (probation and
fine of $100,000); 3:06-CR-2606 (probation and fine of $200,000));
United States v. Insolia, No. 1:07-CR-10251 (D. Mass), D.E. 1
(complaint; attachment, ]] 25-32, February 2007 probable cause
affidavit detailing history of employer's no-match letters from 2002
through 2005 and other investigative methods and facts); 34
(indictment); United States v. Rice, No. 1:07-CR-109 (N.D.N.Y), D.E.
1 (complaint; attached probable cause affidavit) (]] 64-66,
detailing results of matching analysis and SSA letters received by
defendant's employer), D.E. 17 (plea agreement).
---------------------------------------------------------------------------
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., Administrative Record
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, 552 F.Supp.2d at 1008 (``th[e] Court cannot agree with
plaintiffs'' fundamental premise that a no-match letter can never
trigger constructive knowledge, regardless of the circumstances'').
c. SSA's Procedures Better Target No-Match Letters to Employers With
Potential Workforce Problems
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. SSA does not send employer no-match letters to every
employer with a no-match. Instead, SSA sends letters only when an
employer submits a wage report reflecting at least 11 workers with no-
matches, and when the total number of no-matches in a given wage report
represents more than 0.5% of the employer's total Forms W-2 in the
report.
In addition, SSA has continued to refine the wage reporting process
in ways that help to reduce administrative error resulting in a no-
match letter. Employers filing more than 250 Forms W-2 are required to
file electronically (see 42 U.S.C. 405(c)(2)(A); 20 CFR 422.114; 26 CFR
301.6011-2), and electronic filing of Forms W-2 has risen from 53% of
all employee reports in FY2003 to over 80% in FY2007--a 51%
increase.\3\ This direct electronic filing substantially reduces the
likelihood that SSA errors--such as during data entry of the
information submitted on a paper Form W-2--would result in
discrepancies in the wage reports. Employers also have access to SSA's
system for identifying name-SSN mismatches at the time they file the
wage reports. That system can only be used to verify current or former
employees and only for wage reporting (Form W-2) purposes. Employers
who use SSA's system are able to eliminate most no-matches in their
reports and thereby significantly reduce their likelihood of receiving
a no-match letter.
---------------------------------------------------------------------------
\3\ Social Security Administration, Performance and
Accountability Report, Fiscal Year 2007 at 67-8.
---------------------------------------------------------------------------
DHS is also aware that SSA has developed a series of computerized
error-checking routines to resolve certain common errors that result in
unmatched name and SSN. These routines resolve name discrepancies
caused by misspellings, typographical errors, first name and last name
transpositions, and female surname changes (e.g. marriage or divorce).
They can also resolve discrepancies from the use of a derivative
nickname instead of a proper name or from scrambling compound or
hyphenated surnames. The routines can also resolve SSN discrepancies
such as numerical transpositions.
GAO has reported that approximately 60 percent of no-matches in
recent tax years' wage reports are corrected by SSA's algorithms. See
Government Accountability Office, Social Security: Better Coordination
among Federal Agencies Could Reduce Unidentified Earnings Reports (GAO
Report 05-154, 2005), Administrative Record at 400. See also Office of
the Inspector General, Social Security Administration, Effectiveness of
the Single Select Edit Routine (Audit Report A-03-07-17065, Sept.
2007). While these routines cannot resolve all discrepancies, they
reduce the number of inadvertent no-matches that are reported to
employers.
DHS believes that, taken together, these efforts better direct no-
match letters to employers that have potentially significant problems
with their employees' work authorization. Employers with stray mistakes
or de minimis inaccuracies are much less likely to receive no-match
letters.
d. The Longstanding Principle That Employers May Be Liable for INA
Violations Based on Constructive Knowledge
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 25928 (June 25, 1990). As noted in the preamble to the
original regulation, that definition of knowledge is consistent with
the Ninth Circuit's decision in Mester Mfg. Co. v. INS, 879 F.2d 561,
567 (9th Cir. 1989) (holding that, after receiving information that
employees were suspected of having presented false documents to show
work authorization, the employer had constructive knowledge of
unauthorized status because the employer failed to make inquiries or
take appropriate corrective action). See also New El Rey Sausage Co. v.
INS, 925 F.2d 1153, 1158 (9th Cir. 1991).
The rulemaking record demonstrates that employers have continued to
[[Page 63849]]
demand clear guidance on appropriately responding to SSA no-match
letters, consistent with their obligations under the INA. It also
demonstrates a well-established consensus that the appearance of
employees' SSNs on an SSA no-match letter may indicate lack of work
authorization. The record also shows that SSA's practices in generating
no-match letters helps to focus those letters on employers that, in
DHS's view, have non-trivial levels of employees with SSN mismatches in
their workforce, 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.
This reasoned analysis supports DHS's position 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. Assuming, as did the district court, that this
position constituted a change from prior statements in informal agency
correspondence, DHS has now provided additional--and sufficient--
reasoned analysis to support that change.
3. Anti-Discrimination Provisions of the INA
The preamble to the August 2007 Final Rule said that employers that
adopt the rule's safe harbor procedures to verify employees' identity
and work authorization must apply them uniformly to all employees who
appear on employer no-match letters. Failure to do so, the preamble
warned, may violate the INA's anti-discrimination provisions. The
preamble further noted that employers that follow the safe harbor
procedures 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's authority to offer what the
court viewed as interpretations, rather than mere restatements, of
settled anti-discrimination law, noting that DOJ, not DHS, has
authority for interpretation and enforcement of the INA's anti-
discrimination provisions. The court concluded that DHS appeared to
have exceeded its authority. 552 F.Supp.2d at 1011.
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 the Office of Special Counsel, 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, DHS
rescinds the statements in the preamble of the August 2007 Final Rule
discussing the potential for anti-discrimination liability faced by
employers that follow the safe harbor procedures set forth in the
August 2007 Final Rule.\4\ DHS has also revised the language in its
insert letter that will accompany the SSA no-match letters. These
changes do not alter existing law or require any change to the rule
text.
---------------------------------------------------------------------------
\4\ For example, DHS rescinds 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.'' 73 FR at 15950, citing 72 FR
45613-14.
---------------------------------------------------------------------------
DHS recognizes the concerns raised by commenters that
discrimination litigation may be brought against them. As expressed by
one commenter:
One of the greatest potential costs faced by employers as a
result of this rulemaking is the increased likelihood of
discrimination lawsuits brought about by the required termination of
employees who cannot resolve ``mismatches.'' DHS' retraction of the
assurances it attempted to provide in the proposed rule only
increases the uncertainty that employers face. Moreover, even
meritless claims brought by terminated employees will require
significant expenses in legal fees and related costs to defend, and
unless DHS can remove jurisdiction in all courts in which such
actions might be brought, it cannot prevent these expenses. Our
reality is that we will be ``attacked'' by numerous organizations *
* * as we have been in the past.
ICEB-2006-0004-0498.1 at 1-2 (emphasis in original); see also ICEB-
2006-0004-0571.1 at 2; ICEB-2006-0004-0679.1 at 2.
While DHS lacks the authority to announce interpretations of the
anti-discrimination provisions of the INA, DOJ possesses such
authority, and persons seeking guidance regarding employers' anti-
discrimination obligations in following the safe harbor procedures in
the August 2007 Final Rule, as modified by this supplemental
rulemaking, should follow the direction provided by DOJ published in
today's edition of the Federal Register, and available on the Web site
of the Office of Special Counsel for Immigration-Related Unfair
Employment Practices, at http://www.usdoj.gov/crt/osc/htm/
Nomatch032008.htm. Employers may also seek advice on a case-by-case
basis through OSC's toll-free employer hotline: 1-800-255-8155. The
Department continues to urge employers to apply the safe harbor
procedures in this rule to all employees referenced in an SSA no-match
letter or a DHS notice uniformly and without regard to perceived
national origin or citizenship status.
4. Regulatory Flexibility Analysis
In its decision enjoining implementation of the August 2007 Final
Rule, the district court construed the safe harbor in the rule as
effectively creating compliance obligations for employers that received
no-match letters. Doubting the voluntary nature of the safe harbor
rule, the court found it likely that small businesses would incur
significant costs to enter the safe harbor:
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.
552 F.Supp.2d at 1013 (internal quotations and citations omitted). In
light of the district court's conclusion
[[Page 63850]]
that a regulatory flexibility analysis would likely be required, DHS
published an initial regulatory flexibility analysis (IRFA) in the
supplemental proposed rule, 73 FR at 15952-54, and placed on the docket
for public comment the Small Entity Impact Analysis, Supplemental
Proposed Rule: Safe Harbor Procedures for Employers Who Receive a No-
Match Letter, ICEB-2006-0004-0233 (hereinafter, the ``SEIA'').
DHS continues to view the August 2007 Final Rule and this
supplemental rule as interpretive, 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 (D.C.
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. Instead, 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. 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 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. v. FCC, 402 F.3d 205, 214 (D.C. Cir.
2005), the Department provided an IRFA and supporting economic
analysis, and has now prepared a Final Regulatory Flexibility Analysis
(FRFA) in response to the district court's concerns.
As the United States Court of Appeals for the Ninth Circuit has
noted, the Regulatory Flexibility Act (RFA) ``imposes no substantive
requirements on an agency; rather, its requirements are `purely
procedural' in nature. * * * To satisfy the RFA, an agency must only
demonstrate a `reasonable, good-faith effort' to fulfill its
requirements.'' Ranchers Cattlemen Action Legal Fund v. USDA, 415 F.3d
1078, 1101 (9th Cir. 2005). See also Envtl. Def. Ctr. v. EPA, 344 F.3d
832, 879 (9th Cir. 2003) (``Like the Notice and Comment process
required in administrative rulemaking by the APA, the analyses required
by the RFA are essentially procedural hurdles; after considering the
relevant impacts and alternatives, an administrative agency remains
free to regulate as it sees fit.'').
The RFA, by definition, does not apply to individuals. Where it
applies, the RFA requires agencies to analyze the impact of rulemaking
on ``small entities.'' Small entities include small businesses, not-
for-profit organizations that are independently owned and operated and
are not dominant in their fields, and governmental jurisdictions with
populations of less than 50,000. 5 U.S.C. 601(3), (5)-(6). Small
businesses are defined in regulations promulgated by the Small Business
Administration. 13 CFR 121.201.
The RFA provides that an initial regulatory flexibility analysis
(IRFA) shall contain:
(1) A description of the reasons why action by the agency is
being considered;
(2) A succinct statement of the objectives of, and legal basis
for, the proposed rule;
(3) A description of and, where feasible, an estimate of the
number of small entities to which the proposed rule will apply;
(4) A description of the projected reporting, recordkeeping and
other compliance requirements of the proposed rule, including an
estimate of the classes of small entities which will be subject to
the requirement and the type of professional skills necessary for
preparation of the report or record;
(5) An identification, to the extent practicable, of all
relevant Federal rules which may duplicate, overlap or conflict with
the proposed rule.
5 U.S.C. 603(b). Furthermore, an IRFA must also contain:
a description of any significant alternatives to the proposed
rule which accomplish the stated objectives of applicable statutes
and which minimize any significant economic impact of the proposed
rule on small entities. Consistent with the stated objectives of
applicable statutes, the analysis shall discuss significant
alternatives such as--
(1) The establishment of differing compliance or reporting
requirements or timetables that take into account the resources
available to small entities;
(2) The clarification, consolidation, or simplification of
compliance and reporting requirements under the rule for such small
entities;
(3) The use of performance rather than design standards; and
(4) An exemption from coverage of the rule, or any part thereof,
for such small entities.
5 U.S.C. 603(c). The RFA does not require that these elements be
considered in a specific manner, following a prescribed formula or
content. Given the nature of rulemaking, and its diversity, agencies
develop IRFAs in a manner consistent with the statute and the
rulemaking itself.\5\
---------------------------------------------------------------------------
\5\ The Small Business Administration had provided additional
guidance. See Office of Advocacy, Small Business Administration, A
Guide for Government Agencies: How to Comply with the Regulatory
Flexibility Act (2003). It states, in pertinent part:
The RFA requires agencies to conduct sufficient analyses to
measure and consider the regulatory impacts of the rule to determine
whether there will be a significant economic impact on a substantial
number of small entities. No single definition can apply to all
rules, given the dynamics of the economy and changes that are
constantly occurring in the structure of small-entity sectors.
Every rule is different. The level, scope, and complexity of
analysis may vary significantly depending on the characteristics and
composition of the industry or small entity sectors to be regulated.
Id. at 14.
---------------------------------------------------------------------------
The IRFA provided with the supplemental notice of proposed
rulemaking contained the elements listed in 5 U.S.C. 603(b) as well as
the discussion of significant regulatory alternatives required by 5
U.S.C. 603(c). The supplemental proposed rule explicitly requested
comments on the economic aspects of the analysis and on the discussion
of regulatory alternatives. Publication of the supplemental proposed
rule received significant media coverage. The U.S. Small Business
Administration Office of Advocacy (Advocacy) hosted a small business
roundtable shortly after publication of the supplemental proposed rule
to collect comments from interested small businesses and submitted a
public comment letter based on this input. The comments provided by
Advocacy are addressed in the analysis below. As noted above, the
supplemental proposed rule and accompanying IRFA received nearly 3,000
comments from the public, including a significant number of comments
specifically addressing the IRFA and the underlying SEIA.
DHS has reviewed the comments received on the IRFA and has
concluded that the IRFA complied with the statutory standards for such
an analysis and provided the public sufficient information to submit
informed comments regarding the possible impact of this rule.
[[Page 63851]]
In light of comments that identified plausible regulatory
alternatives or areas needing further clarification or adjustments in
the economic model underlying the SEIA, DHS has revised the analysis
and assembled a FRFA. The RFA requires that a FRFA contain:
(1) A succinct statement of the need for, and objectives of, the
rule;
(2) A summary of the significant issues raised by the public
comments in response to the initial regulatory flexibility analysis,
a summary of the assessment of the agency of such issues, and a
statement of any changes made in the proposed rule as a result of
such comments;
(3) A description of and an estimate of the number of small
entities to which the rule will apply or an explanation of why no
such estimate is available;
(4) A description of the projected reporting, recordkeeping and
other compliance requirements of the rule, including an estimate of
the classes of small entities which will be subject to the
requirement and the type of professional skills necessary for
preparation of the report or record; and
(5) A description of the steps the agency has taken to minimize
the significant economic impact on small entities consistent with
the stated objectives of applicable statutes, including a statement
of the factual, policy, and legal reasons for selecting the
alternative adopted in the final rule and why each one of the other
significant alternatives to the rule considered by the agency which
affect the impact on small entities was rejected.
5 U.S.C. 604(a). The discussion below and in the final SEIA on the
docket addresses specific comments received on the IRFA and, together
with the FRFA summarized in this supplemental final rule, provides the
statutorily required agency assessment of comments received,
projections of the number of affected small entities, description of
the anticipated reporting and compliance burdens, and discussion of
steps taken to limit any impact of the rule on small entities. In this
way, DHS has ``demonstrated a `reasonable, good-faith effort' to
fulfill'' the procedural and substantive requirements of the RFA.
III. Public Comments and Responses
A. Authority To Promulgate the Rule
A number of commenters challenged DHS's authority to promulgate
this rule. DHS has reanalyzed its jurisdiction and authority in light
of these comments, and concludes that it has the necessary authority to
promulgate this final rule.
Several commenters suggested that the rule imposes an affirmative
due diligence obligation on employers that does not exist in the INA
once employers complete the Form I-9 process. As is explained in
section II.C, supra, the INA's prohibition on ``knowing'' hiring or
continued employment of unauthorized workers extends to employers that
have constructive 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 decision 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). Contrary to the apparent view of some commenters, the INA does
not absolve employers of any further responsibility once they have
completed the initial Form I-9 verification process. The concept of
constructive knowledge--and employers' responsibility to conduct
reasonable due diligence in response to information that could lead to
knowledge of their employees' illegal status--flows from the INA as
interpreted in long-standing case law and federal regulations; it is
not an invention of this rulemaking.
One commenter argued that the rule would undercut the good faith
compliance defense available to employers that complete the Form I-9
employment eligibility verification process, and is therefore contrary
to the INA. DHS disagrees. The affirmative defense the INA provides to
employers that comply with the Form I-9 process in good faith remains
available as protection against a charge of knowingly hiring
unauthorized employees in violation of INA section 274A(a)(1)(A), but
it has no force, by the statute's plain language, as a defense against
an allegation of knowingly continuing to employ an unauthorized alien
in violation of INA section 274A(a)(2). This rulemaking explains the
evidentiary weight DHS may place on SSA no-match letters and DHS
suspect document notices in identifying, investigating, and prosecuting
employers suspected of continuing to employ unauthorized aliens in
violation of section 274A(a)(2). The commenter's concern over the
continuing viability of the good faith I-9 compliance defense is
misplaced.
One comment also suggested that DHS could not promulgate this rule
because it violates the congressional notification and review
requirements of INA section 274A(d)(3), 8 U.S.C. 1324a(d)(3). That
section provides that the President must notify Congress before he may
make any ``changes in (including additions to) the requirements of
subsection (b)'' of INA section 274A, which established the I-9
employment verification system. INA section 274A(d)(1)(B), 8 U.S.C.
1324a(d)(1)(B) (emphasis added).
The August 2007 Final Rule instructs employers that elect to follow
the safe harbor procedures set out in the rule to confirm identity and
work eligibility by filling out a new Form I-9 for any employees unable
to resolve their mismatch through the 90-day process. This does not,
however, constitute a change to ``the requirements of subsection (b)''
of INA section 274A. The procedures of the safe harbor rule are not a
``requirement''; employers are encouraged to follow these procedures to
limit their legal risk, but they are not compelled to do so. Moreover,
while the I-9 reverification option in the safe harbor procedures is
based on the I-9 process used at the time of hire, it is neither part
of, nor an addendum to, the I-9 process that all employers must follow
at the time of hire. Rather, the safe harbor rule helps employers to
avoid violating the prohibition against knowingly continuing to employ
unauthorized workers. INA section 274A(a)(2), 8 U.S.C. 1324a(a)(2).
B. ``Reasoned Analysis'' Supporting Perceived Change in Policy
Reflected in the Final Rule
Many commenters argued that DHS had not provided an adequate
``reasoned analysis'' the district court suggested was necessary to
support the perceived change in agency position. Several comments
suggested that DHS must establish with certainty, or with some degree
of confidence beyond a rational basis, that a Social Security no-match
letter establishes that the indicated employee was an alien not
authorized to work in the United States. Some argued that the rule
would be arbitrary and capricious unless DHS could refute the claim
``that the SSA database is not a certain indicator of one's right to
work'' in the United States. ICEB 2006-0004-0732.1 at 3.
The comments suggesting that DHS must base the rule on evidence
that an SSA no-match is near-conclusive proof of a listed person's
illegal status misunderstand the nature of this rulemaking action. DHS
has consistently stated that an SSA no-match letter,
[[Page 63852]]
standing alone, does not conclusively establish that any employee
identified in the letter is an unauthorized alien. Nor does an
employer's receipt of, and response to, an SSA no-match letter always
prove that the employer had constructive knowledge that any listed
employees were unauthorized to work in the United States. Rather, this
rulemaking announces DHS's view that a no-match letter, and an
employer's response to it, may be used as evidence, evaluated in light
of ``the totality of the circumstances,'' of an employer's constructive
knowledge. This rulemaking also announces DHS's commitment that an
employer that follows the safe harbor procedures set forth in the rule
will always be found to have responded reasonably to the no-match
letter.
As the district court noted in the pending litigation, DHS does not
claim, and need not prove, that a no-match letter will always be
sufficient evidence to demonstrate constructive knowledge:
The flaw in plaintiffs' argument is their assumption that
receipt of a no-match letter triggers a finding of constructive
knowledge in every instance. In fact, the regulation is written such
that whether an employer has constructive knowledge depends `on the
totality of relevant circumstances.' Depending on the circumstances,
a court may agree with plaintiffs that receipt of a no-match letter
has not put an employer on notice that his employee is likely to be
unauthorized. But this Court cannot agree with plaintiffs'
fundamental premise that a no-match letter can never trigger
constructive knowledge, regardless of the circumstances.
552 F.Supp.2d at 1008.
This safe harbor rule is a rational response to DHS's regulatory
finding that a no-match letter can be evidence of such knowledge--a
finding amply supported in record of this rulemaking and fairly
conceded even by the rule's opponents.
Some commenters argued that the SSA database was fraught with
errors, and that even if SSA no-match letters were an indicator of
possible illegal employment, they are too unreliable to support the
evidentiary weight DHS seeks to place on them. DHS disagrees with the
commenters' suggestion that SSA's records are so substantially
incorrect that DHS can not rely on no-match letters generated from
those records. When attempting to post wages to its Master Earnings
File, SSA compares the employee names and SSNs provided by employers on
Forms W-2 to the names and SSNs recorded in the Agency's NUMIDENT file.
``No-matches'' may result from the number holder's failure to provide
SSA updated information, such as a legal name change resulting from
marriage. Other ``errors'' result from typographical mistakes annotated
on the W-2s by employers. These types of errors are being reduced by a
variety of programmatic efforts, and, with direct electronic reporting
of over 80% of wage data, the potential for errors resulting from the
government's handling of the information is reduced.\6\ As discussed in
more detail below, the effective accuracy of the SSA data from which
no-match letters are derived is estimated to be 99.5 percent. Moreover,
as noted above, DHS views SSA's policy of limiting issuance of no-match
letters to employers whose wage reports contain a certain level of
mismatches as a useful means for separating employers whose reports
contain a certain non-trivial number of errors that might reasonably
indicate possible illegal employment or systematic problems in the
employers' recordkeeping from employers with trivial errors in their
wage reports.
---------------------------------------------------------------------------
\ 6\ Social Security Administration, Performance and
Accountability Report, supra n.2, at 190.
---------------------------------------------------------------------------
Other commenters noted that the supplemental proposed rule did not
explicitly limit the applicability of the safe harbor procedures to the
SSA's ``Employer Correction Request'' or ``EDCOR'' letter. DHS is also
aware that the rule text does not explicitly identify the ``EDCOR''
letter from SSA--addressed to employers and containing more than ten
no-match social security numbers--as the notice from SSA to which the
safe harbor procedures apply. The rule text is written in general terms
to allow the safe harbor procedures to apply to notices that SSA may
issue in the future. DHS has made it clear, however, that the SSA
notice to which the safe harbor rule applies is the ``EDCOR'' letter
listing multiple no-matches, rather than a ``Request for Employee
Information'' or ``DECOR'' letter identifying a single employee with an
SSN/name no-match. First, the text of the rule clearly states that the
procedures may apply where an employer receives ``written notice to the
employer from the Social Security Administration reporting earnings on
a Form W-2 that employees' names and corresponding social security
account numbers fail to match Social Security Administration records.''
The reference to plural no-matches and to W-2 reports distinguishes the
``EDCOR'' letters addressed to employers that list multiple no-matches
from any notice unrelated to a W-2 report or from ``DECOR'' letters
addressed to a single employee or to an employer regarding a single no-
match. Second, DHS explained above and in the preamble to the
supplemental proposed rule that the letter listing multiple employees
with SSN and name no-matches is the notice to which the rule's safe
harbor applies.
C. Anti-Discrimination Provisions of the INA
A significant number of commenters repeated concerns, previously
summarized and addressed in the August 2007 Final Rule, that employers
would engage in illegal discrimination in reaction to this rulemaking.
Such comments regarding the consistency of this regulation with
existing anti-discrimination law and regarding employers' continued
anti-discrimination obligations were addressed in detail in the August
2007 Final Rule, 72 FR at 45620-21, and DHS declines to revisit those
issues in this supplementary rulemaking.
Other commenters objected to DHS's rescission of the statements in
the preamble to the August 2007 Final Rule explaining that employers
will not be engaged in unlawful discrimination under the anti-
discrimination provisions of the INA if they follow the safe harbor
procedures uniformly for all employees, without regard to perceived
national origin or citizenship. In their view, the removal of those
assurances greatly reduced the value of the safe harbor being offered
in this rule, and left employers exposed to potential litigation
accusing them of illegal discrimination as a result of their efforts to
follow the safe harbor procedures set forth in this rulemaking.
DHS agrees that guidance on anti-discrimination compliance is
important to the successful implementation of the safe harbor
procedures. As DHS noted in the August 2007 Final Rule, the Department
of Justice is responsible for enforcing the anti-discrimination
provisions of the INA. DHS believes that the commenters' concerns are
addressed in the anti-discrimination guidance from the DOJ Office of
Special Counsel published in today's edition of the Federal Register.
D. Regulatory Flexibility Analysis
Commenters were divided on whether an initial regulatory
flexibility analysis, and by implication a final regulatory flexibility
analysis, was required. In light of the district court's conclusion
that a regulatory flexibility analysis would likely be required, DHS
has conducted such an analysis, supported by the small entity impact
analysis (SEIA) accompanying this rulemaking. Both are summarized in
greater detail in Section V.B.
The bulk of the comments regarding the RFA argued that the analysis
in the
[[Page 63853]]
IRFA and in the SEIA was flawed. Commenters argued that the scope of
the analysis conducted by DHS was too narrow, that the analysis
incorrectly omitted certain costs from the equation, or that the
analysis was based on inaccurate assumptions about the behavior of
employers and employees that might be impacted by the rule. These
comments regarding the SEIA and IRFA are addressed below.
1. Scope of Regulatory Flexibility Act Review
A number of commenters conflated the requirements of the Regulatory
Flexibility Act, 5 U.S.C. 601 et seq. (RFA), with the requirements of
other statutory and administrative reviews. For example, commenters
suggested that the RFA analysis should include reviews called for by
the Congressional Review Act, 5 U.S.C. 801, the federal data quality
standards guidelines, Executive Order 12866, and other statutes and
executive orders. No law requires that DHS combine all of the elements
of these separate reviews, and DHS declines to do so.
One commenter conceded that these additional reviews are not
required by the RFA:
The DHS Safe-Harbor Rule IRFA presents estimates of costs to
employers associated with following the safe-harbor procedures set
forth in the proposed rule. It excludes certain costs that are not
cognizable under the Regulatory Flexibility Act but are crucial for
estimating the full social impact of the rule--most notably, costs
borne by employees. These costs are not exempt from being counted
under Executive Order 12,866 or the Congressional Review Act.
ICEB-2006-0004-0637.1 at 4. Notwithstanding this admission, the
commenter repeatedly drew from standards outside the RFA to criticize
the content of the IRFA. The law is clear that no other analysis is
bootstrapped into the RFA. It is the case that the RFA permits agencies
to prepare IRFAs in conjunction with, or as a part of, other analyses
required by law, so long as the RFA's requirements are satisfied. 5
U.S.C. 605(a) (``Any Federal agency may perform the analyses required
by [the RFA] in conjunction with or as a part of any other agenda or
analysis required by any other law if such other analysis satisfies the
provisions of such sections.'') The fact that the RFA's requirements
may be managed through other analyses, however, does not expand the
requirements of the RFA or compel agencies to conduct such other
analyses as part of an IRFA or a FRFA. These analyses are not required
by the RFA, nor are they, for the reasons set forth below, mandated for
this rule under any other provision of law.
a. Executive Order 12866 and OMB Circular A-4
Executive Order No. 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), directs agencies
subordinate to the President to assess all costs and benefits of
available regulatory alternatives and, when regulation is necessary, to
select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety, and other
advantages, distributive impacts, and equity). In implementing
Executive Order 12866, the Office of Management and Budget has provided
further internal guidance to agencies through OMB Circular A-4 (Sept.
17, 2003), found at http://www.whitehouse.gov/omb/circulars/a004/a-
4.pdf. OMB Circular A-4 states that it ``is designed to assist analysts
in the regulatory agencies by defining good regulatory analysis * * *
and standardizing the way benefits and costs of Federal regulatory
actions are measured and reported.'' OMB Circular A-4, at 3.
Executive Order 12866 is an exercise of the President's authority
to manage the Executive Branch of the United States under Article II of
the Constitution. The implementation of the Executive Orders and OMB
Circulars, and other internal guidance, is a matter of Executive Branch
consideration and discretion. The Executive Branch may utilize its
standards under Executive Order 12866 in analyzing regulations under
the RFA because the standards of the RFA and Executive Order 12866 do
not conflict, but the RFA does not require use of those standards
internal to the Executive Branch. The comments invoking Executive Order
12866 and OMB Circular A-4 standards to identify alleged deficiencies
in the IRFA are therefore misplaced.
The fact that preparation of a regulatory impact analysis (RIA)
under Executive Order 12866 is a matter of Executive Branch discretion
is underscored by the terms of Executive Order 12866, section 11:
Nothing in this Executive order shall affect any otherwise
available judicial review of agency action. This Executive order is
intended only to improve the internal management of the Federal
Government and does not create any right or benefit, substantive or
procedural, enforceable at law or equity by a party against the
United States, its agencies or instrumentalities, its officers or
employees, or any other person.
(emphasis added). The internal, managerial nature of this and other
similarly-worded Executive Orders has been recognized by the courts,
and actions taken by an agency to comply with the Executive Order are
not subject to judicial review. Cal-Almond, Inc. v. USDA, 14 F.3d 429,
445 (9th Cir. 1993) (citing Michigan v. Thomas, 805 F.2d 176, 187 (6th
Cir. 1986)).
b. Congressional Review Act
Some comments argued that this rule is a ``major rule'' for
purposes of the Congressional Review Act, 5 U.S.C. 801 (CRA). The CRA
delays implementation, and provides a mechanism for congressional
disapproval, of regulations designated as ``major rules'' by the
Administrator of the Office of Management and Budget. Such a
designation is made where OMB finds the rule has resulted in or is
likely to result in (a) An annual effect on the economy of $100,000,000
or more; (b) a major increase in costs or prices for consumers,
individual industries, Federal, State, or local government agencies, or
geographic regions; or (c) significant adverse effects on competition,
employment, investment, productivity, innovation, or on the ability of
United States-based enterprises to compete with foreign-based
enterprises in domestic and export markets. 5 U.S.C. 804(2).
Determinations by OMB under the CRA are not subject to judicial review.
5 U.S.C. 805. OMB has not determined that this rule is a major rule
and, therefore, the CRA does not apply.
2. Direct and Indirect Impact
A number of comments on the supplemental proposed rule objected
that the cost estimates presented in the IRFA did not include estimates
for costs other than for direct compliance with the rule. Examples of
costs commenters urged DHS to take into account included potential lost
wages for individuals who take time away from work to visit an SSA
office or another government office to resolve the no-match, travel
expenses for employees attempting to resolve a no-match, and other
costs incurred by employers, such as legal fees associated with
lawsuits that could be filed by work-authorized employees terminated in
response to a no-match letter.
In addition, many commenters suggested that DHS's RFA analysis
should include a number of other general indirect costs that allegedly
could be borne by society in general--higher cost of food resulting
from the
[[Page 63854]]
disruption of the agricultural labor force where illegal employment is
common, depressed wages from employers shifting from direct employment
to greater reliance on temporary employment agencies, social and
economic cost of unauthorized workers becoming unemployed, general
impact of the rule on the ``macro economy,'' economic impact of
employers moving operations to Mexico or other foreign countries in
search of reduced labor costs and less regulation, and possible growth
in the underground economy and reduction in tax revenues.
DHS disagrees. All of these comments overstate the scope of the
costs that are to be considered under the RFA. The RFA requires
consideration only of the direct costs of a regulation on a small
entity that is required to comply with the regulation. Mid-Tex Electric
Coop. v. FERC, 773 F.2d 327, 340-343 (D.C. Cir. 1985) (holding indirect
impact of a regulation on small entities that do business with or are
otherwise dependent on the regulated entities not considered in RFA
analyses). See also Cement Kiln Recycling Coalition v. EPA, 255 F.3d
855, 869 (D.C. Cir. 2001) (In passing the RFA, ``Congress did not
intend to require that every agency consider every indirect effect that
any regulation might have on small businesses in any stratum of the
national economy * * * [T]o require an agency to assess the impact on
all of the nation's small businesses possibly affected by a rule would
be to convert every rulemaking process into a massive exercise in
economic modeling, an approach we have already rejected.'').
No judicial precedent supports the commenters' view that indirect
economic or social impacts must be considered under the RFA. These
costs can be considered under other analyses and reviews that DHS and
other agencies may conduct in reaching decisions on regulatory matters,
but they fall outside the RFA. See, e.g., Regulatory Flexibility
Improvements Act, Hearing before the Subcommittee on Commercial and
Administrative Law, Committee on the Judiciary, on H.R. 682, 109th
Cong., 2nd Sess. (2006), at 13 (Statement of Thomas Sullivan, Chief
Counsel for Advocacy, Small Business Administration, criticizing the
RFA by noting that ``the RFA * * * does not require agencies to analyze
indirect impacts.'').
3. Baseline Costs, Unauthorized Alien Workers, and the Immigration
Reform and Control Act of 1986
A number of commenters asserted that DHS should include in the IRFA
and FRFA the cost of firing unauthorized alien workers and replacing
those unauthorized alien workers who voluntarily resign or are
terminated by employers when the workers are unable to confirm their
identity and work authorization in accordance with the safe harbor
procedures in this rule. In particular commenters criticized the
exclusion from the IRFA of the costs of complying with section
274A(a)(2) of the INA. That section provides:
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.
The commenters suggested that the cost of terminating and replacing
workers who an employer learns are not authorized to work in the United
States should be accounted for as a cost of the rule, since that
knowledge (or constructive knowledge) results from the no-match
letters, and the termination and replacement costs must be borne
regardless of whether they are counted as a cost of the INA or of the
rule. These comments fundamentally misunderstand the requirements of
the RFA, as well as the INA's longstanding prohibition against
employment of unauthorized aliens.
The RFA explicitly requires DHS to ``describe the impact of the
proposed rule on small entities'' in an initial regulatory flexibility
analysis. 5 U.S.C. 603(a) (emphasis added). The Act also states that a
final regulatory flexibility analysis ``shall contain * * * a
description of the projected reporting, recordkeeping and other
compliance requirements of the rule.'' 5 U.S.C. 604(a)(4) (emphasis
added). The RFA does not require that DHS analyze the impact of the
underlying statutory provisions in either the initial or final
regulatory flexibility analysis. And it would be particularly
irrational to do so here, since termination and replacement costs are
already being incurred by employers attempting to comply with the INA
even before this safe harbor rule goes into effect. The comments
themselves make this clear: such terminations have been documented
since at least 2003--three years before this rule was first proposed.
C. Mehta, N. Theodore & M. Hincapie, supra, at 13-14, Administrative
Record at 327-8 (approximately 53.6 percent of surveyed employers
terminated workers with listed no-matches). See also ICEB-2006-0004-
0688.1 at 2 (``To date, the misuse of SSA's no-match letters by
employers has already resulted in countless, unjust suspensions and/or
firings of low-wage, immigrant workers''); ICEB-2006-0004-0652.1 at 8
(comment by NFIB, citing Mehta, Theodore & Hincapie, supra.).
As DHS explained in the supplemental notice of proposed rulemaking,
the Immigration and Nationality Act expressly prohibits employers from
knowingly hiring or knowingly continuing to employ an alien who is not
authorized to work in the United States. INA section 274A(a)(1), (2), 8
U.S.C. 1324a(a)(1), (2). Employers that have actual or constructive
knowledge of their employees' illegal work status are statutorily
obligated to cease their employment, and any costs that result are
attributable to the INA, not to this safe harbor rule.
While the cost of terminating or replacing unauthorized workers
cannot properly be considered a cost of this rule, some turnover
involving legal workers that are unable or unwilling to resolve their
mismatches through the procedures outlined in this rule could be
counted as a cost of the rule for any employer that elects to follow
the safe harbor procedures. Such turnover costs for legal workers were
estimated in the IRFA, and are discussed in more detail below.
Several comments also suggested that employers may summarily
discharge workers rather than giving them an opportunity to correct
records, and argued that the impact on work-authorized employees who
leave their jobs or are terminated by their employers should be
included in the RFA analysis as a cost of the rule. As mentioned above,
the RFA instructs agencies to examine costs and impacts to ``small
entities''--defined by statute as ``hav[ing] the same meaning as the
terms `small business,' `small organization' and `small governmental
jurisdiction' ''--and which does not include individuals. Therefore,
the commenters misread the RFA. We also note that, if an employer were
to summarily terminate legal workers, the impact on such workers would
be caused not by the rule but by their employer's violation of the safe
harbor procedures. Any legal workers who choose not to correct their
records would effectively be voluntarily resigning, perhaps calculating
that the opportunity cost of correcting their records was greater than
the cost of finding alternate work.
4. Variability of SSA Criteria for Issuing No-Match Letters
A number of commenters suggested that the criteria used by SSA in
determining whether to issue a no-match letter was subject to future
change, and that increased costs could
[[Page 63855]]
be incurred if SSA issues more no-match letters. DHS recognizes that
the impact on small entities could vary if SSA alters its matching
processes or changes its criteria for issuing no-match letters. But the
RFA does not require DHS to speculate about every contingency that
could have some impact on small entities, such as the potential for
another agency to exercise its discretion differently. Since DHS is
unaware of any plans to change SSA's policies for issuing ``EDCOR'' no-
match letters, any attempt in the IRFA or FRFA to analyze hypothetical
changes in SSA policy would be mere speculation.
Some commenters also suggested that the IRFA and FRFA must cover
historical data to account for the existing variability in the number
of no-match letters issued from year to year, even absent any change to
SSA's policies on issuing no-match letters. While such variability
exists, it is largely irrelevant to the calculation under the FRA of
the ``impact'' that may result to an average ``small entity'' that
chooses to follow the safe harbor procedures in the rule. Changes in
the number of no-match letters sent to employers in a given year may
change the aggregate costs incurred by all employers that choose to
follow the safe harbor procedures, but DHS has no data (and commenters
have provided none) that would lead DHS to conclude that such
variations would alter either the share of all no-match letters in a
given year that would be received by small entities or the impact felt
by a specific small entity that receives a no-match letter and decides
to follow the safe harbor procedures. DHS's reliance on 2007 statistics
regarding employers whose reports would have generated no-match letters
for the analysis in the IRFA and SEIA was reasonable.
5. Base Assumptions Made in the IRFA and SEIA
A number of commenters disagreed with assumptions made in the IRFA
and SEIA regarding the impact of the rule on small entities. DHS sought
to catalog all of the assumptions underlying the analysis to make the
methodology, calculations, and findings of the SEIA transparent,
reproducible, and accessible for public review and comment. One
commenter catalogued over thirty assumptions underlying the economic
analysis provided by DHS, and noted that even this list was a subset of
the analytical assumptions openly disclosed by DHS. See ICEB-2006-0004-
07321.1 at 23-25. Notwithstanding DHS's transparency about the
analytical underpinnings of its analysis, commenters who objected to
the substance of DHS's assumptions provided little information to call
into question the reasonableness of those assumptions or even to assist
DHS to evaluate the strength of the commenters' objections.
The analysis required by the Regulatory Flexibility Act need not
produce statistical certainty; the law requires that the DHS
``demonstrate a `reasonable, good-faith effort' to fulfill [the RFA's]
requirements.'' Ranchers Cattlemen Action Legal Fund, 415 F.3d at 1101.
See also Associated Fisheries of Maine v. Daley, 127 F.3d 104, 114-15
(1st Cir. 1997). The IRFA and SEIA produced by DHS in this rulemaking
meet that standard. The assumptions underlying the SEIA are reasonable,
and DHS has utilized the best data available to produce the IRFA and
the SEIA. Where data was unavailable, DHS consistently made
analytically conservative assumptions regarding the cost to employers
that choose to follow the safe harbor procedures in this rule. With one
exception, the public comments did not provide better data or identify
additional sources for empirical data within the scope of the RFA. In
analyzing the comments received and in preparing the FRFA, DHS
attempted once again to ensure that the best available data is used.
Individual comments regarding specific assumptions in DHS's analysis
are addressed in detail below.
a. Assumptions Regarding Impact on Legal Workers
i. Accuracy of SSA Records
A number of commenters suggested that the SSA data used to generate
no-match letters (the Earnings Suspense File, or ``ESF'' database) is
generated from an SSA database (the ``NUMIDENT'' database) that the
commenters allege contains a large number of errors that will cause
work-authorized employees to appear as no-matches, and to have to
correct their discrepancies.\7\ Many of these comments cited a report
by the SSA Office of the Inspector General regarding errors in SSA's
NUMIDENT database,\8\ to argue that the data used for the no-match
letters has an error rate of 4.1 percent. Some commenters suggested
that DHS not use information derived from that database for immigration
enforcement purposes until the database achieves a 99.5% accuracy
level. Referring to the same SSA OIG report, another commenter alleged
that SSA now maintains 17.8 million mismatched records that could
result in no-match letters to employers.
---------------------------------------------------------------------------
\7\ While the Earnings Suspense File is an electronic repository
for wage items that cannot be matched to an individual worker's
earnings record, the database that SSA uses to match a wage item to
a worker is the Numident database.
\8\ Social Security Administration, Office of the Inspector
General, Congressional Response Report: Accuracy of the Social
Security Administration's Numident File (No. A-08-06-26100, Dec.
2006).
---------------------------------------------------------------------------
DHS does not agree with the commenters' inference that the overall
4.1% data discrepancy rate estimated by SSA OIG is relevant to this
rulemaking, or to SSA no-match letters generally, in the way suggested
by the commenters. The SSA OIG's report reviewed the accuracy of four
different data fields in SSA's system--``Name,'' ``Date of Birth,''
``Death Indication,'' and ``Citizenship Status''--and the study's
projected 4.1% data discrepancy rate was based on the cumulative data
discrepancies in all four data fields sampled. But SSA no-match letters
are generated only when an employee's name and SSN submitted by an
employer cannot be matched to SSA records; discrepancies in the ``Date
of Birth,'' ``Death Indication,'' and ``Citizenship Status'' fields do
not cause an employee to be listed on a no-match letter because the
Forms W-2 from which no-match letters are generated do not contain this
information. The SSA OIG report showed that only 0.24% of native-born
U.S. citizens had a name and number mismatch, while naturalized
citizens and non-citizens had a 0.49% and 1.7% mismatch rate,
respectively. This yields a projected overall name and SSN mismatch
rate of 0.4% (weighted average) for all records in the NUMIDENT system.
Based on the SSA OIG report cited by commenters, it appears that the
database that generates no-match letters already exceeds the 99.5%
accuracy level proposed in the comments.
ii. Turnover Rates
The SEIA assumed that employers that follow the safe harbor
procedures may face increased turnover of employees authorized to work
in the United States. To the extent that a work-authorized employee
resigns or is terminated for failing to resolve the no-match, the
employer could be reasonably expected to incur the cost of replacing
that employee. For purposes of the SEIA, DHS estimated that 2% of
authorized employees identified in no-match letters might resign or be
terminated due to failure to resolve a no-match, and therefore the SEIA
included those turnover costs as a cost of an employer's adoption of
the safe harbor procedures in the rule.
It is important to note that this figure is not, as some commenters
have incorrectly claimed, an estimate of the
[[Page 63856]]
number of legal workers that ``will be fired'' as a result of this
rule. Nothing in the August 2007 Final Rule or in this supplemental
rulemaking requires an employer to terminate an employee at the end of
the 93-day no-match resolution and reverification schedule if a no-
match remains unresolved. Should an employer learn in the course of
that process that an employee lacks work authorization, the INA
requires--as it has for over 20 years--that the employment relationship
be terminated. While the regulatory safe harbor is only available if
the rule's procedures are completed with 93 days, an employer may still
be seen to have acted reasonably if an employee has taken longer than
93 days to resolve a no-match, depending upon the particular
circumstances.
Moreover, the SEIA's estimate includes turnover caused by voluntary
departures of employees who decide to seek employment elsewhere rather
than resolve the no-match with SSA. Neither the government nor
employers can compel employees to correct no-matches, and DHS does not
have sufficient data to conclude that 100% of all legal employees will
correct their no-matches within the 93-day schedule set out in the
rule. DHS recognizes that it will cost employers something to replace
workers if (1) some of their employees decided to leave employment
after day 90, and/or (2) some employees (a) attempted but failed to
complete the process of resolving their no-matches in 90 days; (b)
those employees would not or could not produce alternative documents to
complete a new Employee Verification Form I-9; and (c) an employer took
a strict approach to terminate every person with unresolved no-matches
after 93 days. DHS has, therefore, included these turnover costs in the
SEIA.
Several commenters suggested that this projected turnover rate of
2% for legal workers is too low. DHS disagrees. As section III.J of the
SEIA explains, there are significant economic incentives for both the
employer and employee to resolve a no-match. A work-authorized employee
has an incentive to both keep his or her current employment and to
ensure that his or her name and SSN properly match SSA's records so
that he or she will receive full credit for contributions made into
Social Security and maximize the amount of Social Security benefits he
or she will receive in retirement or in case of disability. At the same
time, an employer has an incentive to ensure that employees resolve
their no-match issues to avoid turnover in the workforce, and the SEIA
assumed that employers would pay for human resources staff to assist
employees to resolve a no-match, given the cost to the employer of
replacing those employees. In light of these incentives, DHS's estimate
of 2% was reasonable.
Although the commenters did not provide a basis for changing this
assumption, DHS has added an alternative scenario in an appendix to the
SEIA to examine how these turnover costs could change if the legal
worker replacement rate were doubled from 2% to 4%. That additional
analysis did not result in a material change in the SEIA's estimate of
the rule's impact on small entities or in the reasonable regulatory
alternatives that DHS could consider in this rulemaking.
iii. No-Match Resolution Process
Some commenters also suggested that DHS should reconsider the
SEIA's assumption that 66% of authorized employees will be able to
resolve no-matches without visiting an SSA office. DHS continues to
believe that this assumption is reasonable for purposes of the analysis
required by the RFA.
The SEIA made specific assumptions regarding how the employer and
employee would resolve a no-match in order to estimate the costs on a
per employer basis. DHS believes the cost that an employer would bear
to correct a no-match typically depends on the reason for the no-match.
For example, if an employer were able to determine that the no-match
resulted from an internal clerical error by the employer, the employer
would likely be able to correct this discrepancy quickly and
inexpensively. If the employer determined that there was no clerical
error, the SEIA assumed that the employer would meet with the employee
to verify that the employer's records show the correct name and social
security number. If the employee then determined that the employer had
submitted the correct name and social security number, the employee
would need to visit SSA to resolve the no-match. If the employee needs
to visit SSA, the employer may incur a lost productivity cost for the
time the employee was away from work.
The SEIA stated that no specific data was available to show what
percentage of no-match issues were clerical errors, incorrect
information submitted by the employee to the employer, or an issue that
required a visit to SSA. Accordingly, the SEIA assumed one-third of the
authorized employee no-matches would be clerical errors, one-third of
the authorized employee no-matches would be resolved when the employer
identified an error in an employer's records, and one-third of
authorized employees would visit SSA to attempt to correct the no-
match. None of the comments provided data that could improve on the
SEIA's estimates.\9\
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\9\ One commenter suggested that a DHS-funded study of the Basic
Pilot or E-Verify program shows that a larger share of individuals
listed in no-match letters will need to visit SSA, claiming that
``only in 30% of the time were tentative non-confirmations caused by
either solely an error with the date of birth or the name.'' ICEB-
2006-0004-07321.1 at 27 (citing to Westat, Findings of the Web Basic
Pilot Evaluation, supra at 51). After re-reviewing the Westat
report, DHS disagrees. The passage of the Westat report cited by the
commenter examines the approximately 5% of individuals who receive a
final non-confirmation from the E-Verify system and breaks that
population down by the type of mismatch that caused the system to
flag each person with an initial tentative non-confirmation. That
analysis is graphically represented in Exhibit III-6 of the Westat
report, which shows that 17% of those found unauthorized to work who
claimed U.S. citizenship were flagged as ``DOB not matched'' and 13%
of those found unauthorized to work who claimed U.S. citizenship
were flagged as ``Name not matched.'' It appears that the commenter
added 17% to 13% to arrive at the claim that ``30%'' of tentative
non-confirmations are caused solely by errors in date of birth or
name. The comment misses the mark for a number of reasons. First,
the passage of the Westat report cited by the commenter looks at
individuals who received a final non-confirmation stating that they
were not authorized to work, and sorts individuals not by actual
citizenship status but by citizenship status claimed by the
individual. The population of unauthorized workers includes large
numbers of individuals who falsely claim U.S. citizenship. By
definition, the population relevant to the SEIA's calculation of no-
match resolutions is entirely different, since it is limited to
work-authorized persons. The comment also assumes, without
explanation, that the workers with either a mismatched date of birth
or a mismatched name correlate to the population that will be able
to resolve the mismatch without visiting SSA. The passage of the
Westat report cited by the commenter does not shed any light on the
question of how many employees listed on a no-match letter will need
to visit a Social Security office to resolve their mismatches. E-
Verify and SSA's no-match letter program are distinct programs that
rely on different input data sources and that examine different
things. And the data summarized in Exhibit III-6 of the Westat
report is simply not related to the subset of authorized employees
that will choose to visit SSA.
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Even though DHS does not have hard data on how many mismatches may
be resolved at each step of the safe harbor procedures, we can
reasonably expect that a significant number of no-matches will be
corrected internally by the employer without requiring the employee to
visit SSA. For example, several comments suggested that work-authorized
employees of Latin American and Asian descent appear on no-match
letters because of compound naming conventions or inconsistent
transliteration that sometimes results in inadvertent errors or
discrepancies in employer records. Employers can easily resolve such
inadvertent errors. In addition, electronic filing of W-2
[[Page 63857]]
reports limits SSA staff intervention in wage report data processing
and increases the likelihood that mismatches originated with--and can
be most readily resolved by--the employer.
Commenters did not provide information that would lead DHS to
conclude its estimate was not reasonable. Nevertheless, as with the
turnover rates discussed above, DHS has provided an alternative
scenario in an appendix to the SEIA to model how the no-match
resolution costs would change if the percentage of authorized employees
that must visit a SSA office increases from 33% to 50%. We conclude
that this alternative assumption does not materially change the SEIA's
estimate of the impact on small entities or point to additional
regulatory alternatives that DHS could consider in this rulemaking.
b. Percentage of No-Matches Relating to Unauthorized Aliens
One commenter suggested that the SEIA was inadequate because it
assumed that the general employee turnover rate would be the same for
authorized and unauthorized employees. The commenter believed that this
is significant because the SEIA concludes that 57% of employees listed
in no-match letters already have left their jobs by the time the
employer receives the no-match letter. The commenter suggested that the
turnover rate is likely to be much higher for unauthorized employees,
meaning that authorized employees are more likely to be still employed
when a no-match letter arrives and, thus, authorized employees are more
likely to be impacted by the no-match letter and the safe harbor rule.
DHS is not aware of any Department of Labor, Bureau of Labor
Statistics (BLS), or other data that presents separate turnover rates
for authorized and unauthorized employees. Consequently, DHS is using
the best data available for turnover rates. BLS provides turnover data
for the non-farm sectors and is based on all employees on the payroll,
without distinguishing between those authorized and unauthorized to
work in the United States. Therefore, DHS believes the BLS industry
turnover rates presented in the SEIA should be considered to be
weighted averages of an authorized employee turnover rate and the
unauthorized employee turnover rate.\10\ DHS has clarified the SEIA to
address this point. DHS has not found, and the commenters have not
provided, any empirical evidence that supports a specific turnover rate
or range other than the weighted average in the BLS composite rate.
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