Guidelines * for Best Practices for an Employee s Social Security Number Discrepancy

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1 June 24, 2011 Guidelines * for Best Practices for an Employee s An employer may receive information that an employee claims a Social Security number (SSN) that does not match internal or external records. This information may come from various sources, including the following: A government agency; An E-Verity 1 Tentative Nonconfirmation 2 The person who reports the Social Security number belongs to him or her and not to the employee; The employer s own records; A third party whistleblower. Employers should bear in mind that errors in reporting Social Security numbers can arise from various sources, including from within government records. Alternatively, the report of the error could be false, meaning that the SSN in fact belongs to the employee. Following are guidelines for addressing issues involving discrepancies with an employee s Social Security number. * These materials are provided as general information. The contents do not constitute legal advice. Changes in U.S. law, policy, or procedure may render these materials inaccurate. Consult a qualified immigration attorney before seeking immigration benefits. 1 E-Verify is an Internet-based system that allows businesses to determine the eligibility of their employees to work in the United States, 2 E-Verify works by comparing the information employees provide on the Employment Eligibility Verification form (Form I-9) against millions of government records. Generally, if the information matches, the employee receives an "Employment Authorized" response in E-Verify. If the information does not match, the employee is given an opportunity to resolve the problem. butlerd@lanepowell.com

2 A. Employer s Obligations I. Employers Obligations and Potential Liabilities 1. Reporting an Employee s SSN Pursuant to an agreement between the Security Administration (SSA) and the Internal Revenue Service (IRS), employers are required to report the taxable earnings of their workforce by filing annual wage reports with SSA on Form W-2 (Wage and Tax Statement) and Form W-3 (Transmittal of Income and Tax Statements). The employer must file a Form W-2 for each employee, including his name, SSN, and annual wages, among other information. SSA uses the W-2 to maintain earnings records and calculate Social Security benefits. It transmits this data to the IRS and identifies employer-reporting errors for possible IRS penalty assessment action. 2. Requesting New Employee s Social Security Card On an employee s first day of work, the employer should request the employee s Social Security card; however, the employee is not required to present the card. The employer should explain it is requesting the card to comply with federal tax reporting obligations. Following are alternate scenarios: If an employee presents a Social Security card, the employer must record the name and SSN shown. If an employee does not present a card and has not applied for one, the employer must inform the employee of his duty to apply for one. If an employee does not present his card, but advises the employer of his SSN and name, the employer must record this information in its records. If the employee furnishes Form SS-5, Application for A Social Security Number Card," or a statement concerning such application for an SSN, the employer must retain the information for purposes of filing its employment tax returns. If the employee presents a receipt for an application for an SSN card, the employer must enter in its records the employee name and address, and address of the issuing SSA office and return the receipt to the employee. 2

3 The purpose of these obligations is to assist the Social Security Administration (SSA) to credit Social Security withholding funds accurately and to report income accurately to the Internal Revenue Service (IRS). B. Employer Potential Liability and Penalties 1. IRS liability The IRS has authority to fine employers $50 for each W-2 Form filed with an incorrect SSN. If it is determined that failures occurred due to intentional disregard of the information reporting requirements, the penalty is $100 per return or 10 percent of the amount to be reported correctly. An employer can escape liability if the failure to comply was due to reasonable cause, or for events beyond the employer s control, including the employee s failure to provide the correct SSN. The employer must establish that it relied on the information provided in good faith, and acted in a responsible manner, both before and after the discrepancy came to light. Where the error was based upon the failure of a payee or employer to provide a correct number an employer needs to show that it requested the employee s SSN at the time the employee began work. 2. Potential IRCA Liability Employers addressing SSN discrepancies must be mindful of potential liability under the Immigration Reform and Control Act of 1986, (IRCA). Among other things, IRCA prohibits employers from knowingly hiring or continuing to employ aliens not authorized to work in the United States. In addition, IRCA contains prohibitions on discrimination based on citizenship. IRCA also provides for employer sanctions for document abuse when an employer requests more or different documents than necessary to satisfy IRCA s requirements to show work authorization. In the context of an SSN discrepancy, the discrepancy by itself does not establish the employee lacks authorization to work. Under current law, notice of a discrepancy may create some duty to follow up with the employee to correct the apparent discrepancy. If the employer demands to see an employee s Social Security card or alternate documentation as evidence of work authorization, the employee could bring a claim against the employer under IRCA. However, there may be an exemption from liability where a governmental agency is requesting assistance from an employer to resolve a discrepancy. 3

4 Employers with a policy for systematic follow-up are likely to avoid liability for claims of discrimination should the employer later terminate an employee based on an SSN discrepancy issue. In addition, following a clear policy in a regular fashion can limit the potential for document abuse charges, which requires an employer act with intent to discriminate in order to incur liability. 3. No Obligation or Liability The SSA has no enforcement authority. Thus, the SSA cannot penalize an employer for SSN discrepancies. Further, the employer has no obligation to request corrected SSN information from a former employee. There may be exceptions were the employer receives a subpoena for information. II. Best Practices for Avoiding or Resolving SSN Discrepancies Employers should implement procedures as best practices to avoid and resolve discrepancies. Following are recommended actions and timeframes to follow after receiving information about an SSN discrepancy for an employee. A. Employer action at the time of hire 1. Request the Social Security card of each new employee on the first day of employment. The employee is not required to present the card, but the employer is required to request it. 2. Record the request for the Social Security card, and note whether the employee presents the card or not. 3. Retain copies of the documents reviewed. Enforcement actions can be alleviated if the employer can refer to the documentation reviewed and make corrections to the Form I-9. Minor errors (such as transposition of an SSN) can be quickly corrected. 4

5 B. After notification of discrepancy After the employer receives notification about an SSN discrepancy for an employee, the employer should undertake the following action, targeting 90 days for completion of the process, but allowing for more time if there is a reasonable basis for doing so. 1. Calendar: Check to see if there is any deadline or timeframe for follow-up. If more time is needed, contact the government agency to request an extension of time to respond. 2. Review: Check internal records. Recommended timeframe: Begin as soon as possible, and complete within 5 days after notification As soon as possible after being notified of an SSN discrepancy, the employer should begin reviewing the records of each person whose SSN is identified, to determine the following: Does the person whose name or SSN is identified currently work for the employer? If not, for Social Security purposes there may be little reason to continue the review. However, if the IRS requests follow up for tax records for which the filing date is not yet passed, then the employer is obliged to review its internal records and respond to the IRS, but not to contact the former employee. Is there an easily identifiable discrepancy that results from a typographical, transcribing, misspelling, name change, or similar clerical error in the employer s records, such as the following: Employment Eligibility Verification (I-9) Form W-4 Records on file that list the SSN Personnel records to indicate whether the person had a name change, or other reason for the discrepancy. 5

6 The employer should have completed the review within 5 days of notification, in order to follow up with the next actions in a timely manner. 3. Record: Correct discrepancies, if possible. Recommended timeframe: within 5 days after notification If there is an identifiable error, as soon as possible after checking the records, the employer should do the following: Correct internal records; Inform the SSA or relevant agency; Verify that the name and number, as corrected, match the agency records; Record the correction; Update the Form I-9 Employment Eligibility Verification to reflect corrections. The employer should plan on having completed the correction and notification within 5 days of notification, in case any additional actions are required within the requisite timeframe. 4. Notify employee: Contact employee (if employer was not able to resolve discrepancy) Recommended timeframe: Immediately after employer completes internal records review but no more than five (5) business days after employer receives notification, whichever is shorter For employers enrolled in E-Verify, the employee has eight (8) federal working days to contact the appropriate government agency to commence resolution of a discrepancy. Therefore, the employer should notify the employee of the need to contact the government as soon as possible. If the employer has not been able to resolve the discrepancy, the employer should give the employee the E-Verify nonconfirmation notice or, for employers not enrolled in E-Verify, advise the employee of the discrepancy and ask the employee whether he or she believes that the SSN listed for him or her is correct or not. If the employee indicates the SSN 6

7 is his or her correct number, the discrepancy is presumed to be an SSA error, and the employer should advise the employee to go to the Social Security office to resolve the discrepancy. The efforts to correct the discrepancy should be completed by the 90 th day after the employer has received the notification, if possible. To allow plenty of time to deal with the government agencies, the employer should contact the employee by one week after receiving the notification, by undertaking the following actions: Notify the employee, preferably in writing, of the discrepancy. Notify the employee of the date the employer received the notification. Notify the employee of the 90-day targeted timeframe. Direct the employee to report back within two weeks about actions to resolve the discrepancy. 5. Follow-up with employee: Have employee provide information about actions to correct the discrepancy Recommended timeframe: Begin no later than 2 weeks after notification and complete within 90 days after notification if possible. If the employee provides information to correct the records, then the employer must take the following actions: Correct its records; Inform the relevant agency; Verify the corrected records with the relevant agency; Record the correction internally; Update the Form I-9. If the employee has not been able to correct the discrepancy, then the employer should give the employee the remainder of the 90-day time limit to follow up. Within that remaining time, the employee should visit an SSA office within eight (8) federal workdays after receiving the notice or should contact a Department of 7

8 Homeland Security U.S. Citizenship & Immigration Services (USCIS) Immigration Status Verifier within eight (8) federal workdays after receiving the notice. Note, the employee should not be required to have visited USCIS within 8 days, as it sometimes takes two weeks or more to schedule an appointment. Even assuming the employee is unable to resolve the discrepancy, the employer should not terminate simply due to receipt of information about an SSN discrepancy. 6. Consider termination When Termination is Appropriate or Not Appropriate. In any event, an employer should not initiate termination of an employee until the process is completed, unless the employer obtains actual knowledge (such as through an admission by the employee) or believes, under the circumstances, it is highly probable that the employee is not authorized to work in the United States, and the employer has assessed potential liability under IRCA. A Social Security mismatch alone does not constitute actual knowledge. One exception may be where an employer has an honesty policy or dishonesty policy that it applies across the board to all employees at all levels. The employer with such a policy could terminate an employee who intentionally misrepresented information during the hiring process, and have a valid nondiscriminatory reason for dismissal. Employers also may seek advice on a case-by-case basis through the Office of Special Counsel s toll-free employer hotline ( ). Employees may call Report Evidence of Identity Theft An employer who is convinced that identity theft has occurred may want to consider contacting the Federal Trade Commission (FTC) Identity Theft Hotline at (877) , or provide the Hotline telephone number to employees to secure information on how to prevent identity theft. 8