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NRCA issues comments about the Department of Homeland Security's proposal to rescind the no-match rule

September 18, 2009

VIA ELECTRONIC MAIL

Charles McClain, National Program Manager
U.S. Immigration and Customs Enforcement
Office of Investigations MS 5112
500 12th Street, SW
Washington, DC 20536-20024

RE: DHS Docket No. ICEB-2006-0004—RIN 1653-AA59—Safe-Harbor Procedures for Employers Who Receive a No-Match Letter: Rescission

Dear Director:

The National Roofing Contractors Association (NRCA) would like to provide the following comments on the Department of Homeland Security's (DHS) proposal to amend its regulations by rescinding the amendments promulgated on August 15, 2007, and October 28, 2008, relating to procedures that employers may take to acquire a safe harbor from receipt of no-match letters, as published in the Federal Register on August 19, 2009.

Established in 1886, NRCA is one of the nation's oldest trade associations and the voice of professional roofing contractors worldwide. It is an association of roofing, roof deck, and waterproofing contractors; industry-related associate members, including manufacturers, distributors, architects, consultants, engineers, and city, state, and government agencies; and international members. NRCA has approximately 4,000 members from all 50 states and 54 countries. NRCA contractors typically are small, privately held companies, and the average member employs 45 people in peak season, with sales of about $4.5 million per year.

NRCA and its members are committed to full compliance with the law and recognize the need for improved enforcement of immigration laws. NRCA has strongly advocated comprehensive reform of our nation's immigration laws, including enhanced worksite enforcement measures, for many years, and continues to work toward this objective. However, NRCA firmly believes that the DHS no-match rule is fundamentally flawed and is deeply concerned about the adverse impact that implementation of the rule would have on both employers and employees in the roofing industry. Moreover, NRCA does not believe the rule would achieve the stated goal of improving worksite enforcement of immigration laws, and may significantly exacerbate the problem of illegal immigration if implemented.

NRCA notes that the final no-match rule issued in October, 2008, by DHS's own admission, contains no substantive changes from DHS's original rule published in August, 2007, and later blocked by an injunction issued by the United States District Court for the Northern District of California in AFL-CIO et al. v. Chertoff. As a litigant in the suit filed against the original final rule, NRCA does not believe the final rule addressed the concerns of the District Court that led to the injunction.

As such, NRCA strongly supports DHS's August 19 proposal to amend its regulations in such a way that will result in the no-match rule being completely rescinded. The major reasons for NRCA's strong opposition to the no-match rule, and support for the rescission proposal, are outlined below.

Inaccuracy of the Social Security Administration Database

It is a well-known fact that the Social Security Administration (SSA) database used to generate no-match letters contains many inaccuracies, a significant problem that has been amply documented by government auditors. According to a report by the U.S. Government Accountability Office issued in July, 2006, the SSA database "contains data that are incomplete and outdated," and that "information in the files can also be misleading." In December, 2006, the SSA's Office of Inspector General estimated that the agency's database used for the no-match letters has an error rate of 4.1 percent, and that 70 percent of these errors involve native-born U.S. citizens. As such, no-match letters often result from name changes and clerical errors, such as transposed numbers or other honest mistakes. For the construction industry, and the roofing sector in particular, this problem is severe, as workers who identify themselves as being Latino or Hispanic represent fully one-third of the workforce. Name-matching problems with SSA are common among this community due to the multiple surnames of individuals.

NRCA's members are deeply concerned that the DHS no-match rule, if implemented, would result in the termination of employees who are in fact authorized to work, but who are unable to obtain resolution of a no-match problem that occurs because of corrupt or erroneous data in the SSA database. DHS should not use the SSA database for immigration enforcement purposes until the accuracy of the system is dramatically improved.

Failure to Perform Regulatory Analysis Required By Law

NRCA questions the determination that the no-match rule "is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Act of 1996" because it "has not been found to be likely to result in an annual effect on the economy of $100 million or more." This certification is disputed in an analysis of the supplemental proposed rule by Richard B. Belzer, Ph.D., entitled "Comments on DHS' Safe-Harbor Interim Regulatory Flexibility Analysis (IRFA)." Belzer's analysis, based on DHS's raw numbers in the IRFA, finds that "the aggregate costs to employers alone from the proposed rule will range from $1 billion to $1.6 billion per year." This conclusion is based on DHS's own estimate of the cost of complying with the safe harbor procedures for employers who receive no-match letters. In addition, Belzer's analysis of data in the IRFA also concludes that there would be substantial economic and social costs to legally authorized employees who cannot resolve no-match problems with the SSA.

Belzer's analysis also concludes that the DHS data in the IRFA "show that the proposed safe-harbor rule is economically significant under Executive Order 12866 and under the Congressional Review Act." Thus, DHS would be required to perform a formal Regulatory Impact Analysis on the proposed rule under current law, and must do so before moving forward with any implementation of the rule. Without such analysis as required by law, the rule must be rescinded.

Small Businesses Disproportionately Burdened

NRCA believes that the no-match rule would adversely impact small businesses disproportionately. Comments filed in the docket of the 2007 rule by the U.S. Small Business Administration's Office of Advocacy supports this conclusion. The Office of Advocacy commented that;
    Advocacy believes that the supplemental proposed "No-Match" rule, if finalized, will have a significant economic impact on a substantial number of small entities. As such, DHS should prepare and publish with any final rule a Final Regulatory Impact Analysis (FRFA) under the RFA. Advocacy notes that the FRFA must include, in addition to the economic analysis of the rule, a summary of issues raised in public comments on the IRFA, the agency's response to them, and a statement of the changes the agency has taken to minimize the impact on small entities.
Given the impact of the rule on small entities, the construction industry and the roofing sector, which are both dominated by small firms, will be disproportionately impacted. (In 2005, 92 percent of all construction firms had fewer than 20 employees.) Small construction firms often have little or no administrative staff, and the bulk of its workforce (including management) is outside of their home offices much of the time. The administrative burden of having to comply with the complex regulations in the no-match rule would certainly add to the growing paperwork burden that already threatens the viability of many small businesses in the construction industry.

In addition to the administrative hardships the no-match rule would impose on small businesses, smaller firms would also be disproportionately impacted because they have greater difficulty in affording shocks to the size of their labor forces compared with larger firms. This is especially true in the construction industry, which operates under very low margins and unique demands, such as weather restrictions, performance and bonding requirements, and strict timetables for delivery of goods and services. Absorbing labor shortages in the middle of projects is potentially disastrous for small construction firms, as failure to meet timetables can result in non-payment by the building owner or general contractor. Further, worker shortages disproportionately impact smaller construction companies because it jeopardizes their ability to bid for future contracts.

One of the greatest potential costs that would be faced by employers if the rule is implemented is the increased likelihood of discrimination lawsuits brought about by the required termination of employees who cannot resolve SSA no-matches. The need to defend against even meritless claims brought by terminated employees will result in significant legal expenses for employers. Furthermore, the DHS instructions for employers in the supplemental proposed rule that reference Department of Justice information on this subject are inadequate.

Insufficient Safe Harbor for Employers

The 2008 final rule defines what constitutes a "reasonable response" by an employer to a no-match letter and mandates specific steps to be taken by the employer within defined periods of time. The rule's preamble suggests that taking such measures may allow the employer to avoid liability and mitigate or eliminate potential penalties, but still leaves many questions unanswered. A true safe harbor would provide the employer with protection from all worksite enforcement actions taken in relation to the no-match guidance.

Out of fear of non-compliance with the rule, employers may become extra vigilant in trying to verify an employee's identity and eligibility to work in the U.S. However, there is an extremely fine line for the employer between ensuring that your workforce is legal and violating existing anti-discriminations laws. For example, an employee may present documents other than a Social Security card when completing the I-9 Form. If a no-match letter is subsequently issued, the employer may then confront the employee and request to see the employee's Social Security card. This type of situation would likely present an issue regarding anti-discrimination laws already in effect. Since DHS has not been able to provide clarification on how an employer should respond to such a situation and provide a safe harbor that ensures protection from liability with respect to anti-discrimination laws, the no-match rule must be rescinded.

Another problem is that the rule would significantly increase the scope of what is considered "constructive knowledge" under existing federal immigration statutes. It states that "the employer's obligations under current law, which is that if the employer fails to take reasonable steps after receiving such information, and if the employee is in fact an unauthorized alien, the employer may be found to have had constructive knowledge of that fact." NRCA questions whether this expansion of the definition of constructive knowledge in the rule is justified in existing law.

One of the ways by which an employer can be put on notice is by receiving a written notification from DHS. Unlike SSA, DHS does not have a mechanism in place that regularly checks and reports mismatched immigration documents. Rather, DHS generally is made aware of mismatched immigration documents in the context of an I-9 Forms audit. As noted in the final rule, if an employer receives a letter from DHS, the employer is expected to resolve the issue by "tak[ing] reasonable steps, within 14 days of receiving the notice, to attempt to resolve the question raised by DHS about the immigration status document or the employment authorization document." However, DHS provides no specific guidance as to what those steps should be and what an employer should do to rectify the situation. This is yet another reason why the no-match rule must be rescinded.

Another problem with the rule is that it is not clear what exactly constitutes receipt of a no-match letter by an employer. The rule does not state what happens in the instance where an SSA no-match letter goes directly to an employee at the employer's place of business. Is the employer considered to be on notice and have constructive knowledge in this situation? This is further reason why the finale rule must be rescinded.

Termination of Lawfully Documented Workers

According to information in the DHS IRFA, the 2008 final rule, if implemented, would result in between 37,000 and 165,000 legally authorized workers losing their jobs because they are unable to rectify no-match problems with SSA. Some authorized workers who cannot resolve no-match problems may be forced into long-term unemployment. The social and economic costs of this outcome would be staggering. Richard Belzer estimates the aggregate social welfare costs to authorized workers who cannot resolve no-match problems will be between $8 billion and $37 billion depending on the percentage of no-matches that are authorized vs. unauthorized workers.

In addition to causing many authorized workers to lose their jobs because of unresolved no-match problems, it is highly likely that the DHS no-match rule would result in substantial numbers of legally authorized workers being terminated when an employer receives a no-match letter before the employee can even begin the process of attempting to resolve the problem with SSA. Given the high degree of complexity in the final rule and the uncertainty associated with attempting to implement the rule's "safe harbor" procedures, many employers will simply make a "business decision" to endure the economic disruption associated with losing a valued employee rather than risk legal liability by attempting to remedy the no-match problem. Out of caution, panic and confusion surrounding the intricacies of the rule, if implemented, many employers would likely select the safe legal route by shedding the potential legal liability associated with workers who are the subject of no-match notices by firing these employees.

As a result, it is likely that many native-born U.S. citizens and lawfully documented immigrants will face termination if the no-match rule were to be implemented. The social costs of this regrettable outcome of the no-match rule are extraordinarily high.

Insufficient Time for Resolution

The current timeframes established in the rule for resolving no-match problems are insufficient. Both large and small employers would be faced with challenges to meet the 90-day standard set forth by the rule. The employer has only 90 days, from the date of receipt of the letter or notice, to ensure and confirm that the discrepancy has been rectified. Thus, an employee has less than three months to work out a resolution with the SSA bureaucracy, which could often be an insufficient amount of time. It is well known that efforts to rectify data problems with SSA can, and often do, take significantly longer than 90 days under existing conditions. This problem will be exacerbated by the exponential increase in volume that SSA offices will experience if the no-match rule were to be implemented.

To reiterate, by DHS' own estimates, the failure by employees to resolve no-match problems within the 90-day allotment will result in the termination of thousands of lawfully authorized workers, despite good faith efforts to correct the problems.

Impact on Illegal Immigration

The no-match rule would effectively apply only to employers who are making good faith efforts to comply with the law, and therefore does not address the problem of "bad actor" employers who operate in the underground economy, do not complete the required I-9 Form and pay workers "under the table" in order to avoid federal law. By not addressing the bad actor employers and only proposing increased regulations on those employers trying to act in accordance with the law, the no-match rule will merely increase incentives for employers and employees to enter the underground economy. Workers in the underground economy do not pay taxes and remain in the shadows, and employers are not held accountable.

Thus, the rule, if implemented, would likely have little discernable affect on reducing illegal immigration and in fact could seriously exacerbate the problem by increasing incentives for both employers and workers to operate in the underground economy. This would be harmful to employers who are now attempting to operate within the law since it would increase the competitive advantage that bad actor employers have in the marketplace. Creating further incentives for employers and employees to operate in the underground economy is neither sound economic policy nor in our national security interest.

By focusing its regulatory efforts on employers who are attempting to comply with the law, NRCA believes that the no-match rule would be a misallocation of scarce resources which could be put to better use targeting those employers that deliberately evade the law.

Conclusion

To conclude, NRCA believes that the no-match rule issued in October, 2008, would not achieve the stated goal of reducing illegal immigration, but would have substantial negative impacts on our nation from both an economic and national security perspective. The rule would have severe negative impacts on both native born and immigrant workers who are in fact authorized to work in the U.S. by depriving them of the right to work and earn a living for themselves and their families. As such, NRCA strongly supports the August, 2009, proposal to amend federal regulations in order to fully rescind the no-match rule.

Respectfully submitted,

Duane L. Musser
Vice President of Government Relations





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