The Small Business Administration (SBA) has weighed in on the side of groups that are challenging a regulation regarding what an employer should do when notified that an employee's Social Security number doesn't match government records. Tom Sullivan, the SBA's chief counsel for advocacy, has agreed that the Department of Homeland Security (DHS) violated the Regulatory Flexibility Act by failing to analyze the "no match" rule's impact on small businesses.

Under the rule, employers must fire a worker within 90 days of receiving a "no match" letter if the Social Security number discrepancy is not resolved. Otherwise, they could be prosecuted for knowingly employing an illegal alien. The rule was originally scheduled to go into effect September 14. The Social Security Administration and DHS planned to send letters to 140,000 businesses that employ eight million workers with Social Security numbers that don't match government records.

A federal judge, however, delayed the regulation pending a hearing on a lawsuit filed by the AFL-CIO, which contends the rule could lead to workers unfairly losing their jobs. The U.S. Chamber of Commerce and other business groups joined this lawsuit. They argue that the rule should be postponed until DHS analyzes its impact on small businesses and consider other, less burdensome alternatives. DHS denies that the rule would have significant impact on a large number of small businesses and says such analysis isn't necessary.

Business groups say the rule would cost small businesses at least $100 million a year. They would have to spend a lot of time checking their records and contacting the Social Security Administration. In addition, they say they would lose valuable employees, not because they are illegal workers, but due to clerical errors and name changes.

The lawsuit also charges that DHS exceeded its statutory authority and arbitrarily presumed a mismatched Social Security number indicates that a worker isn't authorized to work.

DHS spokeswoman Laura Keehner said business groups "are making the situation worse for the constituency they believe they are protecting" by fighting the no match regulation. "The vast majority of employers want to do the right thing," she said.

SBA's Sullivan said that last year DHS persuaded his office that the rule would help small employers by protecting them from immigration prosecutions if they followed certain procedures. The chamber's lawsuit "is a wake-up call government wide that small business owners expect agencies to examine how their rules will impact small firms and how they can adopt less burdensome alternatives that meet the underlying objectives," Sullivan concluded.

Information in this article was excerpted and edited from a story in the Austin, TX Business Journal.