Business Challenges Immigration Rule

Business groups are hoping that a U.S. court will block an immigration rule that could affect millions of employers and workers, arguing that the government didn't consider the new regulation's impact on small business.

Business associations joined labor unions in suing the Department of Homeland Security over a plan that could lead companies to fire workers whose Social Security numbers don't match their names in a federal database.

"Agencies must do their homework, and DHS did not" by paying "lip service" to the required review, said Karen Harned, executive director of the National Federation of Independent Business's Legal Foundation, one part of the 600,000-member small-business trade group.

The case is being closely watched because of its potential impact on the economy and on a stalled federal policy aimed at preventing illegal immigration, as well as because of the unusual coalition opposing the rule.

The AFL-CIO and civil liberties groups filed the suit in San Francisco on Aug. 29, alleging that the regulation "would commandeer the Social Security tax system for immigration-enforcement purposes." Homeland Security was ready to mail thousands of alerts to employers about "no match" documentation problems with workers.

Business groups quickly joined the case. They contend that the rule, which aims to identify about 12 million illegal immigrants, would result in forced firings and more than $100 million in costs and liability for owners.

The San Francisco Chamber of Commerce and small-business trade groups representing roofers, landscapers, restaurateurs, franchisees and produce growers claimed the agency ignored the rule's financial impact on them.

Since 1980, federal agencies have been required to analyze how rules would affect small businesses and to consider alternatives.

More than 80 lawsuits since 1996 have claimed that the government did not review or inadequately reviewed a rule's impact on small business. About half the time, agencies were ordered to conduct reviews while the rule was allowed to go into effect, according to David Frulla, an attorney with Kelley Drye Collier Shannon in the District.

Frulla, who has argued a dozen review actions against agencies, said judges in at least four cases blocked rules because of the small-business review -- the outcome the employer groups are seeking.

The Bush administration has argued that the rule doesn't impose new obligations on employers because they already have to verify workers' eligibility to keep them on the job. The government has already used employers' responses in enforcement proceedings, the Department of Homeland Security said in court filings.

It also said a small-business analysis of the rule was unnecessary because it had no effect on such enterprises and clarified for all employers the meaning of its "no match" letters.