On Oct. 10, the U.S. District Court for the Northern District of California issued a preliminary injunction barring implementation of the Department of Homeland Security's (DHS') rule dictating how employers must respond to Social Security Administration (SSA) "no-match" letters, which SSA issues when W-2 forms do not match its records. It is now up to DHS to respond, but the agency likely will not attempt to address the judge's decision until the next administration at the earliest.
NRCA and other business organizations were plaintiffs in the case and argued DHS' rule was promulgated in violation of the Regulatory Flexibility Act (RFA), which requires federal agencies to consider the economic impact of their regulatory actions on small businesses. NRCA and the other plaintiffs asserted DHS had failed to conduct a required regulatory flexibility analysis even though the rule would significantly affect small businesses.
The court agreed that DHS did not comply with RFA. The agency did not give small businesses a voice in the rulemaking process as it was supposed to do, and DHS Secretary Michael Chertoff erroneously certified that the rule would not significantly affect small businesses under RFA.