California Apparel News

A new federal rule aimed at eliminating illegal immigrants from the American workforce is poised to affect employment drastically for many California apparel manufacturers in the coming months.

The Department of Homeland Security recently announced plans to pursue a program that will force companies to fire all employees who cannot provide adequate Social Security documentation following an audit of the company’s records.

The DHS considers the prospect of employment in the United States to be a “magnet” for foreign nationals considering entering the country illegally.

DHS documentation regarding the new rule states, “Reducing the employment magnet is the linchpin of a comprehensive strategy to deter unlawful immigration.”

On March 21, the DHS amended the guidelines for employers who have received “no-match” letters from the Social Security Administration.

No-match letters are sent when the SSA discovers that an employee’s Social Security number does not match the name assigned to it. Under the new rule, employers are given 90 days to provide a matching Social Security number. If the employer cannot, the new regulations require the company to fire the employee.

The No-Match Rule was established in August 2007 by the DHS to amend regulations that provide a “safe harbor” from liability under a provision of the Immigration and Nationality Act, a part of the Immigration Reform and Control Act of 1986. The INA included a grandfather clause for employees hired before 1986. The new rule does not apply to those “grandfathered” workers, according to the DHS.

At least one Los Angeles manufacturer is already being audited, according to sources in the industry. If the manufacturer cannot provide documentation to resolve the discrepancy between the names and Social Security numbers, layoffs could begin as early as this month.

In the past, employees who could not be matched with their Social Security numbers were prohibited from accruing Social Security benefits. But no action was taken against the employer. Some employers opted to ignore the letters, arguing that compliance would violate the anti-discrimination provisions in the Immigration and Nationality Act. The DHS disagreed, and a U.S. District Court in the Northern District of California found in favor of the agency late last year.

Apparel-industry executives warn that the rule will decimate the workforce here in California and force local manufacturers to scramble to find and train replacement workers.

“The No-Match Rule has been around for a while but did not have teeth. It was a warning shot but never detailed the consequences,” said Ilse Metchek, executive director of the California Fashion Association. “If the [new] rules were to be implemented, even without the accompanying ’audit,’ it would lead to mass firing of tax-paying employees, with significant damage to the economy of the region.” Layoffs, relocations, closures

The Los Angeles County Economic Development Corp. looked at the ripple effect of a crackdown on illegal immigrants in its report titled “Unintended Consequences: The Impact of Stepped-Up Immigration Enforcement on the Los Angeles Economy,” released in February.

There are nearly 100,000 people directly working in the fashion industry, according to the LAEDC, which further estimated an additional 128,000 whose employment is indirectly related to the fashion industry, including suppliers of insurance, paper supplies and production machinery, among other goods and services.

“Manufacturing jobs tend to create more indirect employment than service-sector jobs, so their loss will be felt more acutely as the secondary effects ripple through the state,” the report stated.

The LAEDC warned that, at a minimum, the rule will force companies to relocate out of the state. The worst-case scenario proposed in the report is that 50 percent of the industry’s direct jobs will be lost and the industry “goes away.” According to the LAEDC, 224,000 apparel industry–related jobs are at risk.

The CFA recently sent letters and copies of the LAEDC report to the Los Angeles City Council, the Los Angeles County Board of Supervisors and the California Labor Commissioner explaining the rule and the consequences.

“Leaving all ’politics’ aside, this could be an economic disaster for the industry, the city and the region—and not just for the fashion business,” Metchek said.

While the DHS acknowledges there are costs involved in complying with the No-Match Rule, the agency calls the costs “relatively small,” although a statement from the DHS clarified that the cost of replacing and training new workers is not included in its estimates. (The DHS does not consider replacement and training costs to be a direct result of the rule; instead, it attributes those costs to be a result of not complying with the Immigration and Nationality Act by knowingly employing illegal immigrants.)

Metchek pointed out that the rule does not take into account the current economic environment nor the value of experienced employees.

“How do you replace experienced warehouse distribution, sewers, patternmakers, data processing, schedulers, production and general office workers in an economy with a 5.6 percent unemployment rate?” she said. “Even if we could snap our fingers and make every unemployed person available competent to fill the holes left by employees who may have been with a company for many, many years, we would not have enough new hires.”

The DHS considered some alternatives to the rule, including limiting enforcement to certain industries considered at “high risk of abuse,” including agriculture and construction, but deemed the alternatives “unfairly selective.”

The DHS Web site states, “Partial enforcement tends hellip; as a matter of experience to have the effect of redirecting unauthorized workers into un-enforced or under-enforced sectors.”

The DHS is currently accepting public comment on the No-Match Rule. Instructions for making a comment can be found at www.regulations.gov. For more information, visit www.dhs.gov.