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California's New Social Security Number Confidentiality Law


California's Social Security Number Confidentiality Law takes effect on July 1, 2002. Identity theft in America is on the rise, and this new law attempts to protect against it by limiting the use of social security numbers by private entities. Most employers use social security numbers for reporting and identification purposes, and this law may well impact the way you currently use social security numbers.

Effective July 1, 2002, "any entity or person," excluding state and local governmental agencies, is prohibited from:

The new law has two exceptions applicable to employers:

The total impact of the new law on California employers is still not entirely clear because the law does not define important terms such as "application," "form," or "materials" sent by mail, and "for internal verification or administrative purposes." It is also unclear whether the law applies to ERISA-governed benefits.

There is a safe harbor provision for employers who have consistently and continuously used employees' social security numbers in a manner that violates the newly-passed legislation. To qualify for the safe harbor provision the employer must:

The safe harbor provision may not be of significant help for California employers because employees can opt out of non-conforming social security number use any time after July 1, 2002.

We recommend that employers: (1) carefully examine their uses of employee social security numbers, (2) identify any non-conforming practices, and (3) consider modifying documents or delivery methods. We note that the use of social security numbers on the itemized statements which must accompany paychecks will remain unaffected since that use is required by California law.

Although the outlook remains unclear, this attempt by the California legislature to eradicate identity theft and protect employee privacy will impact many employers' current uses of social security numbers.


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