The nation’s largest federation of labor unions sued the U.S. government to block a plan to crack down on employers who hire illegal immigrants.   The labor federation argues more scrutiny of Social Security numbers will result in errors and threaten the jobs of legal workers.

The plan has created deep fears in immigrant communities and among businesses and unions, as it’s an open secret that millions of illegal immigrants work “on the books” with fake names and Social Security numbers and other bogus documents.

The new rules, set to take effect Sept. 14, will violate workers’ rights and impose burdensome obligations on employers who receive “no-match” letters from the Social Security Administration, according to the AFL-CIO lawsuit filed in the U.S. District Court in San Francisco.

The Social Security Administration sends “no match” letters to workers and their employers notifying them, for example, when their Social Security numbers do not match their names. The letters are not shared with other government agencies because of privacy laws.

Although employers are prohibited from hiring illegal workers, their responsibilities with the letters have generally ended with notifying the workers of the discrepancies. Many employers have viewed the letters, and the small fines they sometimes incur, simply as a cost of doing business.

Under the new rules, employers will be required to fire employees who are unable to clear up problems with their Social Security numbers within 90 days. Employers who fail to comply could face fines and criminal prosecution.

“We’ve seen employers use these no-match letters as a union busting tool,” said Ana Avendano, an AFL-CIO attorney and director of its immigrant worker program. “Employers will look at these letters, see all the new burdens, and just decide to fire people.”

The lawsuit, filed on behalf of the AFL-CIO by the American Civil Liberties Union, seeks to force the Bush administration to halt the plan.

In a statement, the Department of Homeland Security said the lawsuit was “an obvious attempt to impede the department’s ability to enforce our immigration laws. It is completely without merit and we intend to fight it vigorously.”

The planned crackdown comes after immigration reform legislation in Congress fell apart this summer.

Wednesday’s lawsuit, which included a handful of other unions and trade councils, focuses on legal immigrants and American workers who could face job discrimination or hassles because of the new rules.

The plaintiffs argue that the Social Security database is riddled with errors and that numbers can be incorrectly flagged due to typographical erross, mistakes filling out forms, or a name change that wasn’t reported after marriage or other reasons.

An estimated 12.7 million of the 17.8 million discrepancies in the Social Security Administration’s — more than 70 percent — were among native-born U.S. citizens, according to a December 2006 report from the Social Security Administration’s Office of the Inspector General.