DOL INTERIM FINAL RULE IMPLEMENTING ACWIA (PUBLISHED DECEMBER 20, 2000): ISSUES OF GENERAL APPLICATION

The U.S. Department of Labor recently published the long awaited regulations implementing changes in the Labor Condition Application program contained in the American Competitiveness and Workforce Improvement Act of 1998 ("ACWIA") and otherwise incorporating regulations first published in 1995 and reissued for notice and comment based on the injunction entered in National Association of Manufacturers v. Department of Labor.

The following is a summary of issues of general application to employers who utilize the H-1B program to supplement their U.S. workforce. GT has published a separate notice for employers who are classified as H-1B dependent, or who have been found guilty of a willful violation of the H-1B labor certification rules within the past five years. Some of the news is good, such as the elimination of the need to file new labor condition applications in the case of corporate mergers and acquisitions (provided the material conditions of H-1B employment remain the same). Some, however, are complex and will require enhanced recordkeeping on the part of H-1B employers, in general.

1. ELIMINATION OF LCA REQUIREMENT IN MERGERS AND REORGANIZATIONS, PROVIDED OBLIGATIONS EXPRESSLY ASSUMED AND DOCUMENTED IN THE PUBLIC ACCESS FILE.

a. DOL's Interim Final Rule provides that a new LCA will not be required merely because a corporate reorganization results in a change of corporate identity, regardless of whether there is a change in the EIN and regardless of whether the IRS definition of single employer is satisfied, provided the successor entity, prior to the continued employment of the H-1B nonimmigrant, agrees to assume the predecessor entity's obligations and liabilities under the LCA. The agreement to comply with the LCA for the future and to any liability of the predecessor under the LCA must be documented with a memorandum in the public access file. An employer that undergoes a change in structure and EIN, but chooses not to insert the required memorandum in the public access file, is required to file new LCAs.

b. A corporation which was H-1B-dependent, and as a result of a change in structure becomes non-dependent, would be required to continue to comply with the secondary displacement attestation unless it chooses to file a new LCA and H-1B petition(s) for any H-1B worker(s) employed pursuant to the ``dependent'' LCA. Similarly, a non-dependent corporation which becomes dependent as a result of corporate restructuring would be required to comply with the H-1B-dependent employer obligations for H-1B workers employed pursuant to a pre-existing LCA, provided the employer has assumed the obligations and liabilities of that LCA.

c. Caution: A new LCA (and H-1B petition) will be required if the H-1B worker changes jobs or where the new entity/employer seeks to hire a new H-1B worker or to extend an existing H-1B petition. Thus the ``new'' employer may not utilize H-1B ``slots'' left over from the previous entity's LCA for a worker hired after a reorganization or restructuring.

2. CALCULATING DEPENDENCY STATUS.

a. The "Snap shot" Method Versus Full Computation. The Interim Final Rule significantly reduces the burden to employers in making the computations of dependency by introducing the "snap shot" test.

i. Employers with 50 or fewer employees in the U.S. are permitted to simply compare their work forces to the definition for H-1B-dependent employer, counting all employees rather than computing full-time equivalents (FTEs). Using this method, if less than 15% of the employer’s U.S. headcount is composed of H-1B workers, no further computation need be made. (If such an employer appears to be H-1B-dependent based on the snap shot test, and the employer which believes itself to be non-dependent, then a full computation would have to be made.

ii. Employers with 51 or more employees in the U.S. may make a quick appraisal by dividing the number of full-time employees by the number of H-1B- workers. If the quotient is less than .15, no further calculations need be made. If the quotient is .15 or greater, and the employer believes itself to be non-dependent because of the number of part-time workers in its work force, a full calculation must be made.

b. Counting H-1B Visa Holders. All H-1B workers are necessarily employees within the meaning of the INA, and therefore must be included in both the numerator and the denominator of the dependency determination.

c. Who is a "Full Time" Employee. The employer may use its own standard for full-time employment, which the Department will accept provided that the standard is no less than 35 hours of work per week. Where the employer has no standard for full-time employment, the Department in an enforcement action will use the standard of 40 hours of work per week (the Fair Labor Standards Act standard).

d. Rules for Counting Part-Time Workers. The NPRM proposed a complicated method of converting part-time workers to their full-time equivalency for purpose of performing the dependency calculation.

i. The Interim Final Rule provides employers an option of considering all part-time workers to be one-half FTE, rather than make the full computation.

ii. Full computation is required where it is not readily apparent whether the H-1B population exceeds 15 percent of the workforce. This may be done by counting the hours worked by each employee, as shown in the employers payroll records. In the alternative, the employer may total the hours worked by all the part-time workers in a work week and divide that total by the standard hours for full-time employment (e.g., 40 hours). The employer may use any reasonable method of approximating the average hours worked by its part-time workers, such as their standard work schedule.

e. Recordkeeping Requirements. There are four circumstances under which dependency calculations must be maintained for later inspection (but not necessarily in the public access file).

i. Where full computation indicates that the employer is not H-1B dependent.

ii. Where the employer changes status from dependent to non-dependent.

iii. Where the employer uses the Internal Revenue Code single employer test. In that case, the employer must document what entities are included in the single employer, as well as the computation performed, showing the number of workers employed by each entity who is included in the calculation

iv. Where the computation includes workers whose names do not appear in the employer’s payroll records.

3. DOCUMENTATION REQUIRED IN THE PUBLIC ACCESS FILE.

a. Memo Describing the Employer’s Wage System and Methodology for Calculating the "Actual Wage" For Similarly Situated U.S. Workers at the Place of Employment. The Department of Labor has deleted the provisions suggesting that the employer's wage system must be objective, as well as the statement that it must be described in the public disclosure file with detail sufficient for a third party to determine the actual wage rate for an H-1B nonimmigrant. However, a description of the employer’s wage system and methodology for determining the actual wage paid to similarly situated U.S. workers must be placed in the public access file, in accordance with existing regulations.

b. Fringe Benefit Plans. The employer must provide a summary of the benefits offered to U.S. workers in the same occupation as H-1B workers, including a statement of how employees are differentiated, if at all. This obligation may be satisfied by including a copy of the employee handbook or summary plan description. Where an employer is providing home country benefits, the employer need only place a notation to that effect in the public access file. DOL is not requiring that detailed records of fringe benefits be maintained in each public access file. These records may be kept in a master file or in any other manner the employer desires (See Section __ below.).

4. MAINTENANCE OF HOURS WORKED RECORDS CLARIFIED.

a. Employers will not be required to keep hourly wage records for its full-time H-1B employees paid on a salary basis. However, hours worked records must be maintained for employees who are not paid on a salary basis and for part-time H-1B workers, regardless of how paid.

b. Where the employer obtains a prevailing wage determination reported in the form of an hourly wage, the employer should convert the wage by multiplying by 2080 hours for an annual salary. If the employee is full-time and to be paid on a salary basis, regardless of the number of hours worked in any one work week, the LCA should reflect that arrangement. However, the prevailing wage must be expressed as an hourly wage if the worker is part-time, in order to ensure that the part-time worker is in fact paid for the proportion of the week in which he or she actually works. The wage payment method shown on the LCA and visa petition will be determinative with respect to the employer’s obligation to maintain records of hours worked.

5. WAGE PAYMENT ISSUES

a. Future bonuses may be credited toward payment of the required wage, provided payment is assured.

b. In computer occupations, a Service Contract Wage of $27.63 @ hour will not be granted safe harbor protection for purposes of meeting the prevailing wage. This is merely the wage cap for purposes of application under the Service Contract Act. In such cases, the SESA is instructed to report the OES wage for the position, which is generally higher.

c. An actual wage range can be used to determine compliance with the actual wage requirement, provided the employer's methodology in assigning wages within the range is based on acceptable, legitimate business factors and the methodology is applied in the same manner to H-1B nonimmigrants and U.S. workers. This should result in U.S. workers and H-1B workers with similar skills and qualifications being paid the same, where their duties and responsibilities are the same. DOL views the actual wage obligation as ongoing and dynamic – meaning that the employer must constantly update and evaluate satisfaction of the actual wage whenever it makes across-the-board adjustments in its salary system. At a minimum, the description of the employer’s actual wage system in the public access file should identify the business-related factors that are considered and the manner in which they are implemented (e.g., stating the wage/salary range for the specific employment in the employer's workforce and identifying the pay differentials for factors such as education and job duties). Computation of U.S. and H-1B workers' particular wages need not appear in the public access file; that information must be available for review by the Department in the event of an enforcement action (such as in each worker's personnel file maintained by the employer

d. The Interim Final Rule continues to provide that any expenses directly related to the filing of the LCA and the H-1B petition are a business expense that may not be paid by the H-1B worker if such payment would reduce his or her wage below the required wage (whether actual or prevailing). These expenses are the responsibility of the employer regardless of whether the INS filing is to bring an H-1B nonimmigrant into the United States, or to amend, change, or extend an H-1B nonimmigrant's status. H-1B nonimmigrants are permitted to pay the expenses of functions which by law are required to be performed by the, such as translation fees and other costs related to the visa application and processing. Any costs associated with the H-1B worker's receipt of legal services he or she contracts to receive relative to obtaining visas for the worker's family, and the various legal obligations of the worker under the laws of the U.S. and the country of origin that might arise in connection with residence and employment in the U.S., are not ordinarily the employer's business expenses. As such, they appropriately may be borne by the worker. If an applicant for a job hired an attorney clearly to serve the employee's interest, to negotiate the terms of the worker's employment contract, to provide information necessary for the H-1B petition or review its terms on the worker's behalf, or to provide the applicant with advice in connection with application of U.S. employment laws, including the various employee protection provisions of the H-1B program and its new whistleblower provisions, the fees for such attorney services are not the employer's business expense.

e. Salaried H-1B workers must be paid at least once monthly on a prescribed schedule. Hourly paid H-1B workers must be paid at least twice monthly on a prescribed schedule.

6. SATISFACTION OF THE LCA POSTING REQUIREMENT – WHAT CONSTITUTES THE WORKSITE 0R PLACE OF EMPLOYMENT; ELECTRONIC POSTING RULES.

a. DOL continues to maintain that posting must be made at the actual worksite. Thus, if the H-1B worker is to be placed at the worksite of a secondary employer, posting must be done at the worksite of the secondary employer and not just at the home office of the primary employer (i.e., the H-1B sponsor).

b. The Interim Final Rule clarifies the operational requirements for electronic posting.

i. An electronic posting on a ``home page'' or electronic bulletin board must be posted for 10 days.

ii. If direct notice is given to each affected employee, as through e-mail or ``hard copy'' notices, the notice need only be given once during the regulatory time period.

iii. Notice by e-mail may be provided by notification to an e-mail group consisting of all of the affected employees.

iv. Electronic posting, unlike hard copy posting, need not be posted in two locations, provided all the affected employees, as a practical matter, have access to the website or bulletin board. Another method of posting would have to be used to reach those employees who do not have such access. For example, home care therapists may not have practical access to a computer at all as a part of their job. Where there is no such access, physical posting at two sites in the home office or individual copies of the notice would be necessary.

v. Electronic notification, like other physical posting, must be provided in the period within 30 days prior to the date the LCA is filed.

vi. Where H-1B nonimmigrants are placed at a worksite not contemplated when the LCA was filed, the notification must be provided on or before the date the H-1B nonimmigrant begins work at the site.

7. CLARIFICATION OF THE OBLIGATION TO OFFER H-1B WORKERS EQUIVALENT WAGES, BENEFITS AND WORKING CONDITIONS.

a. The Interim Final Rule also prohibits employers from denying benefits based on the H-1B worker's temporary status since all H-1B workers, by virtue of their visa restrictions, are temporary workers. Thus, an employer by utilizing ``temporary'' as a basis for comparison could evade offering to these workers the benefits that typically would be paid to workers hired on a ``permanent basis,'' even though the tenure of workers in each group might be of comparable duration, thereby effectively nullifying the statutory provision. An employer would, however, be allowed to require that an H-1B workers meet eligibility and vesting requirements.

b. The Department has concluded, as a general matter, that the statute's ``same basis'' provision does not permit an employer to offer its H-1B workers benefits ``equivalent'' to but different from those offered its U.S. workers.

c. The Department has crafted a two-part Interim Final Rule for employees of multinational employers, distinguishing between workers who are in the United States for a short period of time (90 days or less) and workers who are in the United States for a longer period.

i. Where H-1B workers permanently employed in their ``home country'' (or some other country) are not transferred to the United States but remain on the payroll of their permanent employer in their ``home country'' and continue to receive benefits from the ``home country'' without interruption, the Department will require nothing further, provided the worker is in the United States for no more than 90 continuous days in any one visit to the United States. The employer must also provide reciprocity to its U.S. workers i.e., U.S. workers based abroad and U.S. workers based in the United States must receive the benefits of their home work station (the station abroad or in the United States, respectively) when traveling on temporary business. H-1B workers who are not in the United States more than 90 continuous days in one trip may go back and forth between countries without any consideration to cumulative days of employment in the United States, provided there is no reason to believe the employer is trying to evade the Act's benefit requirements, such as where a worker remains in the United States most of the year but returns to the home country on brief visits.

ii. Once the H-1B worker has worked in the U.S. for more than 90 continuous days (or from the point where the worker is transferred or it is anticipated that the worker will likely remain in the United States for more than 90 continuous days), the H-1B employer is required to offer that worker the same benefits on the same basis as provided to its U.S. workers unless: (1) The worker continues to be employed on the ``home country'' payroll; (2) the worker continues to receive ``home- country'' benefits without interruption; (3) the ``home-country'' benefits are equitable relative to the U.S. benefit package; and (4) the employer provides reciprocity (i.e., similar treatment as discussed above) to its U.S. workers (if any) on assignment away from their home work station.

iii. Once the H-1B worker has worked in the U.S. for more than 90 continuous days (or from the point where the worker is transferred or it is anticipated that the worker will likely remain in the United States for more than 90 continuous days), the H-1B employer is required to offer that worker the same benefits on the same basis as provided to its U.S. workers unless: (1) The worker continues to be employed on the ``home country'' payroll; (2) the worker continues to receive ``home- country'' benefits without interruption; (3) the ``home-country'' benefits are equitable relative to the U.S. benefit package; and (4) the employer provides reciprocity (i.e., similar treatment as discussed above) to its U.S. workers (if any) on assignment away from their home work station.

iv. Any employer that offers health coverage to its U.S. workers must offer similar coverage (same plan and same basis) to its H-1B workers in the United States for more than 90 continuous days unless the H-1B workers' home-country plan provides full coverage (i.e., coverage comparable to what they would receive at their home work station) for medical treatment in the United States.

v. Employers are also required to provide H-1B workers who are in the United States more than 90 continuous days those U.S. ``benefits'' which are paid directly to the worker--namely paid vacation, paid holidays, and bonuses. H-1B workers must also be provided working conditions and eligibility for working conditions (hours, shifts, vacation periods, etc.) on the same basis and criteria provided to U.S. workers.

vi. A multinational firm will not be required to make a valuation of the benefits it offers and provides to U.S. and H-1B workers, but rather will be required, in the event of an investigation, to establish that it provides benefits which are equitable in relation to U.S. workers' benefits. In the event of an enforcement action, the Department will look into all the circumstances bearing upon the benefits to ensure that the H-1B worker's continued receipt of these benefits is not less advantageous to him than the benefits offered U.S. workers. This examination entails a qualitative rather than a quantitative review. In other words, an employer in these circumstances must be able to demonstrate that the worker's ``home-country'' benefits are equitable in relation to the benefits provided its U.S. workers based in the United States, similarity in treatment of all workers, how U.S. workers temporarily stationed abroad are treated, and the facts and circumstances of each H-1B worker. Where the employer makes this demonstration, and there is no appearance of contrivance to avoid payment of U.S. benefits, the Department will not second-guess the employer.

d. Employers must retain a copy of any document provided to employees describing the benefits offered to employees, the eligibility and participation rules, how costs are shared, etc. (e.g., summary plan descriptions, employee handbooks, any special or employee-specific notices that might be sent). Employers also must keep a copy of all benefit plans or other documentation describing benefit plans and any rules the employer may have for differentiating among groups of workers. Lastly, employers will be required to retain evidence as to what benefits are actually provided to U.S. and H-1B workers. Where employees are given a choice of benefits, employers will be required to retain evidence of the benefits selected or declined by employees. Multinational employers who choose to keep H-1B workers on ``home country'' benefit plans will be required to maintain evidence of the benefits provided to the worker before and after the employee went to the United States. In the event of an investigation, multinational employers will also be required to demonstrate that the other requirements for multinational firms are met, as appropriate--e.g., that the employer maintains reciprocity by treating U.S. workers coming to the United States temporarily from abroad the same as H-1B workers, and likewise continues U.S. workers temporarily overseas on U.S. benefits, that the worker was not in the United States for more than 90 continuous days, that ``home country'' benefits are equitable in relation to U.S. benefits, etc.

8. CLARIFICATION OF THE "NO BENCHING" RULE

a. The obligation to commence compensation of H-1B workers begins when the alien "enters into employment " with the petitioning employer. In the Interim Final Rule, the Department fixes that date from the date on or after the date of need on the H-1B petition when the worker makes himself or herself available for work or otherwise comes under the control of the employer and includes all activities thereafter, such as waiting for an assignment, going to an interview or meeting with a customer, attending orientation, or studying for a licensing examination. The Department refused to make an exception based on the lack of an export control license. Clearly the employee is legally eligible to work, but work is simply not available (even if due to circumstances beyond the employer's control).

b. Nonproductive ("benching") pay must be based on the number of hours per week on the H-1B petition. H-1B employees should not regularly work more than the number of hours shown on the petition, which may be expressed as a range of hours. A combination of part-time and full-time positions cannot be entered on a single LCA form. If the H-1B worker normally works full-time or a greater number of hours than shown on the petition, the Department will examine the facts and circumstances and may charge the employer with misrepresentation of a material fact.

c. Employers are prohibited from laying off H-1B workers without pay where the employer's business is shutdown, regardless of whether it affects U.S. workers as well, and regardless of the reason -- whether for economic downturn, annual retooling, or holiday shutdown. Employers also are prohibited from refusing to pay H-1B workers for mandatory vacation, pre-employment training, or disciplinary action. All of these situations are caused by the employer, rather than at the voluntary request of the nonimmigrant. Training or orientation required of an employee before productive work starts is considered compensable time under the Fair Labor Standards Act. If an employer finds need to discipline an H-1B nonimmigrant, it must find a method other than loss of pay, or it may terminate the employment relationship. It would not be considered a bona fide termination if the employer rehires the worker if or when work later becomes available unless the H-1B worker has been working under an H-1B petition with another employer, the H-1B petition has been canceled and the worker has returned to the home country and been rehired by the employer, or the nonimmigrant is validly in the United States pursuant to a change of status.

d. It would be a violation of the no displacement rule for a dependent H-1B employer or willful violator to lay off U.S. workers while continuing to pay H-1B workers employed in substantially similar positions. Employer layoffs under such circumstances also may constitute violations of other non-discrimination laws and may expose violators to liability for compensatory and punitive damages, as well as attorneys fees and costs.

e. If the employer has a policy or plan for compensating U.S. workers taking FMLA or other forms of leave, the employer must make the same benefit available to H-1B workers, regardless of the fact that the law otherwise permits such leave to be unpaid.

9. CLARIFICATION OF WHAT ACTIONS OR CIRCUMSTANCES WOULD BE PROHIBITED AS A ``PENALTY'' ON AN H-1B NONIMMIGRANT LEAVING AN EMPLOYER'S EMPLOYMENT

a. The Department agrees that liquidated damages may encompass other costs the employer has borne on behalf of the employee, such as transportation and visa processing assistance, including attorneys fees – provided such fees are recoverable under applicable state law as liquidated damages in similar situations. Under no circumstances, however, may an employer seek to recover the H-1B filing/training fees in the event of an employee breach.

b. The Department has withdrawn the requirement that an H-1B employer seek a state court judgment on the question of whether a liquidated damage clause in an employment contract constitutes an unlawful penalty before withholding moneys based on such a provision. The Department will make such determinations in the course of investigation of complaints regarding such clauses, and will apply the decisional law of the state with jurisdiction over the employment relationship.

10. IMPORTANT CHANGE IN INTERPRETATION OF THE TOP TIER CIVIL MONEY PENALTY

a. The highest level of penalties (up to $35,000 per violation and a minimum of three years of debarment) are applicable whenever any employer displaces a U.S. worker in the course of committing a willful violation of any of the attestation provisions or a willful misrepresentation--regardless of whether the employer is a dependent employer or willful violator subject to the new attestation provisions of the ACWIA. Application of this higher penalty will arise only where the Department determines that the employer has committed a willful violation of an attestation requirement--e.g., the employer has willfully failed to pay the required wage to H-1B workers. If the Department determines that the employer has displaced a U.S. worker within the period between 90 days before and 90 days after the LCA was filed, and that the employer has replaced that worker with an H-1B worker whom the employer has willfully failed to pay the required wage, the employer will be subject to a CMP of up to $35,000 per violation of the attestation requirements; in addition, the Department will advise INS, which shall not approve any petitions for at least a three-year period. The Interim Final Rule has been amended to correct this provision.

11. MODIFICATION OF THE "SHORT TERM PLACEMENT" EXCEPTION TO THE LCA REQUIREMENT – INCLUDING MODIFICATIONS TO THE "WORKSITE" TEST

a. The Interim Final Rule provides that an employer may make a ``short-term'' placement or assignment of an individual H-1B worker at any worksite or combination of worksites in a non-LCA area for a total of 30 workdays in a one-year period (either the calendar year or the employer's fiscal year, whichever the employer chooses). The Rule also provides that the placement may be expanded by as much as an additional 30 workdays (thus, 60 workdays in a one-year period) if the employer is prepared to show that the worker maintains a workstation at the home office, spends a substantial amount of time at the home office, and maintains his/her ``place of abode'' in the area of the home office. Once an H-1B worker exceeds the workday limitation in a one-year period, the employer would not be permitted to continue the placement of that worker or any other H-1B worker in the same occupation in that area of employment, until one year from the beginning of the next one-year period (either the beginning of the next calendar year, or the beginning of the employer's next fiscal year) or until an LCA is in place. In addition to home-base wages, the employer is also required to reimburse H-1B workers for the actual expenses incurred during their short-term placement. In those rare instances where the employer, in an enforcement action by DOL, is unable to demonstrate the actual expenses incurred, the Department will use the GSA standards to determine whether the reimbursement was sufficient and to assess back wages if appropriate.

b. The short-term placement option is not available where:

i. The H-1B worker has just arrived in the United States (or has changed or extended status to qualify to work for the employer), in which case the worker must be placed at a place of employment listed on the LCA supporting the H-1B petition for the worker.

ii. The employer is moving its H-1B worker(s) among worksites in one or more areas covered by valid LCAs; the worker(s) would be subject to the requirements of those LCAs (e.g., notice, prevailing wage, non-displacement for dependent employers) that cover those worksites.

c. The short term placement rule is not triggered by a casual, short-term ``visit'' of five day’s duration or less where a worker's job is by its nature peripatetic. The worker also may make recurring, short ``visits'' to the location in order to perform job duties without classifying that location as a "worksite" for purposes of the H-1B rules. For a worker who spends most of his or her time at one location but occasionally travels for short periods to other locations, such a worker may spend up to 10 work days at the visitation site without having it converted into his "worksite" for H-1B purposes.