DOL INTERIM FINAL RULE IMPLEMENTING ACWIA (PUBLISHED DECEMBER 20, 2000): ISSUES OF SPECIAL CONCERN TO DEPENDENT EMPLOYERS

Effective January 19, 2000, one day before the Bush Administration takes office, H-1B dependent employers and employers who have found to be willful violators in the five year period leading up to that date (hereinafter referred to simply as "dependent employers") will find themselves subject to severe restrictions on their methods of hiring and recruiting workers for H-1B positions in the United States. The Department of Labor has relieved non-dependent employers of the burdens of calculating the actual percentage of H-1B workers in their workforces, but not so dependent employers. Due to the expiration of the statutory exception, exempt H-1B workers must also be included in calculating the 15% dependency threshold. Once classified as "dependent", an employer is subject to the recruitment and non-displacement rules previously described in the 1999 Notice of Proposed Rulemaking, unless the employer satisfies one of two exemption requirements – i.e., the H-1B worker is paid compensation of $60,000 per year or more, or possesses the equivalent of a U.S. master’s degree in a specialty field which is required for the job in question.

What follows is a summary of the key issues applicable to H-1B dependent employers.

1. EFFECT OF DEPENDENCY DETERMINATION ON EXISTING APPROVED LCA’S.

a. The Interim Final Rule adopts the proposal that H-1B-dependent

employers be required to file a new LCA if they wish to file new H-1B petitions, or extensions of status, after the effective date of the regulations.

b. If a non-dependent employer becomes dependent after the effective date of the regulations and wishes to file new H-1B petitions or extensions of status, it must file a new LCA attesting that it is dependent and agreeing to the new attestation requirements for H-1B-dependent employers.

c. An employer must consider and attest to its dependency status each time it files a new LCA; similarly, an employer seeking to file a new H-1B petition, or seeking an extension of status, must use an LCA in support of the petition that accurately attests as to its dependency status at the time it files the petition.

d. An H-1B employer that changes its status to non-dependent but wishes to petition for additional H-1B nonimmigrants or extensions of stay using an approved ``dependent'' LCA continues to be bound by the dependent-employer attestation requirements unless it files a new LCA attesting to its non-dependency.

e. If a dependent employer attests that an LCA will only be used for exempt employees, but the LCA in fact is used for both exempt and nonexempt workers notwithstanding the employer's attestation, the employer is required to comply (from the beginning of the LCA's effective period) with the special requirements with respect to all workers on the LCA (both exempt and nonexempt).

2. SPECIAL ISSUES FOR DEPENDENT EMPLOYERS AFFECTED BY MERGERS AND ACQUISITIONS. (Also, see discussion in Memorandum for all H-1B Employers)

a. A corporation which was H-1B-dependent, and as a result of a change in structure becomes non-dependent, will 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.

b. A non-dependent corporation which becomes dependent as a result of corporate restructuring will 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. 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.

3. DETERMINING WHETHER A DEPENDENT EMPLOYER MEETS THE $60,000 COMPENSATION TEST.

a. Future (i.e., unpaid but to-be-paid) cash bonuses and similar compensation may be ``counted'' toward the required wage if their payment is assured, but not if they are conditional or contingent on some event such as the employer's annual profits, unless the employer guarantees that the nonimmigrant will receive compensation of at least $60,000 per year in the event the bonus contingency is not met.

b. Bonuses and compensation must be paid ``cash in hand, free and clear, when due,'' and must be received by the worker within the year for which the employer wants to "count'' the compensation.

c. Fringe benefits in the nature of health insurance, pension, and life insurance, are not similar to cash bonuses and are not wages within the meaning of the definition of ``exempt H-1B nonimmigrant.'' Therefore benefits will not count toward the required $60,000 level under the Interim Final Rule.

d. H-1B workers who are hired at compensation of at least $60,000 per year, but who are employed for less than a year, will satisfy the statutory requirement if they receive at least $5,000 for each month worked. For example, a worker who resigns after three months must have been paid at least $15,000.

e. Dependent employers may not condition payment of the $60,000 minimum upon satisfaction of contract requirements if the employee quits prior to the expiration of the term.

4. DETERMINING WHETHER AN H-1B WORKER MEETS THE MASTER’S DEGREE EXEMPTION AND WHETHER THE DEGREE IS IN A SPECIALTY RELATED TO THE INTENDED AREA OF EMPLOYMENT.

a. DOL has determined to disallow the substitution of work experience for formal education in determining whether or not the alien beneficiary holds the equivalent of a U.S. Master’s degree.

b. In determining whether the alien’s degree is in a field related to the position in question, the Department will utilize The Occupational Outlook Handbook and O*NET 98. The Department also will consider other industry studies obtained by employers or the opinions, solicited by the employer, from a bona fide credentialing organization attesting that a nonimmigrant's academic specialty is generally accepted by the pertinent industry or occupation as appropriate or necessary for the employment in question.

c. A dependent employer must be prepared to prove up the educational exemption if audited by DOL. However, documentation of exempt status need not be included in the public access file so long as the employer provides a list of the workers covered under an "exempt-status" LCA.

5. WHAT RECORDS OF RECRUITMENT MUST BE MAINTAINED BY H-1B-DEPENDENT EMPLOYERS IN CASES WHERE NO EXEMPTION APPLIES.

a. Dependent employers are required to preserve all records reflecting efforts to recruit U.S. workers, including the places and dates of the recruitment, advertisements, postings, application forms, job offers, rating forms used by the employer’s representatives at interview, and other personnel documentation related to the hiring process. The employer is required to place in the public access file either documentation of the recruitment effort or a simple list of the places and dates of the advertisements and postings of other recruitment methods used. Copies of print advertisements are not necessary but may be subject to verification. Documentation may be in any form, such as a copy of an order or response from the publisher, an electronic or print record of an Internet notice, or a memorandum to the file. Records must be retained for years.

b. Employers will not be required to maintain evidence of industry practice for recruitment. The only additional recordkeeping burden required by these regulations is that the public disclosure file contain a summary of the principal recruitment methods used and the time frames in which they were used. This recordkeeping requirement may be satisfied by creating a memorandum to the file or the filing of pertinent documents.

c. An employer is not required to undertake separate recruitment efforts for every position listed on the LCA. In a particular situation, an employer may reasonably decide to solicit for all similar positions listed on an LCA(s) at the same time, particularly where the employer plans to hire for the positions at or about the same time. Similarly, employers which regularly experience large numbers of vacancies may undertake ongoing recruitment. The Department of Labor will not second-guess an employer's good faith, reasonable decision in such circumstances, provided it accords with the relevant ``industry- wide standards'' applicable to the employer.

d. There may be circumstances in which using different staff to interview U.S. and H-1B workers may be appropriate. In these situations, however, it is important, in the Department's view, that the personnel who interview the H-1B applicants not have a more effective say in the recruitment/hiring process than the personnel interviewing U.S. applicants. A U.S. worker's ability to compete for the position covered by the LCA should not be adversely affected by the status of the interviewer within the company or its recruitment/selection process. Furthermore, it is important that U.S. workers not be interviewed by employees or agents who have a financial interest in hiring H-1B nonimmigrants rather than U.S. workers.

e. An employer cannot satisfy the good faith recruitment obligation if it does not give good faith consideration to U.S. applicants. DOL specifically rejected selection criteria such as those described by TASA – an international computer consulting firm that recruits from universities in India and trains workers for assignment abroad, including in the United States. TCS explained that its employees, including those it places in H-1B positions, serve as team members of consulting groups that will move from job to job in the United States and elsewhere. It stated that it hires employees with this enduring employment relationship in mind, not for the employee's particular assignment to a job in the United States. In the Department's view, an employer's recruitment obligation attaches to the position for which an H-1B worker is sought in the United States. The focus must be on the particular job(s) in the United States which is/are covered by the LCA, not the position an H-1B applicant already occupies or will occupy with the dependent employer. An employer will fail to meet its recruitment obligation if it utilizes recruitment/selection criteria that have the effect of precluding an equally or better qualified U.S. worker from being hired for the position. The employer cannot reject U.S. workers for employment in the United States simply because they have not trained abroad and/or will not be available for future placement outside the United States.

6. CLARIFICATION OF WHO IS AN EMPLOYEE UNDER THE DEPENDENCY RULES

a. The DOL Interim Final Rule for the existence of an employment relationship is that which exists under U.S. common rather than that which has been adopted by the IRS for payroll withholding purposes. The fact that an employer has treated a worker as an independent contractor for tax purposes, without protest by the IRS, will not excuse an employer's non-compliance with its H-1B obligations toward that worker as an employee if the common law test shows the worker to be an employee.

b. The common-law test requires an assessment of all the factors bearing on the employment relationship, with the right to control the means and manner of work being the key determinant but with no one factor controlling.

c. In the case of a secondary employer, there may be an "indicia of employment" between the H-1B worker and the U.S. worker he displaces based upon the secondary employer’s right to control when, where, and how the worker performs the job, i.e., the manner or method by which the particular duties of the job are to be performed. The test for establishing the indicia of an employment relationship for secondary employment is more lenient than for primary employment. Factors that will tip the balance include whether the secondary employer furnishes tools and equipment (such as computer terminals), whether the work is performed on the premises of the secondary employer, whether there is a continuing relationship between the H-1B worker and the secondary employer, whether the secondary employer has the rights to assign additional projects to the H-1B worker, whether the secondary employer sets the hours of work and duration of the job, whether the work done by the H-1B worker is the same type of work typically done by the primary employer, and whether the secondary employer directly employs workers in the same specialty as the H-1B employee.

7. CLARIFICATION OF THE PHRASE "ESSENTIALLY EQUIVALENT" FOR PURPOSES OF DETERMINING WHETHER A U.S. WORKER HAS BEEN

REPLACED BY AN H-1B WORKER.

a. The Department of Labor is adhering to the distinction between core (i.e., essential) and peripheral elements as a means of comparing jobs to determine if a U.S. worker has been displaced by an H-1B worker. In comparing jobs, the employer must take into account the actual duties of the jobs – not job titles or position descriptions that easily can be tailored to disguise jobs, which in their actual performance, are essentially alike.

b. The Department rejects the view that the ACWIA's displacement provisions only operate on a ``one-to-one'' basis. In the case of a small workforce, such a comparison may be possible, but in other situations a wider inquiry will be required. By way of example, if an employer eliminates the staff of an entire department and out sources the functions previously performed by its U.S. workers with one or more H-1B workers, any U.S. worker(s) who performed jobs that are essentially equivalent to the job filled by the H-1B worker(s) would be entitled to ACWIA protection. The Department will also look closely at situations where a U.S. worker is laid off and his/her job is filled by a U.S. worker colleague whose own job is then filled by an H-1B nonimmigrant.

8. RECORD RETENTION REQUIREMENTS UNDER THE NO DISPLACEMENT CLAUSE.

a. With respect to U.S. workers who leave employment involuntarily during the 90-day periods before and after the filing of an H-1B petition, dependent employers and willful violators are required to preserve all documentation concerning work experience, qualifications, and principal assignments; notification by the employer or the employee regarding the termination of employment and any response thereto; and job evaluations.

b. If the employer offers the U.S. worker another employment opportunity, the employer must maintain a record of the offer, including the position offered and terms of compensation and benefits, and the employee's response thereto.

c. The Interim Final Rule also requires dependent employers to document their inquiries to secondary employers regarding the displacement of U.S. workers in the 90-day windows before and after placement of an H-1B worker, and any responses received from the secondary employers. Note: Satisfaction of this recordkeeping requirement can serve to insulate a dependent employer from the finding of a willful violation and potential disbarment. However, it will not relieve the dependent employer of the possibility of civil money penalties of up to $35,000 for each displaced U.S. worker. Further, the injured U.S. worker may proceed against the dependent employer in arbitration conducted under the auspices of the Department of Justice.

d. The foregoing records must be retained for a period of two years.