This is a great article by our Attorney Ekaterina Powell, Esq., she has been very involved in H1B DOL audits in the past few months as we defend our employer clients.
The number of Labor Condition Application compliance investigations of the H-1B employers by the Department of Labor (DOL) is on the rise. When violations are found, the Administrator of the Wage and Hour Division may assess civil money penalties ranging from $1,000 to $35,000 per violation, depending on the type and severity of the violation. The Administrator may also impose other remedies on the H-1B employers, including payment of back wages, and debarment from the H-1B program for a certain number of years.
Therefore, it is critical for all companies that employ foreign workers under H-1B program to keep themselves up-to-date with the compliance measures and strictly follow the record keeping requirements.
This article will provide an overview of what the H-1B employers need to do in order to protect themselves from the possible violations and to avoid penalties for failure to comply with the record keeping requirements.
H-1B employer needs to create a public access file for each employee’s Labor Condition Application (LCA) that is filed with the Department of Labor. Employers of any H-1B nonimmigrant workers are required to make a filed LCA and its supporting documentation available for public inspection at the employer’s principal place of business or at the place of employment of the H-1B nonimmigrant workers within one day after the date of submission of the LCA. This public inspection file must contain the following:
• Copy of the LCA (with employer’s original signature and cover pages)
• Documentation of the wage to be paid to the H-1B employee
• Explanation of system used to set the actual wage
• Documentation used to establish the prevailing wage
• Copy of the notice given to the union/employees
• A summary of benefits offered to U.S. workers in the same classification as the H-1B worker and a statement explaining any differentiation
• Statement signed by an H-1B employee as proof he or she received a copy of the LCA
• Documentation regarding any adjustment to the wage (e.g., annual raise or cost of living increase)
In the event of corporate change, the public inspection file must also contain:
• A sworn statement by a successor entity accepting all liabilities of predecessor entity
• Affected LCA number(s) and effective date(s)
• Description of successor entity’s actual wage system
• Successor entity’s employer identification number
In addition to the records listed above, every H-1B dependent, willful violator employer must keep the required documentation concerning compliance with the non-displacement of similarly employed U.S. workers obligation.
The determination as to whether an employer is H-1B dependent is reached based on the proportion of the number of the H-1B workers to the total number of full-time employees of the company. If the employer has up to 25 employees with 8 or more H-1B workers, or if the employer has between 26 and 50 employees with 13 or more H-1Bs, or if the employer has 51 and more employees with 15% of the workforce in H-1B status, the employer is considered H-1B dependent.
The employer is considered a willful violator if the company has been found to have committed a willful violation or a misrepresentation of a material fact during the five (5) year period preceding the date of this application.
In addition to the records generally maintained by all H-1B employers, any H-1B-dependent or willful violator employer must keep the following records:
1. Documentation of dependency calculation
2. If the employer utilizes the definition of “single employer” to determine H-1B dependency, a list of all entities included
3. List of “exempt” H-1B worker(s)
4. Documentation of recruiting:
A. Recruiting methods used;
B. Date and copy of advertisement/posting and compensation offered;
C. Any document created/received concerning worker recruitment and interviews; and
D. Offer to U.S. worker(s) and the applicant(s)’ response(s).
5. If operating as a contractor and arranging for an H-1B worker to work at another employer’s work site:
A. Written communication or contract language with secondary employer re: U.S. worker displacement; and/or
B. Contemporaneous written note of secondary employer’s oral statement re: U.S. worker displacement; and
6. Name, last-known address, personnel records, pay records, and anything created/received concerning U.S. worker hiring/firing/departing at or near the time of filing USCIS H-1B petition.
The records listed above must be kept for one year beyond the end of the employment period specified on the LCA, and be available at the employer’s principal place of business in the U.S. or at the place of employment.
Additionally, H-1B employers must maintain complete payroll records and make such available to the Wage and Hour Division upon request. The records must include the following information:
• Name, address, and occupation, for all H-1B workers and any other worker employed by the employer in the same occupation at the place of employment
• Rate of pay, total wages paid each pay period, date of pay and pay period covered by the payment, and total additions to or deductions from pay each pay period for each H-1B worker and any other worker employed by the employer in the same occupation at the place of employment
• Hours worked each day and each week by the employee if the employee is paid on other than a salary basis (with respect to H-1B workers and any other worker employed by the employer in the same occupation at the place of employment)
• With respect to only H-1B workers, whether the worker is a part-time employee
• Documentation of the offer of benefits and eligibility for benefits provided as compensation for services
Payroll records for the nonimmigrant workers and other employees in the occupational classification must be maintained for a period of three years from the date of the creation of the records (or longer if an enforcement proceeding is in effect) and be kept at the employer’s principal place of business in the U.S. or at the place of employment of workers in the H-1B program.
The law in the compliance area is continually evolving. In order to avoid sanctions imposed by the Department of Labor in case of an investigation, the H-1B employers need to be aware of their obligations per the Labor Condition Application. If your company needs assistance with the H-1B investigation or needs advice on the compliance measures, please do not hesitate to contact our office.