Updates on the H-1B compliance procedures – Employer Liable for LCA Wages for Failure to Pay Transportation Costs

Attorney Ekaterina Powell from our office wrote this great article on maintaining H-1B compliance procedures by employers.

If you are an H-1B employer, you need to be familiar with the H-1B regulations and Labor Condition Application (LCA) compliance procedures. Each employer petitioning for an H-1B worker has to file a Labor Condition Application, containing a number of employer’s attestations, which each employer has to abide by. The penalties for LCA violations are severe, ranging from payment of back wages and civil money penalties to debarment from the H-1B program.

Many employers filing H-1B petitions are unfamiliar with the compliance measures that can, unfortunately, lead to employer’s sanctions.

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 recordkeeping requirements. It is advisable for all employers to have a competent legal counsel who could guide them through the H-1B filing and, most importantly, H-1B compliance. A lot of attorneys practicing in the area of nonimmigrant work visas do not provide advice on H-1B compliance as part of the H-1B filing process leaving the employers unaware of the regulations and the possible sanctions for H-1B program’s violations. As a result, employers suffer from sanctions because ignorance or inefficient assistance of counsel is not a defense in DOL’s prosecution and will not eliminate penalties.

Specifically, each H-1B employer should know its obligations once H-1B worker’s employment relationship is terminated. Often times, even though employment relationship is considered terminated under state law, the employer remains liable under the LCA regulations.

In a recent case In the matter of Kevin Limanseto v. Ganze & Company, CASE №: 2011-LCA-00005, issue date 06/30/2011, the Administrative Law Judge found that the employer’s failure to prove every element of bona fide termination, including payment of the H-1B employee’s return trip home, leaves the employer liable for wages for the entire period of authorized employment on the LCA.

In this decision, because the employer was not able to prove every element of bona fide termination of employment relationship, the employer was assessed back wages, interest and other penalties for the entire 3 years of the validity of the LCA, even though the employer terminated the H-1B worker before the proposed H-1B start date.

In that case, the H-1B employee, Limanseto was working for the petitioner, Ganze, under F-1 status. Ganze filed H-1B petition on behalf of Limanseto, which was granted on May 9, 2008 for the three-year period running from October 1, 20008 to September 21, 2011. The employment relationship between the parties was terminated six weeks before the H-1B start date on October 1, 2008. However, ALJ has not found that termination of the employment relationship was bona fide, i.e. sufficient to terminate the H-1B employer’s liabilities as to the LCA’s attestations.

A bona fide termination of an H-1B worker requires the employer to prove three things:
1. notice to the worker (which Ganze has shown);
2. notice to Immigration and Customs Enforcement (currently USCIS), authorities so that the Form I-129 ―Petition for a Nonimmigrant Worker can be cancelled; and
3. payment for the worker‘s transportation home.

An employer with an approved labor condition application also should withdraw it at the Department of Labor to end its obligation to pay the required wage rate. 20 C.F.R. § 655.750(b).

Even though the employer has provided the H-1B worker with the termination of employment notice, it was not enough to relieve the employer from the wage obligation. The ALJ noted that until the employer informs the immigration authorities of the employment termination, “the employer remains on the hook for the H-1B worker‘s wages and benefits.”
In that case, USCIS promptly revoked Limanseto’s H-1B immigration status more than two years later, when Ganze eventually reported that Limanseto wasn’t employed.

However, the ALJ went further and stated that informing the immigration authorities and cancelling the H-1B is not enough. “When it [employer] perfected the second element of a bona fide termination, Ganze might have been relieved of its obligation to pay Limanseto’s wages when it sent the required notice on August 26, 2010. But Ganze remains liable because he can’t prove the third element of a bona fide termination. To ensure that Limanseto would be able to depart before the three-year employment period Ganze requested had ended, the final element of a bona fide termination required Ganze to pay for his trip home.”
This recent case shows that strict compliance with the H-1B regulations is critical in order to relieve the H-1B employers from possible liabilities. Payment for transportation home is one of the elements of bona fide termination of employment relationship.

Prospective employers of an H-1B nonimmigrant, should be aware that “the employer will be liable for the reasonable transportation costs of return transportation of the alien if the alien is dismissed from employment by the employer before the end of the period of authorized admission.” This would not apply if the employee voluntarily terminates his employment prior to the expiration of the H 1B petition validity.

Please note that the Department of Labor looks closely at any situation where there is any question about whether the H-1B nonimmigrant quit his employment (in that case, payment for transportation costs is not required) or whether the worker was dismissed from his job.

This recent case shows that failure on the employer’s part to notify USCIS and pay return transportation costs (when required) would likely result in a finding that the employer has not effected a “bona fide termination” of the employment relationship rendering it liable for back wages.

In Limanseto, the ALJ stated that “the failure to prove every element of a bona fide termination leaves an employer who petitioned for an H-1B worker‘s admission liable ―for the entire period of authorized employment.” [emphasis added]
As a result, the ALJ found that Ganze owes pre-judgment and post-judgment interest on all the amounts due, including back wages for the entire validity of the H-1B petition and the legal fees Ganze had Limanseto pay for its H-1B petition from the time he paid them.

This case shows how important it is for all H-1B employers to be well aware of the H-1B rules and to maintain compliance measures in order to protect themselves from possible sanctions in case of a DOL’s investigation.

Our law office helps employers with filing the H-1B petitions, setting up easy to follow H-1B compliance systems, and defending employers in case of DOL’s investigations. As part of our H-1B services, we educate the H-1B employers and their HR departments on H-1B regulations, the documents that the employers need to keep as part of the H-1B employees’ public access files, the procedures that the employers need to follow if there are any changes in employment relationship or job location, or if there is a termination of employment relationship.

For more information on H-1B filing or H-1B compliance measures, please contact our office.