Labor Condition and H-1B Requirements

The United States Department of Labor (”DOL”) requires employers participating in the H-1B program to adhere to specific regulations concerning wages, working conditions, work stoppage and notice within one (1) working day of filing a Labor Condition Application (”LCA”) with DOL.

FAILURE TO COMPLY WITH DOL REGULATIONS, CAN RESULT IN CIVIL MONETARY PENALTIES FOR EACH VIOLATION RANGING FROM $1,000 TO $35,000, BACK-PAY AWARDS AND DEBARMENT FOR ONE TO THREE YEARS FROM FILING IMMIGRANT OR NONIMMIGRANT VISA PETITIONS FOR H, L, O OR P CLASSIFICATION.

The Immigration and Nationality Act (”INA”), as amended by the Immigration Act of 1990, requires an employer seeking to file a new H 1B petition or seeking to extend an H 1B petition to submit an LCA to the DOL. The LCA must be on file with the DOL before the H 1B petition may be filed with the U.S. Citizenship & Immigration Services (”CIS”).

The INA was further amended with the passage of the American Competitiveness and Workforce Improvement Act of 1998 (”ACWIA”) and the American Competitiveness in the 21st Century Act of 2000 (”AC 21″). Final regulations implementing the changes made by ACWIA were issued on December 20, 2000, effective January 19, 2001.

The LCA (Form ETA 9035) must be submitted to the Employment and Training Administration of the DOL. The LCA is submitted electronically to the DOL, and in doing so, the employer attests to the following:

The employer will pay the “required wage rate” to the prospective H 1B employee. The “required wage” is the greater of the “prevailing wage level” for the occupational classification in the area of intended employment based on the best information available and the “actual wage rate” paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question. The employer is required to begin paying the required wage within thirty (30) days following the employee’s entry into the U.S. in H-1B status, or if the employee is already physically present in the U.S., within sixty (60) days of the date the employee becomes eligible to work in H-1B status for the employer. The employer must further attest that it will pay nonproductive H-1B workers the full pro-rata amount due if the employee was put into this status due to a decision by the employer or the H-1B worker’s lack of a permit or license. In addition, the employer must attest that the H-1B worker will be offered the same benefits as U.S. workers, in accordance with the same criteria;

  1. The working conditions (e.g. benefits, hours, shift, vacation) of U.S. workers similarly employed will not be adversely affected by the employment of the H 1B employee;
  2. The employer is not involved in a strike, lockout or work stoppage in the course of a labor dispute in the occupational classification of the prospective H 1B employee; and
  3. The employer has publicly notified workers employed in the same occupation that an LCA will be filed. Notice of the LCA may be provided through the bargaining representative, if any, or through notices posted in at least two (2) conspicuous locations at the place of business, or electronically (i.e.: electronic mail or intranet posting) on or within 30 days before the date the LCA is filed. The employer must also attest that it will provide the H-1B worker with a copy of the certified LCA on or before the date of hire, and that it will provide the worker with a copy of the Labor Condition Application Cover Pages (Form ETA 9035CP) upon request.

The LCA will be approved for a maximum period of three (3) years; employers are required to obtain current prevailing wage information every time a new LCA is filed.

The DOL requires that employers keep supporting documentation in connection with all LCAs. The DOL requires two (2) types of supporting documentation: (1) documentation which must be made available in a public inspection file; and (2) documentation which must be made available to DOL investigators “upon request”. These requirements are discussed in detail below. In the event of an audit, the DOL’s Wage and Hour Division will conduct an investigation to determine compliance with all elements of the LCA used to hire H-1B employees.

1. The First LCA Requirement: Wages

The most significant requirement for the employer is that the wage paid to the H 1B employee must be the higher of the prevailing wage level for the occupational classification in the area of intended employment and the actual wage rate paid to all of its other employees with similar experience and qualifications for the specific employment in question. The employer must undertake some objective review of its wage level and the “prevailing wage” in its community at the time of preparing the application so that its assessment can be shown to have been based on the “best available evidence.”

With regard to the “actual wage” for the occupation, the employer may take into account objective standards relating to experience, qualifications, education, specific job responsibilities and functions, specialized knowledge and other legitimate business factors. Although the employer is not required to submit supporting documentation of the required wage with the LCA, the employer must maintain documents explaining the compensation system at its principal place of business (discussed more thoroughly below).

The regulations indicate that the prevailing wage for any particular H-1B worker is governed by the LCA that supports the FOREIGN NATIONAL’s H-1B petition, and that prevailing wages on future LCAs for the same occupation are not deemed to be an update of the prevailing wage of previous LCAs. However, employers should note that an increase in pay for new employees due to an increase in the prevailing wage may cause the actual wage to also rise and create an obligation to increase the wages of all H-1B nonimmigrants under previous LCAs.

In calculating “wages paid”, any compensation, which is treated as the H-1B nonimmigrant employee’s earnings for income tax and FICA (Federal Insurance Contributions Act - social security tax) purposes, will be considered to be wages paid for purposes of the H-1B program.

It is a violation of the wage provisions for the H-1B employee to pay legal fees or other costs associated with the preparation and filing of the LCA and H-1B petition such that, when deducted from the employee’s wage, the wage is below the higher of the actual wage or the prevailing wage. (If such payments would not result in a wage violation, such payments are permissible.)

As mentioned above, the employer must also attest that it will pay nonproductive “benched” H-1B workers the full amount specified on the LCA if the employee was put into this status due to a decision by the employer or because of the H-1B worker’s lack of a permit or license. In addition, the employer must attest that the H-1B worker will be offered the same benefits as U.S. workers, and in accordance with the same criteria. An H-1B employee may not be treated as a temporary employee for benefits purposes. The actual benefits received do not have to be the same as U.S. workers as long as the H-1B worker has been offered the same benefit package and they choose to receive different benefits. Documentation of the benefit package offered must be maintained in the public access file.

DOL, in its regulations, states that an employer need not compensate a nonimmigrant if it has effected a “bona fide termination” of the employment relationship. Failure to effect a bona fide termination may result in the award of back wages to the nonimmigrant. CIS, by regulation, requires that an employer notify it of termination of the employment relationship so that CIS can revoke approval of the H-1B visa. It is therefore recommended that the employer provide a termination letter to the H-1B worker, clearly placing him/her on notice that the employment relationship has ended, and notify CIS that termination has occurred.

If it is multinational, the employer may offer “home country” benefits under certain circumstances. If the H-1B worker is employed in the U.S. less than 90 days, the employer can still offer home country benefits. However, the employer must offer a reciprocal benefit to U.S. workers who go abroad and work for the company in the home country. If the employment in the U.S. lasts more than 90 days, an employer can still pay the home country benefits, but the employer must show that the H-1B worker continues to be paid in the home country, is enrolled in the benefits program, the benefits provided are equivalent to or comparable to similarly employed U.S. workers, and U.S. workers transferred abroad are offered reciprocal benefits.

2. The Second LCA Requirement: Working Conditions

This requirement is satisfied when the employer signs the LCA attesting that, for the period of the intended employment of the H 1B worker, the employment of that H-1B worker will not adversely affect the working conditions of individuals similarly employed. Working conditions include hours, shifts, vacation periods and fringe benefits. The employer must also attest that H-1B workers will be afforded working conditions on the same basis, and in accordance with the same criteria, as U.S. workers. The regulations do not require the employer to document the level of working conditions until there is a DOL investigation. Documentation of this requirement is discussed below.

3. The Third LCA Requirement: No Strike or Lockout

This requirement is satisfied when the employer signs the LCA attesting that it is not involved in a strike, lockout, or work stoppage in the course of a labor dispute in the occupational classification in the area of intended employment. The employer must provide written notice to the DOL within three days of the start of a strike, lockout or other work stoppage by workers in the same occupational classification as the H-1B worker. No documentation of this requirement need be maintained.

4. The Fourth LCA Requirement: Notice

This requirement is satisfied when the employer provides notice to the collective bargaining representative (”CBR”) that an LCA has been filed with the DOL (identifying the number of H 1B workers to be employed, the occupational classification, the wages offered, the period of employment, and the location where the H 1B worker(s) will be employed). Where there is no CBR, the employer posts a notice of the LCA in at least two conspicuous locations at the place of employment (which notice includes the information required to be provided to the CBR), or through electronic notification to employees in the occupational classification for which H-1B workers are sought. The posted notice must state that the LCA is available for public inspection at the worksite or the principal place of business. If posting a notice, the notice must be posted on or within the thirty (30) days immediately prior to the date the LCA is filed and must remain posted for ten (10) days. Electronic notice may either be a one-time direct notice such as e-mail or a notice available for ten (10) days by electronic means such as a company intranet. No later than the date the H-1B worker reports to work at the place of employment, the employer must also provide the H-1B worker with a copy of the LCA certified by the DOL. In addition, upon request, the employer must provide the H-1B worker with a copy of the Labor Condition Application Cover Pages (Form ETA 9035CP).

Notices must also be provided at new worksites within the area of intended employment on or before the date the H-1B worker reports to that site. Postings are required at third party worksites.