AILA Summary of 1/5/99 DOL Notice on H-1B Regulations
By Elissa M. McGovern and Theresa Cardinal Brown
On January 5, 1999, the Department of Labor published a Notice of Proposed Rulemaking (NPRM) to update its regulations for administration of the H-1B visa program, following enactment last year of the new H-1B law, the American Competitiveness and Workforce Improvement Act of 1998 (ACWIA).
The NPRM, in addition to the specific regulatory proposals on the various provisions of ACWIA, contains several broader issues that could present many potential pitfalls for immigration practitioners and employers that use the H-1B program. If implemented, these rules would create a major change in the way that H-1B practice is handled. At the very least, immigration attorneys who engage in "dual representation," i.e., are retained by either the employer or the beneficiary but represent the interests of both in the petition process, may have difficulty reconciling their two roles.
First, in this NPRM DOL proposes to incorporate, either by inference or by directly copying, established definitions and regulations from areas of law outside of immigration, including tax law, benefits law under the Employee Retirement and Income Security Act (ERISA), and labor laws including the Fair Labor Standards Act (FLSA), the Equal Pay Act, the Family and Medical Leave Act (FMLA), and Equal Employment Opportunity law (EEO). Therefore, advising employers as to their obligations in the H-1B program, including in the areas of recordkeeping, recruitment, wage and benefits, and taxation, will require attorneys and human resources personnel to consult with experts in those areas of law. Attorneys who do not adequately advise employers could risk malpractice claims.
In addition, since the obligations of the employer with respect to its U.S. workers and the H-1B nonimmigrant are increased under ACWIA and these proposed regulations, more opportunities for conflict between the interest of the nonimmigrant and the employer are likely to arise. For example, H-1B dependent employers who must comply with the new recruitment attestation may be unwilling to hire an H-1B nonimmigrant outside of a traditional recruiting setting. Employers that normally would require employees to sign employment agreements that provide for reimbursement of certain employer expenses if an employee departs early may be prohibited from enforcing such claims upon an H-1B nonimmigrant. Under the new prohibitions against "benching," employers are required in some circumstances to treat H-1B nonimmigrants better than their similarly situated U.S. workers. These and other new proposals to forbid beneficiaries from paying the costs of the H-1B petition process, including attorney’s fees, could place new ethical obligations on attorneys who traditionally have been retained by the foreign national in these cases.
Other areas of grave concern in the regulation include its potential effect on small businesses, and the new recordkeeping requirements that have been justified under the Paperwork Reduction Act.
The NPRM contains a lengthy explanation of why the DOL believes this rule will not have a great impact on small businesses. However, this reasoning is based on DOL’s estimates that only a very small number of employers, and an even smaller number of small business employers, will be subject to the new requirements for H-1B dependent employers. Much of the discussion ignores the new burdens the NPRM would place on all employers such as the requirements for providing equal benefits, the prohibition on enforcement of certain types of contractual provisions absent a State court ruling, and the attempts to reintroduce the short-term placement, "objective wage system" and other provisions from the December 1994 Interim Final Regulation that were struck down in the National Association of Manufacturers v. Reich, No. 95-0715, DDC 1996) (NAM) lawsuit in 1996. Finally, we believe that the DOL’s estimate of the actual paperwork burden on employers of these new regulations significantly underestimates the amount of new documentation that employers, particularly small businesses, will be required to create.
The extent of the issues posed by this proposed rule, and their potential serious impact on the business immigration community, should encourage all to carefully read and analyze this proposed rule. Some initial areas of change/concern of items with the regulatory language include (please note that this is not an exhaustive list):
Definition of employment relationship: DOL will examine work that is performed to find out whether an employment relationship exists as "determined under the common law." DOL cites a broad list of factors, including the control of when, where and how the work is performed, the furnishing of tools and equipment, the presence of a continuing relationship, whether the work is part of the employer’s regular business, and the belief of creating an employer-employee relationship. No one factor or set of factors will be determinative. If a de facto relationship is found, DOL will presumably hold the "secondary" employer liable for all the requirements a primary employer would be held to. This introduces the concept of "joint employment" back into the H-1B context.
Definition of "employer": DOL is also looking to the IRS definition of a single employer (in the multi-entity context) not only for determining whether the employer is dependent or not, as is called for in the statute, but also for all purposes of defining an "employer" in the H-1B program. This could have significant impact on the program, and DOL is looking for comments on the way this would impact employers and their obligations.
Benching: Implements the benching provision of ACWIA, including some examples of activity that would not constitute benching, including a worker’s voluntary request or for leave that is for the convenience of the worker (touring prior to commencing employment, family or medical leave). The rule references that pay may be required under such circumstances, however, under the employer’s benefits plans or by statute (such as the Family Medical Leave Act).
Electronic posting: Implements the ACWIA electronic posting of H-1B hiring. DOL proposes to allow any method an employer usually uses to communicate with its workers about job vacancies, including its home page or electronic bulletin board (as long as affected employees have access to these). The rule does not address how employers can document electronic notice.
Short-term placement: Resurrects, with some minor changes, the "short-term placement" provision that were struck down by the NAM suit several years ago. In short, an employer may use H-1B workers in a non-LCA location for a cumulative total of 90 days (in other words, if all days of work by all H-1B workers for the employer at all worksites in that area of intended employment are less than 90). However, the employer must not be used to break a strike or lockout, and the employer must pay all travel-related expenses using (at a minimum the Federal government per diem rates).
Changes to Appendix A: Resurrects the "Objective Wage System" regulatory proposal, stating that the system for calculating actual wages for all workers must be "sufficiently detailed to enable a third party to apply the system to arrive at the actual wage rate." It requires an objective wage system for all employees, not just those in the occupational classification in which the H-1B worker is employed.
New Appendix B—Guide to Determining the Place of Employment and Other Matters: Defines the place of employment/worksite as the place where the work is actually performed, making some exceptions, including situations where there is (1) employee developmental activity (meetings, conferences) or (2) where the employee’s job functions mandate travel, if certain requirements are met. The "roving employee" concept, however, is limited to certain restrictions and standards. The appendix also reintroduces the prohibition on making or even allowing the employee to pay attorney’s fees or other costs of the LCA or the petition as a failure to meet the required wage obligation. The new proposal, however, states that it would be a violation of the requirement to pay the required wage to require the employee to pay costs associated with the filing of the petition or the LCA—even if the deduction of that amount from the employee’s wages did not reduce the wage to less than the prevailing or actual wage.
The NPRM also provides cause for concern in that it contains several significant regulatory proposals rather than regulatory language on some of the more complex and controversial provisions of ACWIA. The Supplementary Information to the proposed rule discusses many of these provisions in some detail, in some but not all cases discussing various possible options and indicating the preferred course that DOL intends to take. However, it does not provide the actual regulatory language. Among these areas:
Calculation of "dependency": As noted above, ACWIA requires more attestations from those employers considered to be "dependent." The Supplementary Information proposes a definition that generally implements the statutory definition (a percentage of H-1B workers in the employer’s workforce, which varies depending on the size of the employer). The NPRM suggests that DOL will require documentation in close determinations, with a copy of the mathematical determination in the public file. It also looks at possible approaches for calculating a "full-time equivalent employee" as that term is not defined in the statute; when an employer must determine its dependency; and whether employers must file new LCAs when/if their status changes.
Exempt workers: DOL proposes to define who is an "exempt" employee for purposes of calculating dependency. The proposal would look only to an equivalent degree rather than equivalent experience (despite language in the legislative history that would allow looking to experience, as is done in other contexts) and would require actual payment (cash-in-hand) of $60,000 in compensation to full-time employees.
Non-displacement: The proposal would require H-1B dependent employers to keep certain documentation on each former worker in order to prove compliance that they have not displaced those workers and hired H-1B workers, as prohibited by ACWIA, and looks at what DOL could use to determine what is an "essentially equivalent job."
Recruitment: The Supplementary Information discusses what DOL would use for consideration of good-faith recruitment processes and how employers would document the legitimate selection criteria, including making certain information available for public disclosure. The proposals are fairly detailed, and at a minimum would require an employer to demonstrate it has recruited through advertising (print or Internet), publications at higher education or training institutions, and internal posting.
Automated Filing of the LCA: DOL indicates here its intent to begin automated processing of faxed LCAs in two central locations (San Francisco and Philadelphia). We understand from DOL headquarters that it hopes to have the automated processing in Philadelphia operational by the end of this month, with the San Francisco operation on line by the end of February.
Damage/penalty distinction: DOL will propose a regulation that would limit the ability to enforce liquidated damage provisions, requiring employers to obtain a state court judgment in order to enforce such provision.
Comments are due on the proposed regulation on or before February 4, 1999. Over twenty AILA members are on the team that is now drafting a comment, to be reviewed by a team of five additional members and staff.