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DOL Radically Alters H-1B Visa Program
by Cyrus D. Mehta

    The Department of Labor (DOL) recently issued regulations implementing the American Competitiveness and Workforce Improvement Act of 1998 (ACWIA), which introduced the concept of a dependent H-1B employer. These regulations will make it more onerous on employers heavily reliant on H-1B workers to use the H-1B visa program.

     The regulations, which took effect on January 19, 2001, followed closely on the heels of the American Competitiveness in the Twenty-first Century Act of 2000 (AC21) which, among other things, increased the H-1B quota from 115,000 to 195,000. It also introduced innovative portability provisions that would allow an H-1B employee to transfer to another employer upon the filing of an H-1B petition and without waiting for an approval.

     ACWIA had two years earlier increased the H-1B quota from 65,000 to 115,000 but soon got obsolete due to further demand in H-1B visas. Despite the increase, the H-1B cap was reached several months before the end of the 1999 and 2000 fiscal years. Even though AC21 resolved this problem by further increasing the H-1B cap to 195,000, the dependent employer provisions of ACWIA were designed to take effect once DOL promulgated regulations. This happened on January 19, 2001.

Role Of DOL In H-1B Program

     The DOL administers part of the H-1B program.

     Before filing an H-1B petition, an employer has to attest to the DOL on a Labor Condition Application (LCA) that it will pay the higher of the prevailing or actual wage in the area of employment, create similar working conditions for H-1B workers and U.S. workers, guarantee that there is no strike, lockout or work stoppage and promise to post notice to U.S. workers for 10 days that it has hired a foreign worker at the higher of the prevailing or actual wage (the wage paid to similarly situated employees within the organization).

     Every H-1B employer must maintain a public access file containing information on the prevailing and actual wage and proof of posting notice for ten days. Dependent employers must also maintain a summary of their recruitment methods in the public access file.

     The DOL regulations now require employers who are considered to be H-1B dependent or to have been found to be in willful violation of the H-1B program to make two further attestations. The dependent employer or willful violator must attest that it has not displaced an equivalent U.S. worker as well as attest that it has made good faith attempts to recruit U.S. workers at the time of filing the LCA.

Who Is A Dependent Employer?

     An employer is H-1B dependent if it has in the United States:

  1. 25 or fewer full-time equivalent employees (FTE) and more than 7 H-1B employees;
  2. between 26 and 50 FTE employees and more than 12 H-1B employees; or
  3. at least 51 FTE employees and a number of H-1B employees equal to at least 15% of the employer’s total workforce.

     An FTE employee is either one who actually works full-time or a combination of part-time employees.

     The new definition of dependent employer could cover most Indian-based IT firms that normally recruits its workforce from India. Many large IT firms prefer to bring in their own employees who have been meticulously hired and trained in India on H-1B visas rather than recruit randomly in the U.S. labor market. Furthermore, there is an acknowledged shortage of IT workers in the U.S.

     The displacement attestation is extremely onerous. Apart from ensuring that the employer will not replace an equivalent U.S. worker with a H-1B worker within its organization 90 days before or after filing, a dependent employer must also attest that it will not place an H-1B worker at a worksite where a U.S. worker has been laid off or is likely to be laid off. This secondary displacement prohibition triggers when an H-1B dependent employer places an H-1B worker at a worksite operated or owned by another employer where there is "indicia of employment" between the H-1B worker and the other employer. The DOL defines "indicia of employment" to include situations where the dependent employer’s customer has a right to control when, where and how the H-1B worker performs the job.

     Thus the secondary displacement prohibition would become applicable whenever an IT consulting firm dependent on H-1Bs would place its employee at a customer worksite. If the customer displaces a U.S. worker in an essentially equivalent job either 90 days before or after the placement of the H-1B worker at the secondary worksite, the dependent employer will be penalized by the DOL even if it exercises due diligence. If the dependent employer has actual or indirect knowledge of pending lay offs at its customer site, it can be debarred from the H-1B program for a few years if a lay-off does indeed occur.

     The only way in which a dependent employer can protect itself from the higher penalty of debarment is if it secures written assurances from the other employer, inserts a non-displacement clause in the contract or memorializes oral guarantees that it receives from the secondary employer.

     The dependent employer’s obligation to recruit U.S. workers before filing a LCA is more regulated than the present recruitment standards governing the labor certification program leading to the green card. The dependent employer must use "industry-wide standards" and must engage in active and passive recruitment activities. This would involve not just placing advertisement but also resorting to job fairs, headhunters and campus recruitment. The dependent employer must offer the job first to any equally or better qualified U.S. worker. A U.S. worker may file a complaint if he or she has been wrongfully rejected for the job that was later filled by the H-1B worker.

Exempt Employees

     A dependent employer can relieve itself of the recruitment and displacement attestations is if it hires exempt H-1B employees. "Exempt H-1B employees" are those who are either paid $60,000 or more (regardless of the prevailing wage) or if the worker has a master’s degree in the specialty which is generally accepted as appropriate for the position within the occupation or industry. The exempt worker must have the actual foreign equivalent of a master’s degree since the DOL rejects work experience as a basis for equivalency.

General Changes For All Employers

     The DOL regulations also bring about radical changes that affect all employers, whether dependent or nondependent. A few of the most significant ones are summarized below.

Traveling Employees

     The DOL regulations now clarify an employer’s obligations when it assigns an H-1B worker from one worksite to another. An LCA is filed for a specific area of intended employment. This area of intended employment is generally not larger than an area which is within commuting distance from one point to another. Generally, the area of intended employment would cover a town, city or a larger metropolitan region such as New York City, Westchester County, Northern New Jersey and Long Island.

     It is the nature of a consulting business to transfer IT employees from one worksite to another. If the H-1B worker is not sent to a new "worksite" one need not be concerned with any special traveling employee rules. For instance, it is not a new place of employment if the job functions necessitate frequent changes of location with little time at any one place. If a computer engineer troubleshoots at customer sites they would not be new worksites, but it would be considered a new worksite if the computer engineer is placed there for many weeks or months at a time.

     To ensure that it is not a new "worksite" the job must be peripatetic in nature, the duties must require that most time be spent at one location but occasional travel for short periods is needed to other locations, and the travel must be on a casual, short-term basis, which can be recurring but not excessive (i.e. not exceeding 5 consecutive workdays for any one visit by a peripatetic worker, or 10 consecutive workdays for any one visit by a worker who spends most work time at one location and travels occasionally to other locations).

     If an H-1B worker is indeed placed at a new worksite within the intended area designed on the LCA then a notice has to be posted at the new worksite. If an H-1B employee is placed outside the area designated on the labor condition application, then the DOL regulations provide a waiting period of 30 work days before a new LCA is to be filed. This window for filing a new LCA can extend to 60 workdays in a one-year period if the H-1B employee continues to maintain a work station at the permanent worksite and spends a substantial amount of time there during the year, and if the employee’s place of abode is also in the area of the permanent worksite. Under current INS policy, an amended H-1B petition must be filed if the employer files a new LCA.

Attorney’s fees

     The regulations make it a violation of the required wage provisions if the H-1B employee pays attorney fees and other costs connected to the performance of H-1B functions which are required to be performed by the employer (e.g., preparation and filing of LCA and H-1B petition) such that, when deducted from the employee’s wage, the wage would be below the higher of the actual or the prevailing wage.

No Benching

     An employer is prohibited from placing an H-1B employee in nonproductive status based on lack of work assignments or lack of a permit or license. The employee must be paid the full wage even if in nonproductive status. If the nonproductive period is due to circumstances based on the H-1B worker’s voluntary request and convenience, such as caring for a sick relative or touring the U.S., or due to circumstances like maternity leave that render the employee unable to work, the employer is not obligated to pay the employee the wage on the LCA. The obligation to pay an H-1B employee begins as soon as he or she "enters into employment" with the H-1B employer. Even if the H-1B worker has not entered into employment, once the petition is approved, the required wage must start to be paid 30 days after the nonimmigrant is first admitted to the United States, or if he or she is already here, 60 days after the H-1B worker first becomes eligible to work for the employer.

     The payment obligation of an employer ends if there has been a bona fide termination of the employment relationship. The DOL guidelines indicate that a bona fide termination will be deemed to have occurred only when the employer notifies the INS of the termination, the H-1B petition is canceled, and the return fare obligation is fulfilled.

The "No Penalty" Penalty

     ACWIA prohibits the requirement of payment of a penalty for the H-1B employee ceasing employment prior to an agreed date, except that the employer may receive liquidated damages in such a case. Liquidated damages cannot be collected by deduction from the employee’s paycheck.


     ACWIA also requires that benefits be offered to H-1B workers on the same basis and in accordance with the same criteria, as they are offered to the employer’s U.S. workers. The benefits received by the H-1B worker do not have to be identical to those received by U.S. workers, as long as the same benefits package was offered and the H-1B worker voluntarily chose different benefits. If the H-1B worker is employed in the U.S. only 90 days of the time, then home country benefits can apply without determination that they are similar to benefits offered to U.S. workers so long as the employer would offer reciprocal treatment to U.S. workers who are sent abroad.

Corporate Reorganization

     The DOL used to previously insist that whenever there was a change in the employer identification number (EIN) after a reorganization, a new LCA had to be filed. The DOL regulations now do not require a new LCA when there is a corporate reorganization resulting in a change of the EIN. However, the new entity will be required to maintain a list of the H-1B workers transferred, and to maintain in the public access file a list of the affected LCA numbers, their dates of certification, a description of the new entity, actual wage system, EIN of the new entity and a sworn statement from an authorized representative of the new entity expressly assuming the liability and obligation of the existing LCA.

     In special legislation passed by Congress, no amended H-1B petition is necessary if the new corporate entity succeeds to the interests and obligations of the original petitioning employer, provided the terms and conditions of employment remain the same but for the corporate identity of the new petitioner.

About The Author

Cyrus D. Mehta, a graduate of Cambridge University and Columbia Law School, practices immigration law in New York City. He is Vice Chair of the American Immigration Lawyers Association's National Labor Department Liaison Committee, trustee of the American Immigration Law Foundation and recipient of the 1997 Joseph Minsky Young Lawyers Award. He is also Chair of the Immigration and Nationality Law Committee of the Association of the City Bar of New York. He frequently lectures on various immigration subjects at legal seminars, workshops and universities and may be contacted at 212-686-1581 or

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