Hurtling (and Hurting) Down the H-1B Road: Part 3 of 4
Burma-Shave Signs Along the H-1B Road
Your Hummer may be indestructible,Authorized and "Un"Authorized Deductions
Under DOL regulations, an employer that deducts amounts from an H-1B employee's compensation is treated as failing to pay the required wage if the resulting sum is less than the amount otherwise due (i.e., the higher of the prevailing or actual wage). The same outcome holds where employers require H-1B workers to absorb, pay or reimburse the "business expenses" of the employer and the wage thereby dips below the required level.
One particularly controversial DOL position taken in the December 2000 Interim Final Rule is the determination that the employer may not require the H-1B worker to pay-directly or indirectly-attorney fees for the preparation of the LCA and the H-1B petition fees since these are considered an employer business expense. The ALJ in Kutty upheld the DOL's interpretation by including in the back-wage obligation the cost of attorney fees for preparation of H-1B petitions (to the extent that employee payment of these amounts caused the salary to dip below the required H-1B wage). The court took the surprising step, however, of going beyond the DOL regulation and requiring the employer to repay to H-1B employees as back wages any attorney fees paid to procure J-1 waivers of the two-year home-country physical presence requirement of INA §212(e). While acknowledging that inclusion of J-1 waiver fees is debatable, the ALJ refused to say that "including [J-1] waiver costs in the category of employer business expenses is unreasonable, as the [J-1] waiver must be obtained before an H-1B visa can be issued." 
Interestingly, however, the ALJ accepted the WHD investigator's exclusion from employer business expenses of amounts for (a) state medical licenses, and (b) applications submitted to the Drug Enforcement Administration for permission to write prescriptions for controlled drugs. Such expenses conceivably could also be included as employer obligations on the same basis as the court reasoned that J-1 waiver fees should be included in the backwage calculation. Perhaps, the investigator and the court determined sub silentio that such expenses are personal  to the individual or required by law to be performed by the alien. In any event, the distinction between personal and business expenses remains unclear and is likely ripe for further litigation.
Liquidated Damages or Early Resignation Penalty
In Novinvest, the ALJ examined the propriety of a $5,000 "investment fee" in an employment contract which applied if an employee resigned before the agreed term of employment. The court determined that the employer failed to establish that this contractual provision met the regulatory require-ments for an authorized deduction. Under the contract, the worker agreed that the employer would use this fee "'to hire, train and process employees." The court also held that the fee did not qualify as legitimate liquidated damages even though the employer relied on a state court default judgment in its favor. The court reasoned that the employer did not convincingly show that the fee was intended to benefit the employee. The employer offered testimony that the fee was used to recoup expenses for recruiters, long distance communication costs and time spent "helping to acclimate the employee." In the absence of receipts, however, the court refused to accord much weight to the testimony.
This ruling seems questionable on at least three grounds. First, a liquidated-damages clause rarely can be seen to benefit the employee (unless a court were to reason that the employee benefits by receiving a contract for a fixed term of employment rather than employment terminable at will). Second, the employer had secured a judgment from the state court upholding the fee, and state law determinations are the touchstone under the DOL's interim final rule and ACWIA for the interpretation of a liquidated-damages provision.  Third, the lack of documentation ought not be a bar to enforcing a legitimate liquidated-damages clause since such damages typically are allowed by contract when the prospect of incurring damages for a future breach are clearly foreseeable but the precise amount cannot be reasonably ascertained. Apparently, future litigation will be needed to distinguish permissible liquidated damages from forbidden penalties.
THE H-1B ROAD MAY BE CLEAR
Next week: Hurtling (and Hurting) Down the H-1B Road: Part 4 of 4 - Equal Benefits Opportunity
This article is slightly modified from the versions which appeared in 8 Bender's Immigr. Bull. 1022 (June 15, 2003) and as part of the conference materials at the 2003 annual conference of the American Immigration Lawyers Association. Copyright retained by Angelo Paparelli.
Here are typical examples of this quaint literary genre:
The author thanks noted practitioner, Gary Endelman, for editing this article and offering his especially insightful commentary.
Angelo A. Paparelli, certified as a Specialist in Immigration and Nationality Law by the State Bar of California, has been practicing business-sponsored immigration law for 25 years. He is a nationally recognized speaker, published author and leading expert on cutting-edge, business-related immigration issues-including the immigration consequences of mergers, acquisitions, reorganizations and other business changes, consular visa practice, audits of employers' compliance with immigration regulations, and work visas for executives and professionals. From 1991 to 1996, Mr. Paparelli served as co-Chairman of the Immigration and Nationality Law Committee of the ABA's Section on International Law and Practice. He also served from 1988 to 1994 as an elected member of AILA's Board of Governors. He is named in the 1990-2004 editions of Best Lawyers in America under category of Immigration Law. Mr. Paparelli received the President's Award at the June 2001 AILA Annual Conference for his contributions to the Association in liaison with the INS on the immigration consequences of mergers, acquisitions and other forms of entity restructuring. He is a graduate of the University of Michigan (B.A., 1971) and Wayne State University Law School (J.D., 1976). He is the managing partner of Paparelli & Partners LLP, http://www.entertheusa.com/, a firm in Irvine, California that practices exclusively immigration and nationality law.
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