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< Back to current issue of Immigration Daily < Back to current issue of Immigrant's Weekly
[Federal Register: December 20, 2000 (Volume 65, Number 245)]
[Rules and Regulations]
[Page 80109-80158]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20de00-20]
[[Page 80109]]
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Part III
Department of Labor
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Employment and Training Administration
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20 CFR Parts 655 and 656
Temporary Employment in the United States of Nonimmigrants under H-1B
Visas; Final Rule
[[Page 80110]]
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DEPARTMENT OF LABOR
Employment and Training Administration
20 CFR Parts 655 and 656
RIN 1215-AB09
Labor Condition Applications and Requirements for Employers Using
Nonimmigrants on H-1B Visas in Specialty Occupations and as Fashion
Models; Labor Certification Process for Permanent Employment of Aliens
in the United States
AGENCY: Employment and Training Administration, Labor, in concurrence
with the Wage and Hour Division, Employment Standards Administration,
Labor.
ACTION: Interim final rule; request for comments.
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SUMMARY: This document contains interim final regulations implementing
recent legislation and clarifying existing Departmental rules relating
to the temporary employment in the United States of nonimmigrants under
H-1B visas. On January 5, 1999, the Department published a notice of
proposed rulemaking (64 FR 628) seeking public comment on issues to be
addressed in regulations to implement changes made to the Immigration
and Nationality Act (INA) by the American Competitiveness and Workforce
Improvement Act of 1998 (ACWIA). In particular, the ACWIA requires H-
1B-dependent employers and willful violators to comply with certain
additional attestations regarding anti-displacement and recruitment
obligations. The Department also sought further comment on certain
proposals which were previously published for comment as a Proposed
Rule on October 31, 1995 (60 FR 55339), and on certain interpretations
of the statutes and its existing regulations which the Department
proposed to incorporate in the regulations.
DATES: Effective Dates: These regulations are effective January 19,
2001, with the exception of Secs. 655.731(a)(2) and 656.40, (c) and (d)
which are effective December 20, 2000.
Applicabililty Date: Sections 655.731(a)(2) and 656.40 apply
retroactively to any prevailing wage determinations thereunder which
were not final as of October 21, 1998. Sections 655.720 and 655.721 are
applicable to Labor Condition Applications filed on or after February
5, 2001.
Comment Date: Written comments on these regulations and issues
raised in the preamble may be submitted by February 20, 2001, with the
exception of any comments on Form WH-4, which must be submitted by
January 19, 2001.
ADDRESSES: Submit written comments concerning Part 655 to Deputy
Administrator, Wage and Hour Division, ATTN: Immigration Team, U.S.
Department of Labor, Room S-3502, 200 Constitution Avenue, N.W.,
Washington, D.C. 20210. Commenters who wish to receive notification of
receipt of comments are requested to include a self-addressed, stamped
post card. Comments may also be transmitted by facsimile (``FAX'')
machine to (202) 693-1432. This is not a toll-free number.
Submit written comments concerning Part 656 to the Assistant
Secretary for Employment and Training, ATTN: Division of Foreign Labor
Certifications, U.S. Employment Service, Employment and Training
Administration, Department of Labor, Room C-4318, 200 Constitution
Avenue, NW., Washington, DC 20210. Commenters who wish to receive
notification of receipt of comments are requested to include a self-
addressed, stamped post card. Comments may also be transmitted by
facsimile (``FAX'') machine to (202) 693-2769. This is not a toll-free
number.
FOR FURTHER INFORMATION CONTACT: Michael Ginley, Director, Office of
Enforcement Policy, Wage and Hour Division, Employment Standards
Administration, Department of Labor, Room S-3510, 200 Constitution
Avenue, NW., Washington, DC 20210. Telephone: (202) 693-0745 (this is
not a toll-free number).
James Norris, Chief, Division of Foreign Labor Certifications, U.S.
Employment Service, Employment and Training Administration, Department
of Labor, Room C-4318, 200 Constitution Avenue, NW., Washington, DC
20210. Telephone: (202) 693-3010 (this is not a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act
The H-1B nonimmigrant program is a voluntary program that allows
employers to temporarily import and employ nonimmigrants admitted under
H-1B visas to fill specialized jobs not filled by U.S. workers.
(Immigration and Nationality Act (INA), 8 U.S.C. 1101(a)(15)(H)(I)(b),
1182(n), 1184(c)). The statute, among other things, requires that an
employer pay an H-1B worker the higher of the actual wage or the
prevailing wage, to protect U.S. workers' wages and eliminate any
economic incentive or advantage in hiring temporary foreign workers.
Under the Immigration and Nationality Act (INA), as amended by the
Immigration Act of 1990 (Act), and as amended by the Miscellaneous and
Technical Immigration and Naturalization Amendments of 1991, an
employer seeking to employ an alien in a specialty occupation or as a
fashion model of distinguished merit and ability on an H-1B visa is
required to file a labor condition application with and receive
certification from DOL before the Immigration and Naturalization
Service (INS) may approve an H-1B petition. The labor condition
application process is administered by ETA; complaints and
investigations regarding labor condition applications are the
responsibility of ESA.
On January 5, 1999, the Department of Labor (DOL) published a
proposed rule which would implement statutory changes in the H-1B
program made to the INA by the American Competitiveness and Workforce
Improvement Act of 1998 (ACWIA) (Title IV, Pub. L. 105-277). The ACWIA,
as amended by the American Competitiveness in the Twenty-First Century
Act of 2000 (Pub. L. 106-313), among other things, temporarily (until
October 2003) increases the maximum number of H-1B visas permitted each
year; temporarily requires new non-displacement (layoff) and
recruitment attestations by ``H-1B dependent'' employers (as defined by
the ACWIA) and willfully violating employers; and requires employers to
offer the same fringe benefits to H-1B workers on the same basis as it
offers fringe benefits to U.S. workers. The public was invited to
comment on the proposed rule, including the information collection
requirements noted below. In addition, pursuant to the Paperwork
Reduction Act of 1990, DOL submitted a paperwork package to the Office
of Management and Budget (OMB), requesting review and approval of the
information collection requirements included in the proposed rule.
Since publication of the NPRM, additional amendments to the H-1B
provisions were enacted by the American Competitiveness in the Twenty-
first Century Act of 2000 (Pub. L. 106-313, 114 Stat. 1251, October 17,
2000), the Immigration and Nationality Act--Amendments (Pub. L. 106-
311, 114 Stat. 1247, October 17, 2000), and section 401 of the Visa
Waiver Permanent Program Act (Pub. L. 106-396, 114 Stat. 1637, October
30, 2000) (collectively, the October 2000 Amendments). Most pertinent
to these regulations were provisions that raised the ceiling on the
number of H-1B visas that may be issued and extended the
[[Page 80111]]
period of effectiveness of the additional attestations applicable only
to H-1B-dependent employers and willful violators.
Comments were received from members of Congress, OMB, law firms,
information technology industry associations, other industry
associations, information technology firms, research firms, other
employers of H-1B workers, Federal agencies and individuals. Commenters
questioned DOL authority under the ACWIA and/or the Immigration and
Nationality Act to impose the paperwork requirements contained in the
proposed rule. Further, commenters questioned the DOL burden estimates
for these information collections, indicating that the estimates were
much too low. Many commenters contended DOL should only require the
production of records in an investigation context. One commenter
suggested for clarity that DOL provide a check list for H-1B employers
indicating which records must be kept, which records are required by
other statutes or regulations and where these records must be kept.
Many commenters have fundamental misunderstandings of the nature of
the reporting and disclosure requirements proposed in the NPRM. The
Department has made every effort in the NPRM and in the Interim Final
Rule to limit recordkeeping requirements to documents which are
necessary for the Department to ensure compliance, and to documents
which are already required by other statutes and regulations or would
ordinarily be kept by a prudent businessperson. As a general matter,
when reviewing the recordkeeping and disclosure obligations set forth
in the regulations, employers should be aware that the regulations
distinguish between a requirement to ``preserve'' or ``retain'' records
if they otherwise exist, and a requirement to ``maintain'' records
whether or not they already exist. A requirement that employers retain,
for example, ``any'' documentation on a particular subject requires
only that any such documents be retained if they otherwise exist, but
does not require creation of any documents. In addition, the Department
points out that where the regulations do not explicitly require public
access, the records may be kept in the employer's files in any manner
desired; they do not need to be segregated by labor condition
application (LCA) or establishment and do not need to be segregated
from the records of non-H-1B workers, provided they are promptly made
available to the Department upon request in the conduct of an
investigation. The Department considers it important to require that
such records be maintained, as in other enforcement programs, so that
in the event of an investigation, the Department is able to determine
compliance or, in the event of violations, to determine the nature and
extent of the violations. This can only be accomplished with adequate,
accurate records since it is only the employer who is in a position to
know and produce the most probative underlying facts. See Anderson v.
Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946).
In addition, in the regulations, the Department has limited the
documents that must be disclosed to the public to those which the
Department has concluded are necessary for a member of the public to be
able to determine the employer's obligations and the general contours
of how it will comply with its attestation obligations. The regulations
on public access files do not require that there be a separate public
access file for each LCA or for each worker. Thus, for example, an
employer might choose to keep a single public access file with one copy
of each of the required documents which are applicable to all LCAs
(such as the description of the employer's pay system), and separately
clip together those documents which are specific to each LCA.
Nothing in the ACWIA suggests that it intends to deny the
Department the usual authority to require recordkeeping as a means of
ensuring compliance with an employer's statutory obligations. To the
contrary, Section 212(n)(1) specifically requires employers to make the
LCA ``and such accompanying documents as are necessary'' available for
public examination. The Department believes that this provision clearly
permits the Department to determine what documents must be created or
retained by employers to support the LCA. In the absence of such
records, the Department is unable to ascertain whether an employer in
fact is in compliance or the extent of violations.
In an effort to fully educate the public regarding the H-1B program
and its requirements (including paperwork), DOL intends to prepare and
make available pamphlets, fact sheets and a small business compliance
guide. Further compliance assistance material will be made available on
the DOL website. See Section IV.B, below, for an extensive discussion
of this public outreach effort. The following is a brief discussion of
the paperwork requirements contained in the proposed rule, the public
comments on those requirements, the DOL response and the paperwork
requirements imposed by this interim final rule. A much more extensive
discussion of the issues, including the paperwork requirements, is
contained in Section IV of the preamble.
A. Labor Condition Application (Sec. 655.700)
The process of protecting U.S. workers begins with a requirement
that employers file a labor condition application (LCA) (Form ETA 9035)
with the Department. In this application the employer is required to
attest: (1) That it will pay H-1B aliens prevailing wages or actual
wages, whichever are greater--including, pursuant to the ACWIA, the
requirement to pay for certain nonproductive time and to provide
benefits on the same basis as they are provided to U.S. workers; (2)
that it will provide working conditions that will not adversely affect
the working conditions of U.S. workers similarly employed; (3) that
there is no strike or lockout at the place of employment; and (4) that
it has publicly notified the bargaining representative or, if there is
no bargaining representative, the employees, by posting at the place of
employment or by electronic notification--and will provide copies of
the LCA to each H-1B nonimmigrant employed under the LCA. In addition,
the employer must provide the information required in the application
about the number of aliens sought, occupational classification, wage
rate, the prevailing wage rate and the source of the wage rate, and
period of employment. Pursuant to the ACWIA, additional attestation
requirements become applicable to H-1B-dependent employers and willful
violators after promulgation of these regulations. This form, currently
approved by OMB under OMB No. 1205-0310, was revised in the NPRM to
identify H-1B dependent employers and provide for their attestation to
the new requirements. The ACWIA increased the number of H-1B
nonimmigrants from 65,000 to 115,000 in fiscal years 1999 and 2000 and
to 107,500 in fiscal year 2002. Besides the increase in LCAs filed for
these additional workers, by regulation H-1B-dependent employers are
required to file new LCAs if they wish to file petitions for new H-1B
nonimmigrants or to seek extensions of status for existing workers. The
Department estimated in the proposal that 249,500 LCAs are filed
annually by 50,000 H-1B employers (dependent and nondependent). The
only added LCA burden proposed in the NPRM was for H-1B-dependent
employers and willful violators to indicate on the LCA their status and
their agreement to the
[[Page 80112]]
additional attestation requirements. (The time required for an
estimated 50 H-1B employers to make the mathematical calculation to
determine if they must make the additional attestations required of an
H-1B employer is separately set out in C. of this section, below.)
Since it was estimated that only 50 H-1B employers will find it
necessary to make this calculation, out of a total of 50,000 H-1B
employers, the estimate of time necessary to complete the form remained
at 1 hour. Total annual burden was estimated at 249,500 hours.
Since promulgation of the NPRM, the 2000 Amendments to the INA
further increase the ceiling on the number of H-1B visas that may be
issued annually for 2001, 2002 and 2003, to 195,000 annually, with an
additional unspecified number who may be admitted if they will be
employed by a school, a related non-profit entity, a State or local
government research organization, or a nonprofit research organization.
Commenters generally objected to the one hour estimate for
completing the LCA, pointing out that the revised LCA is four pages
long, whereas the current LCA is only one page for an estimated burden
of one and one-quarter hour per LCA.
OMB suggested asked whether the conditions in a, b and c in section
8 capture the requirements for H-1B dependent employers. They also
suggested amending the end of the sentence following the second box to
read ``* * * unless the exemption requirement in the NOTE below is
met.''
A commenter stated that DOL had failed to consider that many
employers will now be forced to file two LCAs where previously they
only filed one. Several of its member employers who previously filed an
LCA for multiple openings indicated that they may file separate LCAs
for each opening rather than take the risk that of INS making a
determination that one H-1B nonimmigrant is not exempt, thus
invalidating the entire LCA.
As discussed in Section IV.B.4 below, the ETA Form 9035 has been
amended to provide that every employer is required to indicate whether
it is or is not H-1B-dependent or a willful violator. Since all
employers are required to determine whether or not they are H-1B
dependent--although for most employers, as discussed below, their
status will be readily apparent and no actual computation will be
necessary--the additional box for non-dependent employers should
require no additional time. There is no other information required
which is not contained on the current form other than to check a box
indicating the agreement of H-1B-dependent employers and willful
violators to the additional attestation requirements. The longer form
is not due to the requirement to furnish additional information, but to
the new format required for the FAXback, which is designed to decrease
significantly the processing time. See Section IV.5, below. The
Department also notes that the 1\1/4\ hour estimate on the current ETA
Form 9035 includes the 15 minutes estimated to file a complaint with
the Wage and Hour Division
Upon review, the Department sees no reason to change its estimate
of an average of one hour per form, including both reading the
instructions and filling out the form (estimated to take no more than
one-half hour per form), as well as taking the actions that are
subsumed in filling out the form (obtain the prevailing wage and
providing notice). Based upon current data, and considering the
regulatory change deleting the necessity for filing a new LCA when an
employer's corporate identity changes (see B. of this section, below)
as well as the requirement that H-1B-dependent employers with current
LCAs file new LCAs if they wish to file new H-1B petitions or requests
for extension of status, DOL estimates that 637,000 LCAs will be
submitted annually by 63,500 H-1B employers (dependent and
nondependent). Total annual burden for the LCA is estimated to be
637,000 hours (637,000 LCAs x 1 hour).
B. Documentation of Corporate Identity (Sec. 655.760)
Currently, the regulatory requirement is that a new LCA must be
filed when an employer's corporate identity changes and a new Employer
Identification Number (EIN) is obtained. Under the proposed rule, an
employer who merely changes corporate identity through acquisition or
spin-off could merely document the change in the public file (including
an express acknowledgment of all LCA obligations on the part of the
successor entity), provided it satisfied the Internal Revenue Code
definition of a single employer. The proposed regulation was designed
to eliminate a burden on businesses to file a new LCA, while at the
same time ensuring that the public is aware of the changes and that the
employer will continue to follow its LCA obligations. It was estimated
in the proposal that 500 H-1B employers would be required to file the
subject documentation annually. It was estimated that the recording and
filing of each such document would take 15 minutes for a total annual
burden of 125 hours.
One commenter asked how DOL's rulemaking affected the INS
interpretation that any ``material change in employment'' necessitates
the filing of an amended petition. Another commenter asked what opinion
an employer is to follow when current DOL opinion is that any change to
an approved LCA requires an amendment to the H-1B petition and the view
of INS is that a change in company name or EIN does not require a new
LCA, just that the change be documented at the time of amendment or
extension. Another commenter stated that the burden for this
requirement is significantly higher than DOL estimated.
Upon reconsideration, DOL's Interim Final Rule provides that a new
LCA will not be required merely because a corporate reorganization
results in a change of corporate identity, regardless of whether there
is a change in the EIN and regardless of whether the IRS definition of
single employer is satisfied, provided that the successor entity, prior
to the continued employment of the H-1B nonimmigrant, agrees to assume
the predecessor entity's obligations and liabilities under the LCA. The
agreement to comply with the LCA for the future and to any liability of
the predecessor under the LCA must be documented with a memorandum in
the public access file.
With these changes, and based on the Department's experience, it is
now estimated that 1000 H-1B employers (an increase from the 500
employers estimated in the NPRM) will be required to file the
documentation annually and that the recording and filing of each such
document will take approximately 30 minutes for a total annual burden
of 500 hours. The Department also estimates that employers who file
this memorandum will file 10,000 fewer LCAs, for a net saving of 9,500
hours.
INS requirements for the filing of an amended petition are separate
from DOL requirements for the filing of LCAs.
C. Determination of H-1B Dependency (Sec. 655.736)
An H-1B employer must calculate the ratio between its H-1B workers
and the number of full-time equivalent employees (FTEs) to determine
whether it meets the statutory definition of an H-1B-dependent employer
(8 U.S.C. 1182 (n)(3)(A)). The NPRM provided that when it is a close
question, the determination would ordinarily be made by examination of
an employer's quarterly tax statement and last payroll (or last quarter
of payrolls if more
[[Page 80113]]
representative) or other evidence as to average hours worked by part-
time employees to aggregate their hours into FTEs, together with a
count of the number of workers under H-1B petitions. Documentation of
this determination would be required where non-dependent status is not
readily apparent and a mathematical determination must be made. A copy
of this determination would be placed in the public disclosure file. In
addition, if an employer changed from dependent to non-dependent
status, or vice-versa, a simple statement of the change in status would
be placed in the public disclosure file. The NPRM explained that
documentation of a determination of H-1B dependency where it is a close
question is necessary to determine employer compliance with H-1B
requirements, and to advise the public of an employer's status. It was
estimated in the proposal that approximately 50 H-1B employers would
need to make the determination with 25 employers who are found not to
be dependent employers would be required to document this determination
annually. The making and documentation of each such determination was
estimated to take approximately 15 minutes, and occur at least twice
annually for a total annual burden of 12.5 hours.
Several commenters expressed the view that the DOL burden estimate
for this requirement was severely underestimated. They remarked that
large employers who hire H-1B employees will have to create systems of
verification of H-1B dependency and that the determination will be
difficult where employees are located in multiple locations and
departments and the data needed to make the determination are
maintained in different databases. Some commenters questioned the
connection DOL made between the use of blanket LCAs and the likelihood
of H-1B dependency and how frequently the determination would need to
be made. Some also commented that it appeared that whenever the
determination is made, a copy of the calculation must be placed in the
public access file, making it a requirement for all H-1B employers, not
just those who are borderline H-1B dependent. OMB commented that the
15-minute burden for the dependency determination seemed low and asked
if the estimate just includes the assurance (how it is written) or does
it also include documentation of the assurance.
Having taken into consideration all of the comments pertaining to
the determination of dependency status, DOL has decided modification
these requirements is appropriate to achieve the purposes of the ACWIA
and avoid unnecessary burden on employers. First, the Interim Final
Rule provides that all employers must retain copies of the I-129
petitions or requests for extensions of status filed with INS. These
documents are critical to several provisions in the regulations,
including in particular the determination of dependency and the number
of hours that must be compensated if employees are ``benched.'' The
Department believes that prudent businessmen would retain copies of
these documents in any event. (See also the discussion in D. of this
section, below.)
The Interim Final Rule also significantly reduces the burden to
employers in making the computations of dependency. The Rule will
permit employers to use a ``snap shot'' test to determine if dependency
status is readily apparent and requires a full computation only if the
number of H-1B workers exceeds 15 percent of the total number of full-
time workers of the employer. Furthermore, the Rule provides employers
an option of considering all part-time workers to be one-half FTE,
rather than make the full computation. If the full computation (where
required because the dependency status is not readily apparent)
indicates that the employer is not H-1B dependent, the employer must
retain a copy of this computation. Further, the employer must retain a
copy of the full computation in specified circumstances which the
Department believes will very rarely occur. The full computation must
be maintained if the employer changes status from dependent to non-
dependent. If the employer uses the Internal Revenue Code single
employer test to determine dependency, it must maintain records
documenting what entities are included in the single employer, as well
as the computation performed, showing the number of workers employed by
each entity who is included in the calculation. Finally, if the
employer includes workers who do not appear on the payroll, a record of
the computation must be kept. The Department has concluded that the
computations or summary of the computations need not be kept in the
public access file.
Although DOL has made several changes to simplify the determination
of dependency status and its documentation, upon reconsideration DOL
has increased its estimate of burden from 15 to 30 minutes, thus
increasing the annual burden for an estimated 25 employers who must
make and document such calculations twice annually from 12.5 to 25
hours. The Department also estimates that no more than 5 percent of
employers will be required to retain copies of H-1B petitions and
extensions who do not currently retain these documents, for an average
of 3 minutes per petition, and a total of 159 hours (3,175 employers
x 3 minutes 60). Total annual burden for this item is
estimated to be 184 hours.
D. List of Exempt H-1B Employees in Public Access File
(Sec. 655.737(a)(1))
The ACWIA provisions regarding non-displacement and recruitment of
U.S. workers do not apply where the LCA is used only for petitions for
exempt H-1B workers. The NPRM provided that where the INS determines a
worker is exempt, employers would be required to maintain a copy of
such documentation in the public access file. Determinations as to
whether or not H-1B workers meet the education requirements to be
classified as exempt H-1B nonimmigrants would be made initially by the
INS in the course of adjudicating the petitions filed on behalf of H-1B
nonimmigrants by dependent employers. In the event of an investigation,
it was anticipated that considerable weight would be given to the INS
determination that H-1B nonimmigrants were exempt, based on the
educational attainments of the workers, since INS has considerable
experience in evaluating the educational qualifications of aliens.
Retention of copies of such determinations would aid DOL in determining
compliance with the H-1B requirements and provide the public with
notice as well. It was estimated in the proposal that 28,125 such
documents would need to be filed annually. Each such filing would take
approximately one minute for an annual burden of approximately 468.8
hours.
One commenter indicated that the one minute to physically complete
the form may be correct but that the estimate ignores the analysis and
review required to determine if they are exempt. Another commenter
asked what documentation must be copied and maintained in the file,
i.e., would INS issue a separate determination or would Form I-797,
Notice of Approval of H-1B Petition suffice? They also believed it was
unclear how DOL estimated only 28,125 documents would be filed annually
when the number of H-1B petition approvals for the current fiscal year
is 115,000.
On further consideration, because of privacy considerations, DOL
has concluded that the H-1B petitions with the INS determinations of
workers' exempt status need not be included in the public access file.
However, DOL
[[Page 80114]]
believes the public should know which workers are not covered by the
new attestation elements so they can challenge a determination of
exempt status where they believe the basis for the exemption is
invalid. Therefore, under the interim final rule employers will be
required to include in their public access file a list of the H-1B
nonimmigrants supported by any LCA attesting that it will be used only
for exempt workers, or in the alternative, a statement that the
employer employs only exempt H-1B workers. DOL estimates that each list
or statement will take approximately 15 minutes and that 200 H-1B
employers will prepare one such list or statement annually for a total
burden of 50 hours.
E. Record of Assurance of Non-displacement of U.S. Workers at Second
Employer's Worksite (Sec. 655.738(e))
Section 212(n)(F)(ii) of the INA, 8 U.S.C. 1182(n)(F)(ii),
prohibits an H-1B-dependent employer from placing H-1B nonimmigrant
with another employer unless the dependent employer makes a bona fide
inquiry as to the secondary employer's intent regarding displacement of
U.S. workers by H-1B workers. The proposed regulation would require an
employer seeking to place an H-1B nonimmigrant with another employer to
secure and retain either a written assurance from the second employer,
a contemporaneous written record of the second employer's oral
statements regarding non-displacement, or a prohibition in the contract
between the H-1B employer and the second employer. Pursuant to the
ACWIA, an H-1B employer may be debarred for a secondary displacement
``only if the Secretary of Labor found that such placing employer * * *
knew or had reason to know of such displacement at the time of the
placement of the nonimmigrant with the other employer.'' Congress
clearly intended that the employer make a reasonable inquiry and give
due regard to available information. In order to assure that the
purposes of the statute are achieved, the Department developed a
regulatory provision to require that the H-1B employer make a
reasonable effort to inquire about potential secondary displacement and
to document those inquiries. It was estimated that approximately 150
employers would place H-1B nonimmigrants with secondary employers where
assurances are required. It was estimated that each such assurance will
take approximately 5 minutes and each such employer would obtain such
assurances 5 times annually for an annual burden of 62.5 hours.
Commenters stated that DOL grossly underestimated the amount of
time necessary to persuade and obtain from the secondary employer the
necessary assurances, create a verification form or revise a contract
and the annual frequency of the assurances. Further, some commenters
felt that DOL had failed to consider the additional burden on the
secondary employer to document their compliance with the assurance.
The paperwork burden estimate, properly, does not include the time
necessary to persuade a secondary employer to provide such an assurance
but does include the development of the verification form or contract
clause and its execution. DOL believes that once the form or contract
clause is created, this form or contract clause will be used uniformly
for subsequent assurances making the average burden per occurrence
minimal. There is no burden on the secondary employer to document its
compliance with the assurance, since it is solely the responsibility of
the primary H-1B employer to comply with the attestation that no U.S.
worker will be displaced by an H-1B worker. DOL estimates an average
burden of 10 minutes per attestation or statement, and that 150 H-1B
employers will document such assurance 5 times annually, for a total
annual burden of 125 hours.
F. Offers of Employment to Displaced U.S. Workers (Sec. 655.738(e))
The ACWIA prohibits H-1B dependent employers and willful violators
from hiring H-1B nonimmigrants if their doing so would displace similar
U.S. workers from an essentially equivalent job in the same area of
employment. The proposed regulations would require H-1B-dependent
employers to keep certain documentation with respect to each former
worker in the same locality and same occupation as any H-1B worker who
left its employ in the period from 90 days before to 90 days after an
employer's petition for an H-1B worker. For all such employees, the
Department proposed that covered H-1B employers maintain the last-known
mailing address, occupational title and job description, any
documentation concerning the employee's experience and qualifications,
and principal assignments. Further, the employer would be required to
keep all documents concerning the departure of such employees and the
terms of any offers of similar employment to such U.S. workers and
responses to those offers. These records are necessary for the
Department to determine whether the H-1B employer has displaced similar
U.S. workers with H-1B nonimmigrants. The Department stated that no
records need be created to comply with these requirements, since the
Equal Employment Opportunity Commission (EEOC) already requires under
its regulations that the records described above be maintained.
Commenters stated that they were unaware of the EEOC regulation
that required this documentation and requested that DOL recite rather
than just refer to the EEOC regulations.
As discussed in Section IV.F.8 below, commenters are generally
correct that the EEOC regulation cited in the NPRM, 29 CFR 1620.14,
does not establish a general requirement that employers create the
records encompassed by the Department's displacement proposal. Rather,
it requires an employer to preserve all personnel or employment records
which the employer ``made or kept''. Furthermore, EEOC requires the
preservation of the same or similar records under other statutes it
administers, such as the Age Discrimination in Employment Act (ADEA).
Under this Interim Final Regulation, DOL is not requiring employers to
create any documents other than basic payroll information, with one
noted exception. If the employer offers the U.S. worker another
employment opportunity, and does not otherwise do so in writing, by the
provisions of section 655.738(e)(1) of these regulations, the employer
must document and retain the offer and the response to such offer.
It is estimated that 10 H-1B employers will make such offers of
employment 5 times annually (50) and that 5 of those offers and
responses would not otherwise be committed to writing without this
paperwork requirement. Each such documentation is estimated to take 30
minutes for a total annual burden of 2.5 hours.
G. Documentation of U.S. Worker Recruitment (Sec. 655.739(i)
Pursuant to the ACWIA, H-1B-dependent employers are required to
make good faith efforts to recruit U.S. workers before hiring H-1B
workers. Under the proposed regulations, H-1B-dependent employers would
be required to retain documentation of the recruiting methods used,
including the places and dates of the advertisements and postings or
other recruitment method used, the content of the advertisements or
postings, and the compensation terms. Further, the employer would be
required to retain any documentation concerning consideration of
applications of U.S. workers, such as copies of applications
[[Page 80115]]
and related documents, rating forms, job offers, etc. The proposed rule
also would require the employer to place either documentation or a
simple list of the places and dates of the advertisements and postings
of other recruitment methods used. Comments were requested regarding
how employers should determine industry-wide standards and make this
determination available for public disclosure. The documentation noted
above is necessary for the Department of Labor to determine whether the
employer has made a good faith effort to recruit U.S. workers and for
the public to be aware of the recruiting methods used. It was estimated
that annually 200 H-1B dependent employers would need to document their
good faith efforts to recruit U.S. workers. The filing of such records
was estimated to take approximately twenty minutes per employer for an
annual burden of approximately 66.7 hours.
Commenters felt the burden for this item was underestimated, i.e.,
that DOL should recognize that employers file more than one LCA each
year and that DOL should recite rather than just refer to the EEOC
regulation requiring this documentation.
As noted in F. above and as discussed at some length in Section
IV.G.5 of the preamble, DOL believes that employers are required to
preserve the records required under current EEOC requirements. With the
exception of the list to be included in the public access file (and
here too employers have the option of putting the actual records in the
file), DOL is not requiring employers to create any documents, but
rather to preserve those documents which are created or received.
Further, DOL, upon further review, has determined that employers will
not be required to maintain evidence of industry practice for
recruitment. The only additional recordkeeping burden required by these
regulation is that the public disclosure file contain a summary of the
principal recruitment methods used and the time frames in which they
were used. This recordkeeping requirement may be satisfied by creating
a memorandum to the file or the filing of pertinent documents. It is
estimated that 200 H-1B employers will file such documents or
memorandum 5 times annually and that each recordkeeping will take 20
minutes, for an annual burden of approximately 333 hours.
H. Documentation of Fringe Benefits (Sec. 655.731(b))
Pursuant to the ACWIA, all employers of H-1B workers are required
to offer benefits to H-1B workers on the same basis and under the same
criteria as offered to similarly employed U.S. workers. The proposed
regulations would require employers to retain copies of all fringe
benefit plans and summary plan descriptions, including all rules
regarding eligibility and benefits, evidence of what benefits are
actually provided to individual workers and how costs are shared
between employers and employees. These records are necessary for the
Department to determine whether the H-1B nonimmigrants are offered the
same fringe benefits as similarly employed U.S. workers. Copies of most
fringe benefit programs are required to be maintained by Internal
Revenue Service and Pension and Welfare Benefits Administration
regulations; thus there would not ordinarily be an additional
recordkeeping burden from these requirements. The Department estimated
that 2,500 employers would spend approximately 15 minutes each
documenting unwritten plans, for an annual burden of 625 hours.
The Department in the proposed rule also inquired as to whether it
would be possible to require multinational employers to keep H-1B
workers on ``home country'' benefit plans in lieu of those provided to
U.S. workers and what records would need to be kept to demonstrate the
value of the ``home-country'' benefits and those provided to U. S.
workers.
A commenter said that DOL should recite, rather than just refer to
the PWBA and IRS regulations. Another commenter stated it was unclear
whether in fact these regulations governing retention of benefits
information meet the DOL requirements for the H-1B program, since the
DOL regulations require specific documentation of the comparative
benefits offered and received by H-1B employees and their U.S.
counterparts, including the need to determine the appropriate
comparison group and then require the maintenance of all the
information in the public inspection file for each H-1B worker. Another
comment stated that DOL has failed to consider the additional burden of
comparing fringe benefits offered by similar employers in the area
which DOL is proposing to require. Commenters questioned the need for
the documentation of fringe benefits to be placed in each public access
file, with others suggesting more flexibility in how the documentation
should be provided. One commenter suggested that employers be allowed
to select equivalent but different valued benefits as long as employers
can show that all similarly situated workers were offered the same
array of benefits.
It is believed that almost all employers of H-1B workers would,
absent the regulation, have already created an employee handbook or
have a summary description plan required by ERISA regulations which
would satisfy the H-1B regulatory requirement. The provision being
considered to require a comparison of fringe benefits offered by
similar employers in the area is not included in this interim final
rule. DOL is not requiring that detailed records of fringe benefits be
maintained in each public access file. These records may be kept in a
master file or in any other manner the employer desires. The public
access file need only contain a summary of the benefits offered to U.S.
workers in the same occupation as H-1B workers, including a statement
of how employees are differentiated, if at all. Ordinarily this would
be satisfied with the employee handbook or summary description
discussed above. Where an employer is providing home country benefits,
the employer need only place a notation to that effect in the public
access file.
There are an estimated 10 percent of H-1B employers, or 6,350 who
provide fringe benefits, such as bonuses, vacations and holidays, not
required by ERISA regulations to be documented. It is estimated to
document these plans would take 15 minutes per employer, for an annual
burden of 1,588 hours (6,350 x 15 minutes). It is further estimated
that 25 percent of H-1B employers (15,875) are multinational employers
and that a note to the file that these workers receive ``home country''
benefits would take 5 minutes per employer for an annual burden of
1,323 hours. The total estimated burden for this item is 2,911 hours.
I. Wage Recordkeeping Requirements Applicable to Employers of H-1B
Nonimmigrants
The Department republished and asked for comment on several
provisions of the December 20, 1994 Final Rule (59 FR 65646) which were
published for notice and comment on October 31, 1995 (60 FR 55339).
Existing regulations require all H-1B employers to document their
actual wage system to be applied to the H-1B nonimmigrants and U.S.
workers. They are also required to keep payroll records for non-FLSA
exempt H-1B workers and other employees for the specific employment in
question. The proposed rule would decrease the burden on employers of
keeping hourly pay records for U.S. workers, requiring such records
only if either the worker is not
[[Page 80116]]
paid on a salary basis, or the actual wage is stated as an hourly wage.
For H-1B workers, such records must also be kept if the prevailing wage
is expressed as an hourly rate. The statute requires that the employer
pay H-1B nonimmigrants the higher of the actual or prevailing wage. The
Department explained that in order to determine if the employer is
paying the required wage, it must be able to ascertain the system an
employer uses to determine the wages of non-H-1B workers. The
Department also stated that it is essential to require the employer to
maintain payroll records for the employer's employees in the specific
employment in question at the place of employment to ensure that H-1B
nonimmigrants are being paid at least the actual wage being paid to
non-H-1B workers or the prevailing wage, whichever is higher. The
Department estimated that approximately 50,000 employers employ H-1B
nonimmigrants. The documentation would have to be done only one time
for each employer. Hourly pay records would have to be prepared with
respect to all affected employees each pay period. The Department
estimated that the public burden wold be approximately 1 hour per
employer per year to document the actual wage system for a total burden
to the regulated community of 50,000 hours in a year.
The payroll recordkeeping requirements are virtually the same as
those required by the Fair Labor Standards Act (FLSA) and any burden
required is subsumed in the OMB Approval No. 1215-0017 for those
regulations at 29 CFR Parts 516, except with respect to records of
hours worked for exempt employees. There would be no burden for U.S.
workers since as a practical matter, hours worked records would be
required for U.S. workers only if they are not exempt from FLSA, or if
they are exempt but paid on an hourly basis (certain computer
professionals), and therefore would keep hourly records in any event.
The Department estimates that 55,000 H-1B workers will be paid on a
salary basis. Hours worked records would be required for these workers
only if the prevailing wage is expressed as an hourly rate--estimated
to 17 percent of all cases. The Department estimated a burden of 2.5
hours per worker per year, for 9,350 workers and a total of 23,375
hours.
Several commenters stated that DOL had grossly underestimated the
burden of documenting the objective wage system. Some indicated that it
was ludicrous to estimate that the documentation is done only once,
since wage systems continually change, documentation will need be done,
at a minimum, each time a new LCA is prepared and employers do not hire
H-1B nonimmigrants only for one position in the organization. Thus, DOL
must calculate how many different job categories are filled by H-1B
nonimmigrants on average for each employer to estimate how many times
the burden of documenting the objective wage system occurs annually.
Further, the documentation must be sufficiently detailed to allow a
third party to determine the actual wage, making the burden higher than
estimated. Some commented that the proposed regulation requires the
actual wage be determined and documented anew for each H-B hire, along
with periodic adjustments to the actual wage system.
The Department has deleted the provisions suggesting that the
employer's wage system must be objective, as well as the statement that
it must be described in the public disclosure file with detail
sufficient for a third party to determine the actual wage rate for an
H-1B nonimmigrant. As stated above, the requirement that a description
of the actual wage system be included in the public access file is
already contained in the regulations at section 655.760(a)(3).
Therefore these regulations create no additional burden for this
requirement.
Some commenters stated that while DOL estimated that only 17
percent of the prevailing wages provided to employers by State
Employment Security Agencies (SESAs) are expressed as hourly rates,
their experience was that SESAs regularly provides employers and
attorneys with the prevailing wage stated as an hourly rate.
With respect to the concern expressed that SESA more frequently
issues hourly rates, the modification to section 655.731(a)(2) in the
interim final rule will provide that employer shall convert the
prevailing wage determination into the form which accurately reflects
the wages which it will pay.
The Department has also concluded that a revision of the regulation
is appropriate to remove the requirement that the employer keep hourly
wage records for its full-time H-1B employees paid on a salary basis.
The regulation continues to require employers to keep hours worked
records for employees who are not paid on a salary basis and for part-
time H-1B workers, regardless of how paid. The additional burden of
keeping records for salaried H-1B workers who are exempt from the FLSA
is estimated at 2.5 hours per worker for 10,500 workers (1.5 percent of
total H-1B workers), for a total annual burden of 26,250 hours.
J. Information Form Alleging H-1B Violations
The ACWIA requires DOL to develop a procedure so that a person,
other than an aggrieved party, can provide, in writing on a form
developed by DOL, information alleging H-1B program violations. The
Department proposes that a single form be used by any party alleging
violations, to the Wage and Hour Division of the U.S. Department of
Labor, whether a complainant or another source. The H-1B Nonimmigrant
Information Form, WH-4, is included in this Interim Final Rule for
public review and comment. It is estimated that 200 such responses will
be received annually and that each response will take approximately 20
minutes, for a total burden of 67 hours.
Total Annual Hours Burden for all Information Collections--667,423
Hours
Retention of Records: The current regulations provide at section
655.760 that copies of the LCAs and its documentation are to be kept
for a period of one year beyond the end of the period of employment
specified on the LCA or one year from the date the LCA was withdrawn,
except that if an enforcement action is commenced, these records must
be kept until the enforcement procedure is completed as set forth in
part 655, subpart I. The payroll records for the H-1B employees and
others employees in the same occupational classification must be
retained for a period of three years from the date(s) of the creation
of the record(s), except that if an enforcement proceeding is
commenced, all payroll records shall be retained until the enforcement
proceeding is completed. These record retention requirements have been
approved by OMB under OMB No. 1205-0310.
After consideration of comments raised in response to the NPRM, the
Department has clarified the record retention requirements to provide
that where there is no enforcement action, the employer shall retain
required records for a period of one year beyond the last date on which
any H-1B nonimmigrant is employed under the labor condition application
or, if no nonimmigrants were employed under the labor condition
application, one year from the date the labor condition application
expired or was withdrawn.
H-1B employers may be from a wide variety of industries. Salaries
for employers and/or their employees who perform the reporting and
[[Page 80117]]
recordkeeping functions required by this regulation may range from
several hundred dollars to several hundred thousand dollars where the
corporate executive office of a large company performs some or all of
these functions themselves. Absent specific wage data regarding such
employers and employees, respondent costs were estimated in the
proposed rule at $25 an hour. Total annual respondent hour costs for
all information collections were estimated to be $8,105,887.50 ($25.00
x 324,235.5 hours).
Some commenters questioned the $25 per hour estimate for respondent
costs, indicating that in order to comply with the information
requirements, H-1B employers must employ high-level compensation
professionals and human resource professionals. The Department
recognizes that some employers may employ highly-paid professionals to
advise them on how to comply with the H-1B program requirements.
However, it is believed that such a need will be short-lived and that
once a system is in place, compliance can be maintained without this
highly paid professional assistance. The $25 an hour respondent cost is
an average cost, which recognizes higher initial cost to effect
compliance, as well as the low cost of performing the clerical filing
functions. Further, as noted above, in addition to the guidance
provided in this regulation and its preamble, the Department intends to
provide non-technical guidance printed material and information in
electronic format which should greatly assist employers and employees
in understanding the H-1B program requirements. Total annual respondent
hour costs for all information collections are estimated at $16,685,575
($25.00 x 667,423).
The paperwork requirements discussed above will not become
effective until OMB has reviewed and approved these requirements and
assigned an OMB approval number.
II. Background
On November 29, 1990, the Immigration and Nationality Act was
amended by the Immigration Act of 1990 (IMMACT 90) (Pub. L. 101-649,
104 Stat. 4978) to create the ``H-1B visa program'' for the temporary
employment in the United States (U.S.) of nonimmigrants in ``specialty
occupations'' and as ``fashion models of distinguished merit and
ability.'' The H-1B provisions of the INA were amended on December 12,
1991, by the Miscellaneous and Technical Immigration and Naturalization
Amendments of 1991 (MTINA) (Pub. L. 102-232, 105 Stat. 1733). Further
amendments were made to the H-1B provisions of the INA on October 21,
1998, by enactment of the American Competitiveness and Workforce
Improvement Act (ACWIA) (Title IV of Pub. L. 105-277, 112 Stat. 2681).
In addition, the H-1B provisions of the INA were amended in October,
2000 by enactment of the American Competitiveness in the Twenty-first
Century Act of 2000 (Pub. L. 106-313, 114 Stat. 1251, October 17,
2000), the Immigration and Nationality Act--Amendments (Pub. L. 106-
311, 114 Stat. 1247, October 17, 2000), and section 401 of the Visa
Waiver Permanent Program Act (Pub. L. 106-396, 114 Stat. 1637, October
30, 2000) (collectively, the October 2000 Amendments).
These cumulative amendments of the INA assigned certain
responsibility to the Department of Labor (Department or DOL) for
implementing several provisions of the Act relating to the temporary
employment of certain nonimmigrants. The H-1B provisions of the INA
govern the temporary entry of foreign ``professionals'' to work in
``specialty occupations'' in the United States under H-1B visas. 8
U.S.C. 1101(a)(15)(H)(i)(b), 1182(n), and 1184(c). The H-1B category of
specialty occupations consists of occupations requiring the theoretical
and practical application of a body of highly specialized knowledge and
the attainment of a Bachelor's or higher degree in the specific
specialty as a minimum for entry into the occupation in the United
States. 8 U.S.C. 1184(i)(1). In addition, an H-1B nonimmigrant in a
specialty occupation must possess full State licensure to practice in
the occupation (if required), completion of the required degree, or
experience equivalent to the degree and recognition of expertise in the
specialty. 8 U.S.C. 1184(i)(2). The category of ``fashion model''
requires that the nonimmigrant be of distinguished merit and ability. 8
U.S.C. 1101(a)(15)(H)(i)(b).
A. Changes Made by the ACWIA and the October 2000 Amendments
The ACWIA made numerous significant changes in the H-1B provisions.
One was the temporary increase in the maximum number of H-1B visas over
the three fiscal years following ACWIA's enactment: For fiscal years
1999 and 2000, the cap would be 115,000; for fiscal year 2001, the cap
would be 107,500; and for fiscal year 2002 (and thereafter), the cap
would return to the original 65,000. Another significant change was the
imposition of additional attestation requirements for certain employers
to provide better protections to U.S. workers. The additional
attestation requirements apply to ``H-1B-dependent employers'' and to
employers who have been found to have committed a willful failure or
misrepresentation with respect to the H-1B requirements (hereafter
referred to as ``willful violators''). H-1B-dependent employers and
willful violators must attest that they: (1) Have not displaced and
will not displace a U.S. worker within the period beginning 90 days
before and ending 90 days after the filing of an H-1B petition; (2)
will not place an H-1B worker with another employer with indicia of an
employment relationship without making an inquiry to assure
displacement has not and will not take place within the period
beginning 90 days before and ending 90 days after the placement; and
(3) have taken good faith steps to recruit U.S. workers for the job for
which the H-1B workers are sought, and will offer the job to any
equally or better qualified U.S. worker. The recruitment provision does
not apply to an LCA for an H-1B worker who is ``exceptional,'' an
``outstanding professor or researcher,'' or a ``multinational manager
or executive'' within the meaning of section 203(b)(1) of the INA. The
ACWIA specified that both the displacement and recruitment/hiring
protections become effective upon the date of the Department's final
regulation and apply only to LCAs filed before October 1, 2001. An H-
1B-dependent employer or willful violator filing an LCA which will be
used only for ``exempt'' H-1B workers is not required to comply with
the new attestation requirements for that LCA.
The ACWIA also instituted a filing fee of $500, to be collected by
INS, for initial petitions and first extensions filed on or after
December 1, 1998, and before October 1, 2001. Institutions of higher
education and related or affiliated nonprofit entities, nonprofit
research organizations, and Governmental research organizations are
exempt from the new fee. The fees are to be used for job training, low-
income scholarships, and program administration/enforcement.
The ACWIA included other generally applicable worker protections,
specifically: whistleblower protection, prohibitions against
reimbursement of the $500 filing fee and against penalizing an H-1B
worker who terminates employment prior to a date agreed with the
employer, and a requirement that the employer pay wages during
nonproductive time if such time is not due to reasons occasioned by the
worker. The ACWIA
[[Page 80118]]
also required employers to offer H-1B workers fringe benefits on the
same basis and in accordance with the same criteria as U.S. workers.
The ACWIA specified new civil money penalties ranging from $1,000
to $35,000 per violation, along with debarment. New investigative
procedures were created, authorizing the Department to conduct
``random'' investigations of willful violators during the five-year
period after the finding of such violation, and establishing an
alternative investigation protocol based on information indicating
potential violations obtained from sources other than aggrieved
parties. Enforcement of the requirement that employers hire U.S.
workers if they are equally or better qualified than the H-1B workers
is carried out by the Attorney General through arbitration.
The ACWIA mandated a particular method of computation of the local
prevailing wage for purposes of the requirements of the H-1B program
and the permanent immigrant worker program with respect to employees of
institutions of higher education and related or affiliated nonprofit
entities, nonprofit research organizations, and Governmental research
organizations. Under the ACWIA provision, the prevailing wage level is
to take into account only employees at such institutions and
organizations.
The ACWIA became law on October 21, 1998. With one exception, its
provisions took effect at that time, and apply both to existing LCAs
and to LCAs filed in the future. Pursuant to section 412(d) of the
ACWIA and section 212(n)(1)(E)(ii) of the INA as amended by the ACWIA,
8 U.S.C. 1182(n)(1)(E)(ii), the special attestation provisions
regarding displacement and recruitment are applicable only to LCAs
filed by H-1B-dependent employers and willful violators on or after the
date this Interim Final Rule becomes effective and until October 21,
2001.
In addition, section 415(b) of the ACWIA provided that the
amendments to section 212(p) of the INA, 8 U.S.C. 1182(p)--relating to
computing the prevailing wage level for employees of an institution of
higher education or a related or affiliated nonprofit entity, for
employees of a nonprofit research organization or Governmental research
organization, or for professional athletes--apply to prevailing wage
computations for LCAs filed before October 21, 1998, ``but only to the
extent that the computation is subject to an administrative or judicial
determination that is not final as of such date.'' Therefore, the
regulations in parts 655 and 656 to implement section 212(p) apply
retroactively to any prevailing wage determinations thereunder which
were not final as of October 21, 1998.
Two other ACWIA's provisions contained temporal qualifications,
relating to the Department's authority to conduct random investigations
and other source investigations (INA, sections 212(n)(2)(F),
212(n)(2)(G), respectively). The Act specified that the Department's
authority, pursuant to section 212(n)(2)(F) of the INA as amended by
the ACWIA, 8 U.S.C. 1182(n)(2)(F), to conduct random investigations of
employers who have committed a willful failure to meet a condition of
their LCAs or who have made a willful misrepresentation of material
fact applies only where such a finding has been made by the Secretary
on or after October 21, 1998. The Act also specified that the
Department's authority, pursuant to section 212(n)(2)(G), 8 U.S.C.
1182(n)(2)(G), to conduct investigations based on credible information
from a source other than an aggrieved person would ``sunset,'' i.e.,
expire, on September 30, 2001.
The October 2000 Amendments made substantial increases in the
numbers of H-1B visas available for the employment of nonimmigrants:
195,000 each year for fiscal years 2001, 2002, and 2003 (with the
number thereafter to revert to the original 65,000 per fiscal year); an
unspecified additional number for fiscal year 1999 to cover
nonimmigrants issued visas above the authorized number for that year;
an unspecified additional number for fiscal year 2000 to cover
petitions filed before September 1, 2000; and an unlimited number for
nonimmigrants employed by institutions of higher education, by their
related or affiliated nonprofit entities, by nonprofit research
organizations, or by governmental research organizations (i.e., visas
for employees of such entities are not counted against the annual
limits). The Amendments extended the effective periods for two ACWIA
provisions: The additional attestation elements for H-1B-dependent
employers and willful violator employers were extended until October 1,
2003; the Department's authority to conduct investigations based on
sources other than aggrieved parties was extended through September 30,
2003. In addition, the Amendments created a ``portability'' option for
H-1B nonimmigrants, by authorizing their change of employers (from one
H-1B employer to another) ``upon the filing by the prospective employer
of a new petition on behalf of such nonimmigrant'' (i.e., eliminating
the need to await the INS adjudication of the petition). Further, the
Amendments authorized the extension of H-1B status for nonimmigrants in
cases of delayed INS adjudications of petitions for employment-based
immigration or applications for adjustment of status for permanent
residence; the extensions of H-1B status are to be made by the INS in
one-year increments. The Amendments doubled the ACWIA-created petition
fee (from $500 to $1,000) and extended the effective period of the fee
provision to October 1, 2003. The Amendments broadened the ACWIA's
exemption of certain employers from payment of the filing fee (to
include nonprofit entities engaging in established curriculum-related
clinical training of students registered at such institutions). In
addition, the Amendments made some changes in the ACWIA allocations of
fee monies for various training programs, increased the ACWIA
allocation of fee monies to the INS for processing of LCAs, and reduced
the ACWIA allocation of fee monies to the Department for processing and
enforcement of LCAs (i.e., reduced from 6 percent to 5 percent, to be
divided equally between processing and enforcement). Finally, the
Amendments directed that an amended H-1B petition was not required to
be filed by an employer that was involved in a corporate restructuring,
where the nonimmigrant's terms and conditions of employment remained
the same.
The Department notes that the ACWIA was the product of extensive
negotiations between the Administration and the House and the Senate.
See 144 Cong. Rec. H8584 (Sept. 24, 1998); 144. Cong. Rec. S10877
(Sept. 24, 1998). Earlier in the year both the House and the Senate had
issued very different bills to address the H-1B program (see S. Rep.
No. 105-186, 105th Cong., 2d Sess. (1998); H.R. Rep. No. 105-657, 105th
Cong., 2d Sess. (1998)). The resulting legislation was a compromise,
and there was no conference committee report or joint statement by the
negotiators that would provide clear legislative history as to its
intent. Although Senator Abraham and Congressman Lamar Smith, as well
as other individual Congressman, made remarks in the Congressional
Record, their views as to the meaning and effect of the legislation are
dramatically different.
The Department further notes that the October 2000 Amendments were
also the product of extensive negotiations, but that there is very
little legislative history concerning the limited
[[Page 80119]]
provisions that were actually enacted by Congress.
Keeping in mind the difficulty with construing legislation under
these circumstances, the Department has--in the Preamble of this
Interim Final Rule--cited to the legislative history of ACWIA in both
the House and the Senate, and to the extensive remarks of both Senator
Abraham and Congressman Smith.
B. Summary of Comments on the January 5, 1999 NPRM
To obtain public input to assist in the development of interim
final regulations, the Department published a Notice of Proposed
Rulemaking (NPRM) and invited public comment in the Federal Register on
January 5, 1999. The NPRM also stated that the Department was re-
publishing for notice and further comment certain provisions of the
Final Rule promulgated in December 1994. These provisions had been
proposed for comment on October 31, 1995, during the pendency of the
litigation in National Association of Manufacturers v. Reich, 1996 WL
420868 (D.D.C. 1996) (NAM), which resulted in an injunction against the
Department's enforcement of some of the provisions on Administrative
Procedure Act (APA) procedural grounds. In addition, the Department
sought comment on a number of interpretive issues arising under the
existing regulations, set forth in proposed Appendix B. The thirty-day
comment period set forth in the January 5, 1999 NPRM was extended until
February 19, 1999.
The Department has, in this Interim Final Rule, carefully
considered comments received in response to the October 31, 1995
Proposed Rule in conjunction with the comments received in response to
the January 5, 1999 NPRM. The 1995 Proposed Rule elicited comments from
13 commenters, including one from a trade association, one from an
association representing immigration attorneys, one from an association
representing firms which provide international personnel to American
businesses, five from information technology companies, one from an
accounting and auditing firm, two from universities and two from law
firms. The proposals which then elicited the greatest number of
comments concerned the actual wage system (Appendix A), workplace
notice, the 90-day short-term placement option for H-1B workers who
move to worksite(s) not covered by LCA(s), and the use of the
Government per diem schedule for travel expenses for those workers. All
but two of these commenters objected to the Department's proposal that
the actual wage be based on a system utilizing objective criteria.
Seven of the commenters objected to the Department's proposals on the
posting of notices at worksites not controlled by the employer, while
eight of the commenters objected to the Department's proposals with
regard to the 90-day option. Five of the commenters objected to the use
of the Government per diem schedule for reimbursement of travel
expenses under this option.
The Department received 92 comments in response to the January 5,
1999 NPRM, including comments which were received late but which were
included in the rulemaking record and fully considered. The commenters
included individuals, a union, employee associations, lawyers or law
firms, businesses, trade and business associations, educational and
research facilities and associations, U.S. Government agencies, and
Members of Congress (one comment from two Senators and one comment
signed by 23 Members of Congress (hereafter referred to as
``Congressional commenters'')).
The proposals eliciting the greatest numbers of comments were those
regarding non-productive time (or ``benching''), the information
required on the LCA regarding the employer's status as H-1B-dependent,
recruitment, displacement, and the posting of notices. Individual
commenters were critical of the H-1B program generally, describing it
as particularly detrimental to the job security of older Americans, and
sought more guidance from the Department with regard to procedures
which American workers may follow to prove displacement. These
commenters also urged the Department to strictly enforce the ACWIA ``no
benching'' provisions; include a requirement that all employers check
the H-1B dependency box on Form ETA 9035, with the imposition of heavy
fines for noncompliance; and require the physical posting of all
notices at the place of employment or worksite.
The union and employee association commenters generally endorsed
the Department's proposed regulations. Educational and research
facilities primarily addressed and supported the Department's proposals
regarding determination of prevailing wages for employees of those
institutions. These commenters also urged the Department and the INS to
be consistent in their application of the definitions contained in the
regulatory provisions.
Two associations, one representing the interests of immigration
lawyers and the other representing the interests of firms which provide
international personnel to American businesses, commented on virtually
every proposal made by the Department in the NPRM. Lawyers and law
firms particularly addressed the proposal that all fees and costs
connected with the filing of the LCA and H-1B petition, including
attorney and INS fees, are to be borne by the employer. The
Department's proposal addressing the timing of the H-1B dependency
determination also drew a strong response from commenters representing
business interests. Senator Abraham, one of the ACWIA's Congressional
sponsors, submitted his October 21, 1998 Congressional Record remarks
to be included in the rulemaking record. Senator Abraham, along with
Senator Bob Graham, further commented on a number of NPRM provisions
they believed to be inconsistent with Congressional intent. The
Department also received a letter signed by 23 Congressmen and
Senators, including Senators Abraham and Graham. These commenters
expressed concerns on a number of provisions, including proposed
paperwork requirements, the requirement that the actual wage be based
on an objective system, and the 90-day short-term placement option.
III. General Issues Applicable to the Rule
In the review of the comments and the development of this rule, the
Department realized that there are a number of general issues which
affect the entire rule. The following discussion addresses these
issues.
A. The Administrative Procedure Act
On January 5, 1999, the Department of Labor published a Notice of
Proposed Rulemaking (NPRM) in the Federal Register (64 FR 628). The
Department published the NPRM to obtain public comment and assistance
in the development of regulations to implement changes made to the INA
by the ACWIA, and to provide an additional opportunity for comment on
certain provisions which were previously published for comment as a
Proposed Rule in 1995 (60 FR 55339). In addition, the Department sought
comments on various interpretations of the existing regulations,
published as proposed Appendix B.
The Department's NPRM set forth specific regulatory language for
comment on some, but not all, of the issues arising from the provisions
of the ACWIA. For those issues with no specific regulatory language,
the Department identified concerns, and set out its proposed approach
to addressing
[[Page 80120]]
them or described alternative approaches. The Department sought comment
on all of these issues and proposals.
The Department was mindful of Congress' intent that the ACWIA
implementing regulations be promulgated in a ``timely manner;'' the
legislation allowed a public comment period of ``not less than 30
days.'' Accordingly, the Department set a 30-day comment period, to
close on February 4, 1999. Upon petition by the American Council on
International Personnel (ACIP), the Department extended the comment
period another 15 days, until February 19, 1999. After consideration of
the comments received, the Department now issues this Interim Final
Rule and invites further comment on the regulatory provisions set forth
in Part IV.A through N of this preamble and the accompanying regulatory
text. After reviewing any comments received, the Department will issue
a Final Rule.
The Department received 13 comments on its regulatory process.
The comments focused primarily on the length of the comment period
and the NPRM's lack of regulatory text on various issues. Nine
commenters generally objected to the length of the comment period in
combination with the lack of regulatory text, variously contending that
the requirements of the Administrative Procedure Act (APA) were
violated in that the bulk of the proposals together with the lack of
regulatory text, definitions, and clear explanations prohibited
meaningful comment even within the extended period allowed. The
American Immigration Lawyers Association (AILA) recommended that the
Department withdraw the NPRM and issue an Advance Notice of Proposed
Rulemaking (ANPR). ACIP and Senators Abraham and Graham suggested that
the Department publish a proposed rule with request for comment prior
to implementing an interim final or final rule. ACIP also expressed
concern about the inclusion of the outstanding issues in the 1995 NPRM
in the proposed rule. In the alternative, ACIP and the American Council
on Education (ACE) requested the Department to defer enforcement of the
interim final rule during an employer education period of at least 60
days following its promulgation.
The Department has concluded that the delay inherent in the
publication of an ANPRM or a new NPRM with full regulatory text would
not be warranted. The new attestation requirements for H-1B-dependent
employers and willful violators created by the ACWIA do not take effect
until these regulations are promulgated and will terminate on October
1, 2003 (with the extended ``sunset'' date specified by the October
2000 Amendments). Congress specifically allowed a comment period of 30
days. The Department obliged commenters by extending this period an
additional 15 days. The analysis of the comments and the preparation of
this Interim Final Rule have been a complex and time-consuming process.
The Department is of the view that there should be no further delay of
key ACWIA provisions. The Department is now providing an additional
opportunity for comment on the provisions of the Interim Final Rule.
Also, the Department seeks comments on additional proposals presented
for the first time; these proposals are not included in the Interim
Final Rule but are presented for comment for possible inclusion in the
Final Rule.
The Department is of the view that the procedure followed on this
Rule is in full compliance with the notice and comment provisions of
the APA. The APA requires that an agency include in its notice of
proposed rulemaking ``either the terms or substance of the proposed
rule or a description of the subjects and issues involved.'' 5 U.S.C.
553(b)(3); see Kooritzky v. Reich, 17 F.3d 1509, 1513 (D.C. Cir. 1994).
Furthermore, the agency must give ``interested persons an opportunity
to participate in the rulemaking through submission of written data,
views, or arguments.'' 5 U.S.C. 553(c). Thus, under the plain language
of the APA, the absence of complete regulatory text in the NPRM does
not compromise the Department's compliance with the notice and comment
requirements of the APA.
The lengthy and detailed preamble to the NPRM, setting forth the
Department's proposals and concerns on each of the issues, struck a
balance between the need to promulgate regulations expeditiously
(created by the ACWIA provision that its new attestation requirements
would not take effect until regulations are issued and will terminate
on October 1, 2001 (now extended until October 1, 2003), as well as the
need to give regulatory guidance with regard to those ACWIA provisions
which took effect immediately), and the opportunity to provide
meaningful public comments. Certainly the public has a right to have a
sufficient description of the subjects and issues involved to offer
meaningful comment. The Department believes that it has fully
accommodated this need with its detailed discussion in the NPRM
preamble. Furthermore, in addition to describing the provisions it
proposed to promulgate where regulatory text was not included in the
NPRM, the Department discussed and sought comments on numerous
additional alternatives it was considering, in an attempt to ensure
that there would be no surprises to the public if, after a review of
the comments, it determined that an alternative was appropriate for the
Interim Final Rule. The NPRM preamble is sufficiently detailed to
``inform the reader, who is not an expert in the subject area, of the
basis and purpose for the * * * proposal[s].'' Federal Register Act, 44
U.S.C. 1501-1511 and regulations thereunder, 1 CFR 1812(a).
The Department has carefully considered the request for a delay in
enforcement for 60 days after the effective date of the regulations.
The Department notes that the new law was extensively negotiated with
stakeholders for nearly a year before it was enacted, that stakeholders
have been aware of the Department's proposed approach to the issues for
more than a year, that a number of the provisions will be in effect for
only a limited period of time, and that several provisions that are the
subject of this rulemaking relate to applications of the law that have
been in effect for nearly a decade and have been addressed in prior
rulemaking. Furthermore, the Department plans to undertake extensive
education efforts, as discussed below. The Department has therefore
concluded that it is inappropriate to administratively declare a period
in which civil money penalties and debarment would not be imposed.
However, we would point out that in all cases the Department's
enforcement and the penalties imposed take into consideration the full
circumstances of any violations found, within the constraints of the
statutory requirements. See INA, section 212(n)(2)(C), 8 U.S.C.
1182(n)(2)(C), and Sec. 655.810 of this Rule. Furthermore, with regard
to the recordkeeping requirements in particular, as discussed in IV.M.5
below, the Department will issue CMP assessments for violations only
where it finds that the violation impedes the ability of the
Administrator to determine whether a violation of the H-1B requirements
has occurred, or the ability of members of the public to have
information needed to file a complaint or information regarding alleged
violations of the Act.
Finally, the Department notes that the changes to the method of
making prevailing wage determinations for academic institutions and
related nonprofit entities, nonprofit research organizations, and
Governmental research organizations, set forth at
[[Page 80121]]
Sec. Sec. 655.731(a)(2) and 656.40, are effective immediately and apply
retroactively to all LCAs filed on or after October 21, 1998, as well
as to all LCAs filed earlier to the extent that the prevailing wage
determination was subject to an administrative or judicial
determination that was not final as of October 21, 1998. Pursuant to 5
U.S.C. 553(d), the Department finds good cause to make these provisions
effective immediately in light of the statutory provisions at Section
415(b) of the ACWIA, expressly making the changes in the prevailing
wage determinations apply retroactively.
B. Dissemination of Information to the Public
A significant concern expressed by a large number of commenters is
the need to ensure that both U.S. and H-1B workers, as well as
employers, are well-informed about their rights and obligations under
the H-1B program in general, and the new provisions of the ACWIA in
particular. The Department appreciates the importance of such education
and intends to undertake active efforts to educate the public about the
H-1B program. Specifically, the Department intends to prepare and make
available pamphlets, fact sheets and a small business compliance guide
in both written and electronic formats. These resources will explain
the obligations of employers, the rights of H-1B and U.S. workers, and
the roles of the Department of Labor and the other government agencies
involved in the program (the INS, the Departments of Justice and
State). The resources will also reference materials available from
these agencies that bear on the employment of H-1B nonimmigrants. The
Department also plans to work with the INS and the State Department to
develop a pamphlet to be provided to visa applicants and posted
electronically that will explain rights and responsibilities under the
H-1B program.
The electronic compliance material will be available through the
Department's web page at http://www.dol.gov, which will provide
electronic links to other sources of information that bear on the
employment of nonimmigrants. From the home page, the material will be
accessible either by going to DOL Agencies: Employment Standards
Administration, Wage and Hour Division (WHD), then to Laws and
Regulations, and then to Compliance Assistance Information: Wage and
Hour Division, or by going directly to
http://www2.dol.gov/dol/esa/public/regs/compliance/whd/whdcomp.htm.
The Department also intends to add an ``H-1B Advisor'' to its
Internet ``Employment Laws Assistance for Workers and Small
Businesses'' (ELAWS) system (located at the bottom of the home page).
The H-1B ELAWS Advisor will be an interactive program that helps
employers, employees, and other interested parties determine their H-1B
rights and responsibilities, 24 hours-a-day, 7 days-a-week. The Advisor
imitates the interaction an individual may have with a DOL expert--it
asks questions, provides information, and directs the user to the
appropriate resolution based on the responses given.
This information may also be obtained from the Wage and Hour
Division's national and local offices. Mail requests should be
addressed to the Wage and Hour Division Immigration Team, Room S-3510,
200 Constitution Avenue, NW., Washington, DC 20210. Telephone requests
should be made of the Wage and Hour Division Immigration Team at (202)
693-0071.
The addresses and phone numbers for Wage-Hour's district offices
may be found on the Department's website at http://www.dol.gov/dol/esa/
public/contacts/whd/america2.htm, and in the Federal government section
of local telephone directories. Additionally, the Interim Final Rule
refers to three electronic resources: America's Job Bank, O*NET, and
the Occupational Outlook Handbook . The job bank may be accessed at
http://www.ajb.dni.us. The O*NET may be downloaded for free or ordered
through the Government Printing Office, which can be reached through
the Department's weblink at http://www.doleta.gov/programs/onet. The
Occupational Outlook Handbook, published by the Department/s Bureau of
Labor Statistics, may be found at http://stats.bls.gov/ocohome.htm.
Finally, the Department will continue its practice of making
available speakers for groups affected by the Department's
administration of the H-1B program. The Department will also furnish
information and copies of its resource materials to both employee and
industry organizations to facilitate distribution to their member
organizations.
IV. Discussion of Provisions of Interim Final Rule and Comments
Issues arising under the Proposed Rule, including the Department's
response to comments thereon are discussed below. For the convenience
of the public, the numbering in this part of the Preamble remains the
same as in the Proposed Rule unless otherwise indicated.
The Department notes that, in a few instances, it is requesting
comments in the Interim Final Rule on a regulation or an approach to a
regulation on which it has not previously sought comment. These
provisions are not included in the Interim Final Rule, but rather will
be considered when the Department promulgates the Final Rule after
review of any comments. These issues are highlighted in the preamble.
The Department also notes that the new regulatory text published
here generally includes all of the surrounding regulatory text in order
to provide context to the reader. However, the only provisions which
are open for comment are the issues discussed in the Preamble.
Further, the Department notes that the Interim Final Rule includes
changes in the regulations to implement the October 2000 Amendments.
These matters are discussed in the appropriate sections of the
Preamble, and comments on the provisions are invited.
The Department has been working with the INS to coordinate our
respective rulemaking efforts under the Act and to achieve consistency
in the implementation of the ACWIA provisions and the October 2000
Amendments.
A. What Constitutes an ``Employer'' for Purposes of the ACWIA
Provisions? (Sec. 655.736(b) and Sec. 655.730(e))
Section 212(n)(3)(C)(ii) of the INA as amended by the ACWIA directs
that ``any group treated as a single employer under subsection (b),
(c), (m), or (o) of section 414 of the Internal Revenue Code of 1986
shall be treated as a single employer'' for purposes of defining an
``H-1B--dependent employer.'' These provisions, found at 26 U.S.C.
414(b), (c), (m) and (o), concern the circumstances in which ostensibly
separate businesses are treated by the Internal Revenue Code (IRC) as a
single employer for purposes of pension and other deferred compensation
plans.
Section 414(b), (c), and (m) of the IRC, respectively, define
``controlled group of corporations,'' ``partnerships, proprietorships,
etc., which are under common control,'' and ``affiliated service
group.'' Section 414(o) provides that the Department of the Treasury
may issue regulations addressing other business arrangements, including
employee leasing, in which a group of employees are treated as employed
by the same employer. However, the Department of the Treasury has not
issued any regulations under this provision; therefore Section 414(o)
will not be taken into account in determining who is treated as a
single
[[Page 80122]]
employer for ACWIA purposes unless regulations are issued by the
Department of the Treasury during the period the H-1B-dependency
provisions of the ACWIA are effective.
Section 414(b) of the IRC provides that all employees within a
``controlled group of corporations'' (within the meaning of section
1563(a) of the Code, determined without regard to sections 1563(a)(4)
and (e)(3)(C)) are treated as employed by a single employer. Under
section 1563(a) and the related Treasury regulations, a controlled
group of corporations is a parent-subsidiary-controlled group, a
brother-sister-controlled group, or a combined group. 26 U.S.C.
1563(a); 26 CFR 1.414(b)-1(a). A parent-subsidiary is, generally, one
or more chains of corporations connected through stock ownership with a
common parent corporation where at least 80 percent of the stock (by
voting rights or value) of each subsidiary corporation is owned by one
or more of the other corporations (either another subsidiary or the
parent corporation), and the common parent corporation owns at least 80
percent of the stock of at least one subsidiary. In general terms, a
brother-sister controlled group is a group of corporations in which
five or fewer persons (individuals, estates or trusts) own 80 percent
or more of the stock of the corporations and certain other ownership
criteria are satisfied. A combined group is a group of three or more
corporations, each of which is a member of a parent-subsidiary
controlled group or a brother-sister controlled group and one of which
is a common parent corporation of a parent-subsidiary controlled group
and is also included in a brother-sister controlled group.
Section 414(c) of the IRC and the related Treasury regulations
state that all employees of trades or businesses (whether or not
incorporated) that are under common control are treated as employed by
a single employer. 26 U.S.C. 414(c); 26 CFR 1.414(c)-2. Trades or
businesses include sole proprietorships, partnerships, estates, trusts
and corporations. Trades or businesses are under common control if they
are included in a parent-subsidiary group of trades or businesses, a
brother-sister group of trades or businesses, or a combined group of
trades or businesses. Generally, the standards for determining whether
trades or businesses are under common control are similar to the
standards that apply to controlled groups of corporations. However, for
these purposes, pursuant to 26 CFR 1.414(c)-2(b)(2), ownership of at
least an 80 percent interest in the profits or capital interest of a
partnership or the actuarial value of a trust or estate constitutes a
controlling interest in a trade or business.
Section 414(m) of the IRC provides that all employees of the
members of an ``affiliated service group'' are treated as employed by a
single employer. 26 U.S.C. 414(m). In general terms, an affiliated
service group is a group consisting of a service organization (the
``first organization''), such as a health care organization, a law firm
or an accounting firm, and one or more of the following: (a) A second
service organization that is a shareholder or partner in the first
organization and that regularly performs services for the first
organization (or is regularly associated with the first organization in
performing services for third persons), or (b) any other organization
if (i) a significant portion of the second organization's business is
the performance of services for the first organization (or an
organization described in clause (a) of this sentence or for both) of a
type historically performed in such service field by employees, and
(ii) ten percent or more of the interest in the second organization is
held by persons who are highly compensated employees of the first
organization (or an organization described in clause (a) of this
sentence). IRS has issued proposed regulations at 52 FR 32502 (Aug. 27,
1987), which may be consulted to ascertain IRS's interpretation of
these provisions.
In the event of an H-1B investigation involving the issue of what
entity or entities constitute a single employer for purposes of the
ACWIA dependency provisions, an employer will be required to provide
documentation necessary to enable the Department to apply these IRC
provisions. The Department emphasizes that if an employer wishes to use
the definitions in section 414(b), (c) or (m) of the IRC, it will be
the employer's burden to establish that it meets the requirements of
the IRC and the regulations thereunder.
In the NPRM, the Department stated that it was considering the
effect and implications of adopting this single definition of
``employer,'' as set forth in these IRC sections for all purposes under
this program, to the extent it may serve to accommodate business
activities and facilitate administration and enforcement of the H-1B
program. Specifically, the Department sought comment on the
consequences of a regulation which would provide that where an
``employer'' files an LCA and thereafter undergoes some change of
structure (e.g., buy-out by a successor corporation; corporate
restructuring or ``spin-off'' of subsidiaries), the employer for LCA
purposes would be the entity which satisfies the IRC definition of a
single employer. The Department sought comment on whether and how it
may be able to modify its current position that a new LCA must be filed
when the employer's corporate identity changes and a new Employer
Identification Number (EIN) is obtained. Thus, the Department raised
the possibility an employer which changes its corporate identity
through acquisition or spin-off would be allowed to forego the filing
of new LCAs if it documented this change in its public access file,
provided that it satisfies the IRC definition of a single employer and
that the documentation includes an express acknowledgment of all LCA
obligations on the part of the ``new'' entity. The Department also
sought comments on whether another approach should be used to address
corporate restructuring.
The Department received 17 comments on its proposals with regard to
defining an employer for purposes of the H-1B program.
ACIP, AILA and the Information Technology Association of America
(ITAA) strongly opposed using the relatively broad IRC definition of
``single employer'' for any purpose other than determining whether an
employer is H-1B-dependent as provided in the ACWIA. These
organizations generally asserted that there was no basis to infer that
Congress intended to expand this extraordinarily broad definition to
the entire H-1B law and that expanded use of this definition would not
facilitate corporate concerns in administering an employer's
obligations in the H-1B program.
AILA further asserted that the IRC ``single employer'' concept is
designed to prevent the avoidance of employee benefit requirements
through the use of separate organizations, employee leasing, or other
arrangements. Therefore, AILA observed, to prevent discrimination in
employee benefits in favor of highly compensated employees, the
``single employer'' encompasses all entities that are related by
financial interest (ownership or transactional). In contrast, AILA
averred, the H-1B program seeks to protect U.S. workers and, to promote
this purpose, an ``employer,'' at a minimum, should have an employment
relationship with respect to covered workers, as defined by the ability
to hire, fire, pay and other indications of control. Thus, AILA
concludes, to depart from the longstanding definition of ``employer''
in the H-1B program, without explicit statutory authority, would be
improper.
Nine commenters (AILA, Cowan & Miller, ITAA, Rubin & Dornbaum, the
[[Page 80123]]
Small Business Survival Committee (SBSC), the U.S. Chamber of Commerce,
White Consolidated Industries, Network Appliance, and the Fred
Hutchinson Cancer Research Center (FHCRC)) stated their view that
extending the use of the definition of ``single employer'' would serve
no useful purpose in facilitating corporate restructuring and efficient
H-1B administration. In fact, they asserted, broader application would
have the opposite effect by requiring multi-entity corporations to
coordinate many functions among the various entities, including
benefits, wages, movement of H-1B employees among the entities, lay-
offs, and other purposes, every time an H-1B worker is hired, promoted,
or moved. The Chamber of Commerce, however, suggested that if a single
employer analysis is required outside the H-1B-dependent employer
context, the Department should adopt the four-factor test developed by
the National Labor Relations Board and approved by the Supreme Court in
single employer labor law cases, rather than the analyses required by
IRC Section 414.
ITAA sought clarification on the calculation of H-1B dependency
given the ACWIA's definition of ``employer.'' For instance, ITAA noted,
a controlled group could consist of parent A and subsidiaries B, C and
D. If subsidiary B were to file an LCA, would the H-1B dependency
calculation be made using all employees of A, B, C, and D, or only the
employees of B? The Department believes that, under the IRC definition
of ``controlled group,'' all of the employees of A, B, C, and D would
be included in the dependency calculation if any of the subsidiaries or
the parent company filed the LCA.
Many employers and their representatives supported the Department's
proposal to modify its current requirement for filing of a new LCA upon
a change in the EIN. AILA, ACIP, Intel Corporation (Intel), ITAA and
the Society for Human Resource Management (SHRM) urged a rule that a
new or amended LCA and H-1B petition not be required upon an
acquisition, merger, spin-off, transfer or other corporate
reorganization regardless of whether there is a change in the EIN. ACIP
further urged that no new or amended LCA and H-1B petition be required
whether or not the new entity meets the IRC definition of ``single
employer.'' Essentially, these groups endorsed a position that they
stated is similar to the I-9 provisions of the INA, 8 CFR
274a.2(b)(1)(viii)(A)(6) & (7), whereby the new employer has the option
of assuming the immigration-related liabilities of the old employer
regardless of whether the employer assumes any other liabilities in the
transaction. Similarly, AILA suggested application of established
successor-in-interest rules. Two other commenters (Kirkpatrick &
Lockhart, Jose E. Latour and Associates (Latour)) also urged
consistency between INS and DOL rules.
ACIP elaborated on this issue, suggesting that continued corporate
compliance responsibility in the event of restructuring could be
accomplished via a simple memorandum placed in the public access file,
rather than a new LCA, except where there is a material change in the
worker's job duties or the worker is relocated to a site not covered by
an LCA, or the new entity hires a new H-1B worker. ACIP stated that an
employer should not be able to use positions on the previous entity's
LCA to hire a new H-1B nonimmigrant.
The AFL-CIO opposed the Department's proposed modification to the
current LCA filing requirements because, in its view, it could create
the substantial risk that employers, through acquisition or spin-off,
could in fact create an H-1B-dependent workforce and yet avoid the
concomitant recruitment and non-displacement obligations of H-1B-
dependent employers. The AFL-CIO pointed out that the governing IRS
regulations use the ``common control'' test to determine whether a
parent-subsidiary group of corporations or brother-sister trades or
business satisfy the Code's definition of single employer. The AFL-CIO
suggested that under the Department's proposal, a non-H-1B-dependent
corporation that has filed an LCA, but has yet to hire any H-1B workers
under that application, could create an H-1B-dependent subsidiary
corporation that meets the ``common control'' test, but avoid filing a
new LCA. The parent could then acquire the requested or remaining
number of H-1B workers on its outstanding LCA, and place them in the
subsidiary workforce without applying any of the new attestation
requirements for H-1B-dependent employers.
The Department believes that the AFL-CIO's legitimate concerns are
related to the statutory definition of ``dependent employer'' and not
to the proposal to eliminate the requirement to file a new LCA when an
employer, as defined by the ACWIA, undergoes a change in corporate
structure. Thus, given the scenario presented by the AFL-CIO, under the
ACWIA-imposed definition of ``employer'' the parent corporation and its
subsidiaries (if they meet the ``common control test'') are a ``single
employer'' whose entire, combined work force is assessed to determine
dependency. Under the IRC definition, the H-1B employees of the
``subsidiary'' are considered part of the larger work force of the
``parent'' corporation, which then may or may not be a dependent
employer required to comply with the ACWIA attestation requirements.
Based on a careful review of all the comments submitted on this
issue, the Department agrees that the use of the IRC definition of
``employer'' should be limited to determining H-1B-dependent employer
status, as set forth in section 212(n)(3)(C)(ii). The IRC rules do not
appear useful to facilitate the resolution of issues involving changes
in corporate status.
However, as urged by the commenters, the Department has concluded
that it is appropriate to change its current requirement that a new LCA
(and, as a result, a new H-1B petition) be filed when corporate
identity changes result in a change in the employer's EIN number. In
the past, the Department has taken the position that a new LCA must be
filed to assure continued compliance responsibility by the ``new''
employer--a corporate entity other than the one that filed the LCA in
the first place. The Department understands, however, that when a
corporate identity changes, it is common for the H-1B worker(s) to
continue to perform the same job duties in the same location for the
new, restructured entity, and for the new entity to assume the
obligations of the previous entity. In such circumstances, where the
obligations are assumed and there is no real change in the H-1B
worker's job and his/her ``new'' employer's responsibilities, filing a
new LCA and H-1B petition solely because of the change in corporate
structure would be an unnecessary and burdensome exercise for the
employer, the State Employment Service Agency (SESA) responsible for a
prevailing wage determination, the Department in reviewing the LCA, and
the INS in adjudicating the H-1B petition.
Further support for the Department's position is found in the
October 2000 Amendments, in which Congress specified:
An amended H-1B petition shall not be required where the
petitioning employer is involved in a corporate restructuring,
including but not limited to a merger, acquisition, or
consolidation, where a new corporate entity succeeds to the
interests and obligations of the original petitioning employer and
where the terms and conditions of employment remain the same but for
the identity of the petitioner.
Section 314(c)(10) of the INA, 8 U.S.C. 1184(c)(10), as enacted by
section 401 of
[[Page 80124]]
the Visa Waiver Permanent Program Act. While this new INA provision is
directed to the INA's processing and adjudication of petitions, we
consider it to be instructive as to Congress' intent that a
restructured ``new'' corporate employer be authorized to continue the
employment of existing H-1B nonimmigrants on the same terms and
conditions as the ``original'' employer.
Therefore, the Department's Interim Final Rule, at Sec. 655.730(e),
provides that a new LCA will not be required merely because a corporate
reorganization results in a change in corporate identity, regardless of
whether there is a change in the EIN, provided that the new employing
entity, prior to the continued employment of the H-1B nonimmigrant,
agrees to assume the predecessor entity's obligations and liabilities
under the LCA. The agreement to comply with the LCA for the future and
assumption of liability for any past violations must be documented with
a memorandum in the public access file, specifically identifying the
affected LCAs and the EIN of the new employing entity, and describing
the new employing entity's actual wage system (see IV.O.3, below). In
addition, the employer will be required to retain in its records a list
of the name and job title of each H-1B worker transferred to the new
employer. It should be noted that the employer's status as a new
employing entity which is not required to file a new LCA is not
determined by traditional principles of successorship (although we
anticipate that the new entity will commonly be a successor employer),
but rather by the new entity's agreement to undertake the obligations
and liabilities of the predecessor under the LCA. This position is
consistent with the assumption of liability under the INA, 8 CFR
274a.2(b)(1)(viii)(A)(6) and (7), whereby a new employer may either
assume liability for the old I-9 forms or prepare new ones, and
provides the employer with flexibility to deal with the circumstances
surrounding the particular corporate reorganization. These principles
apply whether the reorganization is as a result of an acquisition,
merger, sale of stock or assets (``spin-off''), or similar change in
corporate structure. The Department cautions that an employer which
undergoes a change in structure and EIN, but chooses not to insert the
required memorandum in the public access file, is required to file new
LCAs.
A new LCA (and H-1B petition) will be required if the H-1B worker
changes jobs or where the new entity/employer seeks to hire a new H-1B
worker or to extend an existing H-1B petition. Thus the ``new''
employer may not utilize H-1B ``slots'' left over from the previous
entity's LCA for a worker hired after a reorganization or
restructuring. The Department also understands that where there is a
material change in duties (whether or not there is a change in
occupation), INS may require the filing of a new H-1B petition.
The Department emphasizes that a change in a corporation's H-1B-
dependency status as a result of a change in the corporate structure
would have no effect on the employer's obligations with respect to its
current H-1B workers. In other words, a corporation which was H-1B-
dependent, and as a result of a change in structure becomes non-
dependent, would be required to continue to comply with the secondary
displacement attestation unless it chooses to file a new LCA and H-1B
petition(s) for any H-1B worker(s) employed pursuant to the
``dependent'' LCA. Similarly, a non-dependent corporation which becomes
dependent as a result of corporate restructuring would not be required
to comply with the H-1B-dependent employer obligations for H-1B workers
employed pursuant to a pre-existing LCA, provided the employer has
assumed the obligations and liabilities of that LCA. Furthermore, as
discussed, a new LCA (attesting to the newly acquired H-1B-dependent or
non-dependent status) would have to be filed for all future H-1B
petitions and extensions of status.
B. What Is an H-1B Dependent Employer or a Willful Violator?
(Sec. 655.736(a) and (f))
The ACWIA requires non-displacement and recruitment attestations by
``H-1B dependent employers'' and by employers found, after the date of
ACWIA's enactment, to have committed a willful violation or a
misrepresentation of a material fact on an LCA during the five-year
period preceding the filing of an LCA.
The ACWIA definition of ``H-1B-dependent employer'' provides a
formula for comparing the number of H-1B nonimmigrants employed to the
total number of full-time equivalent employees (FTEs) in the employer's
workforce. The Act provides that an H-1B-dependent employer is one that
employs in the United States:
25 or fewer FTEs, and more than seven H-1B nonimmigrants;
or
At least 26 but not more than 50 FTEs, and more than 12 H-
1B nonimmigrants; or,
At least 51 FTEs, and H-1B nonimmigrants in a number that
is equal to at least 15 percent of the number of such FTEs.
Thus, the H-1B-dependency formula for all employers uses two
dissimilar numbers: the number of |
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