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< Back to current issue of Immigration Daily < Back to current issue of Immigrant's Weekly

< 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 80159-80208]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20de00-21]                         
 
[[pp. 80159-80208]] 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

[[Continued from page 80158]]

[[Page 80159]]

lists of all the criteria which the Department would find meet the 
statutory test in the event of an investigation.
    The Department also wishes to specifically caution against 
recruitment practices and selection criteria or practices which have 
the effect of discriminating against U.S. workers or other groups of 
workers, as the comment by Miano recognizes. In this connection, 
workers are advised that the three federal agencies ordinarily 
recognized as responsible for enforcement of anti-discrimination laws 
are the Equal Employment Opportunity Commission (EEOC), the Department 
of Justice's Office of Special Counsel (OSC), and the Department of 
Labor's Office of Federal Contract Compliance Programs (OFCCP). The 
EEOC administers several statutes prohibiting discrimination in 
employment based on factors such as age, race, color, religion, sex, or 
national origin. OFCCP administers several statutes and an executive 
order prohibiting discrimination by Federal government contractors and 
subcontractors based on factors such as race, color, religion, sex, 
national origin, disability, and veteran status. EEOC and OFCCP offices 
are located throughout the United States and can be located in the blue 
pages of the telephone directory. Complaints can be made to the EEOC by 
telephone at: (202) 275-7377; see also their website at www.eeoc.gov. 
Complaints can be made to OFCCP by telephone at: (202) 693-0102, -0106, 
or by contacting the local offices, which can be located at its 
website, www.dol.gov/dol/esa/public/contacts/ofccp/ofcpkeyp.htm.
    OSC administers several statutes concerning employment 
discrimination based on national origin, citizenship status, and 
immigration document abuse. OSC can be contacted at P.O. Box 27728, 
Washington, DC 20038-7728; telephone: 1-800-255-7688 (workers) or 1-
800-255-8155 (employers); and e-mail address: osc.crt@usdoj.gov; see 
also OSC's website at www.USDOJ.gov/crt/osc.
    TCS described its own hiring practices, which it contended should 
be allowed as legitimate under the Department's regulations. 
Specifically, TCS recruits its employees from university campuses 
(apparently in India) and places them in a 12-to 18-month training 
program in India. At the same time requiring a three-year commitment 
from its employees, whom it sends on assignments in India and 
throughout the world. TCS suggested that the Department's proposal 
could be read to require TCS instead to recruit U.S. workers for 
assignments in the United States without regard to the employment terms 
and conditions it applies to its other employees--a requirement which 
it suggested could potentially subject it to anti-discrimination 
claims. TCS argued that the Department's proposal incorrectly focused 
on the recruitment/employment for the particular job listed on an LCA 
rather than the dependent employer's hiring criteria for a position 
with the dependent employer--a position that encompasses duties and 
responsibilities beyond those required for the performance of the 
particular job covered by an LCA. TCS explained that its employees, 
including those it places in H-1B positions, serve as team members of 
consulting groups that will move from job to job in the United States 
and elsewhere. It stated that it hires employees with this enduring 
employment relationship in mind, not for the employee's particular 
assignment to a job in the United States.
    Similar practices are described by Simmons, which asked whether a 
foreign-based employer may give preference to its own (foreign) 
workers, who are familiar with the specific technologies and protocols 
of an ongoing project, and whether it would be required to offer 
permanent as distinguished from temporary positions to employees in the 
U.S., since it otherwise would only temporarily transfer its permanent, 
foreign workers to perform the job in the U.S. Simmons also commented 
that it provides extensive training to its employees in India, and 
asked if it could require that U.S. workers have such skills, or would 
it be required to use the hiring criteria it utilized to hire the 
workers in India. Finally, Simmons asked if it could require U.S. 
workers to have the precise, specialized skills to meet a specific 
customer need.
    In the Department's view, an employer's recruitment obligation 
attaches to the position for which an H-1B worker is sought in the 
United States (the employer is obliged to take, in the words of the 
statute, ``good faith steps to recruit . . . United States workers for 
the job for which the [H-1B worker(s)] is or are sought''). 
Additionally, the employer is required to offer the job to the U.S. 
worker if the worker is at least as qualified as the H-1B worker. 
Accordingly, the focus must be on the particular job(s) in the United 
States which is/are covered by the LCA, not the position an H-1B 
applicant already occupies or will occupy with the dependent employer. 
An employer will fail to meet its recruitment obligation if it utilizes 
recruitment/selection criteria that have the effect of precluding an 
equally or better qualified U.S. worker from being hired for the 
position. The Department also notes that L visas, where the criteria 
are met, may be available as an alternative method to accommodate 
intra-company transfers.
5. What Documentation Would Be Required of Employers? (Sec. 655.739(i))
    Concerning documentation to show that good faith recruitment was 
conducted in accordance with industry-wide standards, the NPRM stated 
that an employer would not need to retain actual copies of 
advertisements, provided it kept a record of the pertinent details. The 
Department proposed that an employer's public access file need only 
contain information summarizing the principal recruitment methods used 
in soliciting potential applicants and the time frame in which such 
recruitment was conducted. The NPRM also requested comments on how 
employers can and should determine industry-wide standards and how to 
make the employer's determination available for public disclosure.
    With regard to documentation concerning pre-selection treatment of 
applicants for employment, the Department proposed in the NPRM that 
employers should retain any documentation they receive or prepare 
concerning the consideration of applications by U.S. workers, such as 
copies of applications and/or related documents, test papers, rating 
forms, records regarding interview and job offers. The Department 
stated its view that the EEOC already requires employers to retain such 
records and therefore this requirement imposes no new obligations on 
employers.
    With regard to the proposed documentation requirement, Senator 
Abraham stated: ``The intent is not to require employers to retain 
extensive documentation in order to be able retroactively to justify 
recruitment and hiring decisions, provided that the employer can give 
an articulable reason for the decisions that it actually made.'' 144 
Cong. Rec. S12751 (Oct. 21, 1998).
    AILA and ACIP cited Senator Abraham's statement in the 
Congressional Record for the principle that the ACWIA did not impose 
any extensive documentation requirements. ACIP, however, stated its 
belief that prudent employers of their own volition may want to retain 
documentation and that it is appropriate for the Department to provide 
guidance on how long employers should retain such documentation.
    The Department disagrees with the view that the ACWIA denies the

[[Page 80160]]

Department the usual regulatory authority to require recordkeeping as a 
means of ensuring compliance with an employer's statutory obligations--
either generally or with specific reference to the recruitment 
obligation. The fact that the H-1B program is primarily complaint-
driven with only attestations of compliance filed initially with the 
Department makes it all the more important that documentation be 
retained so that the Department can determine compliance in the event 
of an investigation. In response to AILA's comment about the length of 
time which documents must be retained, the Department notes that its 
standard record retention requirements are set forth in Sec. 655.760(c) 
of the regulation, which has been clarified as discussed in IV.B.3, 
above.
    With regard to documents concerning recruitment practices, the AFL-
CIO and Miano urged that employers be required to retain copies of all 
job advertisements or other recruiting efforts. AILA asserted that the 
Department's statement that an employer need not keep copies of 
advertisements is an illusory saving because as a practical matter 
saving these documents is the only way to document the information the 
Department proposed to require. AILA recommended that employers only be 
required to keep a summary of their recruitment for the past six 
months, similar to the requirements of the RIR procedures in the 
permanent labor certification program--especially when an employer is 
still recruiting for open positions and it is its practice to hire U.S. 
as well as H-1B workers. However, AILA stated that employers should not 
be required to keep recruitment information in public access files 
because it invites competitor intrusion into an employer's recruitment 
practices.
    The Interim Final Rule, like the proposal, requires employers to 
retain documentation of the recruiting methods used, including the 
places and dates of the recruitment, advertisements, or postings; the 
content of the advertisements and postings; and the compensation terms 
(if not included in the content). The Department continues to believe 
that copies of print advertisements are not necessary since publication 
can be verified if necessary. Rather, the documentation may be in any 
form, such as a copy of an order or response from the publisher, an 
electronic or print record of an Internet notice, or a memorandum to 
the file. Similarly, the documentation of recruitment of positions 
filled by H-1B nonimmigrants need not be segregated from other records 
provided it is available to the Department upon request in the event of 
an investigation.
    In addition, as proposed, the employer will be required to maintain 
a summary of the recruitment methods used and time frames of 
recruitment in its public access file. The Department does not believe 
that information in this summary nature will unduly disclose 
proprietary information since advertisements and attendance at job 
fairs are public in any event.
    ACIP was the only commenter responding to the Department's request 
for comments on how employers should determine industry-wide 
recruitment standards, stating only that it is unaware of any source 
that catalogues standard recruiting practices within an industry. The 
Department repeats its request for further information on this point. 
The Department has determined that employers will not be required to 
maintain evidence of industry practice. However, in the event of an 
investigation, the employer will be required to substantiate its 
assertion as to industry practice through credible evidence, such as 
through trade organization surveys, studies by consultative groups, or 
a statement from a trade organization regarding the industry norm(s). 
The Department will look behind such evidence as it deems appropriate 
in the context of the particular recruitment performed by an employer.
    With regard to documentation concerning pre-selection treatment of 
applicants, AILA disagreed with the Department's characterization of 
EEOC guidelines, stating that EEOC only requires that if documentation 
is created or retained, it must be done consistently. It also stated 
that it is impractical to expect an employer to retain what may be 
thousands of resumes submitted to it at a job fair, especially since 
many resumes do not even relate to positions offered.
    As discussed in detail in IV.D.8, above, in connection with the 
retention of records relating to displacement of U.S. workers, the 
Department disagrees with AILA's characterization of the EEOC 
requirements. The Department continues to believe that most employers 
are already required to preserve copies of the records listed and that 
retention of the documents is necessary to demonstrate fair treatment 
of U.S. applicants. ADEA regulations, for example, require an employer 
to preserve all records it makes, obtains or uses relating to ``[j]ob 
applications, resumes, or any other form of employment inquiry whenever 
submitted to the employer in response to his advertisement or other 
notice of existing or anticipated job openings, including records 
pertaining to the failure or refusal to hire any individual, * * * 
[j]ob orders submitted by the employer to an employment agency or labor 
organization for recruitment of personnel for job openings, * * * [a]ny 
advertisements or notices to the public or to employees relating to job 
openings, promotions, training programs, or opportunities for overtime 
work.'' 29 CFR 1627.3(b)(i).
    The Department emphasizes that it is not requiring employers to 
create any documents regarding treatment of applicants for employment, 
but rather to preserve those documents which are created or received. 
With regard to the comment regarding job fairs, this rule would not 
require employers to retain any resumes which do not relate to the 
positions to be filled by H-1B nonimmigrants. Nor does the Interim 
Final Rule require that any information relating to treatment of 
applications be maintained in the public access file.

F. What Are the Requirements for Posting of Notice? (Combined With 
Section O.5 of the Preamble to the NPRM) (Sec. 655.734(a)(1)(ii)(A) and 
(B))

    Section 212(n)(1)(C) of the INA, 8 U.S.C. 1182(n)(1)(C), requires 
that, at the time of filing the LCA, an employer seeking to hire an H-
1B nonimmigrant shall notify the bargaining representative of its 
employees of the filing or, if there is no bargaining representative, 
post notice of filing in conspicuous locations at the place of 
employment. As amended by the ACWIA, Section 212(n)(1)(C) further 
provides (where there is no bargaining representative) that the notice 
may be accomplished ``by electronic notification to employees in the 
occupational classification for which the H-1B nonimmigrants are 
sought.''
1. What Are the Requirements for Posting of ``Hard Copy'' Notices at 
Worksite(s) Where H-1B Workers Are Placed? (NPRM Section O.5) 
(Sec. 655.734(a)(1)(ii)(A))
    Regulations with respect to this notification requirement were 
published by the Department as a Final Rule on December 20, 1994 (59 FR 
65646, 65647). That Final Rule (set forth in the current Code of 
Federal Regulations) required, among other things, that an employer, 
who sends an H-1B worker to a worksite within the area of intended 
employment listed on the LCA which was not contemplated at the time of 
filing the LCA, post a notice at the worksite on or before the date the 
H-1B nonimmigrant begins work. 20 CFR 655.734(a)(1)(ii)(D). The purpose 
of the

[[Page 80161]]

provision was to enable employers to place H-1B workers at worksites 
where posting had not occurred without filing a new LCA. This provision 
was among those enjoined for lack of notice and comment by the court in 
National Association of Manufacturers v. Reich (NAM), 1996 WL 420868 
(D.D.C. 1996). On October 31, 1995, during the pendency of the NAM 
litigation, the Department republished the regulation for comment (60 
FR 55339).
    In the 1999 NPRM, the Department proposed for comment 
Sec. 655.734(a)(1)(ii)(A) (previously published for notice and comment 
in the October 31, 1995 proposed rule as Sec. 655.734(a)(1)(ii)(C) and 
(D)). The provisions regarding ``hard copy'' notice requirements 
remained essentially unchanged from the 1995 proposed rule. Subclause 
(A)(3) requires employers to post notice at worksites on or within 30 
days before the date the LCA is filed. Subclause (A)(4) requires that 
where the employer places an H-1B nonimmigrant at a worksite which is 
not contemplated at the time of filing the LCA, but is within the area 
of intended employment listed on the LCA, the employer is to post 
notice at the worksite (either by hard copy or electronically) on or 
before the date any H-1B nonimmigrant begins work there. The preamble 
explained that posting is not required if the location is not a 
``worksite,'' as discussed in proposed Appendix B of the NPRM.
    Fourteen commenters responded to the 1995 proposed rule on 
notification. Eight of those commenters (AILA, ACIP, Intel, Microsoft, 
Motorola, NAM, Complete Business Solutions, Inc. (CBSI), and Moon, 
Moss, McGill & Bachelder (Moon)) objected to posting at worksites not 
controlled by the LCA-filing employer. These commenters asserted that 
many employers' customers would not allow posting at their worksites. 
In addition, because the regulations define ``place of employment'' as 
the worksite or physical location at which the H-1B nonimmigrant's work 
is actually performed, some commenters expressed a concern that strict 
application of this definition of place of employment could lead to 
absurd and/or unduly burdensome notice requirements such as posting 
notice at a restaurant when an H-1B nonimmigrant has a business lunch, 
at a courthouse when the nonimmigrant makes a court appearance, or at 
an out-of-town hotel when the nonimmigrant attends a training seminar. 
One commenter (Microsoft), expressed concern about the burden of 
notification and suggested that the notice provision should not apply 
to employers who do not make great use of the H-1B nonimmigrant worker 
visa program.
    The Department received six comments on these provisions in 
response to the 1999 NPRM.
    The AFL-CIO emphasized the importance of giving notice to all 
affected employees, including employees of the secondary employer and 
employees of other staffing firms. The AFL-CIO stated that the purpose 
of the notice is to provide information to affected workers that they 
may have certain rights and that the employer has certain duties 
regarding placement of the H-1B worker which are not diminished because 
the worksite is ``short-term'' or ``transitory.''
    Four employer organizations (ACIP, AILA, ITAA, NACCB) commented on 
the issue of notification (whether hard-copy or electronic) to affected 
workers at third-party worksites. These groups contended that the 
statute requires an employer to notify only its own employees and that 
it is unreasonable to hold a primary employer responsible for notifying 
employees at worksites over which it lacks control. AILA gave as an 
example, workers such as service engineers who travel to a number of 
worksites during the course of a day or a week. AILA stated that if a 
client refuses to post notice, an H-1B worker cannot be sent to the 
site, resulting in a potential loss of business.
    One commenter (Latour) requested that the regulation specify that 
worksite posting requirements do not apply to rehabilitation 
professionals providing home health care.
    The Department has carefully considered the comments submitted in 
response to the 1995 proposed rule and the 1999 NPRM. The Department 
notes first that the statute requires that notice be posted at the 
place of employment. See Section 212(n)(1)(C)(ii). The Department's 
regulations have consistently defined ``place of employment'' as ``the 
worksite or physical location where the work is performed.'' 20 CFR 
655.715 (1992).
    This definition was modified slightly in the 1994 Final Rule 
(currently in effect) to provide ``where the work actually is 
performed.''
    Furthermore, the purposes of notification can only be satisfied by 
notice to all of the affected workers--i.e., all of the workers in the 
occupation in which the H-1B worker is employed at the place of 
employment, including employees of a third-party employer. This is 
critical because of the real possibility of displacement by the H-1B 
employees. Although this would only be a violation if the employer is 
an H-1B-dependent employer or willful violator, there remains a real 
possibility that U.S. workers of other employers could be harmed by the 
placement of the H-1B worker. Thus the notice alerts affected employees 
to the fact that an LCA has been filed and that H-1B workers will be 
placed at the worksite. Without such notice affected workers would not 
be able to file complaints regarding H-1B violations either with regard 
to themselves (if they are displaced because of a placement by an H-1B-
dependent employer or willful violator), or with regard to the H-1B 
workers (which might indirectly affect themselves).
    The Department observes that a number of employers' concerns with 
respect to notification of affected employees, either by hard copy 
posting or electronically, at third-party work sites, have been 
addressed by the interpretation of ``place of employment''/''worksite'' 
discussed in detail in IV.P.1 and .2 of the preamble and Sec. 655.715 
of the Interim Final Rule (see Appendix B of the NPRM). As stated in 
Sec. 655.715, the Department interprets ``place of employment'' as 
excluding locations where the H-1B worker's presence either is due to 
the developmental nature of his/her activity (e.g., management seminar; 
formal training seminar), or is short-term (not exceeding five 
consecutive workdays for any one visit) and transitory due to the 
nature of his/her job (e.g., computer ``troubleshooter,'' sales 
representative, trial witness). Under this interpretation, employers 
would not be required to give notice in many of the situations about 
which concerns have been expressed, but would be required to give 
notice in those instances where the Act and its purposes require. If a 
location does not constitute a ``worksite,'' the employer is not 
required to post notice.
    Although the Department recognizes that in some instances it may be 
inconvenient for an employer to post notice at a worksite controlled by 
another business (such as the customer of an employer), the Department 
notes that its experience in enforcement is that no employer has been 
unable to post notices at a customer's worksite when the operator, 
owner, or controller of the worksite was informed that posting was 
required by the statute and the regulations.
    The Department agrees with the comment that notice need not be 
provided where a rehabilitation professional is providing services in 
the client's home. The Interim Final Rule provides in paragraph (2) of 
the definition of ``place of employment'' in Sec. 655.715, that ``a 
physical therapist

[[Page 80162]]

providing services to patients in their homes within an area of 
employment'' is an example of a non-worksite location; in these 
situations notice must be posted at the worker's home station or 
regular work location.
2. What is Required for ``Electronic Posting'' of Notice to Employees 
of the Employer's Intention to Employ H-1B Nonimmigrants? 
(Sec. 655.734(a)(1)(ii)(B))
    The Department also proposed a regulation, 
Sec. 655.734(a)(1)(ii)(B), which would implement the ACWIA provision 
allowing electronic notification of employees. The ACWIA modified the 
statutory requirement for worksite posting of notices (where there is 
no collective bargaining representative), to permit an H-1B employer to 
use electronic communication as an alternative to posting ``hard copy'' 
notices in conspicuous locations at the place of employment.
    Senator Abraham explained: ``An employer may either post a physical 
notice in the traditional manner, or may post or transmit the identical 
information electronically in the same manner as it posts or transmits 
other company notices to employees. Therefore, use of electronic 
posting by employers should not be restricted by regulation.'' 144 
Cong. Rec. S12751 (Oct. 21, 1998).
    Congressman Smith elaborated: ``By providing this flexibility, 
Congress intended to improve the effectiveness of posting in the 
protection of American workers. Therefore, the electronic notification 
must actually be transmitted to the employees, not merely be made 
available through electronic means such as inclusion on an electronic 
bulletin board.'' 144 Cong. Rec. E2325 (Nov. 12, 1998).
    As the NPRM explained, in providing this alternative method for 
notification to affected workers, Congress indicated no intention of 
reducing the effectiveness of the notice requirement which has been an 
element of the H-1B program from its inception. The proposed regulation 
therefore provided that electronic notice may be accomplished by any 
means the employer ordinarily uses to communicate with is workers about 
job vacancies or promotion opportunities. Thus the NPRM stated that 
notice would be permitted through the employer's ``home page'' or 
``electronic bulletin board'' where employees as a practical matter 
have direct access; or through e-mail or other actively circulated 
electronic message such as the employer's newsletter, provided the 
employees have computer access readily available. Where such computer 
access is not readily available, the NPRM explained that notice may be 
accomplished by posting a ``hard copy'' at the worksite.
    The preamble further explained at Section O.5 that where the H-1B 
nonimmigrant(s) will be employed at the worksite of another employer, 
the H-1B employer is required to provide notice to the affected workers 
at that worksite. Thus, the H-1B employer may make arrangements with 
the other employer to accomplish the notice (e.g., the other employer 
may ``post'' the electronic notice on its Intranet or employee 
newsletter, or may ``post'' hard copy notice in conspicuous locations 
at the place of employment).
    The Department received 30 comments, including 22 from individuals, 
on the 1999 NPRM provisions regarding electronic notice.
    The individuals generally objected to the statutory provision 
allowing electronic posting as an alternative to hard copy posting, 
asserting that Internet posting alone allows companies to hide 
replacement of American workers with foreign workers. The AEA 
essentially expressed a similar view on electronic posting, noting that 
the Internet/Intranet method of notification is unworkable.
    The AFL-CIO commented that electronic posting should only be 
allowed if employers can show that all workers have access to e-mail or 
the Internet site, and that all notices are flagged to them. Another 
employee organization, IEEE, emphasized that to be an effective notice, 
electronic communications must be readily available and accessible to 
all affected U.S. and foreign workers.
    ACE, ACIP and SHRM commended the Department for its flexibility on 
methods of electronic posting. ACIP recommended that the Department 
distinguish between ``indirect'' and ``direct'' electronic notices, 
suggesting that where ``indirect'' notice is given, such as on a 
bulletin board, the employer should have to make the notice available 
for 10 days. If, however, the employer provides direct notice, such as 
e-mail to each employee, ACIP suggested that notice should only have to 
be sent to each affected employee once. SHRM urged the Department to 
allow an employer to document that notice has been given by permitting 
the employer to place a signed notice in the public access file 
regarding how notice was provided. AILA recommended amending the 
regulations to clarify that an employer may satisfy its electronic 
posting obligation by providing the notification on its internal 
network or website. AILA also recommended that with respect to 
employers which send the notice by e-mail, the regulation should 
specify that notification sent to a distribution group of ``affected 
workers'' satisfies the electronic posting requirement. Another 
commenter (Cooley Godward) sought clarification on the issue of how 
electronic posting can comply with the requirement of 
Sec. 655.734(a)(1)(ii)(A) that the LCA be posted in two or more 
conspicuous places, and on whether or not all four pages of the LCA 
must be posted.
    With regard to posting at third-party worksites, AILA suggested 
that a primary employer should be able to satisfy its obligation to 
document that an electronic posting was made at the work site of a 
third-party employer in any one of the following three ways: (1) A 
statement in the contract between the parties requiring the 
notification to be made; (2) a written statement by a responsible party 
at the third-party location; or (3) a printout of the electronic 
communication with a certification about when, how, and to whom it was 
sent.
    The statute does not give the Department the discretion to disallow 
electronic posting, as suggested by the individual commenters. The 
Department agrees with the AFL-CIO and the IEEE, however, that the 
critical consideration is that the notice is readily available and 
accessible to the affected workers. The Department believes that the 
proposed regulation, as drafted, meets these concerns. Posting must be 
by the means the employer ordinarily uses to communicate with its 
workers about job vacancies or promotion opportunities. Posting on the 
employer's ``home page'' or electronic bulletin board is allowed where 
employees as a practical matter have direct access to these resources. 
Where employees lack computer access, a hard copy must be posted or the 
employer may provide employees individual copies of the notice.
    The Interim Final Rule clarifies the operational requirements for 
electronic posting. Like the physical posting, the electronic notice 
need not incorporate a copy of the LCA, although it would be 
permissible since a copy of the LCA would satisfy the substantive 
requirements (see Sec. 655.734(a)(1)(ii)). (Employers are reminded that 
all H-1B nonimmigrants must be given a copy of the LCA. See 
Sec. 655.734(a)(2).) Like ``hard copy'' posting, electronic posting on 
a ``home page'' or electronic bulletin board must be posted for 10 
days. If direct notice is given to each affected employee, as through 
e-mail or ``hard copy'' notices, the notice need only be given once 
during the regulatory time

[[Page 80163]]

period. Notice by e-mail may be provided by notification to an e-mail 
group consisting of all of the affected employees. Electronic posting, 
unlike hard copy posting, need not be posted in two locations, provided 
all the affected employees, as a practical matter, have access to the 
website or bulletin board. Another method of posting would have to be 
used to reach those employees who do not have such access. For example, 
home care therapists may not have practical access to a computer at all 
as a part of their job. Where there is no such access, physical posting 
at two sites in the home office or individual copies of the notice 
would be necessary. The Department believes the existing documentation 
provision is broad enough to encompass electronic posting, both at the 
employer's own worksite and at another employer's worksite.
    The Interim Final Rule also clarifies that electronic notification, 
like other physical posting, shall be provided in the period on or 
before 30 days before the date the LCA is filed. Where H-1B 
nonimmigrants are placed at a worksite not contemplated when the LCA 
was filed, the notification shall be provided on or before the date the 
H-1B nonimmigrant begins work at the site.
    Finally, upon review of the provisions of the ACWIA, the Department 
has concluded that some modification of the required notice is 
appropriate. Specifically, the Department has concluded that the 
content of the notice should be modified to require dependent employers 
and willful violators to notify affected workers, through the methods 
provided herein, that they are H-1B-dependent or a willful violator, 
subject to the requirements for recruitment and non-displacement of 
U.S. workers. Where the employer is dependent (or a willful violator) 
but will employ only exempt workers, the notice must so provide, and 
further state that it is not subject to the recruitment and non-
displacement requirements. In addition, the notice about filing 
complaints with the Department of Justice for failure to offer 
employment to an equally or better qualified U.S. worker will only be 
required for H-1B-dependent employers and willful violators. Finally, 
because the full attestations are set forth in the cover sheet, Form 
ETA 9035CP, the provision in Sec. 655.734(a)(3) requiring employers to 
give copies of the LCA to all H-1B nonimmigrants has been modified to 
provide that copies of the cover sheet shall be given to the H-1B 
nonimmigrant upon request.

G. What Does the ACWIA Require of Employers Regarding Benefits to H-1B 
Nonimmigrants? (Sec. 655.731(c)(3), Sec. 655.732)

    Section 212(n)(2)(C)(viii) of the INA as amended by the ACWIA 
states that ``[i]t is a failure to meet a condition of paragraph 1(A) 
[the wage and working condition attestation requirements] * * * to fail 
to offer an H-1B nonimmigrant, during the nonimmigrant's period of 
authorized employment, benefits and eligibility for benefits (including 
the opportunity to participate in health, life, disability, and other 
insurance plans; the opportunity to participate in retirement and 
savings plans; and cash bonuses and noncash compensation such as stock 
options (whether or not based on performance) on the same basis, and in 
accordance with the same criteria, as the employer offers to United 
States workers.''
    Senator Abraham and Congressman Smith described the operation of 
this provision in similar terms. Senator Abraham explained:

    This obligation is only an obligation to make benefits available 
to an H-1B worker if an employer would make those benefits available 
to the H-1B worker if he or she were a U.S. worker. Thus, if an 
employer offers benefits to U.S. workers who hold certain positions, 
it must offer those same benefits to H-1B workers who hold those 
positions. Conversely, if an employer does not offer a particular 
benefit to U.S. workers who hold certain positions, it is not 
obligated to offer that benefit to an H-1B worker. Similarly, if an 
employer offers performance-based bonuses to certain categories of 
U.S. workers, it must give H-1B workers in the same categories the 
same opportunity to earn such a bonus, although it does not have to 
give the H-1B worker the actual bonus if the H-1B worker does not 
earn it.

144 Cong. Rec. S12753 (Oct. 21, 1998). See also the statement of 
Congressman Smith, 144 Cong. Rec. E2326.
    Senator Abraham continued:

    While this clause is not intended to require that H-1B workers 
be given access to more or better benefits than a U.S. worker who 
would be hired for the same position, it does not forbid an employer 
from doing so. For example, an employer might conclude that it will 
pay foreign relocation expenses for an H-1B worker whereas it will 
not pay such relocation expenses for a U.S. worker.

144 Cong. Rec. S12753 (Oct. 21, 1998).
    Congressman Smith, on the other hand, stated that ``[t]he statement 
`on the same basis' is intended to mean equal or equivalent treatment, 
not preferential treatment for any group of workers. Thus, if an 
employer offers benefits to American workers, it must offer those same 
benefits to H-1B workers.'' 144 Cong. Rec. E2326 (Nov. 12, 1998).
    Senator Abraham also explained that ``care must be taken to find 
the right U.S. worker to whom to compare the H-1B worker in terms of 
access to benefits. *  *  * If a particular benefit is available only 
to an employer's professional staff, then it only need be made 
available to an H-1B filling a professional staff position. If an 
employer's practice is not to offer benefits to part-time or temporary 
U.S. workers, then it is not required to offer benefits to part-time H-
1B workers or temporary H-1B workers employed for similar periods.'' 
144 Cong. Rec. S12753 (Oct. 21, 1998).
    Senator Abraham and Congressman Smith differed in their view as to 
the application of the provision to multinational corporations. Thus 
Senator Abraham stated:

    If an employer's practice is to have its U.S. workers brought in 
on temporary assignment from a foreign affiliate of the employer 
remain on the foreign affiliate's benefits plan, then it must allow 
its H-1B workers brought in on similar assignments to do the same. 
Likewise, in that instance, it need not provide the H-1B workers 
with the benefits package it offers to its U.S. workers based in the 
U.S. Indeed, even if it does not have any U.S. workers stationed 
abroad whom it has brought in this fashion, it should be allowed to 
keep the H-1B worker on its foreign payroll and have that employee 
continue to receive the benefits package that other workers 
stationed at its foreign office receive in order to allow the H-1B 
worker to maintain continuity of benefits. In that instance, the 
basis on which the worker is being disqualified from receiving U.S. 
benefits (that he or she is receiving a different benefits package 
from a foreign affiliate) is one that, if there were any U.S. 
workers who were similarly situated, would be applied in the same 
way to those workers. Hence the H-1B worker is being treated as 
eligible for benefits on the same basis and according to the same 
criteria as U.S. workers. It is just that the criterion that 
disqualifies him or her happens not to disqualify any U.S. workers. 
Or to put the point a little differently: The H-1B worker is being 
given different benefits from the U.S. workers not because of the 
worker's status as an H-1B worker but because of his or her status 
as a permanent employee of a foreign affiliate with a different 
benefits package.

Ibid.
    Congressman Smith had a different perspective:

    There is particular concern regarding such erosion in instances 
where a foreign affiliate of a petitioning employer is involved as 
the agent for payment of wages and provision of benefits to the H-1B 
workers. The statutory obligations must be fully met in such 
instances. Congress intends that the ultimate and complete 
responsibility for all employer obligations under this Act, 
including the provision of benefits to the H-1B worker equal to 
those offered the employer's

[[Page 80164]]

American workers based in the U.S., lies with the American (United 
States) employer who brings nonimmigrant workers into the country. 
Ultimately, it is the American employer, not the foreign subsidiary, 
pledging a benefit package similar to that of its American workers. 
Congress would expect the Secretary to look with particular care at 
circumstances involving a foreign subsidiary where there is an 
appearance of contrivance to avoid the obligation to provide equal 
wages and benefits to H-1B and American workers.

144 Cong. Rec. E2326 (Nov. 12, 1998).
1. What Does ``Same Basis and Same Criteria'' Mean With Respect to an 
Employer's Treatment of U.S. Workers and H-1B Workers With Regard to 
Benefits? (Sec. 655.731(c)(3), Sec. 655.732)
    In the NPRM, the Department proposed that: (a) An employer is 
required to offer H-1B workers the same benefit package it offers to 
U.S. workers; (b) the package must be offered on the same basis as it 
is offered to U.S. workers, i.e., the employer may not impose more 
stringent eligibility or participation requirements on the H-1B workers 
than those applied to U.S. workers; (c) the comparison between the 
benefits offered U.S. and H-1B workers should be between similarly 
employed workers, i.e., those in the same employment categories, such 
as full-time compared to full-time, professional to professional; and 
(d) the benefits actually provided to the H-1B workers, as 
distinguished from the benefits offered, might be different than those 
provided to U.S. workers because of an individual's choice among 
options. The Department also sought comments regarding whether the 
ACWIA would allow an employer to provide a different, but ``equivalent 
package'' to satisfy its benefits obligation, noting the difficulty of 
making an evaluation of the benefits--particularly a qualitative 
evaluation of the benefits, as distinguished from one based on the 
relative costs to the employer of providing such benefits.
    The Department further proposed that an employer, consistent with 
its attestation to adhere to minimum standards for H-1B workers, may 
provide greater benefits to H-1B workers than to U.S. workers. The 
Department acknowledged, however, that the phrases ``same basis'' and 
``same criteria,'' applied literally, could require that U.S. and H-1B 
workers be offered the same (or possibly equivalent) benefits.
    The Department noted the possible complications that might arise 
with respect to benefits afforded employees of a multinational 
corporate operation, particularly where the H-1B worker works in the 
U.S. for only a short period of time. In this situation, the NPRM 
noted, it might not be practical for the U.S. employer to provide the 
H-1B worker with benefits identical to those provided its U.S. workers. 
The Department proposed that while the U.S. employer may cooperate with 
its corporate affiliate in the worker's home country with regard to the 
payment of wages to the worker and the maintenance of his or her ``home 
country'' benefits (such as that country's retirement system), the U.S. 
employer remains ultimately responsible for ensuring that the H-1B 
worker is provided benefits at least equal to those offered U.S. 
workers. The Department stated that it would look closely into 
situations involving a foreign affiliate where there was the appearance 
of a contrived arrangement to avoid the U.S. employer's obligation to 
provide to its H-1B workers wages and benefits at least equal to those 
provided its U.S. workers. At the same time, the Department proposed 
that it would carefully examine the circumstances to consider non-
equivalent but nonetheless equitable benefits, including the H-1B 
worker's actual length of stay in the United States.
    The Department also proposed to modify Sec. 655.732 of the current 
regulations to clarify that an employer must provide the H-B worker 
with fringe benefits and working conditions at least equal to those 
provided U.S. workers. The NPRM noted that such a modification would 
make it clear that the requirement that the H-1B employer provide 
working conditions, including benefits, that will not adversely affect 
those provided similarly employed U.S. workers, requires consideration 
of similarly employed workers in the employer's own workforce and, in 
some circumstances, the prevailing conditions in the area of 
employment.
    Finally, the Department sought comment on whether it would be 
beneficial to develop a regulatory definition of ``benefits'' within 
the meaning of the ACWIA or merely to provide a list of examples. The 
NPRM noted that the ACWIA contemplates the inclusion of various forms 
of cash and non-cash compensation, such as bonuses and stock options, 
which ordinarily are considered wages.
    Several commenters, including AOTA, APTA, IEEE, and an attorney 
(Latour), generally endorsed the Department's NPRM approach in this 
area. IEEE stated that the Department's proposal ``will help implement 
the letter and the spirit of the law that the wages and working 
conditions of U.S. workers not be adversely affected'' and, at the same 
time, ``help to reduce the likelihood that employers will discriminate 
against H-1B workers by offering them less generous benefits.''
    Senators Abraham and Graham and AILA noted that the NPRM created 
some confusion by failing to make it clear that an employer must offer 
``benefits and eligibility for benefits'' on the same basis as offered 
to U.S. workers. Citing to Senator Abraham's statement in the 
Congressional Record, these commenters stated that this phraseology was 
important because workers must be or make themselves eligible to obtain 
benefits--e.g., by selecting a plan, providing partial payment, working 
for a period of time, or performing at a high level. Similarly, ACE 
requested the Department to make clear that a comparison should be made 
between the benefits offered to workers, not the benefits actually 
selected by the workers. ACE mentioned, as one example, ``cafeteria 
plans'' offered by many employers. Under these plans, it explained, 
employees choose certain benefits and not others for a variety of 
reasons.
    The Department agrees that the ACWIA requires an employer to offer 
H-1B workers benefits and eligibility for benefits on the same basis 
and in accordance with the same criteria as U.S. workers. Because 
employers often offer workers a choice of benefits, the ACWIA does not 
require that U.S. workers and H-1B workers actually receive the same 
benefits. Similarly, some employees may opt for ``family'' coverage of 
certain benefits, while others opt for ``individual'' coverage. 
Furthermore, as the commenters noted, workers may be required to meet 
certain criteria or take certain action to avail themselves of the 
benefits. However, an employer cannot satisfy its statutory requirement 
by ``offering'' benefits which it never actually provides to selecting 
workers. Thus, as discussed below, employers are required to retain 
documentation showing that employees actually receive the benefits that 
they have selected. While the Department believes that the NPRM 
comported with the statutory language, the Interim Final Rule clarifies 
these requirements in order to eliminate any ambiguity.
    AILA and ACIP agreed with the Department's proposal that an 
employer lawfully may offer and provide greater benefits to H-1B 
workers than those offered to U.S. workers. The AFL-CIO asserted the 
contrary position. In the AFL-CIO's view, an employer should be 
required to provide identical benefits to H-1B and U.S. workers, a 
result it argues is consistent with the ACWIA's ``same basis'' 
requirement. Senators

[[Page 80165]]

Abraham and Graham suggested that the statute would allow employers to 
offer benefit incentives above and beyond normal benefits to lure 
foreign-based employees with critical skills to work in the United 
States. The Senators suggested that so long as the packages are offered 
on the same basis to U.S. and foreign nationals based abroad, the 
practice should be permitted.
    In the Department's view, the statute does not require that H-1B 
workers and U.S. workers be offered the same benefits. While perhaps 
Section 212(n)(2)(C)(viii), read in isolation, could be read to require 
this result, this provision must be read in the context of the entire 
statute. Section 212(n)(2)(C)(viii) provides that it is a failure to 
meet paragraph (1)(A)--the wage requirements of the Act--to fail to 
provide the required benefits. Section 212(n)(1)(A)(i) in turn provides 
that the employer must offer wages that are ``at least'' those paid to 
similar workers. The Department notes, however, that an H-1B-dependent 
employer or willful violator, when it conducts good faith recruitment 
pursuant to section 212(n)(1)(G)(i), must offer U.S. workers the same 
compensation (including benefits) as it will offer the H-1B workers in 
the recruited positions. Furthermore, providing greater benefits to H-
1B workers may violate requirements of the various discrimination laws. 
The agencies that enforce discrimination requirements and their 
telephone numbers and website addresses are set forth above in IV.E.4, 
above.
    Senators Abraham and Graham asserted that the Department should 
look at the employer's entire benefits structure as it concerns 
``benefits eligibility for its workforce generally'' to make sure that 
the comparison is made to the right employees. These Senators and AILA 
suggested that comparisons could appropriately be made on such bases as 
part-time vs. full-time workers, positions requiring extensive travel 
vs. those that do not, relative seniority, the particular 
organizational component to which the workers are assigned, and whether 
the individual occupies a position for which special incentives should 
apply. Similarly, ACIP suggested that the Department look beyond a 
simple full-time/part-time distinction.
    The Department agrees that it should look at an employer's benefits 
structure. Employers commonly provide different benefits, for example, 
based on part-time vs. full-time status, seniority, union vs. non-
union, organizational component, etc. The Department agrees that H-1B 
workers should be provided benefits based on their position in the 
organizational structure, provided the employer utilizes the same 
distinctions on an organization-wide basis. However, the Department 
will not accept artificial distinctions which are not generally 
accepted in the industry and which have the result of denying benefits 
to H-1B workers on the basis that there are no comparable workers in 
the organization or which otherwise have the effect of discriminating 
between workers on the basis of citizenship, nationality, or other 
prohibited grounds.
    The Interim Final Rule incorporates these principles. The Interim 
Final Rule also prohibits employers from denying benefits based on the 
H-1B worker's temporary status since all H-1B workers, by virtue of 
their visa restrictions, are temporary workers. Thus, an employer by 
utilizing ``temporary'' as a basis for comparison could evade offering 
to these workers the benefits that typically would be paid to workers 
hired on a ``permanent basis,'' even though the tenure of workers in 
each group might be of comparable duration, thereby effectively 
nullifying the statutory provision. An employer would, however, be 
allowed to require that an H-1B workers meet eligibility and vesting 
requirements.
    Sun Microsystems suggested that to the extent there was a perceived 
need for greater scrutiny over fringe benefits, the Department's 
efforts should be restricted to dependent employers. The Department 
disagrees. Unlike some other provisions of the ACWIA, the ``same 
basis''/``same criteria'' provision applies to all H-1B employers.
    TCS asserted that the Department ``should clarify that, where 
length of service is applicable to the amount of the benefit, only the 
H-1B non-immigrant's length of service in the United States, and not 
the H-1B's entire length of service with the employer should be 
included in the calculation.''
    It is the Department's view that an employer is required to offer 
benefits on the same basis as it offers benefits to its U.S. employees. 
If an employer offers benefits based on length of service for the 
employer, it must offer benefits to its H-1B workers on that basis as 
well. (See the discussion below regarding treatment of multinational 
organizations.)
    APTA suggested that the INS inform all H-1B workers of their right 
to be offered the same benefits as U.S. workers, to better ensure that 
they receive the benefits due them. The Department notes that every H-
1B worker is required to receive a copy of the LCA, which contains a 
brief reference to this requirement. Section III.B of the Preamble, 
above, discusses in greater detail the Department's plans to 
disseminate information regarding the program's requirements.
    In response to the Department's query, BRI and AILA contended 
(without citing support for their position) that the ACWIA contemplates 
that an employer may satisfy the benefits attestation by offering H-1B 
workers different but ``equivalent'' benefit packages relative to the 
benefits offered to U.S. workers. BRI further stated that such benefits 
should be compared according to their monetary value.
    The Department has concluded, as a general matter, that the 
statute's ``same basis'' provision does not permit an employer to offer 
its H-1B workers benefits ``equivalent'' to but different from those 
offered its U.S. workers. The Department notes that these commenters, 
like other commenters, appeared to be concerned with benefits provided 
by multinational corporations, which are discussed separately below.
    Intel and ACIP stated that a few countries prohibit their citizens 
from owning stock in foreign corporations. Cooley Godward also raised 
the question of benefits such as stock options whose accrual will 
terminate after an H-1B employee's period of status ends.
    Although there is nothing which requires an employee to take 
advantage of a stock option, it is the Department's view that if an 
employer is aware that its H-1B worker(s) is prohibited from taking 
advantage of a stock option because of laws of the worker's home 
country, the employer should offer such worker(s) an alternative 
benefit of comparable value. With regard to the question of stock 
options or benefits which will accrue after termination of an H-1B 
worker's period of status, such benefits should be provided on the same 
basis as they would otherwise be provided to workers who are no longer 
in the firm's employ (or who have transferred back to the home office). 
If other workers have a right to exercise the option or receive the 
benefit even if they are no longer in the firm's employ, the same would 
be true with regard to H-1B workers.
    Turning to the question of treatment of employees of multinational 
firms, Senators Abraham and Graham asserted that the Department's 
proposal ``appear[s to provide no] consideration of the question of who 
the right similarly situated worker to compare [the transferee] is, and 
whether there actually is one.'' They, instead, suggested that the 
Department should focus on the transferee's status as a permanent 
employee with the

[[Page 80166]]

employer's foreign affiliate, rather than his or her status as an H-1B 
worker.
    TCS stated that it appreciated the Department's sensitivity to the 
issue of the application of the benefits requirement to employees who 
receive a range of benefits from their foreign employer and are only in 
the United States on short-term assignments in connection with their 
long-term employment with the foreign employer. TCS contended, however, 
that the requirement that H-1B workers be provided benefits equivalent 
to those received by U.S. workers is contingent upon the existence of 
``similarly employed'' workers in the United States. TCS argued that 
because it is an Indian company and its employees receive India-based 
benefits, they are not similarly employed to any computer engineers it 
might hire in the United States, and that TCS would therefore be 
relieved from any obligation to offer new benefits to its workers 
during the period of their temporary employment in the United States.
    ACIP commented that a ``length of status'' test ``wrongly assumes 
that the practice of maintaining a foreign benefits program is a matter 
of convenience, when, in fact, the practice is maintained because the 
disruption often causes the employee to lose vested interest in a 
benefit plan.'' Instead, they suggested, ``[t]he Department should 
adopt a rule that allows for a transferee to maintain his or her 
foreign benefits as long as such benefits plan is administered abroad 
continuously without interruption and as long as the company typically 
offers this option to all international transferees.'' Similar comments 
were made by AILA and Intel, which stated that it is in the employees' 
best interest to stay on ``home country'' pay and benefits. SIA also 
stated that if it is an employer's practice to have its workers 
continue to receive ``home country'' benefits when they are on a short-
period assignment in the United States, it should be allowed to 
continue to do so.
    Some commenters (ACIP, Intel, Latour) indicated that multinational 
corporations typically offer similar benefit packages to all their 
employees. Thus, ACIP stated that ``most employers already provide the 
same benefits to all workers and do not distinguish between U.S. and 
foreign nationals.'' At the same time, it noted that ``in dealing with 
a global workforce, it is sometimes necessary to provide different 
benefit packages to workers from different countries, depending upon 
the laws and social services of that country.'' Intel similarly stated 
that the vast majority of its regular full-time H-1B workers are on 
U.S. benefits; it noted that a small percentage of these workers are on 
their ``home country'' pay and benefits. Intel further stated that all 
its H-1B workers are put on U.S. medical benefits, because of ``out of 
country'' coverage problems. ACIP explained that currently employers 
may provide certain benefits to workers depending upon standards in the 
workers' home countries and the employer's international relocation 
policies. As stated by ACIP: ``Benefits may include relocation 
expenses, schooling for children, housing allowance, travel expenses, 
additional vacation time and assistance with health care or other items 
the worker is accustomed to receiving.''
    ACIP applauded the Department's effort to deal with this issue and 
supported the Department's statement that ``should the U.S. worker 
remain on the foreign plan, the U.S. employer will be held responsible 
for compliance with all H-1B regulations.''
    AILA's comment, that flexibility is needed to preserve the ability 
of the H-1B workers to preserve their existing ``home country'' 
benefits (which if interrupted could have significant and perhaps long-
term negative impact on the worker and the worker's family), was 
representative of several comments on this point.
    The Department has carefully considered the question of application 
of the benefits requirements of the ACWIA to multinational firms. The 
Department cannot agree with the construction of the statute that would 
deprive foreign-based employees of the benefit protections enacted by 
the ACWIA on the basis that they are not ``similarly employed.'' On the 
other hand, the Department believes it is appropriate to provide some 
accommodation for multinational corporate operations where ``home 
country'' benefits are equitably equivalent to the benefits provided to 
employees.
    The Department has crafted a two-part Interim Final Rule, 
distinguishing between workers who are in the United States for a short 
period of time (90 days or less) and workers who are in the United 
States for a longer period. Where H-1B workers permanently employed in 
their ``home country'' (or some other country) are not transferred to 
the United States but remain on the payroll of their permanent employer 
in their ``home country'' and continue to receive benefits from the 
``home country'' without interruption, the Department will require 
nothing further, provided the worker is in the United States for no 
more than 90 continuous days in any one visit to the United States. 
Moreover, the employer must also provide reciprocity to its U.S. 
workers i.e., U.S. workers based abroad and U.S. workers based in the 
United States must receive the benefits of their home work station (the 
station abroad or in the United States, respectively) when traveling on 
temporary business. It should be noted that this provision would allow 
H-1B workers who are not in the United States more than 90 continuous 
days in one trip to go back and forth between countries without any 
consideration to cumulative days of employment in the United States, 
provided there is no reason to believe the employer is trying to evade 
the Act's benefit requirements, such as where a worker remains in the 
United States most of the year but returns to the home country on brief 
visits.
    Once the H-1B worker has worked in the U.S. for more than 90 
continuous days (or from the point where the worker is transferred or 
it is anticipated that the worker will likely remain in the United 
States for more than 90 continuous days), the H-1B employer is required 
to offer that worker the same benefits on the same basis as provided to 
its U.S. workers unless: (1) The worker continues to be employed on the 
``home country'' payroll; (2) the worker continues to receive ``home-
country'' benefits without interruption; (3) the ``home-country'' 
benefits are equitable relative to the U.S. benefit package; and (4) 
the employer provides reciprocity (i.e., similar treatment as discussed 
above) to its U.S. workers (if any) on assignment away from their home 
work station. In the Department's view, this strikes an appropriate 
balance between meeting the statutory requirement (thereby protecting 
the benefits of U.S. workers employed in the U.S. against erosion), and 
protecting the H-1B worker's interest in preserving long-term ``home 
country'' benefits which may be threatened by the disruption of these 
benefits.
    Furthermore, as Intel noted in its comments, many health care plans 
fail to provide coverage, or fail to provide full coverage, outside 
their country's boundaries. Therefore any employer that offers health 
coverage to its U.S. workers must offer similar coverage (same plan and 
same basis) to its H-1B workers in the United States for more than 90 
continuous days unless the H-1B workers' home-country plan provides 
full coverage (i.e., coverage comparable to what they would receive at 
their home work station) for medical treatment in the United States.
    In addition, employers will be required to provide H-1B workers who 
are in the United States more than 90

[[Page 80167]]

continuous days those U.S. ``benefits'' which are paid directly to the 
worker--namely paid vacation, paid holidays, and bonuses. H-1B workers 
must also be provided working conditions and eligibility for working 
conditions (hours, shifts, vacation periods, etc.) on the same basis 
and criteria provided to U.S. workers.
    TCS argued that if the Department requires the same or even 
equivalent benefits for its workers, they will receive double 
benefits--the U.S. benefits plus their ``home country'' benefits. In 
the Department's view, TCS is mistaken. The Department's proposal 
tracks the ACWIA. Neither the proposal nor the statute requires the 
employer to continue to maintain ``home country'' benefits in such 
situations. While an employer in such situations, either by contract or 
otherwise, might be required to maintain such benefits (or it may 
decide to do so as a matter of company policy), the ACWIA does not 
impose such an obligation, nor does this rule.
    The Department received a number of comments regarding whether a 
multinational employer continuing ``home country'' benefits to H-1B 
workers need establish that the benefits provided are equivalent or 
equitable in relation to benefits provided U.S. workers. ACIP expressed 
the view that ``it [would be] extremely burdensome to put a dollar 
value on benefits received.'' Similarly, AILA stated that multinational 
employers should be able to provide equitable but non-equivalent 
benefits to H-1B workers. BRI, on the other hand, took the position 
that benefits should be equivalent, comparing their monetary value. The 
AFL-CIO, as discussed above, contended that employers should be 
required to provide identical benefits to H-1B and U.S. workers.
    The Department agrees that a multinational firm, under the 
circumstances described, should not be required to make a valuation of 
the benefits it offers and provides to U.S. and H-1B workers, but 
rather should be required, in the event of an investigation, to 
establish only that it provides benefits which are equitable in 
relation to U.S. workers' benefits. The Department finds very 
persuasive the arguments that it is in the workers' interest to allow 
employers to continue their permanent employees on ``home country'' 
benefits when working temporarily in the United States. At the same 
time, the Department believes that establishing benefits in terms of 
cost is unduly burdensome, and would not further the objective of 
establishing comparable benefits since there is no reason to believe 
even identical benefits abroad would cost the same as benefits in the 
United States.
    Only ACIP provided comments on the meaning of the phrase 
``equitable benefits.'' ACIP suggested that ``[t]he emphasis should be 
on whether the benefits package is equitable in light of basic human 
needs, similarity in treatment of all workers, how U.S. workers 
transferred abroad are treated, and the facts and circumstances of each 
H-1B worker.'' ACIP further stated: ``While we agree that the 
Department should look closely at `contrived cases,' we stress that the 
Department should look closely at the facts of each case to determine 
whether equitable benefits have been provided. * * * [T]he Department 
should not place undue emphasis on any one factor such as the 
employee's length of stay in the U.S.''
    The Department agrees that ``equitability'' between ``home 
country'' and U.S. benefits does not reduce to a bright-line test. In 
the event of an enforcement action, the Department will look into all 
the circumstances bearing upon the benefits to ensure that the H-1B 
worker's continued receipt of these benefits is not less advantageous 
to him than the benefits offered U.S. workers. This examination entails 
a qualitative rather than a quantitative review. In other words, an 
employer in these circumstances must be able to demonstrate that the 
worker's ``home-country'' benefits are equitable in relation to the 
benefits provided its U.S. workers based in the United States, 
similarity in treatment of all workers, how U.S. workers temporarily 
stationed abroad are treated, and the facts and circumstances of each 
H-1B worker. Where the employer makes this demonstration, and there is 
no appearance of contrivance to avoid payment of U.S. benefits, the 
Department will not second-guess the employer.
    Several commenters responded to the Department's request for 
comments on whether it should define ``benefits'' as that term is used 
in Section 212(n)(2)(C)(viii), which provides that the requirement to 
offer benefits and eligibility for benefits includes: ``the opportunity 
to participate in health, life, disability, and other insurance plans; 
the opportunity to participate in retirement and savings plans; and 
cash bonuses and noncash compensation such as stock options (whether or 
not based on performance). * * *''. Senators Abraham and Graham and 
AILA stated that they did not see the need for further defining 
``benefits,'' noting that the statute contains several examples of 
benefits. ACIP also stated that a regulatory definition was 
unnecessary, suggesting that instead the Department should examine the 
facts and circumstances of each case. TCS contended that the statutory 
list of benefits is exclusive; alternatively, it argued that the 
Department should specify the benefits so that employers do not have to 
guess about what is covered--e.g., is a separate office a benefit? ACIP 
asserted that ``[c]ertain cash and non-cash bonuses considered benefits 
under ACWIA are considered wages under other laws. Adopting definitions 
from other laws further confuses immigration law, does not address 
practices abroad, and may have unintended tax consequences.'' 
Similarly, ACIP, SHRM and Cowan & Miller commented that further 
definition of benefits is unnecessary. Rapidigm asked for clarification 
of the Department's statement.
    The Department agrees with the position of most commenters that the 
existing statutory definition is sufficient to administer effectively 
this aspect of the statute. The language of section 212(n)(2)(C)(viii) 
provides a fairly comprehensive list of the benefits that may be 
offered to workers in the U.S. While the use of ``including'' evinces 
an intention that the list is not exhaustive, the list, in the 
Department's view, is representative of the types of benefits that must 
be considered. Thus, an employer, by analogy, may determine whether 
other particular benefits should be taken into account. In this regard, 
the Department notes that the regulatory schemes under other 
employment-related statutes such as FMLA, the Equal Pay Act, the ADEA, 
and ERISA also provide guidance in this area. The Interim Final Rule 
takes this approach in lieu of an attempt to more fully define 
benefits. Under the Department's approach, it would appear clear that 
office accouterments--the example used by TCS--ordinarily would not 
constitute a benefit within the meaning of the statute. At the same 
time, it bears noting that the ACWIA does not relieve employers from 
any obligations they may have incurred through collective bargaining or 
otherwise with regard to particular working conditions, or of its 
obligation not to discriminate based on citizenship or national origin.
    With regard to the Department's stated intention to modify the 
current regulatory provision concerning the working condition 
attestation, ACIP, AILA, and TCS expressed the concern that the 
Department was seeking to impose a new requirement, i.e., that an 
employer was required to offer benefits to H-1B workers at least 
equivalent to the higher of those offered to their own U.S. employees 
or those prevailing in

[[Page 80168]]

the area. ACIP asserted that the Department lacks authority to require 
employers to consider conditions outside their own workforces. Rapidigm 
requested clarification on the meaning of the provision.
    After review of the ACWIA and the provisions of the H-1B program as 
a whole, the Department concurs with commenters that Congress intended 
that the requirement for offering benefits and eligibility for benefits 
to H-1B workers on the same basis and same criteria as they are offered 
to U.S. workers employed by the employer includes both benefits paid as 
compensation for services rendered and working conditions. The 
Department has therefore concluded that it is inappropriate to continue 
the provision in Sec. 655.732 which provides for consideration under 
some circumstances of prevailing conditions in the area of employment. 
Section 655.732 therefore is revised in the Interim Final Rule to 
clearly require that working conditions be provided to H-1B workers on 
the same basis and same criteria as they are offered to U.S. workers.
    The Department also believes that certain benefits appropriately 
are in the nature of compensation for service rendered, and have a 
monetary value to workers and monetary cost to employers. Such benefits 
include cash bonuses, paid vacations and holidays, and termination pay, 
which are paid directly to workers and are taxable when earned. Also 
included are benefits such as health, life and disability insurance, 
and deferred compensation such as retirement plans and stock options 
which are funded by employers, either directly as costs are incurred or 
through contributions to fringe benefit plans or insurance companies. 
The Department has concluded that such benefits are more in the nature 
of wages than working conditions, although the Department cautions that 
only benefits which meet the criteria of Sec. 655.731(c)(2) count 
toward satisfaction of the required wage since such benefits are not 
included in surveys used to determine the prevailing wage. On the other 
hand, benefits which do not have a direct monetary value to workers or 
cost to employers, are in the nature of working conditions, including 
matters such as seniority, hours, shifts, and vacation periods, and 
preferences relating thereto. Sections 655.731 and 655.732 are amended 
to reflect this distinction.
2. What Documentation Will Be Required? (Sec. 655.731(b))
    The Department proposed to require H-1B employers to retain copies 
of fringe benefit plans and summary plan descriptions provided to 
workers, including all rules relative to eligibility and benefits, and 
documents showing the benefits actually provided and how the costs are 
shared between the workers and the employer. The Department sought 
suggestions as to exactly what records would demonstrate the value of 
benefits and satisfy the other retention requirements. The Department 
expressed the view that such records already are required for IRS and 
ERISA purposes (although noting in the paperwork analysis, at 64 FR 
630, that a small percentage of employers might be required to keep 
records that otherwise would not be kept). In connection with the 
Department's query whether it might be possible to provide different 
``home country'' benefits to employees of a multinational corporate 
operation in lieu of those provided to U.S. workers, the Department 
sought comment on what records would be necessary to demonstrate the 
relative value of the ``home-country'' benefits and the benefits 
provided to U.S. workers.
    Many of the commenters opposed the notion of maintaining particular 
documentation in order to demonstrate compliance with the benefits 
attestation. ACIP and AILA asserted that the statute does not authorize 
the Department to require employers to retain documentation, suggesting 
that it is up to an employer to decide what documentation, if any, it 
should retain in order to demonstrate its compliance if it is 
investigated. Similarly, Senators Abraham and Graham stated: ``DOL is 
not authorized to require employers to maintain any particular 
documentation.'' The Department cannot, they asserted, include as part 
of the proposed LCA a ``new attestation'' that ``[the employer] will 
develop and maintain documentation of working conditions and 
benefits.''
    ACIP addressed particular burdens it perceived in retaining such 
documentation, noting, for example, that they already maintain such 
documentation in a location or in a format different than that 
contemplated by the Department. While ACIP recognized that the 
Department correctly stated that employers now keep documents related 
to their fringe benefit plans, ACIP stated that these documents may be 
housed in various departments and urged the Department to let the 
employer decide where documentation must be kept. ACIP further 
explained that much information is sensitive and confidential (e.g., 
stock option and incentive pay plans), requiring the Department, in its 
view, to allow an employer flexibility in documenting these benefits.
    Intel stated that summary plan descriptions are a U.S. requirement. 
It noted that no other countries required the same depth and detail 
regarding the documentation of benefits, though stating that about one-
half of its foreign subsidiaries have some benefits documentation. 
Intel explained that all its employees at orientation receive 
information regarding the company's benefits; in the U.S., it stated 
that employees receive a book that describes benefits, and that each 
year employees receive a particularized benefit portrait. Intel 
asserted that further documentation should not be required; it contends 
that a memorandum to the public access file that its employees are 
advised of the company's benefits at time of their hire should suffice.
    Satyam questioned whether current requirements under other statutes 
and regulations relating to the retention of benefits documents would 
suffice for H-1B purposes; it suggested that the Department should not 
require putting specific information in the public access file. It also 
inquired whether it would be necessary to retain information relevant 
to the comparison group. ITAA said that the Interim Final Rule should 
recite rather than refer to IRS and PWBA requirements. AILA expressed 
the concern that the Department will make it a violation to fail to 
keep copies of benefits documents in a public access file and that 
requiring documentation to be kept up front would impose a huge burden. 
AILA recommended instead that an employer, for example, be simply 
required to bear the burden of proving the ``equivalency'' of foreign 
benefits in the event of an investigation.
    None of the commenters took issue with the Department's statement 
that the documents sought are required already by IRS or ERISA.
    Based on our review of the comments received on the proposal, it is 
apparent that the documentation requirements proposed in the NPRM have 
been misunderstood. With the exception of documentation specifically 
required to be retained in the public access file, there is no 
requirement that information be kept in any particular format or place, 
or that information be segregated by LCA, by locality, by H-1B versus 
U.S. workers, or in any other way from the employer's records for the 
entire company.

[[Page 80169]]

    Nothing in the ACWIA suggests that documentation requirements are 
unauthorized or otherwise improper. 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. The documentation that is required by the Interim 
Final Rule simply effectuates the more specific requirements imposed by 
the ACWIA. Furthermore, as the NPRM stated, the documents sought for 
the most part are already required by the IRS or ERISA, and would be 
kept by an ordinary prudent businessman in any event. Thus, the 
Department's ERISA regulations require at 29 CFR part 2520 that summary 
plan descriptions be provided to participants, and require employers to 
submit lengthy forms (Form 5500) to IRS with detailed information 
regarding their fringe benefits plans, which must be substantiated by 
records. In addition, EEOC rules under the ADEA, 29 CFR 1627.3(b)(2), 
require that every employer retain copies of all employee benefit 
plans, as well as copies of any seniority systems and merit systems 
which are in writing. Where the plan is not in writing, a memorandum 
fully outlining its terms and how it has been communicated to employees 
is required.
    The Department believes that it is essential that employers, in 
order to establish that H-1B workers have in fact been offered the same 
benefits as U.S. workers (or that the special benefit requirements for 
certain employees of multinational firms are met), retain a copy of any 
document provided to employees describing the benefits offered to 
employees, the eligibility and participation rules, how costs are 
shared, etc. (e.g., summary plan descriptions, employee handbooks, any 
special or employee-specific notices that might be sent). It is also 
important that employers keep a copy of all benefit plans or other 
documentation describing benefit plans and any rules the employer may 
have for differentiating among groups of workers. In addition, the 
employer will be required to retain evidence as to what benefits are 
actually provided to U.S. and H-1B workers. Where employees are given a 
choice of benefits, employers will be required to retain evidence of 
the benefits selected or declined by employees.
    For multinational employers who choose to keep H-1B workers on 
``home country'' benefit plans, the employer will be required to 
maintain evidence of the benefits provided to the worker before and 
after the employee went to the United States. In the event of an 
investigation, the employer will also be required to demonstrate that 
the other requirements for multinational firms are met, as 
appropriate--e.g., that the employer maintains reciprocity by treating 
U.S. workers coming to the United States temporarily from abroad the 
same as H-1B workers, and likewise continues U.S. workers temporarily 
overseas on U.S. benefits, that the worker was not in the United States 
for more than 90 continuous days, that ``home country'' benefits are 
equitable in relation to U.S. benefits, etc.
    With regard to the public access file, the employer need only 
maintain a summary of the benefits offered to U.S. workers in the same 
occupation as H-1B workers, including a statement explaining how 
employees are differentiated where not all employees in the occupation 
are offered the same benefits. If an employer has workers receiving 
``home country'' benefits, the employer may place a simple notation to 
that effect in the file. The public access file need not show the 
proprietary details of a plan (such as a stock option or incentive 
distribution plan), the costs of providing the benefits, or the choices 
made by individual workers.
    Since the regulations do not allow an employer to provide 
equivalent benefits as a general matter, and provide an ``equitable'' 
rather than an ``equivalent'' test for multinational benefits, no 
special documents regarding the cost of benefits are required.

H. What Does the ACWIA Require of Employers Regarding Payment of Wages 
to H-1B Nonimmigrants for Nonproductive Time? (Sec. 655.731(c)(7))

    On October 31, 1995, the Department republished for comment a 
provision of the December 20, 1994 Final Rule which articulated the 
Department's position regarding payment of the required wage for 
nonproductive time. This provision, Sec. 655.731(c)(5), required 
payment of the required wage beginning no later than the first day the 
H-1B nonimmigrant is in the United States and continuing throughout the 
nonimmigrant's period of employment, including periods when the 
nonimmigrant is in nonproductive status due to employment-related 
reasons such as training or lack of assigned work. The provision did 
not require payment of such wages where the nonproductive status is due 
to reasons unrelated to employment (e.g., caring for an ill relative), 
provided the nonimmigrant's unpaid status is acceptable to the INS and 
is not subject to a wage payment obligation under some other statute 
(e.g., Family and Medical Leave Act). The provision distinguished 
between full-time and part-time workers as provided on the I-129 
petition filed with INS, but stated that in the event a part-time 
employee regularly worked a greater number of hours than stated on the 
I-129, the employer would be held to the actual hours disclosed in the 
enforcement action. Section 655.731(c)(5) was among the provisions of 
the December 20, 1994 Final Rule which had been enjoined from 
enforcement, due to lack of notice and comment, by the court in 
National Association of Manufacturers v. United States Department of 
Labor.
    Subsequently, the ACWIA, amending section 212(n)(2) of the INA, 
enacted an explicit requirement, consistent with the Department's 
regulation, providing that it is a violation of the wage attestation in 
section 212(n)(1)(A) for an employer to fail to pay an H-1B worker the 
required wage for certain nonproductive time. Like the Department's 
regulation, an exception was created for nonproductive status which is 
due to non-work-related factors such as the worker's own, fully 
voluntary request, or circumstances rendering the worker unable to 
work. Under this provision, workers designated as full-time on the 
petition filed with INS must be paid full-time wages, and employees 
designated as part-time on the petition must be paid the hours 
designated in the petition. This obligation is effective ``after the H-
1B worker has entered into employment with the employer,'' but in any 
event, not later than 30 days after the worker's date of admission to 
the United States (if entering the country pursuant to the petition) or 
60 days after the date the worker ``becomes eligible to work for the 
employer'' (if already in the country when the petition is approved). 
The statute also contains a special provision regarding academic 
salaries which is discussed in IV.I, below.
    Congressman Smith and Senator Abraham, in their remarks after 
enactment of the ACWIA, noted that the most extreme examples of 
``benching'' occur when workers are brought to the United States on the 
promise of a certain wage, but only receive a fraction of that wage 
because the employer does not have enough work for the H-1B worker. 144 
Cong. Rec. E2326 (Nov. 12, 1998); 144 Cong. Rec. S12753-54 (Oct. 21, 
1998). They also both agreed that employers must pay full wages and 
benefits during an H-1B worker's non-productive status when that status 
is due to the employer's decision--based

[[Page 80170]]

on factors such as lack of work for the worker--or due to the worker's 
lack of a license or permit. Congressman Smith also remarked that 
Congress anticipated the Secretary's close scrutiny of 
``voluntariness'' in circumstances that appear to be contrived to take 
advantage of unpaid time. Senator Abraham listed the following examples 
of H-1B employees taking unpaid leave which he stated would not be 
considered ``benching'': leave under FMLA or other corporate policies, 
annual plant shutdowns for holidays or retooling, summer recess or 
semester breaks, or personal days or vacations. Senator Abraham also 
stated that this provision does not prohibit an employer ``from 
terminating an H-1B worker's employment on account of lack of work or 
for any other reason.'' Congressman Smith stated that an attempt by an 
employer to avoid compliance with the ``benching'' provision by laying 
off an American worker ``would trigger the enforcement and penalty 
provisions of the Act.''
    Congressman Smith and Senator Abraham agreed that the benching 
provision is not intended to preclude part-time H-1B employment, agreed 
to between the employer and the H-1B worker when the worker was hired. 
144 Cong. Rec. E2326 (Nov. 12, 1998); 144 Cong. Rec. S12754 (Oct. 21, 
1998). Congressman Smith stated that ``the employer's misrepresentation 
of this material fact should be scrutinized by the Secretary'' in 
determining whether a benching violation or misrepresentation has been 
made, with particular attention to whether U.S. workers would receive 
paid leave for nonproductive time. Senator Abraham stated that the Act 
is not intended to give the Secretary the authority ``to reclassify an 
employee designated as part-time based on the worker's actual workload 
after the employee begins employment.''
    In the NPRM, the Department proposed regulatory text which, except 
for the different statutory language triggering the beginning of the 
period in which the ``benched'' worker must be paid, is very similar to 
its current regulation. In the preamble, the Department stated that it 
was considering whether the H-1B worker ``enters into employment'' when 
he first makes himself available for work, such as by reporting for 
orientation or training, or when the worker actually begins receiving 
orientation or training or ``otherwise performs work or comes under the 
control of his employer.'' In commenting on the purpose of the 
``benching'' provision, the Department observed that an H-1B 
nonimmigrant is not permitted to be employed by another employer while 
``benched'' (unless another employer files a petition on behalf of the 
worker or the worker adjusts his or her status under the INA), and is 
without any legal means of support in the country. In contrast, a U.S. 
worker can seek other employment and would be eligible for Federal 
programs such as food stamps. The Department also observed that the 
employer, at any time, may terminate the employment of the worker, 
notify INS, and pay the worker's return transportation, thereby ceasing 
its obligations to pay for non-productive time under the H-1B program. 
The Department proposed that payment of wages would not be required 
where the nonproductive status is due to reasons unrelated to 
employment, unless such payment is required by INS as a condition of 
the worker maintaining lawful status, or is required by some other Act 
such as FMLA. On the other hand, the employer would not be relieved 
from the wage obligation for any required leave of absence, even if it 
includes U.S. workers.
    The Department received three comments on the 1995 proposed rule on 
this issue. Regarding the requirement in the 1995 NPRM that the 
employer pay the required wage for nonproductive time beginning no 
later than the first day the H-1B nonimmigrant is in the United States 
and continuing throughout the nonimmigrant's period of employment, AILA 
suggested that it would be more reasonable to require the employer to 
begin paying on the day that the nonimmigrant actually reports to work, 
provided that the date is no later than 30 days after the date the 
nonimmigrant enters the U.S. or otherwise becomes eligible to work for 
the employer. AILA also suggested that an exception be made where the 
nonimmigrant is given an unpaid leave of absence pursuant to a 
uniformly-enforced company policy. Similarly, another commenter, an 
electronics manufacturer (Motorola), complained that in the case of a 
temporary reduction in force, the employer would have to retain the H-
1B nonimmigrant at full salary, while U.S. workers are off the payroll.
    The Department received 33 comments on the 1999 NPRM proposals 
addressing the ACWIA's ``benching'' provisions. APTA stressed the 
importance of the Department ensuring that H-1B nonimmigrants are aware 
of their wage rights for nonproductive time. Miano commented that 
companies should not be allowed to use the H-1B program to create 
stables of available employees in anticipation of openings that do not 
yet exist, but should be required to demonstrate that an unfilled 
position actually exists.
    The Department agrees that it is important that H-1B nonimmigrants 
be aware of their rights. For this reason, Sec. 655.734(a)(3) requires 
that all H-1B nonimmigrants be provided a copy of the LCA which 
supports their petition. In addition, the Department is planning a 
comprehensive educational program, as discussed in III.B, above.
    AILA suggested that the Department add to its list of exceptions 
situations where objective economic reasons are present, such as annual 
retooling in the automobile industry for production model changes. ACIP 
and SIA urged the Department to adopt Senator Abraham's October 21, 
1998 comments as examples of what is not benching, i.e. leave under the 
Family and Medical Leave Act; or other corporate policies for no 
payment such as annual plant shutdowns for holidays or retooling, 
summer recess or semester breaks, or personal days or vacations. ACIP 
also urged that similar situations be included in the list of examples 
which do not constitute benching, such as disciplinary action, 
mandatory unpaid pre-employment training or orientation, mandatory 
vacation leave, and periods of downturn where all workers are treated 
the same. ACIP suggested that the facts and circumstances of each case 
be considered, including whether similarly-situated U.S. workers are 
placed on leave and whether H-1B workers knew before accepting 
employment of the possibility of such leave. ACIP and SIA encouraged 
the Department to exercise flexibility to avoid the potential effect of 
companies laying off U.S. workers to avoid the benching of H-1B workers 
by allowing for periods attributable to regular, objective business 
occurrences such as cyclical business downturns, holiday plant 
shutdowns, and plant retooling. They observed that when these events 
occur all workers are treated equally, according to the same standards.
    The AFL-CIO and other commenters observed that the provision's 
prohibition against ``benching'' may lead employers to treat H-1B 
employees better than U.S. workers, and may create the situation where 
an employer retains an H-1B worker over an American worker during a 
lay-off to avoid paying full wages to the H-1B worker. The AFL-CIO 
stated its belief that U.S. workers who are laid off to avoid the 
benching provision may have grounds for a discrimination complaint 
based on nationality and immigration status and that the regulation 
should so indicate.
    The Department believes that the statutory language is clear. The 
statute

[[Page 80171]]

requires payment, after a nonimmigrant has entered into employment with 
an employer, whenever nonproductive status is due to a decision by the 
employer or to the nonimmigrant's lack of a permit or license. In 
contrast, payment is not due when the nonproductive time is due to non-
work-related factors, such as the voluntary request of the nonimmigrant 
for an absence or circumstances rendering the nonimmigrant unable to 
work. Therefore the Department cannot interpret the Act to allow 
employers to be relieved from payment for periods where the employer's 
business is shutdown, regardless of whether it affects U.S. workers as 
well, whether for economic downturn, annual retooling, or holiday 
shutdown; nor can the employer be relieved from liability for mandatory 
vacation, pre-employment training, or disciplinary action. All of these 
situations are caused by the employer, rather than at the voluntary 
request of the nonimmigrant. The Department notes that training or 
orientation required of an employee before productive work starts has 
always been considered compensable time under the Fair Labor Standards 
Act, and that the Department has required payment for such time in its 
enforcement of the H-1B attestation requirements since the injunction 
entered in the NAM litigation. If an employer finds need to discipline 
an H-1B nonimmigrant, it must find a method other than loss of pay, or 
it may terminate the employment relationship.
    The Department understands the concern expressed regarding the 
possibility of an employer laying off U.S. workers while continuing to 
pay H-1B workers because of its obligation to continue paying H-1B 
workers during periods of nonproductive status. Congressman Smith 
suggested that an employer's action in laying off U.S. workers to avoid 
placing H-1B workers in nonproductive status for which they must be 
paid would be a violation of the ACWIA. We agree, with respect to H-1B-
dependent employers and willful violators, where the required showing 
for a prohibited displacement under section 212(n)(1)(E) or (F) is 
made. In addition, we note that a displacement in connection with a 
willful violation of the attestation requirements or a willful 
misrepresentation can bring enhanced penalties pursuant to section 
212(n)(2)(C)(iii). Additionally, other laws provide U.S. workers with 
rights and remedies for an employer's discriminatory practices. The 
names, telephone numbers, and websites of the three federal agencies 
responsible for enforcement of anti-discrimination laws are set forth 
in IV.E.4, above.
    The Department notes that--in determining whether the statutory 
criteria have been met, including the exception for nonpayment based on 
``the voluntary request of the nonimmigrant for an absence''--it will 
look closely at any situation where there is any question about whether 
the period of nonproductive time is truly voluntary. The Department 
will not under any circumstances consider the employer to be relieved 
of wage liability where there is a plant shutdown. Nor will the 
Department relieve an employer from liability simply because the 
employee agreed to periods without pay in the employment contract.
    ACIP and AILA questioned the basis for the Department's proposed 
requirement that workers be paid where required by other statutes such 
as FMLA or the ADA, and that the worker's period of unpaid leave be 
consistent with maintenance of status under INS regulations.
    The Department intended to say nothing more than that an employer 
must comply with other laws. The Department notes that FMLA only 
requires paid leave where the employer has a paid leave plan and either 
the employer or the employee wishes to substitute the paid leave for 
unpaid FMLA leave. Since the employer is required to offer H-1B workers 
the same benefits as U.S. workers, an employer would be required to 
provide H-1B workers with paid leave under any circumstances in which 
it is provided to U.S. workers. Enforcement of this requirement during 
periods where the employee voluntarily takes leave or is unable to 
work, is in accordance with the benefit obligations at section 
212(n)(2)(C)(viii). The Department also wishes to point out, as stated 
by both Senator Abraham and Congressman Smith, that during periods of 
nonproductive time, employers are required to provide fringe benefits 
as well as wages.
    ACIP and AILA agree with the proposal that an employer may choose 
to terminate an H-1B worker without violating the benching provision. 
ACIP also suggests that employers should not be held liable for the 
nonimmigrant's failure to leave the country.
    The Department agrees that an employer is no longer liable for 
payments for nonproductive status if there has been a bona fide 
termination of the employment relationship. The Department would not 
likely consider it to be a bona fide termination for purposes of this 
provision unless INS has been notified that the employment relationship 
has been terminated pursuant to 8 CFR 241.2(h)(11)(i)(A) and the 
petition canceled, and the employee has been provided with payment for 
transportation home where required by section 214(E)(5)(A) of the INA 
and INS regulations at 8 CFR 214.2(h)(4)(iii)(E). In accordance with 
current INS policy (see 76 Interpreter Releases 378), once an employer 
terminates the employment relationship with the H-1B nonimmigrant, 
regardless of any arrangements for severance pay or benefits, that H-1B 
employee must either depart the United States upon termination of his 
or her services, or seek a change of immigration status for which he or 
she may be eligible. Therefore, under no circumstances would the 
Department consider it to be a bona fide termination if the employer 
rehires the worker if or when work later becomes available unless the 
H-1B worker has been working under an H-1B petition with another 
employer, the H-1B petition has been canceled and the worker has 
returned to the home country and been rehired by the employer, or the 
nonimmigrant is validly in the United States pursuant to a change of 
status.
    Commenters also offered their views on the phrase ``entered into 
employment,'' one of the alternative triggers for an employer's 
obligation to pay the H-1B worker wages during periods of nonproductive 
status. The Department proposed that this term means the date when the 
H-1B worker makes himself/herself available for work, e.g., reports for 
orientation or training, performs work for the employer, or is under 
the control of the employer. One attorney-commenter (Hammond) expressed 
appreciation for this ``bright line test'' and described the 30-day 
allowance as reasonable.
    The Department received twenty essentially identical comments on 
this issue from individuals who urged payment of wages to nonimmigrants 
immediately on their arrival to the United States. The AEA suggested 
that the H-1B visa holder be given a firm starting date from his/her 
employer and that wages start from that date. AOTA commented that 
``entered into employment'' should mean when the nonimmigrant makes 
himself or herself available for work. ACIP urged the Department to 
look at the facts of the case, but urged as a general matter that an H-
1B worker has entered into employment when he or she has reported to 
the worksite, has been placed on the payroll, and has completed an I-9 
form; ACIP stated that H-1B workers should not be required to be paid 
for short periods of unpaid

[[Page 80172]]

training or orientation or medical examinations, since U.S. workers are 
not. AILA suggested that ``entered into employment'' occurs when the 
employee actually commences the orientation, training or work because 
ACWIA, in mandating payments by the 30-day and 60-day deadlines, 
appears to provide the employer with discretion regarding the starting 
date prior to those deadlines.
    The statutory language does not permit the Department to define the 
term ``entered into employment'' as the date the H-1B worker arrives in 
the United States. Likewise, payment of wages by the employer cannot be 
required before the H-1B petition is approved. On the other hand, the 
Department notes that the Fair Labor Standards Act itself requires that 
where there is an employment relationship (including where the worker 
has been promised employment, even if the employee is not yet on the 
payroll), both H-1B and U.S. workers be paid for orientation or 
training time required by the employer.
    The Department has concluded that the term ``entered into 
employment'' means the date on or after the date of need on the H-1B 
petition when the worker makes himself or herself available for work or 
otherwise comes under the control of the employer and includes all 
activities thereafter, such as waiting for an assignment, going to an 
interview or meeting with a customer, attending orientation, studying 
for a licensing examination.
    Several employers, attorneys and organizations also commented on 
the meaning of the phrase ``eligible to work for the employer.'' (Sixty 
days thereafter an H-1B nonimmigrant already in the United States 
legally under another visa (e.g., F-1 student visa) or on another H-1B 
visa with another employer must be paid for nonproductive time, even if 
the H-1B nonimmigrant has not yet entered into employment.) One law 
firm (Hammond) encouraged flexibility on the 60-day test. An employer 
(BRI) urged that ``eligible to work for the employer'' should be based 
on the agreement of employment terms between the employer and employee 
and determined by the date an employment agreement is entered into 
between the employer and employee or the completion of the visa 
process, whichever comes last.
    ACIP and Intel requested a specific exception from the benching 
regulations for export control licenses. ACIP explained that an 
employee who awaits a license to practice his or her profession in the 
United States, and is subject to the ACWIA benching provisions, is 
distinguishable from an export control license which must be procured 
by an employer in a process which can take three to six months. 
Therefore, ACIP suggested that the rule provide that where an export 
license and H-1B petition were filed concurrently but the export 
license is not approved within the 60-day window, the employer has an 
additional 90 days to obtain the license before being required to 
rescind the H-1B petition or pay the worker.
    The Department continues to believe that an employee is eligible to 
work on the date of need stated in the petition, provided that the 
petition has been processed and the employee has either received a visa 
or had his/her status adjusted (where the employee is in the United 
States). The Department sees no basis for any exception based on the 
export control license. Clearly the employee is legally eligible to 
work, but work is simply not available (even if due to circumstances 
beyond the employer's control). The Department agrees that a worker 
need not be compensated if the H-1B nonimmigrant voluntarily chooses 
not to make himself or herself available for work, such as where the 
nonimmigrant has not yet finished school or chooses to remain with 
another employer in order to finish a project. In each case, although 
the H-1B nonimmigrant is eligible to work for the employer, he or she 
need not be paid because of the nonimmigrant's voluntary action. The 
Department notes, however, that the nonimmigrant may be out of status 
if he or she does not report to work on the date of need.
    In response to the NPRM's proposals on nonproductive pay for part-
time workers, Senators Abraham and Graham and AILA objected to the 
regulatory language requiring workers be paid for hours that exceed the 
part-time number of hours on the INS petition where in practice the 
worker regularly works a longer schedule. AILA seeks to allow an 
employer which has less work than anticipated after filing an I-129 
petition for full-time work, to secure approval of a new I-129 petition 
for part-time work, after which the employer is obliged to pay only for 
the part-time work.
    In addition, Latour commented that the traditional 40-hour week is 
rapidly changing. It stated that some firms engage workers to perform a 
project which is completed in less than a year, and then the worker has 
several months off and may ``moonlight'' at a second job (presumably 
under a second petition). Latour assumed this practice would be 
considered ``part-time,'' and suggest that DOL focus on three issues in 
determining if there is a violation of the ``benching'' provision: (1) 
Whether the prevailing wage is being paid; (2) whether the worker is 
making a plausible living; (3) whether the nature of the employment 
schedule is usual and reasonable for the type of work.
    The Department agrees that nonproductive pay is based on the number 
of hours per week on the H-1B petition. The LCA has therefore been 
amended to alert employers that their H-1B employees should not 
regularly work more than the number of hours shown on the petition, 
which may be expressed as a range of hours. If the H-1B worker normally 
works full-time or a greater number of hours than shown on the 
petition, the Department will examine the facts and circumstances and 
charge the employer with misrepresentation where appropriate. In light 
of the importance of the distinction between part-time and full-time 
employment for purposes of the employer's wage obligations, the 
Department has modified the proposed LCA form to specify that the 
employer is to designate that the position(s) covered will be either 
part-time or full-time; a combination of part-time and full-time 
positions cannot be entered on a single LCA form.
    The Department cautions employers that time spent in training or 
studying to get a license is ordinarily compensable hours worked under 
the Fair Labor Standards Act without regard to any rules on payment for 
nonproductive time under the H-1B program.
    The Department agrees with AILA's comment that an employer may 
secure approval of a new H-1B petition for part-time work, after which 
the employer is obliged to pay only for the part-time work. The 
nonproductive pay computation is based on the petition that is in 
effect at the time the H-1B worker is in nonproductive status. 
Correspondingly, before INS approves a new petition that changes the 
work time (part-time to full-time or vice versa), the employer will 
need to file a new LCA that reflects the change.
    Finally, the Department disagrees that the scenario described by 
Latour is part-time work. Rather, it is full-time work with periods 
where no work is available due to actions of the employer, rather than 
the employee. This period of non-productive work must be paid unless 
the worker is temporarily unable to return to work because of alternate 
commitments or other factors within the control of the employee.

[[Page 80173]]

I. What Special Rule Does the ACWIA Provide for Academic Salaries? 
(Sec. 655.731(c)(4))

    The ACWIA provision on non-productive time (``benching'') 
(discussed in IV.H, above) has a special rule permitting ``a school or 
other education institution'' to apply an established salary practice 
which might result in an H-1B worker appearing to be ``unpaid'' for 
some part of a calendar year. See Section 212(n)(2(C)(vii)((V) of the 
INA as amended by the ACWIA. Specifically, that provision allows an 
education institution to disburse an annual salary to its H-1B workers 
and U.S. workers in the same occupational classification over fewer 
than 12 months if: (1) The H-1B worker agrees to the compressed annual 
salary payments prior to commencing payment, and (2) the salary 
practice does not otherwise cause any violation of the H-1B worker's 
authorization to remain in the United States.
    Congressman Smith and Senator Abraham both explained that this 
provision ``is intended to make clear that a school or other 
educational institution that customarily pays employees an annual 
salary in disbursements over fewer than 12 months may pay an H-1B 
worker in the same manner without violating clause (vii), provided that 
the H-1B worker agrees to this payment schedule in advance.'' 144 Cong. 
Rec. E2326 (Nov. 12, 1998); 144 Cong. Rec. S1275 (Oct. 21, 1998). 
Congressman Smith explained that Congress ``specifically limited this 
exemption to schools and educational institutions in recognition of 
their unique salary patterns.'' 144 Cong. Rec. E2326. Senator Abraham, 
on the other hand, stated:

    Because Congress is not aware of all the possible kinds of 
legitimate salary arrangements that employers may establish, the 
situation covered by subclause (V) may be merely illustrative of 
other kinds of legitimate salary arrangements under which an 
employee's rate of pay may vary. Accordingly, so long as an H-1B 
worker is not being singled out by such a salary arrangement, it is 
not Congress's intent that such a salary arrangement be treated as 
suspect under or violative of clause (vii) merely because there is 
no special provision like subclause (V) addressing it. To the 
contrary, if it is an arrangement that the employer routinely uses 
with U.S. employees as well as H-1B workers, it should be treated as 
presumptively not a violation of that clause.''

144 Cong. Rec.S1275 9 (Oct. 21, 1998).
    The one commenter on this provision, ACE, urged the Department to 
follow the law as written with no further regulation.
    As the Department explained in the NPRM, the Department believes 
that this provision is directed to the common practice by which 
colleges, universities, and other educational institutions disburse 
faculty salaries over a nine-or ten-month period, with no salary 
payments during the summer, between academic quarters, or over some 
other period during which the faculty member may be away from the 
institution. As the statute provides, this special rule applies only to 
schools and other educational institutions. Any attempts to apply the 
more general definition of organizations to which the special 
prevailing wage requirements apply (see section 212(p)(1) of the INA as 
amended by the ACWIA) would change the statutory mandate. The 
Department has concluded that the NPRM properly implements the 
statutory mandate and will adopt the provision as proposed.

J. What Actions or Circumstances Would be Prohibited as a ``Penalty'' 
on an H-1B Nonimmigrant Leaving an Employer's Employment? 
(Sec. 655.731(c)(10)(i))

    Section 212(n)(2)(C)(vi)(I) of the INA as amended by the ACWIA 
prohibits an employer from ``requir[ing] an H-1B nonimmigrant to pay a 
penalty for ceasing employment with the employer prior to a date agreed 
to by the nonimmigrant and the employer.'' This section requires the 
Department to ``determine whether a required payment is a penalty (and 
not liquidated damages) pursuant to relevant State law.'' As discussed 
in Sections L and M of the NPRM, section 212(n)(2)(C)(vi)(III) provides 
that the Department, after notice and opportunity for a hearing, ``may 
impose a civil money penalty for each such violation and issue an 
administrative order requiring the return to the [H-1B worker] of any 
amount paid in violation * * *, or if [the H-1B worker] cannot be 
located, requiring payment of any such amount to the general fund of 
the Treasury.''
    Senator Abraham explained:

    New clause (vi)(I) * * * directs that the Secretary is to decide 
the question whether a required payment is a prohibited penalty as 
opposed to a permissible liquidated damages clause under relevant 
State law (i.e. the State law whose application choice of law 
principles would dictate). Thus, this section does not itself create 
a new federal definition of ``penalty'', and it creates no authority 
for the Secretary to devise any kind of federal law on this issue, 
whether through regulations or enforcement actions.''

144 Cong. Rec. S12752 (Oct. 21, 1998). Congressman Smith further 
explained that ``[t]his provision was added because of numerous cases 
that have come to light where visa holders or their families were 
required to make large payments to employers because the worker secured 
other employment.'' 144 Cong. Rec. E2325 (Nov. 12, 1998).
    In the NPRM, the Department proposed to prohibit employers from 
attempting to enforce any such liquidated damages provisions without 
first obtaining a State court judgment ordering the H-1B worker to make 
such a payment. The Department explained its view that State courts 
were better versed than the Department to resolve State law questions 
posed by such matters. The Department also stated its intention to make 
it clear that employers cannot collect the additional $500 petition fee 
in the guise of liquidated damages, and noted its concern that some 
employers might attempt to collect liquidated damages in situations 
where the employers' unlawful conduct may have caused the H-1B worker 
to prematurely leave the employment.
    A number of commenters responded to the Department's proposals on 
this issue. Two commenters (Latour, Padayachee) endorsed the approach 
taken in the NPRM. Padayachee also expressed the view that only 
quantifiable liquidated damages should be claimable. A third commenter 
(TCS), generally agreed with the Department's approach, although noting 
some specific objections as identified below.
    The view most frequently expressed by other commenters was that the 
Department's approach was contrary to the intent of the ACWIA. These 
commenters (Senators Abraham and Graham and other Congressional 
commenters, ACIP, AILA, and other employers and employer 
representatives) viewed the proposal as inconsistent with the role 
intended for the Department under the ACWIA, i.e., to determine whether 
or not a specific liquidated damages provision is legal under State 
law. Nallaseth and SBSC asserted that it would be discriminatory to 
require employers to first secure a State court judgment in enforcing 
an agreed damages provision against an H-1B worker when none is 
required to enforce a similar provision involving a U.S. worker. While 
some commenters recognized that the Department's concern about the 
difficulty of identifying and applying State law to a particular 
dispute was well-founded, it was their view that Congress intended the 
Department, not the State courts, to shoulder this burden. Senators 
Abraham and Graham asserted that the proposal that an employer obtain a 
State court judgment as a precondition to enforcing its contractual 
agreement--a practice,

[[Page 80174]]

they stated, they were not aware of under any State's law--constituted 
an attempt by the Department to create federal law on this question in 
contravention of the statute's direction that State law was to be 
applied in resolving such matters. They stated that it was the 
intention of Congress not to require litigation over each such 
agreement, but instead to allow the Department to bring an enforcement 
action if it believes an agreement is punitive as a matter of State 
law.
    Congressional commenters and Network Appliance objected to any 
requirement that employers obtain a state court judgment where there is 
no disagreement between the parties. ACIP asserted: ``Requiring a state 
court judgment to enforce any part of a contract is an unreasonable 
intrusion upon the ability of parties to contract and limits their 
ability to settle disputes through mediation, arbitration or other 
forms of alternative dispute resolution. * * * [A]lthough we agree that 
individual state courts are much better versed in this area of their 
law for their state than the Secretary, it clearly was not Congress' 
intent to impose such a high burden on employers.'' TCS, on the other 
hand, asserted that a State court judgment should be a prerequisite to 
any finding of a violation by the Department, limiting its objection 
primarily to the Department's proposal that a State court judgment must 
be obtained, even where there is no dispute by the parties or they 
choose to resolve the dispute by settlement or otherwise.
    As an alternative to the Department's proposal, ACIP, AILA, and SIA 
suggested that the regulation set forth examples of acceptable 
reimbursements and examples of prohibited penalties. AILA and TCS 
requested that the Department prohibit any class-based complaint or 
relief in the administrative proceeding, i.e., to limit the relief to 
the particular H-1B worker who initiated the complaint. In a similar 
vein, AILA and ACIP argued that whether a provision is a penalty or 
liquidated damages should be inferred from the facts and circumstances 
of the case; thus the fact that a penalty is found in one case does not 
automatically mean all similar provisions are void. TCS asserted that 
the Department should adopt a rule that an employer cannot be held in 
violation of the ACWIA unless a State court first holds that an agreed 
damage provision is a penalty, and, that even where a State court so 
holds, the Department should not find an employer in violation unless 
it fails to cure the violation within a reasonable amount of time.
    TCS also objected to any required notice to employees that would 
suggest that an employer's ability to enforce a damages provision 
contained in the employment contract is limited, expressing concern 
that such notification would encourage H-1B workers to disregard their 
contractual obligations. AILA encouraged the Department to avoid a 
presumption that any ``agreed damage'' is an unenforceable penalty. 
ACIP objected to the Department's statement that it would examine 
``attempts by employers to collect damages where their violations of 
the INA [the H-1B program], or other employment law may have caused the 
H-1B worker to cease employment''--apparently viewing this statement as 
suggesting that employers might contrive to get workers to quit their 
employment in order to collect contract damages.
    Notwithstanding the Department's continued reluctance to identify 
and interpret State law, the Department now concurs with the view that 
Congress intended the Department to determine whether a provision is 
liquidated damages or a penalty. For the same reason, it believes there 
is no merit to the suggestion by TCS that the Department cannot find 
that an employer has violated the ACWIA's bar against punitive damages, 
unless a State court first rules that a violation has occurred. 
Furthermore, the Department agrees that it is unnecessary to obtain a 
court judgment or a ruling from the Department of Labor if an employee 
pays voluntarily or the matter is settled. The Interim Final Rule 
reflects the Department's revised position on this question.
    Under the Interim Final Rule, a complaint regarding an alleged 
attempt to enforce a penalty provision will be processed and 
investigated in the same way as other complaints by aggrieved parties 
under Subparts H and I. Thus, an individual who believes that an 
employer has sought to enforce a penalty provision should file a 
complaint with the Wage and Hour Administrator. After investigation, 
Wage and Hour will issue a determination in accordance with its 
analysis of the relevant State law, and, where violations are found, 
may assess a civil money penalty of $1,000 for each violation and order 
the return of any money paid by the worker(s) to the employer (or, if 
the worker(s) cannot be located, to the U.S. Treasury). A party 
aggrieved by Wage and Hour's determination may request a hearing before 
an ALJ; a party may obtain review of the ALJ's determination by the 
Department's Administrative Review Board.
    The Department agrees with the suggestion that the regulations 
contain some of the general principles applied in resolving whether a 
provision is a permissible liquidated damages provision or an 
impermissible penalty. It is drawn primarily from two legal reference 
publications (American Jurisprudence 2d; Restatement (Second) 
Contracts) that provide a general discussion regarding the differences 
between liquidated damage and penalty provisions. However, the 
decisional and statutory law of a particular State, as applied to the 
particular circumstances relating to the employment and contract at 
issue--not these general principles--will control the resolution of 
most disputes. Furthermore, we do not address other legal remedies that 
may be available to the parties to recover damages for an alleged 
breach of the employment agreement--matters outside the Department's 
charge under the ACWIA. Individual State law also will determine the 
particular state whose law will apply to the dispute, where significant 
aspects of the contract and employment relationship involve different 
States (or nations).
    The Department has also incorporated into the Interim Final Rule 
its proposal to examine attempts by employers to collect damages where 
violations of employment law may have caused the H-1B worker's 
premature termination of his or her employment. It is the Department's 
expectation that where there is a constructive discharge, or the 
employer has committed substantive violations of the H-1B provisions 
directly impacting on the employee (such as wage and benefit 
violations), State law would not permit the employer to collect the 
payment.
    The Department reiterates the point it made in the NPRM that, 
although State law will govern the enforceability of liquidated damage 
provisions in agreements, an H-1B employer nevertheless must comply 
with the requirements of Federal statute and regulation bearing upon 
the H-1B employment relationship. For example, irrespective of any 
contractual agreement to the contrary, an employer is prohibited from 
directly or indirectly allocating any of the $500 LCA fee (recently 
increased to $1,000) or other employer expenses to the H-1B worker (see 
Section 212(n)(2)(C)(vi)(II)). Thus an employer is barred from directly 
withholding the $500 or $1,000 fee from the H-1B worker's pay or from 
indirectly collecting the fee through a liquidated damages provision in 
the contract. The Department agrees that

[[Page 80175]]

liquidated damages may encompass other costs the employer has borne on 
behalf of the employee, such as transportation and visa processing 
assistance. Employers should be aware that liquidated damages may be 
withheld from the required wage only if permitted under the criteria 
for allowable deductions at 20 CFR 655.731(c)(7).
    With regard to the suggestion that the Department issue a rule 
limiting the relief available to the particular worker rather than 
allowing a particular determination to affect other cases or other 
workers, the Department will apply principles of administrative 
collateral estoppel (the legal principle limiting consideration of a 
dispute to only one court action), where appropriate, just as it would 
for any other employment law violation.
    The Department sees no merit to the proposal by TCS that an 
employer may be held in violation of the ACWIA' s punitive damages bar 
only where it fails to cure the violation within a reasonable time 
after a determination that an agreed damages provision is an 
unenforceable penalty. There is nothing in the language of the statute 
to suggest that penalties under this provision should be assessed 
differently than penalties under other provisions.

K. What Standards Apply To Determine If an Employer Received a 
Prohibited Kickback of the Additional $500/$1,000 Petition Filing Fee 
From an H-1B Worker? (Sec. 655.731(c)(10)(ii))

    The ACWIA prohibits an employer from ``requir[ing] an alien who is 
the subject of a [visa] petition * * * for which a fee is imposed under 
section 214(c)(9), to reimburse, or otherwise compensate, the employer 
for part or all of the cost of such fee. It is a violation for such an 
employer otherwise to accept such reimbursement or compensation from 
such an alien.'' The referenced filing fee is the ACWIA-enacted filing 
fee applicable to H-1B petitions, which is in addition to any other 
fees imposed by INS for filing H-1B petitions. The fee was created by 
the ACWIA, in the amount of $500; the October 2000 Amendments increased 
the fee to $1,000. The H-1B worker is not, in any manner, to pay or 
absorb the cost of any of the additional fee.
    Senator Abraham explained that new clause (vi)(II) ``prohibits 
employers from requiring H-1B workers to reimburse or otherwise 
compensate employers for the new fee imposed under new section 
214(c)(9), or to accept such reimbursement or compensation.'' 144 Cong. 
Rec. S12752 (Oct. 21, 1998); see also, 144 Cong. Rec. E2325 (Nov. 12, 
1998). Congressman Smith explained that ``Congress included this 
provision to make it very clear that these fees are to be borne by the 
employer, not passed on to the workers.'' Id.
    The proposed rule stated that the employee is not to be forced, 
encouraged, or permitted to rebate any part of the filing fee to the 
employer, directly or indirectly, e.g., through an intermediary such as 
an attorney, relative, or co-worker.
    The Department received three comments on this issue. All the 
commenters agreed that the statute prohibits employers from accepting 
reimbursement from the H-1B worker for the filing fee.
    AILA asserted that not all third-party reimbursements are 
prohibited (e.g., joint employment arrangements, cooperative or joint 
ventures). The Department agrees that the statute does not prohibit 
payment of the filing fee by a third party, nor does it require payment 
only from the employer. However, the Interim Final Rule does prohibit 
third-party payment if the third party receives or asks for 
reimbursement from the alien. The employer is held accountable even if 
it is a third party which violates the statute.
    The AFL-CIO asserted that the Department should state specifically 
that deductions from the alien's wages will be scrutinized to prevent 
subterfuge for repayment of the filing fee. The Department intends to 
be alert to abuse or subterfuge. The Interim Final Rule makes it clear 
that deductions to cover the fee are not allowed, even if the H-1B 
worker's pay is higher than the required wage.
    A third commenter (ITAA) contended that the Department does not 
have the authority to prohibit the alien from paying the expenses other 
than the filing fee. This issue regarding other expenses is discussed 
at Sec. 655.731(c)(7) and Section P.3 of the NPRM, concerning allowable 
deductions from the required wage.
    The Department has determined that the NPRM properly implements the 
statutory mandate that the employer not force, encourage, or permit an 
employee to rebate any part of the fee back to the employer or a third 
party, directly or indirectly, including payments through an 
intermediary such as an attorney, relative or co-worker. The Interim 
Final Rule, therefore, embodies the proposed rule. In addition, the 
Interim Final Rule takes into account the increased petition filing 
fee, enacted by the October 2000 Amendments. The Rule prescribes that 
for H-1B nonimmigrants admitted on petitions filed prior to December 
18, 2000, the fee ``kickback'' prohibited by this statutory provision 
is $500 (the amount of the filing fee as created by ACWIA), and that 
for nonimmigrants admitted on petitions filed on or subsequent to 
December 18, 2000, the prohibited fee ``kickback'' is $1,000 (the 
increased fee enacted by the October 2000 Amendments). In the event of 
an investigation, the Administrator will determine the amount of the 
statutorily-prohibited ``kickback,'' based on the filing date of the 
petition.

L. What Penalties and Remedies Apply If the Employer Imposes an 
Impermissible Penalty or Receives an Impermissible Rebate? 
(Sec. 655.810)

    The ACWIA enforcement provision on early termination penalties and 
filing fee kickbacks is self-contained and provides its own sanctions 
authority. The Department may impose a civil monetary penalty of $1,000 
for each violation, whether willful or non-willful, and may order the 
employer to reimburse the worker (or the Treasury, if the worker cannot 
be located) for any such payment. The ACWIA provision does not 
authorize debarment for the penalty and kickback violations.
    The Department proposed to adopt the ACWIA language verbatim. Three 
commenters (ACIP, AILA, TCS) encouraged an express provision 
prohibiting any class-based relief or res judicata effect and limiting 
an administrative finding of penalty and corresponding remedy to the 
particular H-1B worker for whom the violation was found. As discussed 
in IV.J, above, the Department will follow traditional principles of 
administrative collateral estoppel, if applicable, as it does under 
other employment laws.
    The Interim Final Rule adopts the statutory language without 
further elaboration.

M. How Did the ACWIA Change DOL's Enforcement of the H-1B Provisions? 
(Subpart I)

    Section 212(n)(2) of the INA as amended by the ACWIA provides 
specific authority to undertake ``random'' investigations of employers 
found to have previously violated their H-1B obligations and to 
undertake investigations of employers, in limited circumstances, based 
on information received from other sources that otherwise would be 
unable to submit complaints as aggrieved parties. The ACWIA also 
provides explicit employee whistleblower protections and enhanced 
monetary and debarment sanctions against employers who willfully 
violate H-1B requirements. The Department proposed to modify Subpart I 
of the current regulations to

[[Page 80176]]

reflect these additional provisions, integrating them into the existing 
regulatory scheme.
1. What Changes Has the ACWIA Made in the DOL's Enforcement Based on 
Complaints From ``Aggrieved Parties''? (Sec. 655.715)
    Section 212(n)(2) of the INA as amended by the ACWIA, states that 
``nothing in this subsection shall be construed as superseding or 
preempting any other enforcement-related authority under this Act * * 
*'' Senator Abraham and Congressman Smith both explained that this 
provision ``clarifies that none of the enforcement authorities granted 
in subsection 212(n)(2) as amended should be construed to supersede or 
preempt other enforcement-related authorities the Secretary of Labor or 
the Attorney General may have under the Immigration and Nationality Act 
or any other law.'' 144 Cong. Rec. S12755 (Oct. 21, 1998); 144 Cong. 
Rec. E2329 (Nov. 12, 1998). For this reason, and because the ACWIA did 
not by its terms purport to amend the Secretary's authority to 
investigate based upon complaints from an ``aggrieved party'' or the 
Secretary's regulations defining ``aggrieved party,'' the Department 
proposed no changes to the existing regulation defining ``aggrieved 
party'' at Sec. 655.715. Accordingly, any changes to those regulations 
would be outside of the scope of this rulemaking.
    Two comments were received regarding the issue of ``aggrieved 
party.''
    AILA asserted that a fair reading of ACWIA suggests that 
governmental entities other than DOL should be removed from the current 
regulatory definition of aggrieved party and should instead present 
``other source'' claims. The U.S. Department of State stated that 
requiring the Department of State to submit information only as an 
``outside source,'' with the compelling standard required by section 
212(n)(2)(G), discussed below, would be a mistake, as it could limit 
the effect of what could be an excellent source of information, and 
would therefore be detrimental to the effectiveness of the H-1B 
category.
    The Department has consistently defined ``aggrieved party'' to 
include ``a government agency which has a program that is impacted by 
the employer's alleged non-compliance with the [LCA].'' 20 CFR 655.715. 
The State Department is an aggrieved party, for example, because its 
mission is adversely affected if H-1B petitions are erroneously 
granted. Because of the responsibility of consular officers to reject 
visa applications of anyone the officer ``knows or has reason to 
believe * * * is ineligible to receive a visa'' (8 U.S.C. 1201(g); 22 
CFR 41.121(a)), the State Department would be required to expend its 
own investigative resources to ferret out illegal practices visa by 
visa if it did not provide information to the Administrator. Similarly, 
the State Department is required to withhold the granting of a visa and 
exclude the alien from the U.S. if it determines that the alien will 
become a public charge (8 U.S.C. 1182(a)(4); 22 CFR 40.41)--a 
possibility that increases significantly if an employer fails to pay 
its H-1B worker the required wage. Many of these violations would 
otherwise go undetected because of the inclination of H-1B workers and 
their employers to hide such matters from INS and the Labor Department.
    Therefore the Department has made no change in the definition of 
``aggrieved party.'' However, the Department will not consider 
information contained on the LCA or associated petition(s), including 
the documentation supporting the petition, to be the sole basis of a 
complaint under section 212(n)(2)(A) while section 212(n)(2)(G) remains 
in effect.
2. What Procedures Does the ACWIA Provide for Random Investigations? 
(Sec. 655.808)
    Section 212(n)(2)(F) of the INA as amended by the ACWIA authorizes 
random investigations of employers found by the Secretary, after the 
ACWIA's enactment on October 21, 1998, to have committed a willful 
failure to meet an LCA condition or a willful misrepresentation of 
material fact on an LCA. The statute authorizes such random 
investigations over a period of five years, beginning on the date of 
the willful violation finding. The same special scrutiny exists where 
an H-1B-dependent employer or willful violator is found by the Attorney 
General to have willfully failed to meet its obligation under section 
212(n)(1)(G)(i)(II) to offer a job to an ``equally or better 
qualified'' U.S. worker. The requirements of section 212(n)(2)(A) 
regarding investigation of complaints are not applicable to these 
random investigations.
    Senator Abraham observed that this provision adds a new section 
212(n)(2)(F) granting the Secretary authority to conduct random 
investigations of employers found after enactment of this act to have 
committed a willful violation or willful misrepresentation for five 
years following the finding. 144 Cong. Rec. S12754 (Oct. 21, 1998). 
Congressman Smith explained that this authority is ``in addition to the 
existing investigative authority in section 212(n)(2)(A), as heretofore 
exercised by the Secretary.'' 144 Cong. Rec. E2327 (Nov. 12, 1998).
    The Department proposed that the date of the willful violation 
``finding'' (which invokes the ``random investigation'' authority) 
would be the date of the agency's final determination of a violation 
for debarment purposes. 20 CFR 655.855(a); 59 FR 656757 (Preamble to 
the Final Rule). Although the NPRM proposed this interpretation, the 
Department sought comment on whether an earlier date, such as that of 
the Administrator's investigation finding or an ALJ's finding would be 
appropriate.
    Three comments were received relating to the proposed regulation on 
random investigation authority.
    IEEE expressed strong support for the new random enforcement 
provision in ACWIA and recommended that the regulations not be written 
or interpreted so strictly as to effectively prevent the Department 
from exercising this authority. Malyankar suggested directly surveying 
H-1B workers themselves at short intervals to determine how the program 
is being used and to detect possible abuses.
    AILA responded that only final action finding a willful violation 
or willful misrepresentation should trigger its authority to conduct 
random investigations.
    The Interim Final Rule, consistent with the AILA suggestion and the 
manner in which the current regulations address other Secretarial 
``findings,'' states that a willful violation ``finding'' within the 
meaning of the statutory provision occurs when the administrative 
review process is completed, as described in Sec. 655.855(b) of the 
regulations.
3. What Procedure Does the ACWIA Provide for Investigation Arising From 
Sources Other Than Aggrieved Parties? (Sec. 655.807)
    Section 212(n)(2)(G) of the INA as amended by the ACWIA authorizes 
the Secretary to investigate possible violations based on information 
provided to the Department by sources other than aggrieved parties. The 
Department may, upon personal certification by the Secretary, undertake 
an investigation under this authority when it receives specific 
credible information that provides reasonable cause to believe that a 
particular type of violation has occurred. The types of violations 
covered are: A willful failure to meet statutory conditions relating to 
wages, working conditions, a strike/lockout, and the displacement and 
recruitment provisions applicable to dependent employers and willful

[[Page 80177]]

violators. In addition, such an investigation may be undertaken where 
the information provides reasonable cause to believe that the employer 
has engaged in a pattern or practice of failures to meet any of these 
conditions; or a substantial failure to meet such a condition that 
affects multiple employees. The Department is also charged with 
developing a form for receiving information on these potential 
violations. The ACWIA specified that this provision would be effective 
until September 30, 2001; the October 2000 Amendments extended the 
effective period to September 30, 2003.
    The ACWIA limits the source who may provide information under this 
provision to a known source who is likely to have knowledge of the 
employer's practices, and specifically excludes information provided to 
the Secretary or to the Attorney General for purposes of securing 
employment of a nonimmigrant. However, the Secretary is authorized to 
commence an investigation under this provision if the information was 
obtained by the Secretary in the course of an investigation under the 
INA or any other Act.
    To allow employers to respond to the allegations before an 
investigation is commenced, the ACWIA provides that the Secretary shall 
ordinarily provide notice to the employer concerning the allegations. 
However, the Secretary is authorized to withhold the source's identity 
and is not required to provide this notice if the Secretary determines 
it would interfere with efforts to secure compliance with the 
requirements of the H-1B program.
    In explaining the purpose and effect of this provision, Senator 
Abraham stated:

    Subsection 413(e) grants the Secretary limited additional 
authority with respect to other employers to investigate certain 
kinds of allegations of failures to comply with labor condition 
attestations. The Secretary's authority under current law is limited 
to investigating complaints concerning such violations that come 
from aggrieved parties. * * * The rationale for this grant of 
authority is to make sure that if DOL receives specific, credible 
information from someone outside the DOL that an employer is doing 
something seriously wrong but that information comes from someone 
who is not an aggrieved party, DOL can nevertheless pursue the lead. 
* * *. Thus, this provision does not authorize `self-directed' or 
`self-initiated' investigations by the Secretary.

144 Cong. Rec. S12754 (Oct. 21, 1998). In contrast, Congressman Smith 
stated:

    Subsection 413(e) specifies a particular investigative process, 
to be used by the Secretary during the three-year period following 
enactment of this legislation. This process does not supplant or 
curtail the Secretary's existing authority in paragraph (2)(A) and 
does not affect the Secretary's newly-created authority under 
paragraph (2)(F) (`random investigations')* * *. This provision does 
not address the matter of ``self-directed'' or ``self-initiated'' 
investigations by the Secretary. * * * Congress' intent in enacting 
this special enforcement process was to endorse the Secretary's 
efforts to be more vigilant and effective in the enforcement of this 
Act, especially given the authorization of a substantial increase in 
temporary foreign workers.

144 Cong. Rec. E2327 (Nov. 12, 1998).
    The Department proposed regulatory language to integrate this 
``other source'' protocol with the Department's other enforcement 
procedures in a new Sec. 655.806. The Department additionally noted in 
the NPRM that it was developing a form to be used in receiving 
information from ``other sources'' that would be published for public 
comment.
    Eight comments were received regarding this provision.
    Three organizations representing employees (AFL-CIO, AOTA, IEEE) 
supported these provisions as essential to careful monitoring of the 
program. IEEE stated its view that it is important that the regulations 
not be written or interpreted so restrictively as to effectively 
prevent the Department from exercising this authority. The AFL-CIO 
commented that the ``integrated procedures'' for handling complaints 
from other sources will make it easier for workers and job applicants 
to follow the status of the complaint and ensure that the Department 
examines complaints against an employer in full.
    AILA commented that Congress, in providing DOL with the new other 
source enforcement authority, ``repudiated and eliminated the so-called 
`self directed' authority to initiate investigations.''
    The Department has long believed that directed (no complaint) 
investigations are appropriate where the Department becomes aware of a 
possible H-1B violation, whether in the course of an investigation of 
another employer, an investigation under another statute, or as the 
result of the receipt of information from some other source. To do 
otherwise would place Department staff in the untenable position of 
being forced to ignore knowledge of potentially serious H-1B violations 
secured in performance of their official duties, and would be a 
departure from the Department's practice under the H-1A nonimmigrant 
nurses program. The Department is also of the view that directed 
investigation authority is not precluded by the Act.
    However, the Department also believes that the explicit provisions 
of the ACWIA concerning random investigations of willful violators and 
investigations based on credible information from sources other than 
aggrieved parties allow it to conduct ``directed'' investigations in 
virtually all situations in which it might have done in the past. 
Consequently, at least through September 30, 2003 (the date the ``other 
source'' investigation authority sunsets), it is the Department's 
intention to conduct only investigations pursuant to complaints from 
aggrieved parties, investigations based on information from sources 
other than aggrieved parties (including information obtained by the 
Secretary during an investigation under the INA or any other Act), and 
random investigations of willful violators.
    AILA also requested that the Department define the terms 
``substantial'' and ``pattern and practice.''
    In the Department's view, it is unnecessary to define these terms 
in the regulations. The concept of a ``substantial'' violation, like 
``willful'' violation, has been in the statute since enactment of MTINA 
in 1991. Furthermore, ``pattern and practice'' is a recognized concept 
in employment law which requires no definition. Finally, the 
determination of whether there is reason to believe there is a pattern 
or practice of failures or a substantial failure to meet a condition 
that affects multiple employees are determinations that are necessarily 
fact-specific, based upon the facts and circumstances of a particular 
case.
    ACIP suggested that employers should be notified of receipt of 
complaints within 48 hours of receipt, and that a decision not to 
notify the employer should be a rare occurrence, happening only if the 
Department possesses clear evidence that the employer is likely to 
impede the investigation.
    The Department anticipates that a decision not to notify an 
employer of the substance of allegations against it is likely to be a 
rare occurrence. It is also the Department's experience that many 
employers quickly remedy violations when brought to their attention. 
However, the Department does not believe it is appropriate to specify 
the time period in which notification will occur, or to delineate a 
standard in the regulations.
    Kirkpatrick & Lockhart and Latour expressed their views that 
investigations should be initiated only on information from injured 
parties, while acknowledging that the scope of the provision goes 
beyond

[[Page 80178]]

``whistleblowers.'' The firms expressed particular concern about 
competitor complaints.
    Contrary to the views expressed by Kirkpatrick & Lockhart and 
Latour, the Department is of the view that the ``other source'' 
provision of the ACWIA was intended to extend to any source likely to 
have knowledge of the employer's practices or employment conditions, or 
of an employer's compliance with its attestation obligations. 
Furthermore, the Department has long considered a competitor to be an 
``aggrieved party,'' as defined in its current regulations at 
Sec. 655.715.
    ITAA noted that the proposed regulations correctly state that the 
``other source'' provisions expire on September 30, 2001, unless 
continued by future legislation, and suggested that the regulations 
should also identify other provisions that will ``sunset'' absent 
further action by Congress. The point is well taken. The Department 
notes that Congress in the October 2000 Amendments has, in fact, 
extended the effective periods for this and other provisions until 
2003. The Interim Final Rule identifies the provisions that will expire 
on particular dates, absent their extension by future legislation.
    AILA requested the opportunity to review and comment on the form 
that is being developed to receive ``other source'' information. One 
commenter (BRI) asserts that Department employees should not be allowed 
to complete forms on behalf of a ``source,'' suggesting that the 
Department's involvement might have a coercive effect.
    The Department has attached its proposed form to this rule in order 
to obtain the views of the public, as required by the Paperwork 
Reduction Act. The Department notes that for the convenience of the 
public and of the Department, it has designed one form for use both by 
aggrieved parties and by other sources. This will allow the Department 
to make a determination as to whether the source is aggrieved, and if 
not, whether the statutory standard is met, after review of the 
information submitted. The Department disagrees with the comment by 
BRI, noting that the ``other source'' procedure is initiated by the 
individual who has submitted information to the Department--not vice-
versa--and that the ACWIA expressly authorizes the Department to 
complete the form on behalf of the individual.
    The Department has made other procedural changes. Sections 
655.800(b), 655.806(a), and 655.807(b) of the Interim Final Rule 
provide that the Administrator may interview the complainant or other 
person supplying information to determine whether the statutory 
standards are met. (As a courtesy, the Administrator will notify the 
person providing the information if the standards have not been met, or 
if, after the determination by the Secretary, an investigation will be 
conducted.)
    The section has been restructured, in accordance with the 
Department's reading of the statute, to provide that the employer will 
ordinarily be provided information regarding the allegations and given 
an opportunity to respond after the Administrator has made an initial 
determination that the statutory standards are met, rather than prior 
to this determination. The Administrator will then review this 
information in order to determine if the allegations should be referred 
to the Secretary for a determination as to whether an investigation 
should be commenced. Where the Administrator has determined that 
notification to the employer should be dispensed with, the Secretary 
will be advised in the referral; there will be no review of this 
determination other than by the Secretary.
    Section 655.806(a)(3) (and the corresponding provision in 
Sec. 655.807(i)) is clarified based on the Department's enforcement 
experience to provide that the time to conduct an investigation may be 
increased where, for reasons outside of the control of the 
Administrator, additional time is necessary to obtain information from 
the employer or other sources to determine if a violation has occurred. 
It has been the Department's experience that employers do not always 
timely provide requested information; in other circumstances Wage-Hour 
must obtain documentation from other agencies, such as information from 
INS regarding petitions filed (especially where employers have not 
provided requested information or where needed to verify information 
supplied by employers).
4. What Protections Are Provided to Whistleblowers by the ACWIA? 
(Sec. 655.801)
    Section 212(n)(2)(C)(iv) of the INA as amended by the ACWIA 
provides explicit protection for H-1B employees who exercise their H-1B 
rights by complaining about a violation of the Act or cooperating with 
an investigation. An employer may not ``intimidate, threaten, restrain, 
coerce, blacklist, discharge, or in any other manner discriminate 
against [such] employee.'' ``Employee'' is defined to include former 
employees and applicants for employment. Like other whistleblower 
statutes, the ACWIA provision protects an employee's ``internal'' 
complaint to the employer or to any other person, as well as an 
employee who cooperates in an investigation or proceeding concerning an 
employer's compliance with the Act and these regulations. As Senator 
Abraham stated, this provision ``essentially codifies current 
Department of Labor regulations concerning whistleblowers.'' 144 Cong. 
Rec. S12752 (Oct. 21, 1998).
    Section 212(n)(2)(C)(vi) directs the Department and the Attorney 
General to establish a process to enable an H-1B worker who files a 
whistleblower complaint to remain in the United States and seek other 
appropriate employment for a period not to exceed the maximum period 
provided for the H-1B classification. As noted in the NPRM, the 
Department and the INS are working in close cooperation to develop this 
process. This mechanism, however, is not within the scope of this 
rulemaking.
    The whistleblower enforcement provision elicited five comments.
    APTA, AOTA, and IEEE expressed strong support for the statute's 
whistleblower provisions.
    AILA suggested that the ACWIA's anti-retaliation language 
protecting an employee from retaliation where the employee has 
disclosed information that the employee ``reasonably believes evidences 
a violation'' of the H-1B provisions covers only ``genuine infractions 
of law.'' It therefore suggested that the Department should amend its 
rule to make clear that the disclosure ``must be other than a de 
minimis violation.''
    The Department rejects this interpretation. The Department is of 
the view that Congress intended that the Department, in interpreting 
and applying this provision, should be guided by the well-developed 
principles that have arisen under the various whistleblower protection 
statutes that have been administered by this Department (see 29 CFR 
part 24). The Department also believes that, as in those programs, the 
parameters of the provision are best developed through adjudication 
rather than through rulemaking. The Department points out that the 
statutory test is whether the employer has discriminated against an 
employee because the employee disclosed information the employee 
reasonably believed evidenced a violation, or because the employee 
cooperated or sought to cooperate in an investigation or other 
proceeding. The Department believes that there is no basis for 
inferring an intention to protect only complaints of actual infractions 
of

[[Page 80179]]

law, or to exclude potential de minimis violations.
    BRI commented that the employer should not be liable for wrongful 
termination until found guilty by the appropriate authority. The 
Department agrees that an employer is not liable for wrongful 
termination until a final decision is issued in a Department of Labor 
proceeding.
5. What Changes Does the ACWIA Make in Enforcement Remedies and 
Penalties? (Sec. 655.810)
    Prior to the ACWIA's enactment, the INA authorized the assessment 
of a civil money penalty (up to $1,000 per violation) and debarment 
from the sponsorship of nonimmigrant aliens for employment (at least 
one year), among other unspecified remedies, for H-1B violations. In 
place of this ``unitary'' scheme, section 212(n)(2)(C)(i)-(iii) of the 
INA as amended by the ACWIA established a three-tier scheme for 
sanctions and remedies, depending upon the nature and severity of the 
violations. The first tier provides for up to $1,000 per violation and 
debarment for at least one year (for violations of the attestation 
provisions regarding a strike or lockout, or the dependent employer/
willful violator provisions regarding displacement; or for substantial 
violation of the attestation provisions regarding notice, the details 
of the attestation, or the dependent employer/willful violator 
provisions regarding recruitment). The second tier provides for up to 
$5,000 per violation and debarment for at least two years (for willful 
violations of any of the attestation provisions, willful 
misrepresentation, or violation of the whistleblower provisions). The 
third tier provides for up to $35,000 and debarment for at least three 
years (for willful violations of any of the attestation provisions or 
willful misrepresentation, in the course of which violation or 
misrepresentation the employer displaced a U.S. worker within the 
period beginning 90 days before and ending 90 days after the filing of 
an H-1B petition supported by the LCA). In each of the three penalty 
tiers, as in the previous statutory provision, the ACWIA authorizes the 
imposition of ``such other administrative remedies as the Secretary 
determines to be appropriate.''
    In explaining new clause (iii), Senator Abraham explained:

    The rationale for this new penalty is that there have been 
expressions of concern that employers are bringing in H-1B workers 
to replace more expensive U.S. workers whom they are laying off. 
Current law, however, requires employers to pay the higher of the 
prevailing or the actual wage to an H-1B worker. Thus, the only way 
an employer could profitably be systematically doing what has been 
suggested is by willfully violating this obligation. Otherwise, the 
employer would have no economic reason for preferring an H-1B worker 
to a U.S. worker as a potential replacement. Thus, the new penalty 
set out in new clause (iii) is designed to assure that there are 
adequate sanctions for (and hence adequate deterrence against) 
[willful violations of the wage provisions] by imposing a severe 
penalty on a willful violation of the existing wage-payment 
requirements in the course of which an employer `displaces' a U.S. 
worker with an H-1B worker.
    At the same time, Congress chose not to make the layoff itself a 
violation. The reason for this is that there are many reasons 
completely unconnected to the hiring of H-1B workers why an employer 
may decide to lay off U.S. workers. * * * Accordingly, it is 
important to understand that unlike the new attestation requirements 
imposed by the amendments to section 212(n)(1), clause (iii) of 
section 212(n)(2)(C) provides no new independent basis for DOL to 
investigate an employer's layoff decisions. The only point at which 
DOL can do so pursuant to clause (iii) is after it has already found 
that the employer has committed a willful violation of one of the 
pre-existing labor condition attestations.
    * * * At that point, and not before, provided that there is 
reasonable cause to believe that an employer had also displaced a 
U.S. worker in the course of committing that violation, it would be 
proper for DOL to investigate, but only in order to ascertain what 
penalty should be imposed. The definitions concerning 
``displacement'' and the like, set out in new 212(n)(3) and 
212(n)(4) of the Immigration and Nationality Act, and discussed in 
the previous portion of this section-by-section analysis dealing 
with the amendments to that Act made by section 412 of this 
legislation, apply in this context as well.

144 Cong. Rec. S12752 (Oct. 21, 1998).
    Congressman Smith explained that new clause (iii) ``clarifies that 
certain kinds of employer conduct constitute a violation of the 
prevailing wage attestation, and that other kinds of employer conduct 
are also prohibited in the H-1B program. * * * Congress intends that 
this new penalty will assure that there are adequate sanctions for (and 
hence adequate deterrence against) any willful violation of the 
existing wage-payment requirements in the course of which an employer 
`displaces' an American worker with an H-1B worker.'' 144 Cong. Rec. 
E2325 (Nov. 12, 1998).
    These penalty provisions do not apply to the ACWIA prohibitions on 
penalizing an H-1B worker for his or her early cessation of employment, 
or on requiring an H-1B worker to reimburse the filing fee. For these 
violations, the Department, instead, may impose a civil money penalty 
of $1,000 for each violation and reimbursement of the H-1B worker (or 
the Treasury if the worker cannot be located). Debarment is not 
available as a sanction for these violations.
    In the NPRM, the Department proposed that ``appropriate 
administrative remedies'' would include the imposition of curative 
actions such as providing notice to workers and affording ``make-
whole'' relief for displaced workers, whistleblowers, or H-1B workers 
who failed to receive proper benefits or eligibility for benefits.
    Senator Abraham and Congressman Smith had divergent views regarding 
the Secretary's authority to impose such remedies. Senator Abraham 
stated that these remedies ``do not include an order to an employer to 
hire, reinstate, or give back pay to a U.S. worker as a result of any 
violation an employer may commit.'' 144 Cong. Rec. S12752 (Oct. 21, 
1998). Congressman Smith, on the other hand, stated that ``Congress 
intends that such remedies will include `make-whole' relief for 
affected American workers (such as, in appropriate circumstances, 
monetary compensation to the American worker or reinstatement to the 
job from which the American worker was dismissed or placement in the 
job to which the American worker should have been hired).'' 144 Cong. 
Rec. E2325 (Nov. 12, 1998).
    Several commenters (Senators Abraham and Graham, AILA, Network 
Appliance, Rubin & Dornbaum, Satyam, and White Consolidated Industries) 
stated that the authority to seek make-whole relief has never been 
asserted by the Department and is beyond the authority granted to the 
Department by the ACWIA. Other Congressional commenters commented that 
the proposed regulations on the scope of administrative remedies go far 
beyond what the statute contemplates, without specifically referring to 
make-whole relief.
    After careful consideration, the Secretary remains persuaded that 
the plain language of the ACWIA (``the Secretary * * * may * * * impose 
such other administrative remedies * * * as the Secretary determines to 
be appropriate'') provides the Secretary the authority to award 
whatever relief is appropriate in the circumstances of a case, 
including make-whole relief. Since the Act already contains explicit 
authority for civil money penalties, back wages, and debarment, it 
seems apparent that Congress intended to allow the Secretary to order 
other appropriate remedies to cure the violations. In the case of 
displacement

[[Page 80180]]

or whistleblower violations in particular, such relief must logically 
include reinstatement and back pay. Nor does the Department believe 
that the fact that explicit language concerning such relief was not 
contained in the ACWIA, as Senator Abraham indicates was sought by the 
Administration, equates to an express legislative denial of such 
remedial authority to the Secretary.
    ITAA, ACIP, and Intel requested that the Department define the 
various terms used in the statute's three-tier scheme for violations.
    The Department notes that ``willful failure'' is currently defined 
in the regulations at Sec. 655.805(b). As discussed above, it is the 
Department's view that it is unnecessary to define these terms further 
in the regulations.
    SBSC sought assurances that ``punitive approaches'' would not be 
applied where there is an absence of negligence, fraud, or other 
blameworthy action. Intel and ACIP suggest that the Department should 
recognize, in effect, a good faith defense for an employer that is 
found in violation of the statute. Intel suggests that the Department 
should establish a practice akin to that provided for I-9 violations by 
8 U.S.C. 1324a(b)(6). This provision stipulates that under certain 
circumstances ``a person is considered to have complied with a 
requirement of this subsection notwithstanding a technical or 
procedural failure to meet such requirement if there was a good faith 
attempt to comply with this requirement.''
    In the Department's view, the ACWIA does not provide a general 
defense in the nature of those suggested by SBSC and Intel. Entirely 
missing from the statute is any provision comparable to 8 U.S.C. 
1324a(b)(6). At the same time, however, it should be noted that the 
Department is vested with some enforcement discretion and intends to 
exercise this discretion in accordance with the purposes served by the 
statute and the public interest. Where appropriate, the Department will 
consider the totality of the circumstances, including an employer's 
demonstrated good faith attempts at compliance, in fashioning remedies 
appropriate to the violation. In this regard, the Department notes that 
its regulations providing the factors to be considered in assessing the 
amount of civil money penalties include an employer's good faith 
efforts to comply, the gravity of the violations, and the violator's 
explanation of the violations. See Sec. 655.810(c) of the current 
regulations.
    Several individuals urged the imposition of heavy penalties upon 
violators. The AFL-CIO suggested in particular that the Department 
should make greater use of the debarment penalty in cases that are 
resolved through consent judgments or other means of settlement.
    The Department, of course, will be guided by the penalty scheme 
established by Congress and the Department's regulatory provisions 
governing debarment and the assessment of penalties. The ACWIA 
establishes a three-tier system for debarment and civil money 
penalties; the remedy in a particular case will depend upon the 
category of the violation involved and consideration of the regulatory 
factors, which may enhance or reduce a civil money penalty under the 
particular circumstances of the violation. The Department notes that 
the ACWIA particularly recognizes the gravity of willful violations, as 
demonstrated by the longer debarment period and authority to conduct 
random investigations. Accordingly, the Secretary will insist on 
debarment in appropriate cases.
    The individual commenters urged the Department to issue a 
regulation that informs American workers of their rights under the 
statute. ITAA also suggested that the regulations should address the 
Attorney General's role under the statute.
    The Interim Final Rule lays out the obligations of H-1B-dependent 
employers and willful violators, including the requirements--as laid 
out in Sections D and E of the NPRM--that they not displace workers, 
that they not place H-1B workers at worksites of other employers where 
U.S. workers are being displaced, that they recruit U.S. workers using 
industry-wide procedures, and that they offer the job to any U.S. 
worker who applies who is equally or more qualified than the H-1B 
workers. The rule also explains the provision for filing complaints 
with the Attorney General for violations of the hiring requirement. In 
addition, although there is no direct remedy for U.S. workers who are 
not employed by dependent employers or willful violators, they may file 
complaints with the Department.
    ITAA requested that the Department clarify enforcement regulations 
as they pertain to recruitment violations and specify that only H-1B-
dependent employers may be liable for such violations. The Interim 
Final Rule has been clarified to make clear that only an H-1B-dependent 
employer or willful violator may be held liable for a recruitment 
violation. The recruitment obligations of dependent employers are 
discussed in much greater detail in IV.E, above.
    Finally, on review of the NPRM, the Department notes that it had 
misconstrued the scope of the third tier of penalties. The highest 
level of penalties (up to $35,000 per violation and a minimum of three 
years of debarment) are applicable whenever any employer displaces a 
U.S. worker in the course of committing a willful violation of any of 
the attestation provisions or a willful misrepresentation--regardless 
of whether the employer is a dependent employer or willful violator 
subject to the new attestation provisions of the ACWIA. In the 
Department's view this construction is clear from a careful reading of 
the statutory language, as well as the statement describing this 
provision by Senator Abraham, quoted above, at 144 Cong. Rec. S12752 
(Oct. 21, 1998). Application of this higher penalty will arise only 
where the Department determines that the employer has committed a 
willful violation of an attestation requirement--e.g., the employer has 
willfully failed to pay the required wage to H-1B workers. If the 
Department determines that the employer has displaced a U.S. worker 
within the period between 90 days before and 90 days after the LCA was 
filed, and that the employer has replaced that worker with an H-1B 
worker whom the employer has willfully failed to pay the required wage, 
the employer will be subject to a CMP of up to $35,000 per violation of 
the attestation requirements; in addition, the Department will advise 
INS, which shall not approve any petitions for at least a three-year 
period. The Interim Final Rule has been amended to correct this 
provision.
    In addition, the H-1B enforcement provisions contained in Subpart I 
of Part 655 have been restructured to make them clearer and more user-
friendly. Changes have also been made to comport with the Department's 
enforcement experience. Specifically, as discussed in IV.M.3, above, 
Sec. 655.806(a)(3) (and the corresponding provision in Sec. 655.807(i)) 
clarifies that the time to conduct an investigation may be increased 
where, for reasons outside of the control of the Administrator, 
additional time is necessary to obtain information from the employer or 
other sources to determine if a violation has occurred. Sections 
655.800(b), 655.806(a), and 655.807(b) provide that the Administrator 
may interview the complainant or other person supplying information to 
determine whether the statutory standards are met.

[[Page 80181]]

    Various clarifying changes have been made to proposed Sec. 655.810, 
setting forth the remedies available to the Administrator upon a 
finding of violations. As discussed in IV.G, above, the Department has 
determined that certain benefits are in the nature of compensation for 
services rendered, and have a monetary value to workers and monetary 
cost to employers. Therefore such benefits are more in the nature of 
wages than of working conditions. Paragraph (a) of Sec. 655.810 makes 
it clear that payment of unpaid benefits can be ordered by the 
Administrator pursuant to the Administrator's authority to order 
payment of back wages under section 212(n)(2)(D).
    In addition, the Interim Final Rule clarifies at 
Secs. 655.810(a)(14) and 655.810(a)(16) that the Department will issue 
CMP assessments for violations of the public access provisions of the 
Act, or for regulatory violations, such as a failure to cooperate in 
the investigation (see Sec. 655.800(c)). The Department will also 
assess CMPs for violations of the recordkeeping requirements, where the 
violation impedes either 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. Under 
the existing regulations (Sec. 655.810(b)), CMP assessments may be 
imposed for any violations of the regulations.
    Finally, in conformance with the Federal Civil Penalties Inflation 
Adjustment Act of 1990, as amended (see 28 U.S.C. 2461 note), new 
Sec. 655.810(f) provides for inflationary adjustments to be made, by 
regulation, to civil money penalties in accordance with a specified 
cost-of-living formula. Such adjustments will be published in the 
Federal Register. The amount of the penalty in a particular case will 
be based on the penalty in effect at the time of the violation.

N. What Modification to Part 656 Does the ACWIA Provide for the 
Determination of the Prevailing Wage for Employees of ``Institutions of 
Higher Education,'' ``Related or Affiliated Nonprofit Entities,'' 
``Nonprofit Research Organizations,'' or ``Governmental Research 
Organizations''? (Sec. 655.731(a)(2), Sec. 656.40)

    The ACWIA amends the INA (Section 212(p)(1), 8 U.S.C. 1182(p)(1)) 
to require that the computation of the prevailing wage for employees of 
institutions of higher education, nonprofit entities related to or 
affiliated with such institutions, nonprofit research organizations, 
and Governmental research organizations only take into account the 
wages paid by such institutions and organizations in the area of 
employment. In addition, section 212(p)(1) provides that with respect 
to professional athletes as defined in section 212(a)(5)(A)(iii)(II), 
where the job opportunity is covered by professional sports league 
rules, the wage prescribed by those rules shall be considered the 
prevailing wage. This ACWIA directive concerning academic and research 
institutions affects both the H-1B program and the Permanent Labor 
Certification program, since both programs use the prevailing wage 
computation procedures set out in the Permanent program regulation at 
20 CFR 656.40. The provision regarding professional athletes affects 
only the Permanent program.
    On March 20, 1998 (63 FR 13756), the Department published a Final 
Rule amending its Permanent Labor Certification regulation to change 
the effects of the en banc decision of the Board of Alien Labor 
Certification Appeals in Hathaway Children's Services (91-INA-388, 
February 4, 1994), which required prevailing wages to be calculated by 
using wage data obtained by surveying across industries in the 
occupation in the area of intended employment. The 1998 Final Rule, in 
effect, allows prevailing wage determinations made for researchers 
employed by colleges and universities, Federally Funded Research and 
Development Centers (FFRDCs) operated by colleges and universities, and 
certain Federal research agencies to be made by using wage data 
collected only from those entities. The Department stated in the 
Preamble to that Final Rule that the amendment to the regulation also 
changed the way prevailing wages are determined for those entities 
filing H-1B labor condition applications on behalf of researchers, 
since the regulations governing the prevailing wage determinations for 
the Permanent program are followed by State Employment Security 
Agencies (SESAs) in determining prevailing wages for the H-1B program 
as well.
    The ACWIA provision goes considerably beyond the regulatory 
amendments made by the Department. The ACWIA provisions extend to all 
nonprofit research organizations and Governmental research 
organizations. In addition, the ACWIA provisions extend not only to 
researchers, but to all occupations in which institutions of higher 
education, nonprofit entities related to or affiliated with such 
institutions, and nonprofit research organizations or Governmental 
research organizations may want to employ H-1B workers or aliens 
immigrating for the purpose of employment.
    In describing the application of this provision, Senator Abraham 
stated in pertinent part:

    Paragraph 212(p)(1) provides that the prevailing wage level at 
institutions of higher education and nonprofit research institutes 
shall take into account only employees at such institutions. The 
provision separates the prevailing wage calculations between 
academic and research institutions and other non-profit entities and 
those for for-profit businesses. Higher education institutions and 
nonprofit research institutes conduct scientific research projects, 
for the benefit of the public and frequently with federal funds, and 
recruit highly-trained researchers with strong academic 
qualifications to carry out their important missions. The bill 
establishes in statute that wages for employees at colleges, 
universities, nonprofit research institutes must be calculated 
separately from industry.

144 Cong. Rec. S12756 (Oct. 21, 1998).
    The Department consulted with the INS on the definitional issues, 
since that agency has addressed similar issues with regard to the 
implementation of the additional fee required for petitions on behalf 
of H-1B nonimmigrants. The employers excluded from that fee are the 
same as the employers specified in the ACWIA provision concerning 
prevailing wage determinations. The Department worked with the INS in 
developing the following definitions contained in its Interim Final 
Rule published on November 30, 1998 (63 FR 65657), 8 CFR 
214.2(h)(19)(iii)(B):

    ``An institution of higher education, as defined in section 
801(a) of the Higher Education Act of 1965;
    ``An affiliated or related nonprofit entity. A nonprofit entity 
(including but not limited to hospitals and medical or research 
institutions) that is connected or associated with an institution of 
higher education, through shared ownership or control by the same 
board or federation, operated by an institution of higher education, 
or attached to an institution of higher education as a member, 
branch, cooperative, or subsidiary;
    ``A nonprofit research organization or Governmental research 
organization. A research organization that is either a nonprofit 
organization or entity that is primarily engaged in basic research 
and/or applied research, or a U.S. Government entity whose primary 
mission is the performance or promotion of basic and/or applied 
research. Basic research is research to gain more comprehensive 
knowledge or understanding of the subject under study, without 
specific applications in mind. Basic research is also research that 
advances scientific knowledge, but does not have specific immediate 
commercial objectives although it may be in fields of present or 
potential commercial

[[Page 80182]]

interest. Applied research is research to gain knowledge or 
understanding to determine the means by which a specific, recognized 
need may be met. Applied research includes investigations oriented 
to discovering new scientific knowledge that has specific commercial 
objectives with respect to products, processes, or services.''

    The INS Interim Final Rule also provides, in relevant part, that a 
nonprofit organization or entity is one that is qualified as a tax 
exempt organization under Section 501(c) (3), (4) or (6) of the 
Internal Revenue Code of 1986 (IRC) and has received approval as a tax 
exempt organization from the Internal Revenue Service, as it relates to 
research or educational purposes.
    In the NPRM, the Department sought comments on the proper 
definitions of the entities to which the ACWIA prevailing wage 
provisions apply. The Department shared these comments with INS in the 
development of definitions to apply to both the INS and Departmental 
regulations. Comments received by INS concerning these definitions have 
also been considered by the Department and are included in the record 
of this rule.
    In order to determine prevailing wages as required by the ACWIA, 
the Department explained that it is also necessary to determine the 
appropriate universe(s) to survey, and to determine the availability of 
relevant, reliable data. The Act sets forth the four types of 
organizations in two groups: educational institutions and related 
research organizations; and other nonprofit research organizations and 
Governmental research organizations. The Department stated, however, 
that the Act does not seem to require that prevailing wages be 
determined separately for those two groups, as distinguished from a 
universe consisting of all four groups, or surveys of the four types of 
organizations separately, or some other combination.
    The Department explained in the NPRM that it has reason to believe 
that it may not be feasible to identify the different kinds of entities 
that might comprise educational institutions' related or affiliated 
nonprofit entities, or nonprofit research organizations. If those 
entities cannot be identified, it may not be possible to properly 
define the universe that should be surveyed to determine the 
appropriate prevailing wages. One possible alternative the Department 
said it would explore is the use of the prevailing wage data it 
currently collects in surveying institutions of higher education to 
determine prevailing wages for one universe consisting of institutions 
of higher education, affiliated or nonprofit research institutions, and 
nonprofit research organizations. The Department also stated that data 
currently being collected by the Office of Personnel Management (OPM) 
may be able to be used to determine prevailing wages for Federal 
Governmental research organizations.
    The Department sought comments on the appropriate universes to use 
in determining prevailing wages for the entities (employers) mentioned 
in the ACWIA, methods to develop an appropriate universe, and the 
feasibility and appropriateness of the Department's using data 
collected from institutions of higher education and Federal 
Governmental research organizations to determine prevailing wages.
    In the period since the NPRM was published, INS has published its 
Final Rule implementing the fee provisions of the ACWIA (65 FR 10678; 
February 29, 2000). These regulations include provisions defining 
organizations which are exempt from the H-1B petition filing fee. As 
discussed above, the ACWIA defines exempt organizations as those 
organizations described in section 212(p)(1). More recently, the 
October 2000 Amendments (Pub. L. 106-311) amended section 214(c)(9) of 
the INA to provide a modified definition of organizations exempt from 
the fee. However, this recent provision has no effect on the 
Department's prevailing wage obligation.
    The Department received six comments on this section of the NPRM. 
The American Council on Education (ACE) also attached a copy of its 
comments on the INS Interim Final Rule. The Department also reviewed 
the comments received by INS pertaining to this issue.
    With respect to definitions of covered entities, ACE and the 
Association of Independent Research Institutes (AIRI) commended the 
efforts of federal agencies to jointly develop regulatory definitions, 
and urged that all regulations that implement ACWIA sections include 
identical definitions, regardless of the agency source of the 
regulation.
    AIRI stated that the proposed definitions adequately cover its 
member institutions--independent, nonprofit research institutions 
performing basic and clinical research in behavioral sciences. 
Similarly, the Smithsonian Institution stated that it had no problem 
with the definitions, stating that it believes that it qualifies as 
both a nonprofit research organization and as a governmental research 
organization.
    ACE observed that the new section 212(p)(1) references only those 
institutions included in section 101(a) of the Higher Education Act of 
1965. (ACE pointed out a typographical error in the NPRM, which 
referenced section 801 of the Higher Education Act rather than section 
101(a).) The Higher Education Amendments of 1998 (Pub. L. No. 105-244, 
112 Stat. 1581 (Oct. 7, 1998)), reauthorized the Higher Education Act 
and made a number of amendments. Institutions contained in sections 
101(a) and (b) of the Act as amended in 1998, 20 U.S.C. 1001(a) and 
(b), were formerly contained in 20 U.S.C. 1201(a), which itself 
incorporated 20 U.S.C. 1088. ACE stated its belief that Congress 
inadvertently neglected to reference section 101(b) as well as section 
101(a) of the Higher Education Act as amended in 1998 when it passed 
the ACWIA. ACE requested that the definition of an ``institution of 
higher education'' contained in the NPRM therefore be modified to 
include both section 101(a) and section 101(b), pending clarification 
by the Department of Education or a technical amendment. Unless this is 
done, ACE contends, some categories of higher education, such as 
independent medical colleges or graduate universities, might not 
qualify for the academic prevailing wage determination.
    ACE further stated, with respect to definitions, that the NPRM did 
not define a ``governmental research organization.'' Both AILA and ACE 
stated that the definition should indicate that such organizations 
include all federal, state, and local government laboratories 
conducting scientific and/or scholarly research. ACE also noted that 
FFRDCs are operated by contractors rather than the Federal Government 
itself. ACE suggested that FFRDC contractors should be eligible for the 
academic prevailing wage if they are institutions of higher education, 
affiliated or related nonprofit entities, nonprofit research 
organizations, or governmental research organizations. ACE also 
recognized the problem inherent in applying the prevailing wage 
methodology provided for by section 212(p)(1) to for-profit contractors 
that operate FFRDCs. Nonetheless, ACE indicated it considered all 
FFRDC's to be members of the academic research community, and expressed 
hope that the Department will work with the ACE and the FFRDC 
contractor community to develop an appropriate solution to allow all 
academic researchers to be treated equally.
    ACE also urged that the definition of ``affiliated or related 
nonprofit entity'' include, in addition, those nonprofit research 
hospitals which have an

[[Page 80183]]

historic affiliation with universities but do not meet the strict 
definition of ``affiliation'' in the INS Interim Final Rule. ACE 
proposed a specific modification of the definition to accommodate these 
hospitals. Similarly, AILA maintained in the comments it submitted to 
INS, that ``[c]ertain non-profit or governmental (non-research) 
institutions may have arrangements for the sharing of information, 
training or research with educational institutions, yet would not by 
this definition [of affiliated or related non-profit entity] be exempt 
from the fee.''
    Finally, ACE urged that the definition of nonprofit organizations 
or entities be modified so that a state or local organization exempt 
from tax under IRC Section 115 or under an applicable state law 
qualifies as a nonprofit organization or entity for purposes of the 
ACWIA. By doing so, ACE contends, the Department's regulation would be 
consistent with the INS Interim Final Rule.
    The Research Corporation of the University of Hawaii (RCUH) sought 
clarification regarding its status. RCUH explained that it was 
established by the State of Hawaii as a ``public instrumentality,'' 
part of the University of Hawaii ``for administrative purposes only,'' 
and non-profit under state law but not under the IRC. It expressed the 
view that both DOL and INS had failed to consider the special category 
of public/private semi-autonomous, non-profit research organizations 
created by other government agencies, and that they fit within the 
intent of the ACWIA language regarding non-profit research 
organizations.
    In its comments on the definition provisions of the NPRM pertaining 
to nonprofit research organizations and Governmental research 
organizations, AILA maintained that the use of the word ``scientific'' 
connotes a natural science like chemistry or physics, but not a social 
science like history or sociology. In addition, AILA opined that the 
distinction between basic research and applied research is often a 
distinction drawn within the natural sciences, and that the NPRM 
therefore implies that DOL believes that ACWIA amendments covers only 
nonprofit organizations engaged in natural science research. The ACWIA 
amendments, according to the AILA, broadly refer to research and 
nowhere introduce the language limiting the amendment to natural 
science research.
    With respect to the definition of ``nonprofit research 
organization,'' AILA opined that nonprofit research organizations 
engaged in substantial research should be covered by the ACWIA 
amendments, whether or not research is the nonprofit's primary purpose. 
AILA suggested that the Department's definition of nonprofit research 
organizations include ``organizations primarily engaged in research and 
organizations engaged in research as an essential or significant 
element of their operations.''
    A law firm representing Texas school districts and private schools 
(Tindall and Foster) commented that elementary and secondary 
educational institutions should be exempt from the filing fee because 
they operate on tighter budgets than institutions of higher education 
and because of the critical shortage of bilingual teachers. That 
commenter also stated that ACWIA prevailing wage provisions should 
include elementary and secondary education institutions.
    With regard to the comments by ACE that the definition of ``(a)n 
institution of higher education'' presented in the NPRM should be 
modified to include those institutions contained in section 101(b), as 
well as those contained in section 101(a) of the Higher Education Act, 
as amended by the Higher Education Amendments of 1998, the Department 
believes it is constrained by the unambiguous statutory language to 
include only those institutions in section 101(a). Furthermore, there 
is no indication in the legislative history as viewed in conjunction 
with the history of the Higher Education Amendments to indicate 
Congress intended to include section 101(b).
    Concerning the view expressed by ACE and AILA that the definition 
of a ``Governmental research organization'' should include state and 
local government laboratories conducting scientific and/or scholarly 
research, the Department has concluded that by Congress' use of the 
initial capital ``G'' in the word ``Governmental'' in the statute, 
Congress intended to limit the provision to the Federal research 
organizations. In the INA, the words ``Government'' and ``government'' 
appear numerous times. It appears that only when a small ``g'' is used, 
does the term include state and local as well as Federal government 
agencies. See the discussion in C. Stine, ``Out of the Shadows: 
Defining `Known to the Government' in the Immigration Reform and 
Control Act of 1986,'' 11 Fordham Int'l L.J. 641, 653 (Spring 1988); 
see also Kalaw v. Ferro, 651 F. Supp. 1163 1169-70 (W.D.N.Y. 1987). 
Furthermore, throughout the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 
(Oct. 21, 1998), of which the ACWIA is a part, it appears that a 
capital ``G'' is used to mean the United States government or the 
government of a foreign nation, while a small ``g'' is used to refer to 
state, local, and tribal governments (unless the complete term 
``Federal government'' is used). See also, State Bank of Albany v. 
United States, 530 F.2d 1379, 1382 (Ct. CL. 1976).
    The Department agrees with the view expressed by ACE that the 
status of entities contracting with FFRDCs determines the application 
of the special provisions of Section 212(p)(1). An academic institution 
operating an FFRDC, for example, would obtain the prevailing wage 
determination applicable to academic institutions. The determination of 
prevailing wages for for-profit employers that operate FFRDCs is 
outside the scope of the proposed rule and is not addressed in this 
document.
    As noted above, ACE recommended that the definition of ``[a]n 
affiliated or nonprofit entity'' be modified to include other 
``nonprofit research hospitals'' that do not meet the definition of 
``affiliation'' in the Department's NPRM and the INS Interim Final Rule 
and, because their primary mission is patient care, do not meet the 
definition of a ``nonprofit research organization.'' Specifically, ACE 
recommended that the phrase ``or through a documented understanding or 
affiliation'' be added to the definition. The Department is of the 
view, however, that the definition of ``affiliated or related nonprofit 
entity'' in the NPRM and the INA Interim Final Rule is consistent with 
the ordinary meaning of the phrase. The definition proposed by ACE is 
inappropriately broad and would likely include many entities in 
addition to the ones about which ACE and AILA are concerned. 
Consequently, the Department has decided not to adopt the modification 
to the definition of ``affiliated or nonprofit entity.''
    In support of its view that the definition of a nonprofit 
organization or entity should be modified to include organizations 
exempt from tax under section 115 of the IRC (26 U.S.C. 115) or under 
an applicable state law as a nonprofit organization or entity, ACE 
stated that INS covers such organizations in its interim rule. To the 
contrary, the INS Interim Final Rule at 8 CFR 214.2(h)(iv) does not 
provide that organizations can qualify as nonprofit entities on the 
basis of being exempt from tax under IRC Section 115 or under an 
applicable state law, but instead provides at Sec. 214.2(h)(iv):

    For purposes of paragraphs (h)(19)(B) and (C) of this section, a 
nonprofit organization or entity is one that is qualified as a tax 
exempt organization under section 501(c)(3),

[[Page 80184]]

(4) or (6) of the Internal Revenue Code of 1966 (26 U.S.C. 
501(c)(3), (c)(4) or (c)(6)) and has received approval as a tax 
exempt organization from the Internal Revenue Service, as it relates 
to research or educational purposes.

The preamble to the INS Interim Final Rule (63 FR 65658) does 
acknowledge that certain organizations (e.g., churches) qualify for 
nonprofit status without a notice from the IRS confirming such status. 
(It is unlikely that such organizations would be institutions of higher 
education and related or affiliated institutions, or nonprofit and 
Governmental research organizations.) The INS goes on to state that it 
believes that most employers of specialty occupation workers claiming 
an exemption will be able to meet the evidentiary requirement specified 
in the rule, either with a notice from the IRS or other documents 
demonstrating the United States employer's nonprofit status. The 
Department agrees with these statements by INS. The preamble to the INS 
rule does not indicate that nonprofit status will in any instance be 
determined by the employer's tax exempt status pursuant to IRC Section 
115 or state law. Moreover, we see no reason to include entities 
encompassed by Section 115 within the definition of nonprofit entities. 
Section 115 does not purport to be a list of tax-exempt organizations, 
but rather is a reference to the kinds of state income which are 
excluded from gross income in determining income tax. Furthermore, the 
Department believes that it is generally accepted that nonprofit status 
is determined by an entity's status under section 501(c). If Congress 
wanted an entity's nonprofit status to be determined by state law, 
Congress could have expressly so provided.
    Based on the foregoing, this rule provides, as does INS' Interim 
Final Rule, that a nonprofit organization or entity is one that is 
qualified as a tax exempt organization under IRC section 501(c)(3), 
(c)(4) or (c)(6), and has received approval from the Internal Revenue 
Service as it relates to research or educational purposes.
    As indicated above, AILA believed the Department was implying in 
the NPRM that the ACWIA amendments and the definitions in the NPRM 
pertaining to nonprofit research organizations and Governmental 
research organizations only applied to organizations engaged in natural 
science research. The definitions of basic research and applied 
research used in the NPRM (and the INS interim rule) are based on the 
definitions of ``Basic Research'' and ``Applied Research'' found on 
pages 4-9 of Science & Engineering Indicators--1996, published by the 
National Science Foundation (NSF). The materials contained in the NSF 
publication indicate that these definitions apply to the social and 
behavioral sciences (which include psychology, sociology and other 
social sciences), as well as the natural sciences (which include all 
physical, earth, atmospheric, biological and agricultural sciences). 
NSF staff have confirmed that the NSF definitions of basic and applied 
research apply to both the social and natural sciences. These 
definitions are used in NSF's resource surveys and are well understood 
by members of the research community. The Department has revised the 
regulation to provide that ``research'' includes research in the 
sciences, social sciences, and humanities.
    The Department has also concluded that the definition of nonprofit 
research organization should be limited to organizations primarily 
engaged in research. We believe this is most consistent with the 
statutory phrase ``research organization.'' Furthermore, Senator 
Abraham's statement, quoted above, indicates a specific Congressional 
intent that the determination of the prevailing wage not include other 
types of nonprofit entities. In addition, since workers in all 
occupations for which nonprofit research entities file H-1B labor 
condition applications or applications for alien employment 
certification are potentially affected by the ACWIA prevailing wage 
amendments, the proposed modification could affect large numbers of H-
1B workers not engaged in research or related activities, thereby 
increasing the possibility of an adverse effect on U.S. workers who are 
not engaged in research or related activities. The Department believes 
such a construction would not be consistent with Congressional intent.
    As indicated above, AILA indicated in its comments that the groups 
included in prevailing wage determinations should only include 
``similarly employed'' individuals. This issue is outside the scope of 
this rulemaking. However, it is the Department's position that all 
occupations included within an OES occupational group for which 
prevailing wage determinations are provided are ``similarly employed.'' 
The Department also notes that the OES does collect data for faculty 
members by certain disciplines in accordance with an agreement reached 
with the academic community.
    With regard to the collection of prevailing wage data and 
prevailing wage determinations, ACE and AIRI strongly supported the 
Department's approach as the most feasible solution to meeting the 
ACWIA requirements. These two organizations observed that institutions 
of higher education, affiliated and related research institutions, and 
nonprofit research organizations, are comparable for prevailing wage 
purposes due to the similarity of their missions and employment of H-1B 
nonimmigrants. ACE recommended a separate category for governmental 
research organizations based on their understanding that pay scales and 
wages for government research labs and other related activities are 
established and predetermined by federal, state and local governments, 
and do not necessarily correspond to the other three groups. The 
Smithsonian Institution opposed this approach, and urged the Department 
to treat all groups as a single universe for purposes of determining 
prevailing wage levels. The Smithsonian also noted that the NPRM did 
not address the issue of how organizations in the four groups are to 
make their status known to the local SESA for prevailing wage 
determinations. Moreover, the Smithsonian recommended that the 
Department follow the example of the INS for I-129W, with no additional 
evidentiary requirements.
    ACE also expressed concern regarding the Department's treatment of 
independent academic wage surveys, stating its view that much DOL and 
state and local government academic wage information is inaccurate due 
to inclusion of an insufficient number of academic institutions. It 
therefore encouraged the Department to adopt independent surveys of 
academic wages.
    AILA argued that the division of employer groups into two distinct 
subparagraphs in section 212(p)(1) is indicative of Congressional 
intent to treat the two groups separately. AILA further commented that 
the groups included in the prevailing wage determination should only 
include similarly employed individuals, as distinguished from a group 
of occupations. AILA also stated that similarly employed workers should 
include reference to the skills and knowledge required by the position.
    As noted in the NPRM, the Department does not believe that the 
ACWIA requires that the four types of organizations be grouped in any 
particular way in determining the universe for prevailing wage surveys. 
The Department agrees with AIRI and ACE that there are substantial 
similarities among employment found in colleges and universities, 
affiliated or

[[Page 80185]]

related nonprofit entities, and nonprofit research organizations. 
Therefore, the Department plans to use the data it currently collects 
in surveying institutions of higher education to determine prevailing 
wages for institutions of higher education, related or nonprofit 
entities, and nonprofit research organizations.
    The Department also agrees with ACE that pay scales for 
Governmental research laboratories and other related activities are 
established by the Federal government and do not necessarily correspond 
with the three other groups mentioned above. For this reason, the 
Department does not contemplate including Governmental research 
organizations in the same universe as the other three types of 
organizations unless the technical problems in determining prevailing 
wages for the Government research organizations prove to be 
insurmountable. The Department intends to use data currently being 
collected by the Office of Personnel Management relating to Federal 
Government employment to determine prevailing wages for Federal 
Government research organizations if certain technical issues can be 
satisfactorily resolved. One possible alternative approach would be to 
use Government-wide prevailing wage data by occupation as a proxy for 
prevailing wages in Government research organizations.
    As an interim measure, since the prevailing wage provisions were 
effective on enactment of the ACWIA, the Department has issued a 
directive that provides that prevailing wages for institutions of 
higher education, affiliated or nonprofit entities, nonprofit research 
organizations and Government organizations should be based on the wages 
now being collected by the Occupational Employment Statistics Program 
for colleges and universities. General Administrative Letter No. 2-99, 
(GAL 2-99) dated April 23, 1999, ``Subject: Availability and Use of 
Occupational Employment Statistics Survey Data for Alien Labor 
Certification Purposes.'' With regard to ACE's comments on use of 
independent academic wage surveys, the Department points out that its 
guidance in GAL 2-98, dated October 31, 1997, ``Subject: Prevailing 
Wage Policy for Nonagricultural Immigration Programs,'' allows 
employers to submit their own surveys, which will be used by the SESA 
to determine prevailing wage if they meet the required standards.
    With respect to the suggestion from the law firm that elementary 
and secondary educational institutions should be made exempt from the 
filing fee and should be included within the scope of the prevailing 
wage provisions, the Department notes that the fee provision has been 
modified by the October 2000 Amendments to exempt such organizations, 
but no such modification was made to the prevailing wage provisions.
    The Smithsonian Institution in its comments points out that one 
issue not addressed in the NPRM is how the categories of employers are 
to make their status known when they ask the local SESA for a 
prevailing wage determination. These provisions have been in effect 
since enactment of the ACWIA and the Department has not found that any 
additional paperwork requirements are necessary. The Department 
anticipates that employers which are entitled to this provision will 
make themselves known. If additional guidance is necessary, the 
Department will provide it.
    The regulatory text consistent with the above discussion is 
incorporated in the rules for the Permanent program, 20 CFR part 656, 
Sec. 656.40(c). Conforming changes are made to cross-reference this 
provision in Sec. 656.40(a) and in the H-1B regulations at 
Sec. 655.731(a)(2) and (3). In addition, the related provisions 
concerning prevailing wages for academic institutions and certain 
Federal research agencies at Sec. 656.3 (definition of ``Federal 
research agency'') and Subpart E, Sec. 656.50, are deleted.
    Finally, Section 415(b) of the ACWIA provides that these special 
prevailing wage provisions apply to computations made for applications 
filed on or after the date of enactment of the ACWIA, and to 
applications filed earlier ``to the extent that the computation is 
subject to an administrative or judicial determination that is not 
final as of such date.'' Thus, as discussed above, the amendments made 
to Secs. 655.731(a)(2) and 656.40 are effective immediately, and apply 
to all cases in which the determination of the prevailing wage was not 
yet finally determined administratively pursuant to the regulations at 
Parts 655 and 656. Moreover, they are applicable to any cases pending 
in Federal court which were not finally decided where the prevailing 
wage determination was under review, as of the date of enactment.

O. What H-1B Regulatory Matters, in Addition to the ACWIA Provisions, 
Are Addressed in This Interim Final Rule?

    In the NPRM, the Department re-published for further notice and 
comment some of the provisions of the Final Rule promulgated in 
December 1994 which had been proposed for comment on October 31, 1995, 
during the pendency of the NAM litigation. That litigation resulted in 
an injunction against the Department's enforcement of some of these 
provisions on Administrative Procedure Act procedural grounds (National 
Association of Manufacturers v. Reich, No. 95-0715, D.D.C. July 22, 
1996).
    As explained in the NPRM, some of the provisions of the Final Rule 
were modified in the NPRM in light of ACWIA requirements and others in 
light of comments received in response to the October, 1995 proposal.
    This Interim Final Rule is based on the Department's consideration 
of all comments received, both on the 1995 proposal and the recent 
NPRM.
1. What Are the Standards or Restrictions for Placement of H-1B Workers 
at Locations Other Than Those Identified on the Original LCA? 
(Sec. 655.735)
    In the NPRM, the Department dealt separately with three related 
matters concerning the work locations of H-1B workers and the movement 
of such workers to new locations. These matters, which are of 
significant concern to users of the H-1B program, were: the regulation 
concerning short-term placement of H-1B workers at worksites not 
covered by any LCA (NPRM Section O.1); the interpretation of the term 
``place of employment''/''worksite,'' which affects many of the 
employer's LCA obligations (NPRM Section P.1); and the interface among 
the regulatory provisions affecting the ``roving'' or ``floating'' of 
H-1B workers away from their home base worksite(s) (NPRM Section P.2). 
Because the reactions of commenters indicated some confusion about the 
interplay among these three matters, they are addressed in the 
following combined discussion.
a. What Are the Opportunities and Guidelines for Short-Term Placement 
of H-1B Workers at Worksite(s) Outside the Location(s) Listed on the 
LCA? (NPRM Section O.1)
    Regulations to authorize short-term placement of H-1B workers at 
places of employment outside the areas of intended employment listed on 
the employer's LCA(s) were first published by the Department in the 
December 20, 1994 Final Rule. The structure and application of this 
short-term placement option assumes that the new location to which an 
H-1B worker is sent is, in fact, a ``place of employment'' or 
``worksite'' for that worker. However, as discussed below, not every 
physical location at which an H-1B worker's duties are

[[Page 80186]]

performed will constitute a ``worksite'' for that worker (see 
subsection b, below). It is important for employers to recognize that 
if the location is not a ``worksite'' for that H-1B worker, then the 
short-term placement provision will not be applicable to that worker at 
that location and, consequently, the placement of the worker there will 
not be subject to the requirements of this section of the regulation 
(see IV.O.1.b and c, below). The following discussion of the short-term 
placement option is, therefore, based on the assumption that the H-1B 
worker(s) will be temporarily placed at worksites which are not covered 
by an LCA.
    Prior to promulgation of the short-term placement option, an 
employer was not permitted to employ a worker at a worksite in any area 
unless the employer had a certified LCA covering that area of 
employment. Section 655.735(b)(4) of the 1994 Final Rule provided the 
short-term placement option, whereby ``the employer's placement(s) of 
H-1B nonimmigrant(s) at any worksite(s) in an area of employment not 
listed on the employer's labor condition application(s) shall be 
limited to a cumulative total of ninety (90) workdays within a three-
year period, beginning on the first day on which the employer placed an 
H-1B nonimmigrant at any worksite within such area of employment.'' 
This provision was intended by the Department to allow employers 
greater flexibility in deploying their H-1B workers in response to 
business needs and opportunities in new areas. The Department 
recognized that an employer could, in any such situation, choose to 
file a new LCA covering the new worksite at which it intended to place 
H-1B workers. However, the Department sought to provide a mechanism by 
which an employer--desiring to move its H-1B worker(s) quickly, or 
contemplating a temporary operation in a new location--could be 
accommodated under the program without the delay or obligations 
involved in filing a new LCA. With that goal in mind, the regulation 
authorized an employer to use H-1B worker(s) at worksite(s) in an area 
of employment not covered by an existing LCA for a total of 90 workdays 
within a three-year period, without having to file a new LCA for that 
new area. Essentially, the Department created a limited exception to 
the rule that there must be an LCA covering every worksite at which an 
H-1B worker is employed. By creating this exception, the Department 
enabled employers wishing to use H-1B worker(s) to respond immediately 
to an opportunity or a problem in a non-LCA location without waiting to 
prepare and file an LCA for that location. If the situation requiring 
quick response by H-1B worker(s) was resolved within the regulation's 
``short-term'' window, then a new LCA would never be required. If, on 
the other hand, the H-1B worker(s) would be needed at worksite(s) in 
the new area for a longer period of time, the employer would have ample 
time to prepare and file a new LCA while already using the H-1B 
worker(s) there. The ``short-term'' placement regulation set forth in 
the 1994 Final Rule specified that the ``short-term'' 90-day period 
would be calculated by totaling all days of work by all the employer's 
H-1B workers in the area of employment (covering all worksites within 
that area), beginning with the first workday of any H-1B worker at any 
worksite in that area. The 90-day period was applied separately to each 
new area of employment (i.e., a separate 90-day period was available 
for each new city or commuting area).
    This provision was enjoined because of lack of appropriate notice 
and comment, in the NAM decision. In the meantime, the provision was 
published for comment in the October 31, 1995, Proposed Rule. The 
Department received eight comments in response to the 1995 proposed 
rule. All eight commenters considered the proposed ``short-term'' 
placement option to be unworkable. Several commenters (ACIP, Intel, 
Microsoft, Motorola, NAM) described this option as particularly 
burdensome to employers with many employees in positions where movement 
is required as a normal incident of job duties.
    ACIP, Intel, and Microsoft commented that large employers, with 
many employees dispersed over a number of worksites, did not have the 
practical ability to keep track of cumulative work days for H-1B 
workers for every location to which the employees travel for business. 
Microsoft added that the ``short-term'' placement option effectively 
prevented H-1B employees from participating in joint development 
projects with development partners. Microsoft recommended that the rule 
be revised to increase the number of short-term placement days from 90 
to 180 and that the regulation impose the time test on a per employee 
basis, rather than on a location basis; apply it to a specific worksite 
and not any worksite within the area of employment; and require a new 
LCA only when the principal place of employment is changed. Intel and 
ACIP recommended that the Department revise its approach to the roving 
employee to one which differentiates between companies that are 
dependent on foreign workers (employee base is comprised of more than 
15 percent 
H-1B workers) and those that are not dependent. Such a system, Intel 
opined, would enable the Department to better focus its enforcement 
activities, while not penalizing non-dependent employers with excessive 
paperwork. ACIP further suggested that additional paperwork 
requirements should apply only when travel to another location involves 
``performance of services'' and the H-1B worker does not remain under 
the ``sole control'' of the H-1B employer. ACIP also suggested that 
additional H-1B workers should be able to travel to any location for 
which an LCA is already on file for that employer and occupation, 
without any additional paperwork. AILA and NAM objected to the 
cumulative nature of the proposed rule and its application to an entire 
area, rather than to a given work site. ACIP, along with Coopers & 
Lybrand and CBSI, recommended that the 90-day limit should apply to one 
employee at one specific worksite, rather than for all of the 
employer's H-1B workers.
    Based on the comments received in response to that 1995 
publication, the 1999 NPRM proposed and requested comments on a 
modified version of the provision--allowing the employer to utilize the 
``short-term'' placement option in an area of employment without an LCA 
until any individual 
H-1B worker works for 90 days at any worksite or combination of 
worksites in the area of employment. Under the proposal, the 90 
workdays would be counted on a per-worker basis. The proposal specified 
that as soon as one H-1B worker has worked more than 90 workdays within 
that area of employment, no more work can be performed by any H-1B 
worker at any worksite in that area unless, and until, the employer 
files and ETA certifies an LCA for the area. In other words, the entire 
workforce and all worksites in the area of employment would be subject 
to a new LCA once any one H-1B worker has worked 90 days in a three-
year period in the area.
    Twenty commenters addressed the NPRM revisions to the short-term 
placement rule, including those who commented in both 1995 and 1999.
    The AFL-CIO objected to the existence of a short-term placement 
option. It expressed the view that the Department had given H-1B 
employers an unnecessary and harmful ``benefit of the doubt'' in the 
proposed regulation, and that employers may use short-term placement to 
avoid prevailing wage and notice requirements.

[[Page 80187]]

    Several commenters considered the rule to be complex and burdensome 
for employers. Seven commenters (ACIP, AILA, Cowan & Miller, Rubin & 
Dornbaum, White Consolidated Industries, Network Appliance, FHCRC) 
stated that the Department's proposal unrealistically requires the 
human resources staff at a large company to keep track of personnel 
movement from multiple divisions or offices to various customer sites 
around the country. Three commenters (Senators Abraham and Graham, 
Congressional commenters, and Oracle) stated that the Department has no 
authority, explicit or implicit, to impose what they believe is a 
complex monitoring requirement under the rule.
    AILA stated that the Department's proposed modification to the rule 
was unresponsive to employers' fundamental concerns. AILA recommended 
that the regulation should have no bright-line test for the amount of 
time constituting temporary placement versus permanent re-assignment to 
the new non-LCA worksite. AILA suggested that the distinction between 
temporary and permanent placement should be based ``on all of the facts 
and circumstances of the situation,'' including such facts as whether 
the H-1B worker's ``place of abode'' has changed, whether the worker's 
business card shows the new work address, and whether the worker has a 
phone line and work station at the new worksite. AILA also suggested 
that, if a time test were to be used in the regulation, it should 
operate as a presumption rather than a bright-line rule (i.e., once the 
time limit had been reached, a presumption would arise that the 
worker's place of employment had changed, but the employer could rebut 
the presumption by showing that the placement was temporary in light of 
the facts and circumstances). Further, AILA suggested that the 
determination of temporary versus permanent placement should be 
examined in an enforcement context, rather than be subject to a bright-
line rule.
    Eight commenters expressed concerns regarding the proposed 
regulation's time test of 90 cumulative workdays for any H-1B worker 
over a three-year period. Four commenters (ACIP, AILA, Oracle and SBSC) 
stated that limiting an individual worker to an average of 30 workdays 
per year (90 days over a three-year period) in any one geographic area 
would severely limit a company's ability to do business in the area. 
Two commenters (ACIP, AILA) stated that 90 workdays over three years is 
unreasonable; they suggested that the regulation allow 90 days per year 
rather than 90 days over three years (i.e., three times the cumulative 
workdays stated in the NPRM time test). Three commenters (ACIP, ITAA, 
and Hammond) suggested that the time test be applied to each H-1B 
worker for each worksite (i.e., the 90-day count would restart if the 
worker moved to a different worksite within the same area of 
employment, and one worker's accumulation of 90 workdays would have no 
effect on the rest of the employer's H-1B workforce in that area). In 
this regard, two commenters (Hammond, ACIP) commended the Department's 
modification of the regulation to provide for a workday count on a 
worker-by-worker basis (rather than a cumulative count of all workdays 
of all of an employer's H-1B workers in the area of employment), but 
ACIP nevertheless asserted that the modified regulation was unworkable 
since large employers do not track workers in such a manner. Two 
commenters (University of California, ACE) stated that the limitation 
of 90 cumulative workdays in a three-year period may have an adverse 
effect on academic researchers, whose research activities would not 
likely exceed 90 consecutive days but may require more than 90 
cumulative workdays in a three-year period. These commenters suggested 
an exception to the time test, for researchers working for higher 
education institutions, government labs and research affiliated units 
for activities directly related to their research where the research 
requires travel and work at sites that have one of a kind equipment.
    The Department has carefully considered the views of the AFL-CIO, 
which objected to the existence of the short-term placement option 
because of the potential for employer avoidance of H-1B program 
obligations applicable to the workers' new worksites. The Department 
shares this concern that employers' obligations be met and that U.S. 
workers be protected through the prevailing wage and notice 
requirements. However, the Department believes that it is appropriate 
and important to provide H-1B employers with a regulatory mechanism to 
accommodate legitimate business needs while, at the same time, 
preserving the program's protections. Without the regulation's short-
term placement option, an employer would, quite literally, be unable to 
place any H-1B worker at any worksite that is not already covered by an 
LCA; the employer would have to prepare and file an LCA and await ETA 
certification prior to dispatching any H-1B worker(s) to such a 
worksite. Considering the fast pace of business--especially in 
industries such as information technology--the delay involved in the 
LCA process could handicap an employer which needed to use its H-1B 
workers to respond to a business need or opportunity at a non-LCA 
worksite. The Department considers the short-term placement option to 
be a reasonable means by which the employer may meet its obligations 
both in its business and in the H-1B program. This option allows the 
employer to move its H-1B worker(s) quickly, but also requires that the 
employer continue to comply with 
H-1B standards (e.g., paying ``home base'' wages plus travel expenses 
to H-1B worker(s) in short-term placement). By setting a limitation on 
short-term placements, the regulatory provision also assures that the 
employer which needs to use its H-1B worker(s) at the new worksite 
beyond such a time-frame will have to fully comply with all statutory 
obligations for that location (e.g., provide notice, obtain local 
prevailing wage rate and make any pay adjustments needed to meet that 
rate).
    The Department recognizes that some employers and interest groups 
view the short-term placement option as impractical and burdensome. 
These commenters view the regulation as requiring employers to keep 
detailed records of placement of H-1B worker(s) to non-LCA worksite(s) 
in order to ensure that the workday limit is not exceeded by any 
worker. The Department considers it important to emphasize that the 
short-term placement regulation creates an option for the employer, and 
that no employer is required to use this provision. Further, the 
regulation does not impose any recordkeeping requirements on an 
employer that chooses to make short-term placements; the employer may 
utilize any appropriate means to ensure that the workday limit is not 
exceeded. Obviously, an employer may avoid all the perceived 
``burdens'' of the short-term placement regulation simply by 
withholding its H-1B worker(s) from all non-LCA worksites until after 
the LCA filing process is completed and the worker(s) can be sent to 
the new worksites pursuant to new LCAs. Or, an employer may promptly 
file a new LCA when the first H-1B worker is sent to a non-LCA 
worksite, so that the LCA is certified well before the workday limit is 
reached.
    The Department also reminds employers that--regardless of whether 
they are taking advantage of the short-term placement option--they are 
obliged to be vigilant in maintaining their compliance with the H-1B

[[Page 80188]]

program's requirements, many of which are worksite-specific. The 
Department presumes that employers are taking appropriate steps to 
assure such compliance, which would logically include the employer's 
being aware of the locations of its H-1B worker(s). An employer which 
is unable to determine the whereabouts of its H-1B worker(s) would be 
handicapped in assuring that the worker(s) are employed in full 
compliance with an approved LCA (e.g., worksite notice, strike/lockout 
prohibition, local prevailing wage rate) or in accordance with the 
short-term placement option (e.g., workday limitation, travel costs).
    The Department has carefully considered but is unable to 
accommodate the suggestion that the short-term placement option have no 
``time test'' but, instead, allow a post hoc determination of temporary 
versus permanent placement based on ``all the facts and 
circumstances.'' Such an approach would, in the Department's view, be 
too vague to be effective from either the employer's or the worker's 
perspective. A bright-line test, based on workdays, affords certainty 
to the employer and to workers regarding applicable standards (e.g., 
clarity as to when a new prevailing wage or notice would be needed).
    After fully considering the commenters' views, however, the 
Department has concluded that the NPRM's time test--90 cumulative 
workdays for any one H-1B worker at any worksite or combination of 
worksites in one area of employment over a three-year period--should be 
modified to provide a more reasonable accommodation for employers' 
business needs. In the Interim Final Rule, the Department has 
maintained the worker-by-worker count of workdays (which most 
commenters endorsed) and has made an annual allocation, rather than a 
three-year accumulation, of workdays (which several commenters 
suggested). In addition, the Interim Final Rule incorporates the 
concept of short-term placement being determined, in part, based on 
facts such as the H-1B worker's maintenance of his/her workstation at 
the ``home office,'' as indicated by one of the commenters. Using these 
concepts, the Interim Final Rule provides that an employer may make a 
``short-term'' placement or assignment of an individual H-1B worker at 
any worksite or combination of worksites in a non-LCA area for a total 
of 30 workdays in a one-year period (either the calendar year or the 
employer's fiscal year, whichever the employer chooses). The Rule also 
provides that the placement may be expanded by as much as an additional 
30 workdays (thus, 60 workdays in a one-year period) if the employer is 
prepared to show that the worker maintains a workstation at the home 
office, spends a substantial amount of time at the home office, and 
maintains his/her ``place of abode'' in the area of the home office. 
Thus, under this regulation, the employer would be able to place an 
individual H-1B worker at worksite(s) in a non-LCA area for as many as 
60 workdays in a one-year period, and have that placement be considered 
``short-term'' so as not to trigger the requirements for filing and 
complying with a new LCA for the area of employment. Once an H-1B 
worker exceeds the workday limitation in a one-year period, the 
employer would not be permitted to continue the placement of that 
worker or any other H-1B worker in the same occupation in that area of 
employment, until one year from the beginning of the next one-year 
period (either the beginning of the next calendar year, or the 
beginning of the employer's next fiscal year) or until an LCA is in 
place.
    The Department believes that any greater presence by an employer's 
workforce in an area cannot be considered short-term and should require 
the employer both to provide notice to the local workforce and to pay 
local prevailing wages. Under the Interim Final Rule, the employer may 
choose how to use the annual available workdays in placing an H-1B 
worker ``temporarily'' at worksite(s) in the area of employment (i.e., 
use them all consecutively, or at different times within one year). 
While some other measurement might have been preferred by some 
commenters, the Department believes that, as a matter of common sense 
and fairness, a worker's placement at a worksite for more than the 
equivalent of 12 normal workweeks in a calendar year (60 workdays, 
five-day work weeks) cannot reasonably be characterized as ``short-
term,'' whether the workdays are taken in one block or spread over a 
period of time.
    The Department recognizes that some commenters have criticized the 
regulation as being confusing and difficult to use. Therefore, the 
Interim Final Rule contains clarifying changes which make the provision 
more user-friendly. For example, the Rule includes a definition of the 
``one-year period'' for short-term placements (i.e., either the 
calendar year or the employer's fiscal year, whichever the employer 
chooses) and provides a clear description of the employer's choices of 
actions when the time limit for short-term placement has been reached 
(i.e., file an LCA to continue using H-1B workers, or discontinue use 
of H-1B workers until the next one-year period begins). These 
clarifications--made in response to commenters's concerns--do not 
affect the substantive requirements of the regulation.
    The Department has concluded that the same standards should apply 
to all H-1B employers. A profusion of time tests and rules for 
different industries or types of employers would increase the 
complexity of the regulation without appreciable benefit in achieving 
the purposes of the program. The employer's option of timely filing an 
LCA for the location should alleviate any ``burdens'' which might 
otherwise argue for special rules or exceptions for certain industries.
    One commenter (ACIP) suggested that the regulation should authorize 
employers to use a ``national LCA'' which would permit free movement of 
H-1B workers to any and all worksites around the country without the 
need to monitor the number of workdays at any particular worksites. 
According to ACIP, some employers pay a wage which is greater than the 
prevailing wage in any part of the country, as measured by the OES 
survey, the source of prevailing wage determinations issued by the 
Employment Service, or other published, nationwide data sources, so 
that their placements of H-1B workers at any worksites (whether 
temporarily or permanently) would have no adverse impact on local 
wages. Since this concept of a ``national LCA'' was not set forth for 
notice and comment in the NPRM, the Department cannot consider the 
matter for purposes of the Interim Final Rule. However, the Department 
is of the view that the concept warrants consideration. The Department, 
therefore, proposes it here for comment and possible inclusion in the 
Final Rule. In particular, the Department seeks comments as to whether 
such an LCA would be feasible under the statutory scheme, and also 
seeks information and suggestions as to how such an LCA would address 
each of the statutorily-prescribed attestation elements (e.g., 
collective bargaining notice or worksite notice; local prevailing wage 
rates; strike/lockout).
    The Department wishes to emphasize that it considers the various 
components of the short-term placement rule to be non-severable. After 
the injunction was issued by the court in NAM, some confusion arose 
concerning the effect of the injunction--i.e., whether short-term 
placements were permitted without any time restriction, or whether 
employers would be required to place H-1B workers only at worksites in 
areas of

[[Page 80189]]

employment with certified LCAs. The Department has approached this 
matter on a case-by-case basis, taking into account the confusion 
created by the NAM decision. However, with the issuance of this Interim 
Final Rule, the Department considers all such confusion to have been 
dispelled. Therefore, the Department cautions employers that--except in 
accordance with the strict requirements of the short-term placement 
option--the H-1B provisions of the INA and the Department's regulations 
require that an LCA be filed for any and all worksites where H-1B 
workers are employed. Violations of any of the provisions of the short-
term placement option will result in its inapplicability in its 
entirety.
i. When Is the Short-Term Placement Option Available? (Sec. 655.735)
    As explained in the NPRM, the short-term placement option would be 
available only when an employer wants to send its H-1B worker(s) who 
are already in the United States under an H-1B petition supported by an 
LCA filed by the employer to a new worksite which is in an area of 
employment for which the employer does not have an LCA in effect for 
the occupation. After the 90-workday limit is reached by any one H-1B 
worker, the short-term placement option would no longer be available 
for any H-1B worker(s) for any worksite in that area of employment; the 
employer would be required to have an LCA in effect for the new area 
and to be in full compliance with all the LCA requirements. The NPRM 
explained that the short-term placement option would not be available 
where the H-1B worker has just arrived in the United States (or has 
adjusted status), in which case the worker must be placed at a place of 
employment listed on the LCA supporting the H-1B petition for the 
worker. In addition, the short-term placement option would not be 
available where the employer is moving its H-1B worker(s) among 
worksites in one or more areas covered by valid LCAs; the worker(s) 
would be subject to the requirements of those LCAs (e.g., notice, 
prevailing wage, non-displacement for dependent employers) that cover 
those worksites. For example, as the NPRM explained, the short-term 
placement option cannot be used where the employer has an LCA in effect 
for an area of employment in order to avoid ``overcrowding'' the LCA 
with H-1B workers. As a matter of enforcement discretion in determining 
whether a violation exists in an ``overcrowded'' LCA situation, the 
Department will look at all the facts and circumstances in order to 
determine whether the employer is acting in good faith to assure 
compliance with the program, including taking steps to file new LCA(s) 
and rectify the overfilling of the numerical limitation specified by 
the employer itself on the initial LCA(s).
    The Department received three comments addressing the specifics of 
the availability of the short-term placement option. ACIP commended the 
Department for demonstrating flexibility and for clarifying that an 
employer may file LCAs with multiple, open slots and use those slots 
for roving employees. However, ACIP sought clarification that short-
term placements under the 90-workday rule do not ``fill'' an open LCA 
slot. ACIP also sought clarification of the NPRM discussion of the 
temporary placement of H-1B workers ``overfilling'' a valid LCA, 
particularly concerning the Department's use of enforcement discretion 
in such situations. ACIP suggested that, due to the lengthy processing 
time of LCAs, the Department should permit the employer to ``overfill'' 
an LCA. The second commenter, ITAA, stated that, in its view, the 
Department's past practice was to ignore ``LCA overcrowding'' if the 
employer met the notice and wage requirements for each worker at the 
site. ITAA observed that, under the proposed regulation, the Department 
stated an intention to use its enforcement authority and cite 
violations for ``LCA overcrowding'' if the number of H-1Bs 
``significantly exceeds'' the number of openings listed on the LCA. 
ITAA anticipated that DOL would assess penalties for ``misrepresenting 
a material fact'' or a ``substantial failure'' to accurately list the 
information on the LCA. Therefore, ITAA requested a definition of 
``significant'' overcrowding of the LCA. The third commenter, Latour, 
suggested that the Department be flexible regarding ``overfilled'' LCAs 
and consider employers' explanations in those situations where the 
``overfill'' is significant.
    As for the concerns of the commenters regarding the potential use 
of the short-term placement option to deal with situations of 
``overcrowded'' or ``overfilled'' LCAs, the Department points out that 
the statute expressly requires that the employer's LCA ``specif[y] the 
number of workers sought,'' and further provides that a substantial 
failure to comply with this requirement can result in the assessment of 
a $1,000 civil money penalty and one-year debarment (8 U.S.C. 
212(n)(1)(D) and 212(n)(2)(C)(i)). The number of H-1B workers taking 
jobs in a local labor market is a matter which Congress obviously 
considers to be significant, and the Department cannot set aside the 
statutory requirement that the employer accurately attest to this 
specific information. The Department is not aware of serious problems 
concerning overcrowded LCAs since the H-1B program's inception. Thus, 
the Department has used, and will continue to use, a rule of reason in 
assessing such situations; violations will not be cited as long as the 
employer is showing good faith and is taking steps to come into 
compliance. The determination would necessarily be made on a case-by-
case basis, and it is not feasible to issue bright-line rules such as 
some particular degree of overcrowding which would be tolerable.
    With respect to the query as to whether the use of the short-term 
placement option would affect the ``overcrowding'' determination, the 
Department emphasizes that where an LCA is in effect, the short-term 
placement option is simply not applicable. The LCA's terms--including 
its specification of the number of H-1B workers to be employed in the 
area-- are binding on the employer, except with respect to an H-1B 
worker who moves into and out of the area without establishing a 
``worksite'' there (see IV.O.1.b, below).
ii. What Are the Standards for Payment of the H-1B Worker's Travel 
Expenses Under the Short-Term Placement Option? (Sec. 655.735(b)(3), 
Previously Set Forth in Appendix B, Section a)
    A component of the proposed short-term placement option is the 
requirement that employers who wish to avail themselves of this option 
pay travel-related expenses at a level at least equal to the rate 
prescribed for Federal Government employees on travel or temporary 
assignment, as set out in the General Services Administration (GSA) 
regulations. The NPRM explained that the GSA standards were used as a 
benchmark because the Department believes that some basic, universally 
available measures are needed, and because the GSA standards (based on 
surveys of travel costs) are appropriate for this purpose. The NPRM 
proposed to modify the provisions in the current Final Rule (enjoined 
by NAM), so as to better explain the uses of the GSA standards (e.g., 
no payment to the worker for lodging would be required where the worker 
actually incurs no lodging costs).
    The nine commenters on this proposal (ACIP, AILA, Cowan & Miller, 
Hammond & Associates, Intel, ITAA, Latour, Rubin & Dornbaum, White 
Consolidated Industries) were

[[Page 80190]]

unanimous in their opposition to a regulation that would require 
employers to have separate travel reimbursement standards for H-1B 
workers than for other employees. These commenters suggested that the 
standard for H-1B workers, like all other workers, should be 
reimbursement for actual expenses incurred while on travel.
    The Department has fully considered these comments, as well as its 
own post-NAM enforcement experience. During the post-NAM period, when 
the regulation has been enjoined, the Department has been enforcing 
actual expense reimbursement for all H-1B business travelers. In these 
enforcement proceedings, the Department has not encountered problems 
pertaining to abusive practices or difficulties in proof of actual 
expenses, since it has found that employers in fact keep a record of 
expenses as a prudent business practice. Therefore, the Department is 
adopting the commenters' recommendation. The regulation is modified in 
this Interim Final Rule to specify that employers who use the short-
term placement option must reimburse H-1B workers for the actual 
expenses incurred during their short-term placement. In those rare 
instances where the employer, in an enforcement action by DOL, is 
unable to demonstrate the actual expenses incurred, the Department will 
use the GSA standards to determine whether the reimbursement was 
sufficient and to assess back wages if appropriate.
b. What Constitutes an H-1B Worker's ``Worksite'' or ``Place of 
Employment'' for Purposes of the Employer's Obligations Under the 
Program? (NPRM Section P.1) (Sec. 655.715)
    The H-1B program's requirements largely focus on the H-1B worker's 
``place of employment'' or ``worksite.'' That location controls the 
prevailing wage determination, identifies where the employer must 
provide notice to workers, and specifies the scope of the strike/
lockout prohibition. A location which is not a worksite, on the other 
hand, would not trigger those requirements, even if the H-1B worker 
were at that location in the course of the performance of job duties. 
The NPRM echoed the previous rules issued under this program at 
Sec. 655.715, which define ``place of employment'' as ``the worksite or 
physical location where the work is actually performed.'' However, the 
NPRM provided further interpretation of this term (as part of proposed 
Appendix B to Subpart H of the regulations), in an effort to better 
inform the users of the program and to alleviate some apparent 
confusion on this matter.
    The proposed guidance was in response to some employers' concern 
that a strict or literal application of the ``place of employment''/
``worksite'' definition could lead to absurd and/or burdensome 
compliance requirements with regard to the employer's obligation of 
providing required notice and adjusting the H-1B worker's wages to 
comply with different prevailing wages for work at various locations. 
Employers raised questions regarding whether the ``worksite'' 
definition would be applicable (thus either causing the worker's time 
at that location to be counted towards the 90-workday ceiling, or 
triggering compliance obligations under an LCA covering that location) 
where an H-1B worker has a business lunch at a local restaurant, or 
appears as a witness in a court, or attends a training seminar at an 
out-of-town hotel.
    The NPRM, in Appendix B, proposed that the term ``place of 
employment'' or ``worksite'' does not include any location where either 
of two criteria is satisfied:
    1. An H-1B worker who is stationed and regularly works at one 
location is temporarily at another location for a particular individual 
or employer-required developmental activity such as a management 
conference, a staff seminar, or a formal training course (other than 
``on-the-job-training'' at a location where the employee is stationed 
and regularly works). For the H-1B worker participating in such 
activities, the location of the function would not be considered a 
``place of employment'' or ``worksite,'' and such location--whether 
owned or controlled by the employer or by a third party--would not 
invoke H-1B program requirements with regard to that worker at that 
location. However, if the employer uses H-1B nonimmigrants as 
instructors or resource or support staff who continuously or regularly 
perform their duties at such locations, the locations would be ``places 
of employment'' or ``worksites'' for any such workers and, thus, would 
be subject to H-1B program requirements with regard to these workers.
    2. The H-1B worker's presence at that location satisfies three 
requirements regarding the nature and duration of the worker's job 
functions there--
    a. The nature and duration of the H-1B worker's presence at the 
location is due to the fact that either the H-1B worker's job is by 
nature peripatetic, in that the normal duties of the worker's 
occupation (rather than the nature or the employer's business) require 
frequent travel (local or non-local) from location to location, or the 
H-1B worker spends most of the time working at one location but 
occasionally travels for short periods to other locations; and
    b. The H-1B worker's presence at the locations to which the worker 
travels from the ``home'' worksite is on a casual, short-term basis, 
which can be recurring but not excessive (i.e., not exceeding five 
consecutive workdays for any one visit); and
    c. The H-1B worker is not at the location to perform work in an 
occupation in which workers are on strike or lockout.
    The NPRM provided examples to illustrate these criteria, and 
explained that for an H-1B worker who performs work at a location which 
is a non-worksite (under either criterion 1 or criterion 2), the 
``place of employment'' or ``worksite'' for purposes of notice, 
prevailing wage and working conditions is the worker's home base or 
regular work location. Further, the NPRM stated that, in applying this 
interpretation of ``place of employment'' or ``worksite,'' the 
Department will look carefully at any situations which appear to be 
contrived or abusive, such as where the H-1B worker's purported ``place 
of employment'' is a location other than where the worker spends most 
of his/her time, or where the purported ``area of employment'' does not 
include the location(s) where the worker spends most of his/her time.
    The Department received nine comments on the NPRM ``worksite''/
``place of employment'' proposal.
    Several commenters addressed the general matter of whether the 
proposed Appendix B guidance was appropriate. Senators Abraham and 
Graham and Oracle remarked that ``place of employment'' is a term with 
a plain meaning (in their view, the location where the individual is 
employed); they stated that, in modern commerce, workers employed in 
one location frequently must travel to other locations to perform their 
duties and that, when they do so, they are not employed there but are 
merely visiting. Rapidigm, a staffing firm, requested a clearer 
definition of ``worksite,'' and asked whether the amount of time spent 
at a location is the only factor, regardless of the nature of the work 
or who has control or supervision of the worker. AILA urged that the 
proposed Appendix B be dropped because, in its view, it creates an 
absurd result and is ``micromanagement'' by the Department.
    A number of commenters (ACIP, Intel, ITAA, Latour, Godward) 
expressed their approval of the Department's recognition that not all 
activities engaged in by a worker occur at a ``worksite.'' However, 
some commenters

[[Page 80191]]

were dissatisfied with the NPRM's proposal of five consecutive workdays 
as the test for a ``casual, short-term'' stay for purposes of a non-
worksite visit by an H-1B worker. ACIP, Intel and ITAA stated that this 
standard is overly restrictive and unrealistic. ACIP suggested that the 
Department should not be concerned with the length of stay, as long as 
the worker is engaged in non-worksite activities; ACIP recommended 
that, if a duration-of-stay standard was adopted, it should be 10 
workdays at least. ITAA expressed a similar view that ``casual, short-
term basis'' should be defined to include visits of up to10 consecutive 
work days to accommodate training courses, business seminars, and other 
events which may last between five and 10 days. Intel recommended that 
the focus should be on the purpose of the trip, rather than on the 
length of stay.
    The Department seeks to achieve the purposes of the Act which 
focuses its protections for workers on the ``place of employment,'' 
while accommodating the legitimate needs of employers using the H-1B 
program. The regulation, since the inception of the program, has 
recognized that the identification of the ``place of employment'' 
cannot be merely a matter of the employer's designation, since that 
approach would not serve the purposes of protecting workers' prevailing 
wages and other rights. Instead, the regulation identifies the ``place 
of employment'' by looking to the activities of the H-1B worker, 
defining ``place of employment'' as ``the worksite or physical location 
where the work is actually performed'' (20 CFR 655.715). However, the 
Department has determined that the regulation must afford reasonable 
flexibility so as to take into account the common practices of 
employers whose workers may have more than one ``place of employment'' 
over a period of time or, who may perform duties at various locations 
which should not, for practical reasons, be characterized as ``places 
of employment.'' In this regard, the Department shares the view of 
those commenters who observed that workers may legitimately ``visit'' 
locations to perform job duties without in all circumstances making 
those locations into ``places of employment'' for purposes of the H-1B 
program.
    After consideration of all the comments, the Department has 
concluded that the five cumulative workdays standard is a reasonable 
and appropriate measure of a casual, short-term ``visit'' where a 
worker's job is by its nature peripatetic. A full, ordinary workweek of 
five days is, in the Department's view, a practical and reasonable 
measurement of a business ``visit'' by a worker performing job duties. 
Further, the worker may make recurring, short ``visits'' to the 
location, in order to perform job duties. On the other hand, the 
Department believes that more flexibility is appropriate for a worker 
who spends most of his or her time at one location but occasionally 
travels for short periods to other locations. Under these 
circumstances, the Department believes that a duration of up to 10 
workdays is appropriate. The Interim Final Rule is modified 
accordingly.
    With regard to the concern of some commenters that a five-workdays 
time frame would be unrealistic for developmental activities such as 
training and business seminars, the Department points out that there 
is, in fact, no time frame for developmental activities. Such 
activities are specifically addressed under criterion 1 rather than 
under criterion 2, which contains the business ``visit'' concept.
    Finally, based on considerations of clarity and ease of use of the 
regulations, the Department has determined that the criteria for 
distinguishing between a worksite and a non-worksite should be included 
in the regulatory text which defines the statutory term ``place of 
employment.'' Thus, in this Interim Final Rule, this material appears 
in the regulation at Sec. 655.715, rather than in Appendix B as 
proposed.
c. Under What Circumstances May an H-1B Worker ``Rove'' or ``Float'' 
From His/Her ``Home Base'' Worksite? (NPRM Section P.2 and Proposed 
Appendix B, section b)
    The statute and regulations do not permit the employment of H-1B 
workers as ``roving'' or ``floating'' employees for whom no particular 
LCA, and thus no specific set of LCA requirements, would be applicable. 
However, as explained in the NPRM, the Department recognizes that some 
employers need to move their H-1B workers from place to place in order 
to meet the needs of clients or to respond to business problems and 
opportunities. This practice of moving H-1B workers is sometimes 
described as having the workers ``rove'' or ``float'' from a ``home 
base'' worksite. To assist employers in understanding how this practice 
can be accommodated under the program, Appendix B of the NPRM proposed 
guidance concerning the three circumstances in which an H-1B worker 
could legitimately ``rove'' or ``float'' from his/her home base 
worksite to perform job duties at some other location. This guidance, 
like the other provisions of proposed Appendix B, was initially 
developed as interpretive guidance that the Department had planned to 
issue independently of the regulations.
    The Department received two comments on its proposed guidance.
    AILA urged that the Appendix B guidance be dropped, because it 
considered both the ``rove''/''float'' discussion and the 
interpretation of ``worksite'' to be attempts by the Department ``to 
micromanage employers' commerce'' through ``peculiar workplace rules.''
    ITAA requested clarification concerning the interface between the 
Department and INS policies concerning when an LCA for a ``new'' area 
of employment may be substituted for the ``original'' LCA, and whether 
such a substitution would require the filing of a new petition. The 
Department recognizes that employers need clarity regarding this 
matter, and will consult with the INS with the intention of providing 
official, coordinated guidance.
    The Department has concluded, upon further review, that 
incorporation of the interpretive guidance in proposed Appendix B, 
section b, into the regulation is not necessary or appropriate at this 
time. The Department plans to issue separate interpretive guidance 
explaining the inter-relationship between the various provisions 
regarding employment of 
H-1B nonimmigrant workers outside of their home work station.
2. What Are an Employer's Wage Obligations for an H-1B Worker's 
``Nonproductive Time''? (See IV.H, Above)
3. What Are the Guidelines for Determining and Documenting the 
Employer's ``Actual Wage''? (Appendix A to Subpart H)
    Section 212(n)(1)(A)(i)(I) of the INA as amended by the Immigration 
Act of 1990 (IMMACT 90) and the Miscellaneous and Technical Immigration 
and Naturalization Amendments of 1991 (MTINA) requires that an employer 
seeking to employ H-1B nonimmigrants agree that it will pay the 
nonimmigrants at least the higher of the prevailing wage or the 
``actual wage level paid by the employer to all other individuals with 
similar experience and qualifications for the specific employment in 
question.''
    In explaining the amendments to the H-1B program made by MTINA, 
Senator Reid explained Congress intended ``specific employment to mean 
the specific position held by the H-1B

[[Page 80192]]

worker at the place of employment.'' Furthermore, by ``similar 
experience and qualifications,'' Congress intended consideration of 
``experience, qualifications, education, job responsibility and 
function, specialized knowledge, and other such legitimate factors'' 
137 Cong. Rec. S18243 (Nov. 26, 1991).
    The Department's regulations explaining the ``actual wage'' 
requirement, as amended in 1992 and 1994, provide at Sec. 655.731(a)(1) 
that in determining the actual wage, employers may take into 
consideration experience, qualifications, education, job responsibility 
and function, specialized knowledge, and other legitimate business 
factors. Legitimate business factors are ``those that it is reasonable 
to conclude are necessary because they conform to recognized principles 
or can be demonstrated by accepted rules and standards.'' The actual 
wage is the amount paid to other employees with substantially similar 
experience and qualifications with substantially the same duties and 
responsibilities, or if there are no such employees, the wage paid the 
H-1B nonimmigrant. In addition, the regulation requires that 
adjustments such as cost of living increases or other periodic 
adjustments, higher entry rate due to market conditions, or the 
employee moving into a more advanced level of the occupation, be 
provided to H-1B nonimmigrants where the employer's pay system or scale 
provides for such adjustments during the LCA.
    The regulations further provide at Sec. 655.731(b)(2) that the 
employer shall retain documentation specifying the basis it used to 
establish the actual wage, i.e., showing how the wage for the H-1B 
worker relates to the wages paid other individuals with similar 
experience and qualifications for the specific employment at the place 
of employment. The documentation is also required to show that after 
any adjustments in the employer's pay system or scale, the wage paid is 
at least the greater of the adjusted actual wage or the prevailing 
wage. In addition, the regulations provide at Sec. 655.760(a)(3) that 
the public access file shall contain ``[a] full, clear explanation of 
the system that the employer used to set the `actual wage' * * *, 
including any periodic increases which the system may provide. * * *'' 
This explanation may be in the form of a memorandum summarizing the 
system, or a copy of the pay system or scale. Payroll records do not 
need to be in the public access file, but are required to be made 
available to the Department in an enforcement action.
    The Department initially offered guidance on factors to be 
considered in making this determination, with examples, in the preamble 
to the Interim Final Rule of January 13, 1992 (57 FR 1319). This 
guidance, in modified form, was published as Appendix A to Subpart H in 
the Final Rule of December 20, 1994 (59 FR 65671). In addition to the 
examples set forth in the preamble to the 1992 Interim Final Rule, 
Appendix A provided that the employer may take into consideration 
``objective standards,'' and must ``have and document an objective 
system used to determine the wages of non-H-1B workers.'' The Appendix 
further provided that the explanation of the wage system in the public 
access file ``must be sufficiently detailed to enable a third party to 
apply the system to arrive at the actual wage rate computed by the 
employer for any H-1B nonimmigrant.'' The portions of Appendix A 
relating to an objective wage system were enjoined by the court in NAM, 
for lack of prior notice and comment. In the meantime, the ``Appendix 
A'' guidance was republished for public comment in the Proposed Rule 
dated October 31, 1995 (60 FR 55339).
    The Department republished Appendix A for further notice and 
comment in the 1999 NPRM, as modified to include job performance among 
the legitimate business factors which may be taken into consideration. 
The underlying regulatory provisions at Secs. 655.731(a)(1), 
655.731(b)(2), and 655.760(a)(3) were not open for notice and comment. 
The preamble explained that under Appendix A as proposed, the employer 
would not be required to create or to document an elaborate ``step'' or 
``grid'' type pay system, or any other complex, rigid system. Rather, 
the employer's actual wage system could take into consideration any 
objective, business-related factors relating to experience, 
qualifications, education, specific job responsibilities and functions, 
job performance, specialized knowledge and other business factors. The 
use of any or all of the factors would be at the discretion of the 
employer. All factors used in the employer's actual wage system would 
need to be applied to H-1B nonimmigrant workers in the same, 
nondiscriminatory manner as the factors would be applied to U.S. 
workers in the occupational classification. Further, the preamble 
explained that the explanation of the actual wage system in the public 
access file must be sufficiently detailed to enable a third party to 
understand how the wage system would apply to a particular worker and 
``to derive a reasonably accurate understanding of that worker's 
wage.''
    The Department received nine comments on proposed Appendix A in the 
1995 Proposed Rule, and 15 (including two 1995 commenters) in response 
to the 1999 NPRM. Most 1995 and 1999 commenters viewed the Appendix 
guidance as inconsistent with the INA and demonstrating a lack of 
understanding of corporate pay systems. The comments focused on an 
employer's responsibilities in making the actual wage determination, 
what factors should be considered in making the determination, how the 
factors should be considered, when the factors should be considered, 
and the documentation required to enable a third party to apply the 
wage system to determine the actual wage rate.
    Senators Abraham and Graham, the Congressional commenters, AILA (in 
1995 and 1999 comments), FHCRC, Hammond, Network Appliance, Oracle, 
Rubin & Dornbaum, Sun Microsystems, the Massachusetts Institute of 
Technology (MIT) (1995 comment) and the National Association of 
Manufacturers (NAM) (1995 comment) contended that the INA does not 
require, nor did Congress intend, that employers be required to create 
and document an objective wage system for their U.S. workers to meet 
the requirement to pay H-1B workers no less than the greater of the 
actual or prevailing wage. AILA indicated further that the INA requires 
the actual wage to be paid only to H-1B workers, and does not dictate 
the wages of U.S. workers. NAM indicated that this requirement ignores 
the realities of how businesses establish salaries and epitomizes 
regulatory overreach.
    Several commenters (AILA, ACIP, Kirkpatrick & Lockhart, Latour and 
Sun Microsystems) disagreed with the Appendix A requirement that an 
employer use only objective factors in determining the actual wage 
while others offered suggestions on factors to be considered. 
Kirkpatrick & Lockhart indicated that by limiting this determination to 
objective factors, the Department was eliminating an employer's 
discretion in hiring and ignoring the reality that subjective as well 
as objective factors are evaluated in compensating employees in the 
corporate world. Frost & Jacobs (1995 comment) suggested that the 
Department include ``performance level'' as a legitimate business 
factor in determining actual wage. ITAA agreed with the Department's 
addition of ``job performance'' as an acceptable business factor in the 
January 5, 1999 NPRM.

[[Page 80193]]

    After carefully considering all the comments, the Department has 
concluded that Appendix A--which was created in response to employers' 
requests for technical guidance--has not served its intended purpose 
and has, instead, caused some confusion. The Department has, therefore, 
decided that Appendix A will not be included in the Interim Final Rule. 
The controlling standards for determining and documenting an employee's 
``actual wage'' are contained in the current regulation, 20 CFR 
655.731(a)(1), 655.731(b)(2), and 655.760(a)(3) (none of which were 
opened for comment in the NPRM). If the need arises in the future, the 
Department, as appropriate, will provide compliance advice or technical 
assistance further explaining the current regulation.
    The commenters' reactions to the proposed Appendix A are based, in 
large part, on a lack of understanding of the fact that the 
Department's regulations (20 CFR 655.731(a)(1), 655.731(b)(2), and 
655.760(a)(3))--which the proposed Appendix A was intended to explain 
and clarify--do not direct employers to develop a special corporate-
wide wage system specifically to support the employment of H-1B 
nonimmigrants. The Department agrees with the commenters that section 
212(n)(1)(A)((i)(I) of the INA does not require an employer seeking H-
1B nonimmigrants to create an objective wage system for its U.S. and H-
1B workers. The Department is imposing no obligation to create such a 
system.
    Section 655.760(a)(3) requires that the factors used be legitimate 
business factors such as experience, qualifications, education, 
specific job responsibilities and functions, specialized knowledge, and 
job performance. The use of any or all of these factors is at the 
discretion of the employer. Whatever factors are used in the employer's 
actual wage system must be applied to H-1B nonimmigrant workers in the 
same, nondiscriminatory manner that they are applied to U.S. workers. 
Furthermore, the factors applied must relate to the statutory standard, 
i.e., the workers' experience, qualifications, and job duties. 
Accordingly, it is the Department's position that an employer may not 
differentiate between the pay of H-1B and U.S. workers based on market 
forces, such as the lowest wage a worker is willing to accept. 
Similarly, it is inappropriate for an employer to consider factors 
which are not relevant to the job and which are not uniformly applied 
to H-1B and U.S. workers.
    The Appendix A guidelines were drafted under the presumption that 
all U.S. businesses use wage systems to determine professional salaries 
that consider various legitimate business factors. The Department 
drafted Appendix A to limit the actual wage determination to objective 
legitimate business factors already being used by the employer because 
such factors could reasonably be used by the Department in its 
enforcement to compare H-1B nonimmigrant and U.S. workers in the 
specific employment in question. Although the Department remains 
concerned about the inherent difficulty in comparing the pay of workers 
based on subjective factors, it is persuaded that some subjective 
factors, such as an evaluation of performance levels, may be legitimate 
business factors used in setting the actual wage. However, pursuant to 
Sec. 655.760(a)(3), the employer continues to be required to describe 
the wage system it used to determine the actual wage paid to H-1B 
nonimmigrants.
    AILA and NAM (1995 comments) disagreed with the requirement that an 
employer establish the actual wage based on the ``occupation'' in which 
the H-1B nonimmigrant is employed. The commenters stated that the 
statute requires that H-1B workers be paid at least (the greater of the 
prevailing or) actual wage of those with similar qualifications and 
experience employed in the ``specific employment'' in question, a 
smaller group than dictated by the NPRM. Therefore AILA suggested that 
employers should be required to analyze which jobs are comparable for 
actual wage purposes, and pay the H-1B worker at least as much as the 
employees in those jobs.
    The Department agrees that an employer must determine which workers 
are the subject of comparison with the H-1B worker in order to 
determine the actual wage required to be paid, at a minimum, to the H-
1B worker. The Department also agrees that the appropriate actual wage 
determination comparison for H-1B nonimmigrants is to ``individuals 
with similar experience and qualifications for the specific employment 
in question'' and not ``occupation.'' However, in many circumstances 
this comparison can only be made if the Department is able to review 
the employer's compensation system for employees in the occupational 
category, since the employer's compensation system for other employees 
in the same occupation bears directly on determinations of the actual 
wage required to be paid for the specific employment in question.
    Intel (1995 comments) and Microsoft (1995 comments) suggested that 
the Department allow blanket approval--as meeting actual wage 
requirements--for large employers with established ``total 
compensation'' wage systems which meet certain requirements such as 
executive bonuses and profit sharing supplements to base salary. The 
Department disagrees with this suggestion. The Department is charged 
with enforcement of the statutory requirement that the employer pay the 
H-1B worker(s) the higher of the actual or prevailing wage. Such 
enforcement includes a determination that H-1B workers have, in fact, 
been paid at least the actual wage paid to other workers with similar 
experience and qualifications for the specific employment--a 
determination that can only be made through an examination of the 
application of the employer's actual wage system. Furthermore, it would 
be inappropriate for the Department to make exceptions for large 
employers; the statute indicates no Congressional intent for differing 
obligations for employers depending upon the size of their workforce or 
the sophistication or apparent generosity of their compensation 
systems.
    AILA (1995 comments) and NAM (1995 comments) asked how the 
Department can determine the actual wage in the absence of 
documentation by using an average (as stated in the preamble to the 
1995 NPRM, 60 FR 55341), when the express language of the regulation is 
that the actual wage is not an average. AILA recommended that if the 
Department is allowed to use an average to compute the actual wage, 
employers should be able to use an average as well.
    The Department is unable to accommodate the recommendation that 
employers be authorized to compute the actual wage by averaging the 
wages paid to employees. As stated in the preamble to the 1995 Proposed 
Rule, the actual wage is not an average. It reflects application of an 
employer's actual pay system. Use of the average by the employer would 
not satisfy the statutory requirement. However, the Department must 
have some method of determining the actual wage and calculating any 
back wages due H-1B workers if the employer has not documented and 
cannot reconstruct its actual wage system. In such circumstances, 
averaging the wages of non-H-1B workers may be an enforcement method of 
last resort. The Department would identify U.S. workers in the specific 
employment in question with experience and qualifications similar to 
the H-1B nonimmigrant and average their wages to determine the actual 
wage back wage assessment.

[[Page 80194]]

    ITAA requested that an employer be permitted to set an actual wage 
range for a particular position, even if some H-1B workers with similar 
skills and education make more than others, as long as the workers are 
paid within the range and meet the prevailing wage requirement.
    The Department agrees that an actual wage range can be used to 
determine compliance with the actual wage requirement, provided the 
employer's methodology in assigning wages within the range is based on 
acceptable, legitimate business factors and the methodology is applied 
in the same manner to H-1B nonimmigrants and U.S. workers. This should 
result in U.S. workers and H-1B workers with similar skills and 
qualifications being paid the same, where their duties and 
responsibilities are the same.
    MIT (1995 comments), AILA (1995 comments), NAM (1995 comments), 
Microsoft (1995 comments), CBSI (1995 comments), Intel, and Rubin & 
Dornbaum objected to the requirement to update and document changes to 
the actual wage when the employer's pay system or scale provides for 
pay adjustments during the validity period of the LCA. They stated that 
Section 212(n)(1)(A)(i) of the INA directs that the required wage rate 
determination be ``based on the best information available as of the 
time of filing the application;'' thus an actual wage update should be 
required only at the time of filing the LCA. AILA further stated that 
to require constant reconsideration of the actual wage (like the 
prevailing wage) would be a massive burden on employers which Congress 
did not intend to impose.
    The Department notes that the INA language referred to in the 
comments was included in the Miscellaneous and Technical Immigration 
and Naturalization Amendments of 1991 (MTINA), Public Law 102-232, 105 
Stat. 1733, and refers to the sources of wage information (``the best 
information available'') that an employer may use when reporting the 
appropriate wage on its LCA. 137 Cong. Rec. S18243 (Nov. 26, 1991) 
(Statement of Senator Simpson). As Senator Simpson stated, with the 
enactment of MTINA, employers were no longer required ``to use any 
specific methodology to determine that the alien's wage complies with 
the wage requirements of the Act and may utilize a State agency 
determination, such as SESA, an authoritative independent source, or 
other legitimate sources of wage information.''
    The Department's interpretation of an employer's actual wage 
obligation as an ongoing, dynamic obligation has been the Department's 
position since the inception of the H-1B program, as provided by 
Sec. 655.731(a)(1) of the existing regulations (which were not open for 
notice and comment). The regulation explains that the actual wage 
obligation includes adjustments in the actual wage. In response to 
comments on the 1993 NPRM expressing concern that infrequent prevailing 
wage updates would allow an employer to use ``stale'' wage data, the 
Department stated in the preamble to the December 20, 1994 Final Rule 
(59 FR 65654): ``[T]he ``actual wage rate'' has been and will continue 
to be a ``safety net'' for the H-1B nonimmigrant. Assuming the actual 
wage is higher than the prevailing wage and thus is the required wage 
rate, if an employer normally gives its employees a raise at year's 
end, or the employer's system provides for other adjustments, H-1B 
nonimmigrants must also be given the raise (consistent with employer-
established criteria such as level of performance, attendance, etc.).'' 
Conversely, if no raises, bonuses, or other updates are provided U.S. 
workers throughout the life of the LCA, the 
H-1B worker is not entitled to such payments or adjustments. The 
Department's interpretation furthers the Congressional intent of parity 
in wages and benefits for U.S. workers and H-1B nonimmigrants.
    Several commenters (Microsoft (1995 comment), Motorola (1995 
comment), Coopers & Lybrand (1995 comment), ITAA, Intel, ACIP, and AILA 
expressed strong concern over the requirement that the employer's 
compensation system be sufficiently detailed and documented in the 
public access file to enable a third party to apply the system to 
arrive at the actual wage. The commenters contended that such a 
requirement is unrealistic and imposes an impossible burden on 
employers. Microsoft (1995 comment) recommended that the pertinent 
portion of Appendix A be revised to read: ``The explanation of the 
compensation system should be sufficiently detailed to illustrate to a 
third party, in the event of an enforcement action, how the employer 
applied the system to arrive at the actual wage for an H-1B 
nonimmigrant.'' MIT (1995 comment) agreed with the requirement of an 
equitable wage system for all employees, and recommended that the 
wording of the provision be changed to indicate that only a general 
explanation of the compensation system be provided. Similarly, Intel 
recommended that the employer be required to provide a general 
description of its compensation system sufficient to enable a third 
party to clearly understand how wages were determined. Intel also 
stated that it was unclear whether the employer had to do a detailed 
analysis for each LCA or an overview of the compensation system to 
support the third party review. ACIP and AILA indicated that it was 
unrealistic to expect a third party to be able to calculate a 
particular worker's salary based on the employer's documentation of its 
actual wage system. ACIP was troubled that an employer could be 
debarred for having inadequate documentation and urged the Department 
to eliminate or simplify this requirement. AILA recommended that 
employers should make the analysis of comparable employee, decide the 
appropriate documentation of the analysis, and leave the rest to 
enforcement.
    The Department is persuaded that its proposed Appendix A 
requirement for a public access file with the detail sufficient to 
enable a third party to determine the actual wage rate for an 
H-1B nonimmigrant is an impractical requirement for employers. The 
explanation of the compensation system found in the public access file 
must be sufficiently detailed for a third party to understand how the 
employer applied its pay system to arrive at the actual wage for its H-
1B nonimmigrant(s). It is the Department's view that although third 
parties may not have the information needed to arrive at the specific 
actual wage for the H-1B nonimmigrant(s), the information should be 
sufficient to allow them to make a judgement on the potential for an 
actual wage problem. At a minimum, the description of the actual wage 
system in the public access file should identify the business-related 
factors that are considered and the manner in which they are 
implemented (e.g., stating the wage/salary range for the specific 
employment in the employer's workforce and identifying the pay 
differentials for factors such as education and job duties). 
Computation of U.S. and H-1B workers' particular wages need not appear 
in the public access file; that information must be available for 
review by the Department in the event of an enforcement action (such as 
in each worker's personnel file maintained by the employer).
4. What Records Must the Employer Keep Concerning Employees' Hours 
Worked? (Sec. 655.731(b)(1))
    The Department sought further comment on proposed amendments to 
Sec. 655.731(b)(1), the basic recordkeeping obligation to support an 
employer's

[[Page 80195]]

wage obligation. This provision was published for comment in the 
Proposed Rule dated October 31, 1995 (60 FR 55339). An earlier 
amendment to Sec. 655.731(b)(1) was promulgated in the Department's 
Final Rule of December 20, 1994 (59 FR 65646), which was enjoined by 
the court in NAM, for lack of prior notice and comment.
    The proposed regulation would require employers to keep specified 
payroll records for H-1B workers and ``for all other employees for the 
specific employment in question at the place of employment.'' Hours 
worked records would be required if (1) the employee is not paid on a 
salary basis, (2) the actual wage is expressed as an hourly rate, or 
(3) with respect to H-1B workers only, the prevailing wage is expressed 
as an hourly rate.
    The Department has made a number of accommodations already to 
concerns expressed regarding the requirements of this rule, 
particularly in regard to the circumstances in which hours worked 
records must be maintained. Therefore a detailed rulemaking history is 
useful.
    The regulations currently in effect at 20 CFR 655.731(b)(1) (1993) 
(i.e., the regulations which are not under injunction), require that 
payroll records be maintained for H-1B workers and for ``all other 
individuals with experience and qualifications similar to the H-1B 
nonimmigrant for the specific employment in question at the place of 
employment.'' Hours worked records are required if the employee is paid 
on other than a salary basis, or if the prevailing wage or actual wage 
is expressed as an hourly wage.
    The 1994 Final Rule (set forth in the CFR, but enjoined in NAM), 
like the current NPRM, required that an employer maintain payroll 
records for H-1B workers and for ``all other employees for the specific 
employment in question at the place of the employment.'' Upon further 
consideration, the Department issued a Notice of Enforcement Position 
(60 FR 49505, September 26, 1995) announcing that, with respect to any 
additional workers for whom the Final Rule may have applied 
recordkeeping requirements (i.e., U.S. workers in the specific 
employment in question who did not have similar qualifications and 
experience), the Department would enforce the provision to require the 
employer to keep only those records which are required by the Fair 
Labor Standards Act (FLSA), 29 CFR Part 516. The Department concluded 
that, in virtually all situations, the records required by the FLSA 
would include those listed under the H-B Final Rule.
    In the October 1995 NPRM, the Department proposed to require 
employers to retain records of hours worked for all employees in the 
same specific employment as the H-B worker if (1) the employee is not 
paid on a salary basis, (2) the actual wage is expressed as an hourly 
rate, or (3) with respect to H-1B workers only, the prevailing wage is 
expressed as an hourly rate. Thus unlike the rule currently in effect 
(or the final rule enjoined in NAM), where the actual wage is expressed 
as a salary but the prevailing wage is expressed as an hourly wage, 
hourly records would not be required for U.S. workers in the specific 
employment question.
    The January 1999 NPRM was identical to the October 1995 proposed 
rule, as described above.
    The Department received one comment on the proposed modification of 
the documentation requirements in response to the 1995 NPRM and five 
additional comments in response to the 1999 NPRM.
    A law firm (Moon) (1995 comment) commended the Department for 
``revising the recordkeeping requirement to release employers from any 
obligation to keep records of hours worked by FLSA-exempt [U.S.] 
employees.'' At the same time, it criticized the proposal insofar as it 
requires records to be kept for FLSA-exempt H-1B workers where the 
prevailing wage is expressed as an hourly rate--a requirement it 
characterized as artificial and inconsistent with traditional FLSA 
principles. The firm recommended that the Department instead require 
SESAs to issue prevailing wage determinations on a salaried basis for 
exempt workers.
    Intel asserted that all of its H-1B workers are paid on a salary 
basis (and apparently are listed as such on their LCAs); Intel noted, 
however, that SESAs sometimes issue rates on an hourly basis and 
suggested that the rule be clarified so that this alone would not 
trigger a recordkeeping requirement. Intel and ACIP both suggested that 
the provision should be modified to make plain that such records need 
be kept only where an employer includes an hourly rate on an LCA. ACIP 
stated that it should not matter if the SESA lists the rate as an 
hourly wage. It further argued that if recordkeeping is required in all 
instances where a SESA issues an hourly rate, this requirement would 
``muddy up'' the FLSA-status of the workers. Another commenter (Rubin) 
expressed similar concerns, stating that considerable paperwork will be 
generated if recordkeeping is triggered simply because a SESA, without 
regard to the practice within a profession, issues a rate as an hourly 
wage.
    The Department appreciates the concern expressed by commenters that 
SESAs sometimes issue hourly rates for certain occupations without 
regard to whether workers are commonly paid on a salary basis or the 
FLSA-exempt nature of the job. The Department notes that while SESAs 
ordinarily base prevailing wage determinations on the U.S. Bureau of 
Labor Statistics, Occupational Employment Statistics survey (OES), 
which are generally expressed as an hourly wage, the SESAs will issue 
the prevailing wage as a salary rate upon request. In addition, to 
alleviate the concerns of employers and to avoid confusion with regard 
to the nature of the prevailing wage or recordkeeping obligations, the 
Department is modifying Sec. 655.731(a)(2) to expressly authorize the 
employer to convert the prevailing wage determination into the form 
which accurately reflects the wage which it will pay (i.e., where the 
prevailing wage is expressed as an annual ``salary,'' it may be 
converted to an hourly rate by dividing the amount by 2080; where the 
prevailing wage is expressed as an hourly rate, it may be converted to 
a salary by multiplying the amount by 2080). The modified regulation 
instructs that the employer shall state the prevailing wage on the LCA 
in the manner in which the wage will be paid, i.e., as an hourly rate 
or a salary. However, the prevailing wage must be expressed as an 
hourly wage if the worker is part-time, in order to ensure that the 
part-time worker is in fact paid for the proportion of the week in 
which he or she actually works.
    In addition, after review, the Department has concluded that a 
further revision of the regulation is appropriate to remove the 
requirement that an employer keep hourly wage records for its full-time 
H-1B employees paid on a salary basis. (Employers are also directed to 
Sec. 655.731(a)(4) (not revised in this rule), which explains payment 
of wages to employees paid on a salary basis.) The regulation continues 
to require employers to keep hours worked records for part-time 
employees, as well as hourly employees. It is the Department's view 
that there is no other way to ensure that employers comply with their 
obligation to pay these workers at least the prevailing wage for all 
hours worked. Otherwise, for example, an employer would be able to 
state on its H-1B petition that an employee will be paid 20 hours per 
week, pay the employee an annual salary based on 20 hours per week, 
keep no record of hours worked, and actually

[[Page 80196]]

work the employee 30 hours a week. In any event, the Department 
believes that most employers keep hours worked records for their part-
time employees.
    Another commenter (Latour) agreed that it was reasonable for DOL to 
require the retention of the records enumerated in the proposal, which 
it stated were records kept by typical employers. However, it expressed 
concern over a perceived requirement that all the documentation must be 
included in the public access file. Another commenter (Baumann) 
expressed concern over the requirement that the records be kept 
beginning with the date the LCA is submitted throughout the period of 
employment. This commenter stated that the proposal, read in the 
broadest sense, requires an employer to continue to update the public 
access file each time a new worker is hired or a current employee 
receives a pay increase. He requested the Department to make clear that 
the wage information relating to non-H-1B workers is limited to the 
period before the filing of the LCA.
    It appears that these commenters have misunderstood the 
documentation requirement as it relates to the public access file. The 
basic payroll information required to be maintained does not need to be 
included in the public access file, but rather must be available to the 
Wage and Hour Division in the event of an investigation. As provided in 
Sec. 655.760(a), the public access file is required to contain only the 
wage rate to be paid the H-1B workers, an explanation of the employer's 
actual wage system (discussed in IV.O.3, above), and the documentation 
used to establish the prevailing wage.
5. What Are the Requirements for Posting of ``Hard Copy'' Notices at 
Worksite(s) Where H-1B Workers Are Placed? (See IV.F, above)
6. What Are the Time Periods or ``Windows'' Within Which Employers May 
File LCAs? (Sec. 655.730(b) and Sec. 655.731(a)(2)(iii)(A)(1))
    Regulations with respect to the time periods or ``windows'' within 
which employers may file labor condition applications were first 
published by the Department as Secs. 655.730(b) and 
655.731(a)(2)(iii)(A)(1) in the December 20, 1994 Final Rule. That rule 
provides at Sec. 655.730(b) that ``a labor condition application shall 
be submitted * * * no earlier than six months before the beginning date 
of the period of intended employment shown on the LCA.'' Section 
655.731(a)(2)(iii)(A)(1) states that ``[a]n employer who chooses to 
utilize a SESA prevailing wage determination shall file the labor 
condition application not more than 90 days after the date of issuance 
of such SESA wage determination.''
    These provisions were challenged in the NAM litigation as violative 
of the notice and comment provision of the APA, 5 U.S.C. 553(b)(3). The 
district court in NAM, however, concluded that Secs. 655.730(b) and 
655.731(a)(2)(iii)(A)(1) ``lie on the procedural side of the spectrum 
and are exempt from the notice and comment requirement of the APA.'' 
The court further found that the ``plaintiff has failed to demonstrate 
that the two time periods are so short that they encroach upon an 
employer's ability to utilize the H-1B workers, and plaintiff has 
failed to show that the rules alter any substantive standard by which 
[the Department] will evaluate LCAs.'' Therefore these rules are 
currently in effect.
    On October 3, 1995, during the pendency of the NAM litigation, the 
Department republished these sections for comment. The 1999 NPRM 
republished these sections for comment without modification.
    Six commenters (Intel, CBSI, Motorola, Moon, AILA, MIT) responded 
to the republication of these sections in the 1995 Proposed Rule. With 
respect to the requirement that an LCA be filed within 90 days of 
issuance of a SESA prevailing wage determination, all six commenters 
asserted that the requirement would make more work for employers and 
that it would slow down the LCA process. Two of these commenters (CBSI, 
MIT) also suggested that the validity period of a SESA determination 
should be 180 days, and one commenter (Moon) suggested that SESA 
determinations should carry no expiration date.
    Three commenters (AILA, BRI, ITAA) responded to these sections as 
republished in the 1999 NPRM. ITAA supported the provision permitting 
employers to file LCAs up to six months before the beginning date of 
the period of intended employment as shown on the LCA, stating the 
proposal reflected an ``appropriate balance'' of the Department's and 
business interests. One commenter (BRI) sought clarification on whether 
an LCA already certified could be used any time during the validity of 
the LCA, assuming the prevailing wage was obtained from a source other 
than a SESA.
    AILA objected to the 90-day validity period for the SESA prevailing 
wage as arbitrary and--because most U.S. employers make annual wage 
assessments--unrelated to the ``real world wage.'' Therefore, AILA 
asserted, requesting a prevailing wage from the SESA every 90 days 
places an undue burden on U.S. employers. AILA recommended that SESA 
prevailing wages should be valid for a period of one year, based on the 
observation that SESAs rely on the OES survey--an annual survey--to 
obtain wage information for purposes of issuing prevailing wage 
determinations.
    The Department has considered the comments offered in response to 
its proposals regarding the time frames in which LCAs may be filed by 
employers.
    Because there has been no objection to the requirement of 
Sec. 655.730(b) that an LCA be filed within six months of the beginning 
date of intended employment, the Department will adopt that regulation 
as proposed.
    With regard to the length of the ``validity period'' of SESA-issued 
wage determinations--the period during which the determination may be 
used by an employer to support a visa petition--the Department has 
concluded that the proposed rule can be modified to accommodate the 
views of the commenters, while maintaining the crucial principle that 
prevailing wage determinations should reflect rates which are current 
and accurate for the locality and the occupational classification. The 
Interim Final Rule therefore provides that the SESA's issuance of a 
prevailing wage determination shall include a specification of a 
validity period, which shall be not less than 90 days and not more than 
one year from the date of the issuance. The Department will provide 
guidance to the SESAs with regard to their assignment of validity 
periods. The Department notes that the Bureau of Labor Statistics' 
Occupational Employment Statistics (OES) survey and most employer-
provided surveys are updated on a regular basis, and the update cycles 
for such surveys can be readily determined--unlike the update cycle for 
prevailing wages based on Service Contract Act and Davis-Bacon wage 
determinations or collective bargaining agreements. The Department 
anticipates that the validity period will be 90 days where the wage 
rate is based on SCA, Davis-Bacon, or collective bargaining agreements. 
The Department anticipates that where the wage rate is based on the OES 
survey or on a survey provided by the employer and found acceptable by 
the SESA, the validity period will ordinarily be until the next update, 
provided it is at least 90 days and no more than one year from the date 
of issuance. This will reduce the burden of employers and SESAs in 
filing and responding to wage determinations without any adverse affect 
on worker wages.

[[Page 80197]]

7. How May an Employer Challenge a SESA/ES-Issued Prevailing Wage 
Determination? (Sec. 655.731(a)(2)(iii)(A)(1) and (d)(2), 
Sec. 655.840(c))
    H-1B regulations specifically explaining the procedures available 
to employers to challenge a SESA-issued prevailing wage determination 
were first published by the Department in the December 1994 Final Rule. 
That rule provides at Secs. 655.731(a)(2)(iii)(A)(1), 655.731(d)(2) and 
655.840(c) that irrespective of whether the wage determination is 
obtained by the employer prior to filing the LCA or by the Wage and 
Hour Division in an enforcement proceeding, employers must assert any 
challenge to the wage determination under the Employment Service (ES) 
complaint system at 20 CFR part 658, Subpart E, rather than in an 
enforcement proceeding before the Office of Administrative Law Judges 
pursuant to Subpart I of part 655. Furthermore, pursuant to 
Sec. 655.731(a)(2)(iii)(A)(1), an employer which wishes to appeal a 
SESA-issued wage determination must file the appeal and obtain a final 
ruling pursuant to the ES complaint system prior to filing any LCA 
based on that determination. Section 655.731(d)(2) provides that where 
a prevailing wage determination is obtained by Wage and Hour pursuant 
to Sec. 655.731(d)(1), an employer must file any appeal within 10 days 
of receipt of the wage determination; notwithstanding the provisions of 
Secs. 658.420 and 658.426, the appeal is filed directly with ETA, 
rather than with the SESA.
    These provisions of the 1994 Final Rule were challenged in the NAM 
litigation as contrary to the requirements of the APA. The court, in 
that matter, concluded that these provisions were procedural 
regulations, exempt from APA notice and comment requirements, and 
further found that the plaintiffs in that case had failed to 
demonstrate that an employer's substantive rights had been altered by 
these provisions. Accordingly, the regulations were not enjoined and 
remain in effect. During the pendency of that litigation, these 
provisions were republished for notice and comment in the October 1995 
Proposed Rule. The identical provisions were republished for notice and 
comment in the January 1999 Proposed Rule.
    The Department received five comments (AILA, Frost & Jacobs, Moon, 
Motorola, NAM) in response to the proposals republished in 1995. All 
commenters opposed the proposed provisions. One commenter (Moon) 
asserted that the ES system was inadequate because it ``handcuffs the 
employer by gagging the SESA from revealing information.'' The 
commenter was alluding to the language in Sec. 655.731(d)(2), which 
states that neither ETA nor the SESA may divulge any employer wage data 
which was collected under the promise of confidentiality. Another 
commenter (Frost & Jacobs) urged that any challenge of a SESA 
determination be required to be resolved by the ES in a timely manner 
(recommended 30-day time limit). Motorola was also concerned with the 
ability of the ES to timely respond to SESA challenges, especially in 
situations of H-1B visa extensions or changes in status from an F-visa 
to an H-1B. In these situations, this commenter noted, an employer is 
forced to accept the challenged wage in order to obtain the LCA so that 
the application may be filed with the INS in sufficient time to prevent 
removing an individual from the payroll for lack of work authorization.
    In their comments to the 1995 proposals, NAM and AILA contended 
that allowing challenges to prevailing wage determinations to be made 
only pursuant to the ES complaint system deprives employers of their 
procedural due process protections. These organizations commented that 
a paper appeal to an administrative agency, staffed by paid employees 
of the very agency which determined the prevailing wage, without any 
rights to discovery, an examination of the evidence in support of the 
wage determination, or an express written decision, does not substitute 
for the right to be heard by an independent ALJ where all of these 
rights are guaranteed.
    The 1999 NPRM republication of the 1995 proposals on this issue 
sought further comment on these proposals. AILA, the sole commenter on 
this issue, stated that a poll of its members revealed that the 
complaint process is rarely used because of failure by either the ES or 
SESA Prevailing Wage Unit to publicize it. AILA further criticized the 
complaint system as laborious, complicated and protracted, requiring 
handling by several different offices of the SESA and ETA. Furthermore, 
the opportunity for a hearing before a DOL administrative law judge is 
permitted only at the discretion of the ETA Regional Administrator. 
AILA stated that without the opportunity for meaningful review of a 
SESA wage determination by an impartial judicial tribunal, such as in 
an ALJ hearing, employers feel that a meaningful and fair review might 
not be possible under the ES complaint system.
    The Department continues to be of the view, as stated in the 
preamble to the December 1994 Final Rule, that ``permitting an employer 
to operate under a SESA prevailing wage determination and later 
contesting it in the course of an investigation or enforcement action 
is contrary to sound public policy; such a delayed disruptive challenge 
would have a harmful effect on U.S. and H-1B employees, competing 
employers, and other parties who may have received notice of and/or 
relied on the prevailing wage at issue.''
    Challenges to SESA prevailing wage determinations prior to filing 
the LCA (as distinguished from challenges to prevailing wage 
determinations obtained by Wage and Hour) must be made through the ES 
complaint system by filing a complaint with the SESA. However, it 
should be clarified that complaints need not be initiated at the ES 
local office level. The complaint may be filed directly with the 
organization within the SESA responsible for alien labor certification 
prevailing wage determinations. This office is usually part of the 
central state office. Since the implementation of the OES program, SESA 
local offices are not involved in making or issuing prevailing wage 
determinations. See ETA's General Administrative Letter 2-98 (October 
3, 1997).
    Furthermore, although the regulations at Sec. 658.421(h) provide 
that the offer of a hearing before an administrative law judge is 
discretionary, it is ETA's policy that where the employer is appealing 
a wage determination obtained by Wage-Hour pursuant to Sec. 655.731(d), 
the ETA Regional Administrator will offer a hearing before an 
Administrative Law Judge in every H-1B case which is not resolved to 
the employer's satisfaction.
    With regard to comments that challenges to a SESA prevailing wage 
determination should be resolved more expeditiously, the Department 
believes that allowing employers to initiate a challenge to the a SESA 
prevailing wage determination at the State rather than the local office 
level will simplify and reduce the time necessary to resolve those 
complaints. The regulations governing the ES complaint system provide 
that if the complaint has not been resolved within 30 working days the 
State office shall make a written determination. Furthermore, appeals 
to wage determinations obtained by Wage-Hour are filed directly with 
the ETA Regional Administrator, thus shortening the process.
    As indicated above, one commenter to the 1995 Proposed Rule 
objected to the provision at Sec. 655.731(d)(2) which

[[Page 80198]]

states, in relevant part, that neither ETA nor the SESA shall divulge 
any employer wage data which was collected under the promise of 
confidentiality. This regulatory provision prohibiting release of wage 
information codified a longstanding ETA policy of not releasing such 
information because release of such information would inhibit employers 
responding to SESA conducted prevailing wage surveys. Furthermore, 
since January 1998, SESAs, pursuant to ETA's General Administrative 
Letter 2-98 (October 3, 1997), have based their prevailing wage 
determinations on the wage component of the Bureau of Labor Statistics' 
expanded Occupational Employment Statistics (OES) program. The 
occupational employment statistics questionnaire used to conduct 
occupational employment surveys informs potential respondent employers 
that ``[t]he Bureau of Labor Statistics and the State agency collecting 
this information will use the information you provide for statistical 
purposes only and will hold the information in confidence to the full 
extent permitted by law.'' This statement reflects longstanding BLS 
policies and practices, as well as longstanding ETA policies and 
practices, which are essential to obtain the information needed to 
provide timely and accurate statistics to the public. Accordingly, the 
Department is leaving unchanged the provision at Sec. 655.731(d)(2) 
which states that in a challenge to a SESA wage determination ``neither 
ETA nor the SESA shall divulge any employer wage data which was 
collected under the promise of confidentiality.''
    AILA has maintained that one reason that the ES complaint system 
has not been widely used is that it has not been widely publicized; 
AILA contends that despite the stated obligation at 20 CFR 658.410(d), 
not all State agencies have publicized the use of the ES complaint 
system through the prominent display of an ETA-approved ES complaint 
system poster in each local office. ETA operating experience indicates 
that a failure to display an ETA-approved ES complaint system poster in 
each local office is a rare occurrence. Such a failure would be a basis 
for a complaint about ES actions or omissions under ES regulations (20 
CFR 658.401). Further, the availability of the ES complaint to 
challenge SESA prevailing wage determinations issued under the H-1B 
program is clearly set forth in the H-1B regulations.
    The Department has concluded that at this time further measures to 
streamline the complaint process for challenging SESA prevailing wage 
determinations are not warranted. The basic structure of the current 
system appears to be adequate in view of the few complaints (about six) 
concerning SESA wage determinations that have been received and 
processed since publication of the 1994 Final Rule. On review, however, 
the Department has concluded that classification determinations, 
including specifically whether an employee is properly classified as an 
experienced or inexperienced worker, are properly the subject of ALJ 
enforcement proceedings pursuant to part 655, subpart I, since a 
determination of whether an employee has been appropriately classified 
can best be determined upon a review of the actual duties performed by 
the employee. Accordingly, Secs. 655.731(a)(2)(iii)(A)(1) and (3), and 
655.731(d)(2)(ii), are revised to remove references to determinations 
by the SESA or the ETA Regional Administrator regarding occupational 
classification.

P. What Additional Interpretative Regulations Did the Department 
Propose?

    The Department proposed a new Appendix B to the regulations in 
order to explain the Department's interpretation of several provisions 
of the regulations which were not themselves open for notice and 
comment. As the Department stated in the NPRM, these interpretations 
concerned questions that had arisen in its administration of the 
program and had been discussed with interest groups. It was the 
Department's view that because of the interest raised over these 
questions, its interpretations should be included in the regulations, 
either as an appendix or as regulatory text. As discussed below, on a 
number of the issues, the provisions have been removed from Appendix B 
into the regulations.
1. What Constitutes an H-1B Worker's ``Worksite'' or ``Place of 
Employment'' for Purposes of the Employer's Obligations Under the 
Program? (See IV.O.1.b, Above)
2. Under What Circumstances May an H-1B Worker ``Rove'' or ``Float'' 
From His/Her ``Home Base'' Worksite? (See IV.O.1.c, Above)
3. What H-1B Related Fees and Costs Are Considered To Be an Employer's 
Business Expenses? (Sec. 655.731(c)(9)(ii)&(iii), Previously in 
Proposed Appendix B, Section c)
    Section 655.731(c)(7)(iii)(C) of the current regulations excludes 
from deductions which are authorized to be taken from the required wage 
those deductions which are a recoupment of the employer's business 
expenses. Paragraph (c)(9) further explains that where the imposition 
of the employer's business expense(s) on the H-1B worker has the effect 
of reducing the employee's wages below the required wage (the 
prevailing wage or actual wage, whichever is greater), that will be 
considered an unauthorized deduction from wages. These provisions were 
not open for notice and comment.
    The Department sought comment on proposed Appendix B, which 
explains its interpretation of the operation of these provisions in the 
context of the H-1B petition process. The NPRM notes that the filing of 
an LCA and the filing of an H-1B petition are legal obligations 
required to be performed by the employer alone (workers are not 
permitted to file an LCA or an H-1B petition). Therefore the NPRM 
provides that any costs incurred in the filing of the LCA and the H-1B 
petition (e.g., prevailing wage survey preparation, attorney fees, INS 
fees) cannot be shifted to the employee; such costs are the sole 
responsibility of the employer, even if the worker proposes to pay the 
fees.
    The NPRM further notes that bona fide costs incurred in connection 
with visa functions which are required by law to be performed by the 
nonimmigrant (e.g., translation fees and other costs relating to visa 
application and processing for prospective nonimmigrant residing 
outside of the United States) do not constitute an employer's business 
expense. The Department stated, however, that it would look behind what 
appear to be contrived allocations of costs.
    The Department received 21 comments on this issue. All of the 
commenters (a number of whom were attorneys commenting only on this 
issue) opposed the Department's position in the NPRM. As a general 
matter, these commenters contended that the question of how fees are 
allocated between the employer and the H-1B worker is a question which 
should be decided between the employer and the employee.
    Immigration attorneys and their professional association (AILA), as 
well as Senators Abraham and Graham, argued that the Department is 
interfering with the H-1B workers' right to counsel. AILA argued that 
how the H-1B petition is drafted is critical to an employee, since it 
may affect his or her maintenance of status and ability to stay in the 
United States. Another attorney (Freedman) stated that attorney 
representation of the alien has acted as a buffer against employer 
abuses, that there is no reason to imply that an

[[Page 80199]]

attorney representing an employer is more competent or more impartial 
than an attorney suggested by an alien, and that employers may not be 
aware of the expertise necessary to file H-1B petitions. This attorney 
also suggested that the requirement that employers pay attorney fees 
would intimidate a potential whistleblower.
    Many commenters (AILA, ACIP, and a number of attorneys, businesses 
and trade associations) argued, in effect, that since Congress, in 
drafting the ACWIA, specifically prohibited employers from imposing the 
additional petition fee on employees, the failure to prohibit the 
payment of other expenses by employees evidences an intention to allow 
their imposition by an employer.
    ITAA and ACIP argued that the current law is directed toward 
prohibiting certain deductions from an employee's salary that will push 
it below the required wage rate. In other words, as long as the H-1B 
worker receives at least the required wage, it should not be a 
violation if the worker then spends that money for job-related matters 
such as fees. ACIP and ITAA stated that as a minimum, if the H-1B 
worker's wages minus the expenses equals or exceeds the required wage 
rate, there should be no violation. Latour agreed with the Department 
that if an H-1B worker's wage is below the prevailing wage, it would be 
a violation to deduct attorney fees from the worker's compensation, but 
stated that there is no basis for prohibiting the employer from having 
the employee handle the payment if the fees, when subtracted from the 
worker's pay, would not result in compensation less than the prevailing 
wage.
    BRI pointed out that many employers provide payment of immigration 
expenses as a benefit to employees. Making it mandatory that all 
employers pay such fees will disadvantage those employers who offer 
payment of fees as a benefit. BRI also suggested that employer payment 
of fees would make H-1B workers more likely to take advantage of the 
system.
    ACIP, AILA, and ITAA asserted that an employer should be able to 
collect these expenses as liquidated damages if the H-1B nonimmigrant 
prematurely terminates an employment contract. One attorney (Freedman) 
contended that by listing attorney fees as an employer business 
expense, the Department was establishing a regulatory basis for 
repayment as liquidated damages--thereby promoting the abusive actions 
for which the ACWIA was enacted.
    Educational and research institutions (ACE, AIRI, University of 
California, Johns Hopkins) noted that the INS has determined that 
because ACWIA has allowed an exemption from the additional fee for H-1B 
petitions from higher education institutions, affiliated or related 
research institutions, and nonprofit and governmental research 
organizations, these institutions are also exempt from the requirement 
that employers pay the $110 filing fee. Thus, they stated that INS has 
determined that H-1B workers may pay the cost of the filing fee, as in 
the past. These commenters therefore urged that DOL accept this 
approach so there is no conflict between Federal agencies. The 
University of California also stated that an employer does not have an 
interest in a worker being in the United States prior to commencement 
of employment and therefore should not bear the cost of a change of 
status. Finally, three attorney commenters (Latour, Quan, and Stump) 
argued that forbidding legal fee payment by nonimmigrant workers will 
be especially onerous to small businesses, small private schools, and 
other financially-limited groups which are not familiar with the 
requirements of the H-1B program.
    At the outset, the Department wants to clarify an apparent 
misconception by some commenters regarding the restrictions placed upon 
employers in assessing the employer's own business expenses to H-1B 
workers. An H-1B employer is prohibited from imposing its business 
expenses on the H-1B worker--including attorney fees and other expenses 
associated with the filing of an LCA and H-1B petition--only to the 
extent that the assessment would reduce the H-1B worker's pay below the 
required wage, i.e., the higher of the prevailing wage and the actual 
wage.
    ``Actual wage'' is explained at Sec. 655.731(a)(1) of the existing 
regulations as ``the wage rate paid by the employer to all other 
individuals with the similar experience and qualifications for the 
specific employment in question.'' The regulation continues by noting 
that ``[w]here no such other employees exist at the place of 
employment, the actual wage shall be the wage paid to the H-1B 
nonimmigrant by the employer.''
    The Department also wishes to emphasize, as provided in 
Sec. 655.731(c)(9) of the existing regulations (renumbered in the 
Interim Final Rule as Sec. 655.731(c)(12)), that where a worker is 
required to pay an expense, it is in effect a deduction in wages which 
is prohibited if it has the effect of reducing an employee's pay (after 
subtracting the amount of the expense) below the required wage (i.e., 
the higher of the actual wage or the prevailing wage). An employer 
cannot avoid its wage requirements by paying an employee a check at the 
required wage and then accepting a prohibited payment from a worker 
either directly, or indirectly through the worker's payment of an 
expense which is the employer's responsibility.
    The Interim Final Rule continues to provide that any expenses 
directly related to the filing of the LCA and the H-1B petition are a 
business expense that may not be paid by the H-1B worker if such 
payment would reduce his or her wage below the required wage. These 
expenses are the responsibility of the employer regardless of whether 
the INS filing is to bring an H-1B nonimmigrant into the United States, 
or to amend, change, or extend an H-1B nonimmigrant's status. As stated 
in the NPRM, the LCA application and H-1B petition, by law, may only be 
filed by the H-1B employer. The employer is not required to seek legal 
representation in completing and filing an LCA or H-1B petition, but 
once it utilizes the services of an attorney for this purpose, it has 
incurred an expense associated with the preparation of documents for 
which it has legal responsibility.
    H-1B nonimmigrants are permitted to pay the expenses of functions 
which by law are required to be performed by the nonimmigrant, such as 
translation fees and other costs related to the visa application and 
processing. The Department also recognizes that there may be situations 
where an H-1B worker receives legal advice that is personal to the 
worker. Thus, we did not intend to imply that an H-1B worker may never 
hire an attorney in connection with his or her employment in the United 
States. While the illustrative expenses (translation fees and other 
costs relating to the visa application) were not denominated in the 
NPRM as legal expenses, if they were provided through an attorney these 
costs and associated attorney fees would be personal to the worker and 
may be paid by the worker, rather than expenses that would have to 
borne by the employer. Similarly, any costs associated with the H-1B 
worker's receipt of legal services he or she contracts to receive 
relative to obtaining visas for the worker's family, and the various 
legal obligations of the worker under the laws of the U.S. and the 
country of origin that might arise in connection with residence and 
employment in the U.S., are not ordinarily the employer's business 
expenses. As such, they appropriately may be borne by the worker.
    An employer, however, may not seek to pass its legal costs 
associated with the

[[Page 80200]]

LCA and H-1B petition on to the employee. With respect to the concerns 
regarding small employers who may not have familiarity with H-1B 
requirements and may not know an attorney specializing in this area of 
law, there is nothing to prohibit an H-1B worker from recommending to 
the employer an attorney familiar with the requirements of the H-1B 
program. In addition, if an applicant for a job hired an attorney 
clearly to serve the employee's interest, to negotiate the terms of the 
worker's employment contract, to provide information necessary for the 
H-1B petition or review its terms on the worker's behalf, or to provide 
the applicant with advice in connection with application of U.S. 
employment laws, including the various employee protection provisions 
of the H-1B program and its new whistleblower provisions, the fees for 
such attorney services are not the employer's business expense. In its 
enforcement, the Department will look behind any situation where it 
appears that an employee is absorbing an employer's business expenses 
in the guise of the employee paying his or her own legitimate fees and 
expenses.
    Contrary to the view of many commenters, the Department does not 
read the ACWIA's proscription against an employer's assessment of the 
additional petition filing fee on the H-1B worker as evincing an 
intention that an employer may assess any other expenses against the 
worker. Neither the language of this provision, nor its place within 
the statute's larger context, allows a conclusion that Congress 
intended this provision to affect the ability of an employer to assess 
other costs to H-1B workers. The ACWIA prohibition against charging the 
H-1B worker for the filing fee is much more sweeping than the 
regulatory provision at issue. The ACWIA prohibits an employer from 
charging the fee, even where there would not be a resulting wage 
violation, and even as a part of the liquidated damages an employer may 
contract with a worker to pay for early termination.
    The Department concurs with the comments that the ACWIA does not 
preclude the recovery of expenses in connection with the filing of the 
LCA and H-1B petition as liquidated damages. It is the Department's 
view that there is no basis for distinguishing attorney fees and other 
expenses in connection with these filings from other expenses which may 
be permitted, under state law, as liquidated damages. However, as set 
forth in IV.K, above, the Interim Final Rule provides that the $500/
$1,000 filing fee may not be collected through liquidated damages.
    As stated above, education and research groups stated that INS has 
taken the position that qualified education and research organizations 
who are exempt from paying the additional filing fee will not be 
required to pay the separate $110 petition filing fee themselves, but 
rather INS will accept payment made by the H-1B workers. The Department 
does not believe that this statement is inconsistent with its position, 
since, as discussed above, employers are not prohibited from requiring 
workers to make these payments where the workers are paid above the 
required wage. To the extent these commenters may be suggesting that 
the Department should create an exception for academic and research 
institutions, the Department sees no basis for this suggestion. The 
status of these institutions as exempt from the additional filing fee 
does not change the fact that they are employers who, as such, are 
required to file the LCA and the H-1B petition, and to pay the 
attendant costs if payment by the H-1B worker would bring the worker's 
wages below the required wage.
    In the Interim Final Rule, the discussion of expenses of the H-1B 
program which the employer may not impose on H-1B workers has been 
removed from Appendix B and incorporated in the regulations at 
Sec. 655.731(c)(9)(ii) and (iii).
4. When Is the Service Contract Act Wage Rate Required To Be Applied as 
the ``Prevailing Wage''? (Sec. 655.731(a)(2)(i)(B), Previously Set 
Forth in Proposed Appendix B, Section d)
    Under Sec. 655.731(a)(2)(i) and (iii)(A) of the regulations, if 
there is an applicable wage determination issued under the McNamara-
O'Hara Service Contract Act (SCA) for the occupational classification 
in the area of employment, that SCA wage determination is considered by 
the Department to constitute the prevailing wage for that occupation in 
that area. This use of the SCA wage determination applies regardless of 
whether the employer is an SCA contractor, and regardless of whether 
the workers will be employed on an SCA contract. In the NPRM, the 
Department addressed questions that have arisen concerning application 
of the SCA wage rate for computer occupations where the wage rate on 
the wage determination is $27.63, and application of the SCA wage rate 
where the employer is of the view that the workers are exempt from the 
SCA.
    The NPRM provided at Appendix B, section d, that where an SCA wage 
determination for an occupational classification in the computer 
industry states a rate of $27.63, that rate will not be issued by the 
SESA and may not be used by the employer as the prevailing wage. That 
rate does not constitute a statement of the prevailing wage; it is the 
highest wage that any worker in a skilled computer occupation is 
required to be paid under the SCA. Under that statute, workers are 
exempt from the Act's requirements if they earn more than $27.63 per 
hour, regardless of whether they are paid on a salary basis an hourly 
rate. (See 29 CFR 4.156; 541.3). In such a case, the SESA will use the 
OES survey--rather than the SCA rate--and the employer, if it chooses 
not to obtain a prevailing wage rate from the SESA, will need to 
consult the OES survey or another source for wage information.
    Proposed Appendix B also provided that the question of whether the 
nonimmigrant worker(s) who will be employed will be exempt or non-
exempt from the SCA is irrelevant to use of the SCA wage determination 
to access the prevailing wage. Therefore, in issuing the SCA wage rate 
as the prevailing wage determination, the SESA will not consider 
questions of employee exemption, and, in an enforcement action, the 
Department will consider the SCA wage rate to be the prevailing wage 
without regard to whether any particular H-1B employee(s) would be 
exempt from the SCA if employed under an SCA contract.
    The Department received six comments on this issue. ACIP expressed 
confusion over the Department's singling out the SCA wage rate for 
computer operations, and urged reconsideration of this position before 
issuing interim final regulations. AILA stated that the Department's 
proposal is inconsistent because of this singling out of the SCA rate 
for computer operations, and contended, along with two other commenters 
(Rubin & Dornbaum, Cowan & Miller), that by designating the SCA wage as 
the prevailing wage, the Department virtually requires employers to use 
SESA determinations instead of the other wage sources permitted by law. 
Finally, AILA questioned the proposal to disregard the exempt status of 
the H-1B workers, contending that this is inconsistent with the 
practice used in the Permanent Program, as recognized in the Technical 
Assistance Guide at page 114. Network Appliance and FHCRC objected to 
application of the SCA wage rate where the employer is not subject to 
that Act.

[[Page 80201]]

    The significant role in the regulations of SCA determinations of 
the prevailing wage is founded in the legislative history of the H-1B 
program in IMMACT 90, which evidences Congressional intent that 
prevailing wage determinations be made as in the Permanent Alien Labor 
Certification (immigrant worker) Program, 20 CFR 656.40. See Conf. Rep. 
No. 101-955, 101st Cong., 2d Sess. 122 (1990), 1990 U.S.C.C.A.N. 6787. 
In any event, the general provisions governing use of wage rates in SCA 
wage determinations set forth in the regulations at 
Sec. 655.731(a)(2)(i) and (iii)(A) were not published for comment. 
Proposed Appendix B, section d, addressed only two specific questions: 
application of the SCA wage rate to skilled workers in computer 
occupations, and the broader question of the relevance of whether 
workers would be exempt from the SCA.
    The Department continues to be of the view that SCA wage 
determinations cannot properly be used for computer occupations where 
the wage is stated as $27.63 per hour. As explained above, this wage 
rate is not in any sense a statement of the prevailing wage for the 
occupation. Rather, this rate is instead a ``cap'' on the SCA-required 
wage that results from an SCA statutory provision which has no 
application in the H-1B program. Allowing the use of the $27.63 rate as 
the prevailing wage would therefore undermine the statutory requirement 
that workers be paid at least the prevailing wage, and create an 
economic incentive to utilize H-1B workers rather than U.S. workers. 
Furthermore, computer occupations are treated differently than other 
occupations with regard to the use of SCA rates because these 
occupations are treated uniquely under the SCA. Only for skilled 
computer occupations is there a cap on the wage set under the SCA, by 
virtue of a Congressional enactment exempting workers who are paid more 
than $27.63 per hour from the Fair Labor Standards Act, and therefore 
from the SCA. See 41 U.S.C. 357(b); Pub. L. 101-583, Sec. 2, Nov. 15, 
1990, 104 Stat. 2871, as amended by Pub. L. 104-188, 110 Stat. 1929.
    For several reasons, the Department also continues to be of the 
view that the potential SCA-exempt status of the nonimmigrant workers 
who will be employed under the LCA is irrelevant. SCA wage 
determinations (with the exception of computer professionals, as 
discussed above) are the Department's statement of the prevailing wage 
of the occupations listed, and are made without regard to the exempt 
status of workers surveyed. Furthermore, exemption status cannot be 
determined in advance, based on an employee's occupation. Rather, 
determinations are made only on examination of the actual duties 
performed by individual employees and on an examination of the manner 
in which the employees are paid. With the exception of computer 
professionals, doctors and attorneys, SCA-exempt employees must be paid 
either on a salary or fee basis. See 29 CFR part 541. The Department 
notes that this interpretation is not in fact inconsistent with the 
provisions of the Permanent Program's Technical Assistance Guide, which 
requires use of the SCA wage determination ``[i]f the job opportunity 
is in an occupation and a geographic area for which DOL has made a wage 
determination'' under the SCA. Page 114 of the Guide simply points out 
that executive, administrative, and professional employees are exempt 
from the SCA, but does not state that the exemption is intended to 
limit the application of the SCA wage determination in determining the 
prevailing wage under the permanent program. In any event, it is the 
Department's intention to conform its prevailing wage determinations 
under the Permanent Program to the interpretations in this Rule, as set 
forth in Sec. 655.731(a)(2)(i)(B) (rather than in Appendix B, as 
proposed).
5. How Are the ``PMSA'' and ``CMSA'' Concepts Applied? (Sec. 655.715, 
Previously in Proposed Appendix B, Section e)
    The regulations at Sec. 655.731(a)(2) require that the prevailing 
wage be determined for the occupational classification in the area of 
intended employment. ``Area of intended employment'' in turn is defined 
to include ``the area within normal commuting distance'' of the place 
where the H-1B worker will be employed. This definition further 
provides that ``[i]f the place of employment is within a Metropolitan 
Statistical Area (MSA), any place within the MSA is deemed to be within 
normal commuting distance of the place of employment.''
    Proposed Appendix B, section e, further explained that in computing 
prevailing wages for an ``area of intended employment,'' the Department 
will consider all locations within either an MSA or a primary 
metropolitan statistical area (PMSA) to constitute ``normal commuting 
distance.'' The NPRM further stated that ``a consolidated metropolitan 
statistical area (CMSA) will not be used in this manner in determining 
the prevailing wage rates.'' The Department sought to explain, 
parenthetically, that this simply meant that all locations within a 
CMSA will not necessarily be deemed to be within normal commuting 
distance. The Department determined, based on its operational 
experience, that CMSAs can be too geographically broad to be used in 
this manner. Because the Department has not adopted any rigid measure 
of distance as a ``normal commuting area,'' locations near the 
boundaries of MSAs and PMSAs, and locations within or near the 
boundaries of CMSAs may be within normal commuting distance, depending 
on the factual circumstances.
    The Department received four comments (ACIP, AILA, Intel, Latour) 
on this issue. ACIP believes that there is no justification for 
eliminating the use of CMSAs for prevailing wage purposes, and that 
requiring the use of PMSAs and MSAs will unnecessarily inflate the 
prevailing wage rate for employers located in certain metropolitan 
areas. That organization further commented that the fact that many wage 
surveys use CMSAs supports their contention that workers do in fact 
commute within these regions and CMSAs should continue to be a valid 
statistical area.
    AILA expressed its agreement that employers should make good faith 
efforts to utilize surveys which fit a geographical area, but noted 
that it is not always possible. Thus, it recommended that employers be 
able to use broader geographic surveys where no valid local surveys can 
be found. Intel expressed a similar view. Latour stated that it has 
used ``normal commuting distance'' since IMMACT 90, and the 
Department's proposal would only create confusion for employers.
    These comments demonstrate a misunderstanding on the part of the 
commenters of the Department's view on the use of CMSAs. The Department 
did not intend to place a blanket prohibition on the use of CMSAs. 
Rather, the Department intended only to clarify, albeit 
parenthetically, that, unlike MSAs and PMSAs, locations within a CMSA 
are not automatically deemed to be within normal commuting distance. If 
an employer can show that it could not get an adequate sample at the 
MSA or PMSA level, a survey based upon a CMSA may, in fact, be 
appropriate. In such a situation, the employer should demonstrate that 
it was not possible to obtain a representative sample of similarly 
employed workers within the MSA or PMSA. Upon such a showing, the CMSA 
survey should be acceptable. Furthermore, if an employer is unable to 
obtain a representative sample at the MSA or PMSA level, GAL 2-98 
(ETA's prevailing wage policy directive)

[[Page 80202]]

specifically directs that the geographic base of the survey should be 
expanded. The Department's proposals on this issue also sought to 
introduce the PMSA concept into the regulation, which had previously 
discussed only MSAs. The Department has therefore amended the 
definition of ``Area of intended employment'' in Sec. 655.715, 
consistent with this discussion, and has removed the discussion from 
proposed Appendix B, section e.
6. How Does the ``Weighted Average'' Apply in the Determination of the 
Prevailing Wage, and What Other Issues Have Arisen Concerning the 
Determination of the Prevailing Wage? (Sec. 655.731(b)(3)(iii)(B)(1), 
Previously in Proposed Appendix B, Section f; Sec. 655.731(a)(2)(vii); 
and Proposed Revisions to Sec. 655.731(a)(2)(iii) and (d)(4))
    Proposed Appendix B, section f, explained that, due to the 
inadvertent omission of the word ``weighted'' from one provision of the 
regulation, there had been a suggestion of confusion regarding whether 
an employer which uses an ``independent authoritative source'' to 
determine prevailing wages was required to use a ``weighted average'' 
methodology. Therefore proposed Appendix B described this methodology 
and how and when it is to be used.
    The Department received no comments on this provision. The 
Department has amended Sec. 655.731(b)(3)(iii)(B)(1) to expressly 
require a weighted average and has removed this section from Appendix 
B.
    As discussed above in IV.O.4, the Department has concluded that an 
employer will not be required to keep hourly wage records for full-time 
H-1B workers paid on a salary basis where the prevailing wage is 
expressed as an hourly wage. In order to permit this change in the 
recordkeeping provisions, it is necessary that the regulations be 
amended to explain that the hourly wage may be converted to a salary. 
Section 655.731(a)(2)(vii) is therefore amended to provide that an 
hourly rate may be converted to a weekly salary by multiplying the rate 
by 40, and may be converted to an annual salary by multiplying by 2080, 
etc.
7. What is the Effect of a New LCA on the Employer's Prevailing Wage 
Obligation Under a Pre-Existing LCA? (Sec. 655.731(a)(4), Previously in 
Proposed Appendix B, Section g)
    The Department, in the 1999 NPRM, acknowledged the possibility of 
confusion among employers regarding the prevailing wage obligation of 
an employer which has filed more than one LCA for the same occupational 
classification in the same area of employment. In such circumstances, 
the Department observed, the employer could have H-1B employees in the 
same occupational classification in the same area of employment brought 
into the United States (or accorded H-1B status) based on petitions 
approved pursuant to different LCAs (filed at different times) with 
different prevailing wage determinations. Therefore, the Department 
advised in proposed Appendix B to Subpart H, that the prevailing wage 
rate as to any particular H-1B nonimmigrant is prescribed by the LCA 
which supports that nonimmigrant's H-1B petition. The regulations 
require that the employer obtain the prevailing wage at the time that 
the LCA is filed (Sec. 655.731(a)(2)). The LCA is valid for the period 
certified by ETA, and the employer must satisfy all the LCA's 
requirements for as long as any H-1B nonimmigrants are employed 
pursuant to that LCA (Sec. 655.750). Where new nonimmigrants are 
employed pursuant to a new LCA, that new LCA prescribes the employer's 
obligations as to those new nonimmigrants. The prevailing wage 
determination on the later/subsequent LCA does not ``relate back'' to 
operate as an ``update'' of the prevailing wage for the previously-
filed LCA for the same occupational classification in the same area of 
employment. The Department also cautioned employers that every H-1B 
worker is to be paid in accordance with the employer's actual wage 
system (regardless of any difference among prevailing wage rates under 
various LCAs), and thus is to receive any pay increases which that 
system provides (e.g., merit increases; cost of living increases).
    One commenter, AILA, welcomed the acknowledgment that a prevailing 
wage on an LCA is not changed by later prevailing wage determinations. 
However, AILA expressed opposition to the reminder that an employer is 
obligated to pay any wage increases provided by its actual wage system.
    The Department has removed its discussion of this issue from 
Appendix B to the regulations at Sec. 655.731(a)(4). The issue of 
payment of wage increases under the actual wage system is discussed 
above in IV.O.3 of the preamble.

Q. Miscellaneous Matters

    The Department has also made minor changes to the regulations not 
discussed above.
    Section 655.700(c)(2) has been amended to explain the effect of the 
ACWIA amendments upon the entry and employment of a nonimmigrant who is 
a citizen of Mexico pursuant to the provisions of the North American 
Free Trade Agreement (NAFTA). As a general matter, the H-1B 
requirements continue to apply. To avoid the imposition of more 
stringent requirements on the entry of such nonimmigrants (who are 
classified as ``TN''), however, neither the recruitment nor the 
displacement provisions apply to these nonimmigrants. The Interim Final 
Rule also continues the practice of applying the statutory and 
regulatory provisions for registered nurses (most recently the Nursing 
Relief for Disadvantaged Areas Act of 1999, Pub. L. 106-95) to TNs.
    In addition, several places (e.g., Secs. 655.700, 655.705, 
655.715), have been revised to reflect the amendments made by the ACWIA 
and the October 2000 Amendments, and to reflect the current 
Departmental organizational structure.

V. Executive Order 12866

    Because of its importance to the public and to the Administration's 
priorities, the Department is treating this rule as a ``significant 
regulatory action'' within the meaning of section 3(f)(4) of Executive 
Order (E.O.) 12866. E.O. 12866 requires a full economic impact analysis 
only for ``economically significant'' rules as defined in section 
3(f)(1). An ``economically significant'' rule pursuant to section 
3(f)(1) is one that may ``have an annual effect on the economy of $100 
million or more, or adversely affect in a material way the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal governments or communities.''
    As noted in the NPRM, the H-1B visa program is a voluntary program 
that allows employers to temporarily secure and employ nonimmigrants 
admitted under H-1B visas to fill specialized jobs not filled by U.S. 
workers. In order to protect U.S. workers' wages and eliminate any 
economic incentive or advantage in hiring temporary foreign workers, 
Section 212(n) of the INA imposes various requirements on employers, 
including the requirement that the employer pay an H-1B worker the 
higher of the actual wage or the prevailing wage. This Interim Final 
Rule implements statutory changes in the H-1B visa program enacted by 
the ACWIA. The ACWIA (1) temporarily increases the maximum number of H-
1B visas permitted each year; (2) temporarily requires, during the 
increased H-1B cap period, new non-displacement (layoff) and 
recruitment attestations by ``H-1B-

[[Page 80203]]

dependent'' employers and employers found to have committed willful 
violations or misrepresentations; (3) requires employers of H-1B 
workers to offer the same fringe benefits to H-1B workers as they offer 
U.S. workers; (4) requires employers in certain cases to pay H-1B 
workers in a non-productive status; and (5) provides whistleblower 
protections to employees (including former employees and applicants) 
who disclose information about potential violations or cooperate in an 
investigation or proceeding. In addition, this Rule contains final 
rules on certain proposals previously published for comment in October 
1995, and on proposals relating to the Department's interpretations of 
the INA and its existing regulations.
    The Department, in the NPRM, concluded that this rule is not 
``economically significant'' because the direct, incremental costs that 
an employer would incur because of this rule, above customary business 
expenses associated with recruiting qualified job applicants and 
retaining qualified employees in specialized jobs, are expected to be 
minimal. Collectively, the changes proposed by this rule will not have 
an annual effect on the economy of $100 million or more or adversely 
affect in a material way the economy, a sector of the economy, 
productivity, jobs, the environment, public health or safety, or State, 
local, or tribal governments or communities. Therefore, the Department 
concluded that this rule is not a ``significant regulatory action'' as 
defined by section 3(f)(1) of E.O. 12866, and no economic impact 
analysis is required under section 6(a)(3).
    Four commenters (ACIP, AILA, Hammond and TCS) specifically 
responded to the Department's findings with respect to E.O. 12866. 
Hammond disagreed with the Department's assessment that a full economic 
impact analysis is not required. That commenter stated its belief that 
the direct, incremental costs an employer would incur because of this 
rule are above the customary and usual business expenses for recruiting 
qualified job applicants and for retaining qualified employees in 
specialized jobs. Hammond contended that the rule will impose 
significant costs that will have an annual effect on the economy of 
$100 million or more, and will adversely affect the computer industry 
and its productivity.
    All four commenters stated their view that the Department has 
underestimated the additional burdens and costs to be attributed to the 
new regulatory provisions on all H-1B employers, and that the economic 
impact of the rule is not limited to H-1B-dependent employers. AILA 
urged the Department to provide a more accurate and reasonable estimate 
of the burden created by its regulatory provisions, using reliable data 
and computations, before imposing the regulations in final form. In the 
alternative, and in the absence of data to support a reasonable 
estimate of the economic impact on H-1B employers, AILA recommended the 
adoption of regulations that are less burdensome.
    For the reasons discussed above and in the preamble of the NPRM, 
the Department continues to believe that the Interim Final Rule is not 
an ``economically significant'' regulatory action under E.O. 12866, 
section 3(f)(1). Furthermore, as described in detail above, the 
Department has made significant changes in several provisions which 
will lessen the perceived burden to employers. Accordingly, the Rule 
does not require an assessment of costs and benefits under section 
6(a)(3) of that E.O. The Rule, however, was treated as a ``significant 
regulatory action'' under E.O. 12866, section 3(f)(4), because of its 
importance to the public and to the Administration's priorities and 
was, therefore, reviewed by the Office of Management and Budget.

VI. Final Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires agencies 
to prepare and make available for public comment an initial regulatory 
flexibility analysis, describing the anticipated impact of the proposed 
rule on small entities. This initial analysis was published as part of 
the NPRM. The initial regulatory flexibility analysis concluded that 
the proposed rule would not have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act. The Regulatory Flexibility Act also 
requires agencies to prepare a final regulatory analysis, assessing 
comments received on the initial analysis, describing any significant 
alternatives affecting small entities that were considered in arriving 
at the final rule, and the anticipated impact of the rule on small 
entities.
    In the initial regulatory flexibility analysis, the Department 
noted that available data and analyses indicated that most of the 
businesses in the industries in which H-1B workers likely would be 
employed would meet SBA's definition of ``small.'' The Department, 
however, stated its conclusion that the economic impact of the rule 
would not be significant. As there explained, most of the new 
compliance obligations addressed in this rulemaking apply to only a 
small subset of the full universe of employers that participate in the 
H-1B program, namely, those that meet the new definition of ``H-1B 
dependent employer'' and those found to have committed willful 
violations or misrepresentations (``willful violators''), which the 
Department estimated to be no more than 200 employers.
    Upon further analysis, including review of the comments received by 
the Department, we have concluded that the Department's initial 
assessment was correct, i.e., the rules will not have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act.
    The discussion which follows addresses the statutory requirements 
bearing on this final analysis. While much of the discussion closely 
tracks the language in the Department's initial analysis, we address 
below the comments received bearing upon the impact of the rule on 
small entities. The reader should review the supplementary information 
section of the preamble (particularly section IV) for a full discussion 
of the various alternatives considered by the Department in crafting 
the IFR. However, we discuss below some aspects of these alternatives 
as they relate to small entities.

1. What Are the Objectives of, and the Legal Basis for, the Interim 
Final Rule?

    On October 21, 1998, President Clinton signed into law the American 
Competitiveness and Workforce Improvement Act of 1998 (ACWIA), which 
was enacted as Title IV of the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act for Fiscal Year 1999 (Public Law 105-
277). The ACWIA amended the Immigration and Nationality Act (INA), as 
amended (8 U.S.C. 1101 et seq.), relating to the H-1B visa program. 
Under the H-1B visa program, employers may temporarily employ 
nonimmigrants admitted into the U.S. under H-1B visas in specialty 
occupations and as fashion models, instead of employing U.S. workers, 
under certain conditions. Section 412(d) of the ACWIA provides that 
some of the amendments made by the ACWIA do not take effect until the 
Department promulgates implementing regulations, which are the subject 
of this rulemaking.
    The Interim Final Rule is issued pursuant to provisions of the INA, 
as amended, and the ACWIA, 8 U.S.C. 1101(a)(15)(H)(i)(b), 1182(n), and 
1184; 29 U.S.C. 49 et seq.; sec. 303(a)(8), Pub. L. 102-232, 105 Stat. 
1733, 1748 (8

[[Page 80204]]

U.S.C. 1182 note); and sec. 412(d) and (e), Pub. L. 105-277, 112 Stat. 
2681. The objectives of the rule are to enable employers to understand 
and comply with applicable requirements under the amended H-1B visa 
program, and to advise employees and applicants of the protections 
afforded by the amendments to U.S. and H-1B workers.

2. What Comments Were Received Addressing the Initial Regulatory 
Flexibility Analysis, How Does the Department Assess the Comments, and 
What Changes, if Any, Were Made as a Result of the Comments?

    As discussed below, the Department received only a few comments 
(from ACIP, AILA, Hammond and ITAA) that specifically discussed the 
initial regulatory flexibility analysis. The comments specifically 
directed at the initial regulatory flexibility analysis addressed only 
the commenters' disagreement with the Department's estimate of the 
number of U.S. employers that would be affected by the rule's 
requirements pertaining to H-1B-dependent employers or willful 
violators. Employers with such status (generally those employers with 
more than 15 percent of their workforce comprised of nonimmigrants or 
employers found to have willfully violated H-1B requirements) must 
follow requirements not imposed on the much larger number of employers 
that employ a smaller percentage of nonimmigrant workers. Since the 
comments received specifically relate to the Department's estimate 
regarding the number of small entities affected by the IFR, the 
comments are discussed in the next section of this analysis.
    Although not raised in connection with the initial analysis, 
numerous commenters, as detailed in the preceding sections of the 
preamble to the Interim Final Rule, objected to the recordkeeping 
burdens imposed by the rule; a few commenters (Chamber of Commerce, 
IEEE, Simmons) expressed a general concern that the regulations would 
impose requirements that small businesses would find burdensome. (See 
sections IV.D.7, D.8, E.1.)
    The Department has taken these comments into account, clarifying 
the particular requirements in several respects. While many of these 
comments did not differentiate among employers by size, the Department 
has made many adjustments in the Interim Final Rule, as discussed 
above, that will benefit small employers. The comments reflected some 
misunderstanding regarding the need to create, as distinguished from 
retaining or maintaining, documents relating to the H-1B employment 
process. The Rule requires the creation of documents in only a 
relatively few instances. And, in most instances, the maintenance of 
these documents already is required by other statutes and regulations. 
For example, while the regulation requires employers in some instances 
to maintain basic payroll and hours worked records for certain 
employees, employers are already required to do so by other federal 
statutes, such as the Fair Labor Standards Act. In a related matter, 
the Interim Final Rule clarifies that employers need not segregate H-1B 
documents in a file or system separate from other employment documents. 
Finally, the Rule, at Sec. 655.760, clarifies the documents that need 
to be kept in a public access file and simplifies the employer's 
obligations in this regard. These aspects of the Rule are discussed in 
full in the earlier sections of the preamble. The reader's particular 
attention to the following points is recommended: The Paperwork 
Reduction Act summary in section I; non-displacement documentation 
(IV.D.8); recruitment practices (IV.E.2); recruitment documentation 
(IV.E.5); benefits documentation (IV.G.2); location of documents 
(IV.D.3); hours worked documentation (IV.O.4); public access rules 
clarified (IV.O.4 and Sec. 655.760 of the Rule).
    The Rule also contains several provisions that will particularly 
benefit small businesses. The Department has provided: A toll free fax 
number to file LCAs (see IV.B); free or nominal charge resources for 
determining ``master's degree equivalence'' (see IV.C.2) and 
determining ``specialities related to'' a master's degree (see IV.C.3). 
Other aspects of the Rule that may be of particular assistance to some 
small entities include the use of a download program that can be used 
with Apple Macintosh systems (see IV.B.5) and employer options 
regarding the payment of benefits to H-1B workers already employed 
abroad by the employer or its affiliate (see IV.G.1). The Department's 
outreach efforts to explain the requirements of the ACWIA and the Rule 
also benefit small entities. As part of these efforts, the Department, 
as discussed in the preamble above, at section IV.B, plans to make 
available soon its small business compliance guide and to set up a 
computer program that will enable individuals and employers to obtain 
answers to their H-1B questions.
    The Department received some miscellaneous comments that concern 
small entities. As noted above, at section IV.N of the preamble, the 
Department received a comment requesting that state school districts 
and private schools be included in the special prevailing wage 
provisions. The Department has concluded that the statute does not 
allow for such exemption.
    One commenter (Gurtu & McGoldrick) expressed the summary view that 
the rules would impose excessive recordkeeping requirements on small 
businesses. As noted here and throughout the preamble, we believe that 
the Interim Final Rule imposes only minimal obligations on employers, 
and that the ACWIA does not allow the latitude to except small entities 
from the requirements necessary to ensure compliance with the statute. 
(See section 8 below.)
    Another commenter (SBSC) expressed the view that the Department's 
use of established definitions and regulations from areas of the law 
external to immigration would prove costly to small employers. We 
believe that we have provided ample information to allow all employers 
to understand and comply with all aspects of the H-1B program. No 
employer is required to look beyond the regulations in order to meet 
these obligations. At the same time, the references in the preamble to 
other statutes should assist employers by providing them with 
potentially useful guides to help them in meeting these requirements 
and by reminding them that other laws may bear on the employment of H-
1B workers.

3. How Many Small Entities Will Be Covered by the Interim Final Rule?

    A. As the Department noted in the initial regulatory flexibility 
analysis, the rule will have the greatest impact on ``H-1B-dependent'' 
employers and ``willful violators.'' Other aspects of the rule will 
apply all to employers which seek to temporarily employ nonimmigrants 
admitted into the U.S. under the H-1B visa program in specialty 
occupations and as fashion models. The initial analysis distinguished 
between ``H-1B dependent employers''/''willful violators'' and all 
other H-1B employers and we follow that approach here in discussing 
these two groups of employers.
    Section 412 (a)(3) of the ACWIA defines ``H-1B-dependent employer'' 
as an employer that has 25 or fewer full-time equivalent employees 
employed in the U.S. and more than 7 H-1B nonimmigrants, at least 26 
but not more than 50 full-time equivalent employees and more than 12 H-
1B nonimmigrants, or at least 51 full-time equivalent employees and a 
workforce of H-1B nonimmigrants comprising at least 15

[[Page 80205]]

percent of its full-time equivalent employees. The ACWIA requires H-1B-
dependent employers and employers found to have willfully violated H-1B 
requirements to attest that they will not displace (layoff) U.S. 
workers and replace them with H-1B workers in essentially equivalent 
jobs, that they will not place H-1B workers with other employers 
without first inquiring as to whether they intend to displace U.S. 
workers, and that they have taken good faith steps to recruit in the 
United States for U.S. workers to fill the jobs for which they are 
seeking H-1B workers. An employer filing an LCA pertaining only to 
``exempt H-1B nonimmigrants'' need not comply with the non-displacement 
and good faith recruitment attestations, regardless of status as an H-
1B-dependent or willful violator. ``Exempt H-1B nonimmigrants'' are 
defined as those who earn at least $60,000 annually or who have 
attained a master's degree or its equivalent in a specialty related to 
the intended employment.
    B. The definition of ``small'' business varies considerably, 
depending on the policy issues and circumstances under review, the 
industry being studied, and the measures used. The size standards used 
by the U.S. Small Business Administration (SBA) to define small 
business concerns according to their Standard Industrial Classification 
(SIC) codes are codified at 13 CFR 121.201. SBA's small size standards 
are generally expressed either in maximum number of employees or annual 
receipts (in millions of dollars).
    As explained in the initial analysis, we could apply SBA's size 
standards and gauge precisely how many of the affected businesses are 
``small'' if we were able to construct a profile of each business that 
used H-1B workers, showing both the total number of workers employed 
and the portion that are H-1B workers, together with total annual 
receipts and the applicable SIC industry code. Unfortunately, the 
precise data required for this analysis are not available. However, we 
know that by far the greatest number of occupations in LCAs certified 
under the H-1B program have historically been for computer-related 
occupations, and for therapists (principally physical and 
occupational).\1\ Looking just at these categories would present a view 
of 60 to 70 percent of all the certified job openings under the H-1B 
program.
---------------------------------------------------------------------------

    \1\ Our initial analysis, utilizing 1997 data, showed that 
398,324 job openings were certified--44.4 percent in computer-
related occupations and 25.9 percent for therapists. More recent 
data for FY 1999 shows 53.2 percent of 1,089,524 openings certified 
were in computer-related occupations and 17.7 percent were 
therapists (of whom 118,350 or 88.27 percent were filed by one 
employer). For the period October 1, 1999 through May 31, 2000, 
514,263 openings were certified--61 percent in computer-related 
occupations and only 0.5 percent therapists.
---------------------------------------------------------------------------

    For Major Group 73, Business Services, the SBA's small business 
size standards for SIC codes in which computer-related occupations 
would likely be employed are all at the $18 million level (annual 
receipts).\2\ Data from the 1992 Census of Service Industries: 
Establishment and Firm Size (published February 1995) indicate that 
39,511 out of a total 40,242 firms (or 98.18 percent) have annual 
receipts less than $18 million.
---------------------------------------------------------------------------

    \2\ Major Group 73 includes the followng SIC industries: 
Computer Programming Services (7371); Prepackaged Software (7372); 
Computer Intergrated Systems Design (7373); Computer Processing and 
Data Preparation and Processing Services (7374); Information 
Retrieval Services (7375); Computer Facilities Management Services 
(7376); Computer Rental and Leasing (7377); Computer Maintenance and 
Repair (7378); and Computer Related Services. Not Elsewhere 
Classified (N.E.C.) (7379).
---------------------------------------------------------------------------

    The Business Services category would not include other users of H-
1B workers in computer-related occupations, such as computer equipment 
manufacturers. For computer and other electronic equipment 
manufacturers, the SBA's small size threshold is 1,000 employees.\3\ In 
1994 (latest data on size distribution), 1.6 percent of the 
establishments employed 1,000 or more workers (comprising 42.1 percent 
of the employment in the industry).\4\ There were more than 14,000 
establishments in this industry in 1996.
---------------------------------------------------------------------------

    \3\ According to BLS, the following five SICs comprise the 
electronic equipment manufacturing industry: 357, Computer and 
Office Equipment; 365; Household Audio and Video Equipment; 366, 
Communications Equipment; 367, Electronic Components and 
Accessories; and 381, Search and Navigation Equipment. These five 
SICs share common need for high levels of computer programmers, 
analysts, engineers and other computer scientists. BLS has published 
data on establishment size for the industry as a whole, but not its 
five components. See Career Guide to Industries, BLS Bulletin 2503, 
pp. 53-56, January 1998. The products of this industry include 
computers and computer storage devices such as disk drives; 
semiconductors (silicon or computer chips or integrated circuits), 
which are the core of computers and other advanced electronic 
products; computer peripheral equipment such as printers and 
scanners; calculating and accounting machines such as automated 
teller machines; and other electronic equipment using highly skilled 
computer and other scientists and professionals.
    \4\ BLS Bulletin 2503 (January 1998). Source: U.S. Department of 
Commerce. County Business Patterns, 1994.
---------------------------------------------------------------------------

    For Major Group 80, Health Services, the SBA's small size threshold 
for all categories within the group are at the $5 million (annual 
receipts) level. Data from the 1992 Census of Service Industries: 
Establishment and Firm Size (February 1995) indicate that 244,437 out 
of a total 249,052 firms (or 98.15 percent) have annual receipts less 
than $5 million.\5\
---------------------------------------------------------------------------

    \5\ SIC industries 8021 (Offices and Clinics of Dentists), 8042 
(Offices and Clinics of Optometrists), 8072 (Dental Laboratories), 
and 8092 (Kidney Dialysis Centers) were subtracted from the total 
number of health service firms in SIC 80 for purposes of this 
analysis, based on the assumption that such firms would not likely 
employ physical or occupational therapists.
---------------------------------------------------------------------------

    Based on the above data, we concluded in the initial analysis that 
the vast majority (over 98 percent) of the businesses in the industries 
in which H-1B workers are likely to be employed would meet SBA's 
definition of ``small.'' In the initial analysis, the Department 
estimated that approximately 50,000 employers a year file LCA's for H-
1B nonimmigrants. The Department also estimated that not more than ten 
(10) employers a year will be found to have committed willful 
violations. The Department has received no comments, nor possesses any 
other information, that would call into question this approach or the 
estimate it yielded in the initial analysis. Based upon its updated 
review of the number of LCAs filed per year and taking into 
consideration the increase in petitions permitted by the October 2000 
amendments to the INA, the Department currently estimates that 63,500 
employers a year will file LCAs.
    C. As noted in the initial analysis, there are no data available to 
determine how many ``H-1B-dependent'' employers will exist under the 
rule. We arrived at our estimate of the number of ``H-1B-dependent'' 
employers for purposes of the initial analysis, as follows. Although 
the test for H-1B dependency varies with the size of the employer, an 
employer must employ at least seven H-1B workers to be dependent. 
Therefore, we stated that if we assume that every H-1B-dependent 
employer had the smallest workforce threshold (25 full-time equivalent 
employees) and therefore subject to the ``more than seven H-1B'' 
workers test, we can estimate the maximum potential number of H-1B-
dependent employers in computer-related fields and health services 
(using therapists) by determining how many of those employers submitted 
LCAs seeking certification of more than seven H-1B nonimmigrants on a 
single LCA. This approach undercounts the potential number of H-1B-
dependent employers because some employers requesting fewer than seven 
H-1B workers on a single LCA may already employ other H-1B workers or 
may file more than one LCA. For purposes of the initial analysis, 
therefore, we calculated the number of employers for which more

[[Page 80206]]

than five (5) H-1B nonimmigrants were certified on a single LCA to work 
in computer-related fields or as therapists in FY 1997, to estimate an 
upper-bound limit of the maximum potential number of H-1B-dependent 
employers. This yielded a total of 1,425 employers (8.7 percent of the 
total in the sample). This approach for setting the maximum upper limit 
greatly overstates H-1B dependency, however, because many larger firms 
employing more than 25 full-time employees would automatically be 
included in the count of H-1B dependents. For example, we know, that 
many major employers of H-1B workers have workforces larger than 25 
full-time equivalent employees. In addition, some employers file LCAs 
certifying a need for H-1B workers but for various reasons never fill 
all the positions.
    Both ACIP and AILA asserted that the Department's premises and 
conclusion were not logically connected and, along with the other two 
commenters, contended that the Department's estimate is not supported 
by reliable data. AILA stated that the number of affected employers and 
the resultant burden ``may be significantly higher than the DOL 
suggests.'' ACIP and AILA asserted that the Department's estimated 
``upper limit'' of 1,425 H-1B dependent employers was based on an 
unsupported and, in their view, incorrect assumption that employers 
generally file ``blanket LCAs.'' Hammond recommended that the 
Department work with the INS to analyze the economic information 
required in an H-1B petition to determine the probable number of small 
and H-1B dependent employers that will be affected by the proposed 
regulations.
    As the Department explained in both the initial regulatory analysis 
and in other sections of the preamble to the NPRM, aside from 
reasonable estimates, there are no data available to determine 
precisely how many ``H-1B dependent'' employers will exist under the 
rule in any given year, nor how many employers will be found to have 
committed willful violations or misrepresentations. Such precision 
would require a profile of each business that used H-1B workers, 
showing both the total number of workers employed and the portion that 
are H-1B workers, together with total annual receipts and the 
applicable SIC industry code for each business. Additional data 
identifying the education and earnings profiles of the H-1B workers 
would be needed to determine whether H-1B-dependent employers would 
likely be filing LCAs for only exempt workers. In the course of 
developing the NPRM, the Department requested available information 
from the INS and was advised that information required in an H-1B 
petition would not enable us or the INS to determine the probable 
number of small or H-1B-dependent employers that would be affected by 
the proposed regulations. The Department's conclusion that no such data 
existed was borne out by the lack of any suggestions in the comments 
that such data exist. Similarly, we received no suggestions for 
arriving at a better estimate of the number of employers that would be 
affected by the rule.
    After review of the comments and available data, the Department has 
concluded that there are no data to assist it in determining the likely 
number of H-1B-dependent employers and willful violators. The 
Department has received no information that leads it to question its 
estimate in the initial analysis that the number of H-1B-dependent 
employers and willful violators who would be subject to the new 
recruitment and displacement attestations would be between 100 and 200 
employers. The Department does not believe that the increase in the cap 
for H-1B workers will have a proportionate effect on the number of 
dependent employers, since the Department believes that most such 
employers are already dependent. To take into account employers that 
may have been close to H-1B-dependency under the former cap who could 
now employ a larger number of H-1B workers, the Department now 
estimates the number of H-1B-dependent employers and willful violators 
to be 150 to 250 employers, at a midpoint of 200 employers.

4. What Are the Projected Reporting, Recordkeeping and Other Compliance 
Requirements of the Interim Final Rule, Which Small Entities Will They 
Affect, and What Type of Professional Skills Are Needed To Meet the 
Requirements?

    The reporting and recordkeeping requirements of the Rule are not 
overly complex, and in most cases simply require that a copy be kept of 
a record made for other purposes or that a simple arithmetic 
calculation be performed. There are no requirements for technical, 
specialized or professional skills to comply with the reporting or 
recordkeeping provisions of the rule. The particular reporting and 
recordkeeping requirements of this Rule are described above in the 
Supplementary Information section entitled ``Paperwork Reduction Act'' 
and in various places throughout the preamble. Some of these 
requirements are also briefly summarized below.
    As noted, most new recordkeeping and compliance requirements 
imposed by the ACWIA and this rule apply only to employers meeting the 
new definition of ``H-1B-dependent employer'' or employers found to 
have committed willful violations or misrepresentations, which we 
estimate to number between 125 and 225. To determine if it meets the 
new definition of ``H-1B-dependent employer,'' an employer of H-1B 
workers must compare the number of its H-1B workers to the number of 
full-time equivalent employees. H-1B-dependent employers and willful 
violators must comply with the new ``non-displacement'' and ``good 
faith recruitment'' requirements of the ACWIA. In many cases, it will 
be readily apparent, at either end of the spectrum, whether an employer 
is or is not H-1B dependent and no actual computation will be 
necessary. Based on the comments, the Interim Final Rule provides an 
easy test for determining if H-1B-dependency status is readily 
apparent. In the few instances where actual computations will be 
required, the Rule also provides an easier, alternative method of 
determining full-time equivalent employees.
    The ACWIA provisions on non-displacement and recruitment of U.S. 
workers do not apply if the LCA is used for petitioning only ``exempt 
H-1B nonimmigrants.'' If INS determines in the course of adjudicating 
an H-1B petition that an H-1B nonimmigrant is exempt, the employer must 
keep a copy of the determination in the public access file.
    The Interim Final Rule would require an H-1B-dependent employer or 
willful violator that is seeking to place an H-1B nonimmigrant with 
another employer to secure and retain a written assurance from the 
second employer, a contemporaneous written record of the second 
employer's verbal statement, or a prohibition in the contract between 
the two employers, stating that the second employer has not displaced 
and intends not to displace a U.S. worker.
    H-1B-dependent employers and willful violators must maintain 
documentation that they have not displaced U.S. workers for a period 90 
days before and 90 days after the employer petitions for an H-1B 
worker. The Interim Final Rule, like the proposed rule, requires 
covered employers to maintain typical personnel records that would 
ordinarily be readily available, including name, last known mailing 
address, title and description of job, and any documentation kept on 
the employee's experience and

[[Page 80207]]

qualifications and principal assignments, for all U.S. workers who left 
employment during the 180-day window. The employer must also keep all 
documents concerning the departure of any such U.S. employees and the 
terms of any offers of similar employment made to them and their 
responses. In most cases no special records need to be created to meet 
these requirements. EEOC requires under its regulations that any such 
existing records be maintained by employers.
    H-1B-dependent employers and willful violators must make good faith 
efforts to recruit U.S. workers using procedures that meet industry-
wide standards before hiring H-1B workers. These employers will be 
required to keep documentation of the recruiting methods they used, 
including the places, dates, and contents of advertisements or 
postings, and the compensation terms (if not included in contents of 
advertisements and postings). These employers must also summarize in 
the public disclosure file the principal recruitment methods used and 
the time frame within which the recruitment was conducted. As discussed 
above at section IV.E.5 of the preamble to this Rule, the NPRM 
requested comments on how employers should determine industry-wide 
standards, and how to make this determination available to U.S. 
workers. (See IV.E.1, E.5.) Inasmuch as the requirements are based on 
industry-wide standards, meeting this statutory standard should not 
impose significant burdens on affected employers in most cases. To 
ascertain whether employers have given good faith consideration to U.S. 
worker/applicants, the Interim Final Rule also requires the retention 
of applications and related documents, rating forms, job offers, etc. 
Retention of such records already is required by EEOC, so no additional 
burden will be imposed. (See IV.D.8, above.)
    All employers of H-1B workers must offer fringe benefits to H-1B 
workers on the same basis and terms as offered to similarly-employed 
U.S. workers. To document that they have done so, employers must keep 
copies of their fringe benefit plans and summary plan descriptions, 
including rules on eligibility and benefits, evidence of what benefits 
are actually provided to workers, and how costs are shared between 
employers and employees. Because regulations of the Pension and Welfare 
Benefits Administration and the Internal Revenue Service generally 
require employers to keep copies of such fringe benefit information, 
meeting this requirement should not impose any additional burdens on 
most affected employers, and in the few cases where such information is 
not currently retained, it is anticipated that the additional burden 
will be minor. (See IV.G.1, above.)
    As noted in the initial analysis, the Department republished and 
asked for comment on several provisions of the December 20, 1994 Final 
Rule (59 FR 65646) that were published for notice and comment on 
October 31, 1995 (60 FR 55339). As explained above, H-1B workers are 
required to be paid at least the actual wage or the prevailing wage, 
whichever is higher. To ensure this requirement is met, employers are 
required to include in the public access file documents explaining 
their actual wage system, and to maintain payroll records for the 
specific employment in question for both their H-1B workers and their 
U.S. workers. The Interim Final Rule revises the proposal to require 
that hours worked records be retained with respect to U.S. workers only 
if the employee is not paid on a salary basis or the actual wage is 
expressed as an hourly rate, and further that hours worked records be 
kept for H-1B workers only if the worker is part-time or is not paid on 
a salary basis. In virtually all cases, these employees would be paid 
hourly and hourly pay records would therefore be kept. (See IV.O.4, 
above.)

5. Are There any Federal Rules That Duplicate, Overlap or Conflict With 
the Interim Final Rule?

    There are no Federal rules that directly duplicate, overlap or 
conflict with the Interim Final Rule. Title VII of the Civil Rights Act 
of 1964 (42 U.S.C. 2000e et seq.), enforced by the EEOC, prohibits 
national origin discrimination by employers with 15 or more employees 
(see 29 CFR part 1606). The Immigration Reform and Control Act of 1986 
(see 8 U.S.C. 1324b; 8 U.S.C. 1103(a)), enforced by the U.S. Department 
of Justice, prohibits national origin discrimination by employers with 
between four and fourteen employees (those not covered by Title VII), 
and citizenship-status discrimination by employers with at least four 
employees (see 28 CFR part 44). In addition, under the ACWIA, an ``H-1B 
dependent'' employer must attest that it has taken good faith steps to 
recruit in the U.S. for the position for which it is seeking the H-1B 
worker, and that it has offered the job to any U.S. worker/applicant 
who is equally or better qualified. The Department of Labor is 
responsible for enforcing the required recruitment, and the Department 
of Justice is responsible for administering an arbitration process 
detailed in the ACWIA if U.S. worker/applicants complain that they were 
not offered a job for which they were equally or better qualified, as 
required.

6. Are There Significant Alternatives Available Such as Differing 
Compliance or Reporting Requirements or Timetables for Small Entities?

    The compliance and reporting requirements of the Interim Final 
Rule, together with those significant alternatives which have been 
identified, are discussed in the ``Supplementary Information'' section 
of the preamble above. Different timetables for implementing the 
statutory requirements for smaller businesses would not be consistent 
with the statute. The statute temporarily increases the maximum 
allowable number of nonimmigrants that may be admitted into the U.S. to 
perform specialized jobs not filled by U.S. workers, and temporarily 
adds corresponding provisions intended to protect the wages and working 
conditions of U.S. workers in similar jobs during the same period.

7. Can Compliance and Reporting Requirements Be Clarified, 
Consolidated, or Simplified Under the Interim Final Rule for Small 
Entities?

    The compliance and reporting requirements of the Interim Final 
Rule, and each of the alternatives considered together with their 
expected advantages and disadvantages, are described in the preamble 
above. The Department has attempted to keep new recordkeeping 
requirements to the minimum necessary for the Department to ascertain 
compliance and for the public to be aware of the primary documentation 
relied on by the employer to satisfy the statutory requirements. (See 
Section 212(n)(1) of the INA.) Moreover, most of the recordkeeping 
requirements already are imposed by other statutes, or only require 
retention of documents which, in any event, would be kept as a matter 
of prudent business practice.
    Upon further review and consideration if the comments received, the 
Department has clarified several aspects of the rule. Among other items 
clarified are the documents to be kept in the public disclosure file 
and other documents which, in contrast, need not be segregated within 
the employer's system of records. (See Sec. 655.760.)
    In this connection, the Department also considered the use of 
performance rather than design standards in the regulations. The 
proposed rules discussed such alternatives, such as establishing a 
presumption of good faith recruitment based on the employer's hiring a 
significant number of U.S.

[[Page 80208]]

workers and, thereby, accomplishing a significant reduction in the 
ratio of H-1B workers to U.S. workers in the employer's workforce. (See 
IV.E.1, E.2, above.) The comments received on these proposals were 
negative and these alternatives were not included in the Interim Final 
Rule.

8. Can Small Entities Be Exempted From Coverage of the Rule, or Any 
Part of the Rule?

    Exemption from coverage under this Interim Final Rule for small 
entities would not be appropriate under the terms of the controlling H-
1B statutory mandates. The ACWIA contains no authority for the 
Department to grant such an exemption except to the extent that the 
statute itself grants an exemption (e.g., the definition of ``H-1B-
dependent employer''). Further, as discussed above, the Department 
believes that the impact on small businesses will not require 
significant, additional expenditures. The direct, incremental costs 
associated with the customary and usual business expenses for 
recruiting qualified job applicants and retaining qualified employees 
in specialized jobs should be minimally affected by implementation of 
this Rule. Most employers, including the smallest entities, should 
already have systems in place to meet the additional requirements 
prescribed by the ACWIA and this Rule.

VII. Small Business Regulatory Enforcement Fairness Act

    The Department, in the NPRM, concluded that the proposed rule is 
not a ``major rule'' within the meaning of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 801 et 
seq.. The rule will not likely result in (1) an annual effect on the 
economy of $100 million or more; (2) a major increase in costs or 
prices for consumers, individual industries, Federal, State or local 
government agencies, or geographic regions; or (3) significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of U.S. based enterprises to compete with 
foreign-based enterprises in domestic or export markets.
    Five commenters (ACIP, AILA, Hammond, ITAA and SBSC) responded to 
the Department's conclusion that this rule is not a ``major rule'' 
within the meaning of SBREFA. The commenters generally focused on their 
belief that the Department has underestimated the costs to employers of 
complying with the rule. They asserted that a reasonable, reliable 
estimate of costs would show that the rule is a major one requiring 
approval by Congress. ACIP and AILA contended that the Department has 
underestimated the cost of this rule to employers because it has not 
included in its analysis the costs to employers for legal services, 
training materials, computers, files and other systems necessary for 
compliance.
    The Department believes that employer compliance with the 
additional requirements of the ACWIA will not require significant, 
additional expenditures as suggested by commenters. The direct, 
incremental costs associated with the customary and usual business 
expenses for recruiting qualified job applicants and retaining 
qualified employees in specialized jobs should be minimally affected by 
implementation of this rule. Those systems needed for compliance with 
the few additional requirements of the ACWIA should largely already be 
in place. The Department has concluded that collectively, the changes 
set forth in this Rule will not have an economically significant 
impact, and therefore the Rule is not a major rule under SBREFA.

VIII. Unfunded Mandates Reform Act of 1995; Executive Order 13132

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531 
et seq.) directs agencies to assess the effects of Federal regulatory 
actions on State, local, and tribal governments, and the private 
sector, ``* * * (other than to the extent that such regulations 
incorporate requirements specifically set forth in law).'' The 
Department concluded in the NPRM that for purposes of the Unfunded 
Mandates Reform Act, this rule does not include any Federal mandate 
that may result in increased annual expenditures in excess of $100 
million by State, local or tribal governments in the aggregate, or by 
the private sector. Moreover, the requirements of the Unfunded Mandates 
Reform Act do not apply to this Rule because it does not include a 
``Federal mandate,'' which is defined to included either a ``Federal 
intergovernmental mandate'' or a ``Federal private sector mandate.'' 2 
U.S.C. 658(6). Except in limited circumstances not applicable here, 
those terms do not include ``a duty arising from participation in a 
voluntary program.'' 2 U.S.C. 658(5)(A)(I)(II) and 7(A)(ii). A decision 
by an employer to obtain an H-1B worker is purely voluntary and the 
obligations arise ``from participation in a voluntary Federal 
program.''
    AILA specifically took issue with the Department's description of 
the H-1B program as ``voluntary.'' AILA believes that there is very 
little that is ``voluntary'' about the H-1B program. Rather, that group 
asserts, Congress recognized an urgent need for additional qualified 
professionals in certain fields and responded to that need by enacting 
ACWIA. AILA describes the H-1B program as a ``government monopoly'' 
where businesses have no choice but to accept the burdensome 
requirements of the program if they are to obtain the highly skilled 
foreign workers necessary for their economic survival. While from an 
employer's perspective, use of the H-1B visa program may be an economic 
necessity, participation in the program remains voluntary since it 
applies only to employers who choose to participate in the program.
    In addition, the Rule will not have substantial direct effects on 
the States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, within the meaning of Executive Order 
13132. Therefore, in accordance with Executive Order 13132, it is 
determined that this rule does not have sufficient federalism 
implications to warrant the preparation of a federalism summary impact 
statement.

IX. Catalog of Federal Domestic Assistance Number

    This program is listed in the Catalog of Federal Domestic 
Assistance at 17.252.

List of Subjects in 20 CFR Parts 655 and 656

    Administrative practice and procedure, Agriculture, Aliens, 
Employment, Forest and forest products, Health professions, 
Immigration, Labor, Longshore work, Migrant labor, Penalties, Reporting 
requirements, Students, Wages.

The Interim Final Rule

    Parts 655 and 656 of Chapter V of Title 20, Code of Federal 
Regulations, are amended as follows:

PART 655--TEMPORARY EMPLOYMENT OF ALIENS IN THE UNITED STATES

    1. The table of contents for part 655, subparts H and I, is revised 
to read as follows:
Subpart H--Labor Condition Applications and Requirements for Employers 
Using Nonimmigrants on H-1B Visas in Specialty Occupations and as 
Fashion Models
655.700   What statutory provisions govern the employment of H-1B 
nonimmigrants and how do employers apply for an H-1B visa?
655.705   What federal agencies are involved in the H-1B program, 
and what are the


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