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


[Federal Register: May 17, 2007 (Volume 72, Number 95)]
[Rules and Regulations]               
[Page 27903-27947]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17my07-15]                         


[[Page 27903]]

-----------------------------------------------------------------------

Part II





Department of Labor





-----------------------------------------------------------------------



Employment and Training Administration



-----------------------------------------------------------------------



20 CFR Part 656



Labor Certification for the Permanent Employment of Aliens in the 
United States; Reducing the Incentives and Opportunities for Fraud and 
Abuse and Enhancing Program Integrity; Final Rule


[[Page 27904]]


-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Part 656

RIN 1205-AB42

 
Labor Certification for the Permanent Employment of Aliens in the 
United States; Reducing the Incentives and Opportunities for Fraud and 
Abuse and Enhancing Program Integrity

AGENCY: Employment and Training Administration, Department of Labor.

ACTION: Final Rule.

-----------------------------------------------------------------------

SUMMARY: The Department of Labor (DOL or Department) is amending its 
regulations to enhance program integrity and reduce the incentives and 
opportunities for fraud and abuse related to the permanent employment 
of aliens in the United States.
    This Final Rule includes several major provisions. It prohibits the 
substitution of alien beneficiaries on permanent labor certification 
applications and resulting certifications. The Final Rule provides a 
180-day validity period for approved labor certifications; employers 
will have 180 calendar days within which to file an approved permanent 
labor certification in support of a Form I-140 Immigrant Petition for 
Alien Worker (Form I-140 hereafter) with the Department of Homeland 
Security (DHS). The rule prohibits the sale, barter or purchase of 
permanent labor certifications and applications. In addition, this rule 
requires employers to pay the costs of preparing, filing and obtaining 
certification. An employer's transfer to the alien beneficiary of the 
employer's costs incurred in the labor certification or application 
process is strictly prohibited. The rule makes clear an alien may pay 
his or her own legitimate costs in the permanent labor certification 
process, including attorneys' fees for representation of the alien. The 
rule also reinforces existing law pertaining to the submission of 
fraudulent or false information and clarifies current DOL procedures 
for responding to incidents of possible fraud. Finally, the rule 
establishes procedures for debarment from the permanent labor 
certification program.
    Consistent with the proposed rule, the provisions in this Final 
Rule apply to permanent labor certification applications and approved 
certifications filed under both the Program Electronic Review 
Management (PERM) program regulation effective March 28, 2005, and 
prior regulations implementing the permanent labor certification 
program. This rule also clarifies the Department's ``no modifications'' 
policy for applications filed on or after March 28, 2005, under the 
new, streamlined PERM process.

DATES: This Final Rule is effective July 16, 2007.

FOR FURTHER INFORMATION CONTACT: William L. Carlson, Administrator, 
Office of Foreign Labor Certification, Employment and Training 
Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Room C-4312, Washington, DC 20210. Telephone: (202) 693-3010 (this is 
not a toll-free number).
    Individuals with hearing or speech impairments may access the 
telephone number above via TTY by calling the toll-free Federal 
Information Relay Service at (800) 877-8339 (this is a toll-free 
number).

SUPPLEMENTARY INFORMATION

I. Background

    The purpose of this Final Rule is to impose clear limitations on 
the acquisition and use of permanent labor certification applications 
and permanent labor certifications in order to reduce incentives and 
opportunities for fraud and abuse in the permanent labor certification 
program. It also promulgates key measures to enhance the integrity of 
the permanent labor certification program. This Final Rule continues 
efforts the Department initiated several years ago to construct a 
deliberate, coordinated fraud reduction and prevention framework within 
the permanent labor certification program. The Department laid the 
groundwork for greater integrity and security during the planning and 
promulgation of the 2004 Final Rule to implement the re-engineered PERM 
system. While fraud prevention has always been a goal of the 
Department's labor certification programs, our continuing program 
experience and that of other Federal agencies has demonstrated the need 
to focus on the specific opportunities for fraud and abuse addressed in 
this rule.

A. Statutory Standard and Current Department of Labor Regulations

    Under section 212(a)(5)(A) of the Immigration and Nationality Act 
(INA or Act) (8 U.S.C. 1182(a)(5)(A)), before the Department of 
Homeland Security (DHS) may approve petition requests and the 
Department of State (DOS) may issue visas and admit certain immigrant 
aliens to work permanently in the United States (U.S.), the Secretary 
of Labor (Secretary) must certify to the Secretary of Homeland Security 
and the Secretary of State that:
    (a) There are not sufficient U.S. workers who are able, willing, 
qualified, and available at the time of the application for a visa and 
admission into the United States and at the place where the alien is to 
perform the work; and
    (b) The employment of the alien will not adversely affect the wages 
and working conditions of similarly employed U.S. workers.
    If the Secretary of Labor, through the Employment and Training 
Administration (ETA), is satisfied in his or her review of a sponsoring 
employer's application for certification that these two requirements 
have been met, he or she so certifies by granting a permanent labor 
certification. If DOL cannot make both of the above findings, the 
application for permanent labor certification is denied. The Department 
of Labor's regulation at 20 CFR part 656 governs the labor 
certification process for the permanent employment of immigrant aliens 
and sets forth the responsibilities of employers who wish to employ 
immigrant aliens permanently in the United States.
    The INA does not specifically address substitution of aliens in the 
permanent labor certification process. Similarly, the Department of 
Labor's regulations are silent on the question of substitution.
    On May 6, 2002, the Department published a Notice of Proposed 
Rulemaking (NPRM) to streamline the permanent labor certification 
program. 67 FR 30466 (May 6, 2002). A Final Rule implementing the 
streamlined permanent labor certification program through revisions to 
20 CFR part 656 was published on December 27, 2004, and took effect on 
March 28, 2005. 69 FR 77326 (Dec. 27, 2004). The prior 20 CFR part 656 
(2004) governs processing of permanent labor certification applications 
filed prior to March 28, 2005, except where certain provisions of this 
Final Rule will impact such applications. Previously filed applications 
may be refiled under the new PERM rule.

B. General Immigration Process Involving Permanent Labor Certifications

    To obtain permanent alien workers, U.S. employers generally must 
engage in a multi-step process that involves DOL and DHS and, in some 
instances, DOS. The INA classifies employment-based (EB) immigrant 
workers into categories, e.g., EB-2 and EB-3, based on the general job 
requirements and the perceived benefit to American society.

[[Page 27905]]

U.S. employers must demonstrate that the requested job requirements, 
and in some cases the alien, fit into one of these classifications. The 
first step in the process for the EB-2 and EB-3 classifications, 
further described below, generally begins with the U.S. employer filing 
a labor certification application with DOL in accordance with 20 CFR 
part 656. The U.S. employer must demonstrate to DOL, through a test of 
the labor market, that there are no U.S. workers able, willing, 
qualified, and available at the time of the application for a visa and 
admission to the United States and at the place where the alien is to 
perform the work. The employer must also demonstrate that the 
employment of the alien will not adversely affect the wages and working 
conditions of similarly employed U.S. workers. Following review of the 
permanent labor certification application, DOL will either certify or 
deny the application.
    The Immigrant Petition for Alien Worker (Form I-140) is a petition 
filed with the United States Citizenship and Immigration Services 
(USCIS), within DHS, by a U.S. employer for a prospective permanent 
alien employee. Most Form I-140 petitions filed under section 203(b)(2) 
and (3) of the Act, the EB-2 and EB-3 classifications, must be 
accompanied by an approved labor certification issued by DOL. DHS has 
established procedures for filing Form I-140 petitions under 8 CFR 
204.5.
    DHS reviews the approved labor certification in conjunction with 
the Form I-140 petition and other supporting documents to evaluate 
whether the position being offered to the alien named in the petition 
is the same as the position specified on the labor certification and 
whether the employment qualifies for the immigrant classification 
requested by the employer. In addition, DHS evaluates the alien's 
education, training, and work experience to determine whether the 
particular alien meets the job requirements specified on the labor 
certification. The approved labor certification is also used to 
establish the priority date for which an immigrant visa will be made 
available to the alien, based on the date the labor certification 
application was originally filed.

C. Current ETA Practices Involving Permanent Labor Certifications

    Although not mentioned in 20 CFR part 656, ETA has for years 
informally allowed employers to substitute an alien named on a pending 
or approved labor certification with another prospective alien 
employee. Labor certification substitution has occurred either while 
the permanent labor certification application is pending at DOL or--by 
DOL's delegation to DHS--while a Form I-140 petition, filed with an 
approved labor certification, is pending with DHS. Historically, this 
substitution practice was permitted as an accommodation to U.S. 
employers due to the length of time it took to obtain a permanent labor 
certification or receive approval of the Form I-140 petition.
    Currently, the regulations do not set any validity period on a 
permanent labor certification and, thus, permanent labor certifications 
are valid indefinitely. Also, DOL regulations do not address payments 
related to the permanent labor certification program or debarment 
authority. In this Final Rule, the Department addresses problems that 
have arisen related to substitution, lack of a validity period for 
certifications, and financial transactions related to the permanent 
labor certification program.

D. Issues Arising From Current Practices

    For more than 15 years, the Department has expressed concern that 
various immigration practices, including substitution, were subject to 
a high degree of fraud and abuse. See, e.g., Interim Final Rule, 56 FR 
54920 (October 23, 1991).\1\ This concern was heightened by a number of 
recent criminal prosecutions by the Department of Justice (DOJ) as well 
as recommendations from the Department of Justice and the Department of 
Labor's Office of Inspector General (OIG), and public comments 
concerning fraud received in response to the May 6, 2002, NPRM on PERM. 
See, e.g., 69 FR at 77328, 77329, 77363, and 77364 (Dec. 27, 2004).
---------------------------------------------------------------------------

    \1\ The 1991 Interim Final Rule included a provision prohibiting 
substitution. That provision was overturned by the U.S. Court of 
Appeals for the D.C. Circuit on Administrative Procedure Act 
procedural grounds. Kooritzky v. Reich, 17 F.3d 1509 (D.C. Cir. 
1994). DOL addressed the court's concern through publication of the 
NPRM for notice and comment on February 13, 2006, consideration of 
comments received and development of this Final Rule. 71 FR 7656 
(Feb. 13, 2006). It is of no small significance that the plaintiff 
in that suit, an attorney, was later convicted for the criminal sale 
of fraudulent labor certifications used for substitution. U.S. v. 
Kooritzky, No. 02-502-A (E.D. Va. 2003).
---------------------------------------------------------------------------

    The Department's review of recent prosecutions by DOJ, in 
particular, revealed that the ability to substitute alien beneficiaries 
has turned labor certifications into commodities which can be sold by 
unscrupulous employers, attorneys, or agents to those seeking a ``green 
card.'' Similarly, the ability to sell labor certifications has been 
greatly enhanced by their current open-ended validity, providing a 
lengthy period during which a certification may be marketed. In many of 
these applications, the job offer was fictitious. In others, the job in 
question existed but was never truly open to U.S. workers. Rather, the 
job was steered to a specific alien in return for a substantial fee or 
``kickback.'' The Federal Government has prosecuted a number of cases 
resulting from employers, agents, or attorneys seeking to fraudulently 
profit from the substitution of aliens on approved labor certifications 
and applications. One attorney filed approximately 2,700 fraudulent 
applications with DOL for fees of up to $20,000 per application. Many 
of these applications were filed for the sole purpose of later being 
sold to aliens who would be substituted for named beneficiaries on the 
approved labor certifications. See U.S. v. Kooritzky, No. 02-502-A 
(E.D. Va. 2003). Additional prosecutions have also involved the sale of 
fraudulent applications or certifications. See, e.g., U.S. v. 
Ivanchukov, et al., No. 04-421 (E.D. Va. 2005); U.S. v. Mir, No. 8:03-
CR-00156-AW-ALL (D. Md. 2003); U.S. v. Fredman, et al., No. WMN-05-198 
(D. Md.); U.S. v. Lee, No. 03-947-M (E.D. Va.); U.S. v. Mederos, No. 
04-314-A (E.D. Va.); U.S. v. Yum (E.D. Va. 2006); U.S. v. Mandalapa, 
No. 205-NJ-03117-PS (D. N.J. 2006); U.S. v. Heguman, No. CR 04-1635(A)-
RSWL (C.D. Cal. 2007). Our program experience confirms that such 
fraudulent activity adds to the cost of foreign labor certification 
programs--for example, resources spent processing fraudulent 
applications, anticipating and combating unscrupulous conduct, and 
assisting debarments or prosecutions after the fact.
    The Final Rule implementing the streamlined permanent labor 
certification program also discussed DOL's and others' concerns about 
fraud in the program and the steps the Department would be taking to 
minimize the filing of fraudulent or non-meritorious applications. 69 
FR at 77328, 77329, and 77363 (Dec. 27, 2004). As implemented, the 
basic labor certification process under the new PERM system 
incorporates fraud detection measures targeting areas that have 
historically shown vulnerability. These measures include system and 
manual checks in key areas, as well as the use of auditing triggers and 
techniques, both targeted and random, which can be adjusted as 
appropriate to maintain security and integrity in the process.
    Personal Identification Numbers (PINs) and passwords for 
registration into the automated filing system are assigned to accounts 
issued to

[[Page 27906]]

sponsoring employers, who may then create sub-accounts for attorneys or 
agents who represent the employer. The initial stages of registration 
and application include system checks to verify the employer-applicant 
is a bona fide business entity. Once DOL's initial review of a filed 
application shows it to be technically acceptable for processing, the 
application transfers to a substantive review queue, where it may be 
selected for audit either randomly or based on specific criteria that 
tie closely to program requirements. Staff at ETA's National Processing 
Centers, where PERM applications are processed, also confirm 
information directly with employers, for example, to ensure each 
employer is aware an application has been filed on its behalf and is, 
in fact, sponsoring the alien named on the application.
    While these measures are targeted based on our program experience, 
they focus largely on discrete activities (employer verification, 
sponsorship, etc.) or on program requirements as reflected in questions 
throughout the application, and do not address broader labor 
certification policies historically of concern to the Department. For 
example, in the Final Rule to implement the PERM program, the 
Department noted the practice of allowing the substitution of alien 
beneficiaries may provide an incentive for fraudulent applications to 
be filed. 69 FR at 77363 (Dec. 27, 2004). The Department also concluded 
in that Final Rule that the emerging ``black market'' for purchase and 
sale of approved labor certifications is not consistent with the 
purpose of the labor certification statute at section 212(a)(5)(A) of 
the INA. While DOL was not able to address many of these fraud issues 
in the PERM Final Rule because they arguably went beyond the scope of 
the proposals contained in the PERM NPRM, the Department clearly 
indicated it would be exploring regulatory solutions to address these 
issues. 69 FR at 77328, 77329, and 77363 (Dec. 27, 2004).
    Similarly, the Department determined that additional regulatory 
action was required to reinforce and clarify core program components, 
both to strengthen fraud prevention and enhance program integrity. For 
example, a prohibition on modifications to applications was an original 
assumption of the PERM program and having such a clear, enforceable 
prohibition is critical to its long-term efficiency and effectiveness. 
A prohibition against the transfer of labor certification costs from 
sponsoring employers to alien beneficiaries keeps legitimate business 
costs with the employer, minimizes improper financial involvement by 
aliens in the labor certification process, and strengthens the 
enforceability of the bona fide job opportunity requirement.
    Accordingly, on February 13, 2006, the Department published in the 
Federal Register a Notice of Proposed Rulemaking to amend its 
regulations governing the permanent labor certification process to curb 
fraud and abuse and strengthen program integrity. 71 FR 7656. As 
proposed, the rule prohibited substitution of aliens not originally 
named on applications for permanent labor certification; limited the 
period of validity of a permanent labor certification to 45 calendar 
days; prohibited certain financial transactions or activities related 
to permanent labor certifications; and took other steps to enhance 
program integrity and reduce or avert fraud.
    This Final Rule builds on the foundation laid in the 2004 Final 
Rule implementing the streamlined permanent program and follows through 
on the strong commitment reflected in the NPRM for this rulemaking, 
culminating a multi-year effort to enhance integrity and fraud 
prevention mechanisms in the permanent labor certification program.
    To assist compliance and enforcement under this rule, the 
Department is reviewing available resources to determine its ability to 
establish a new toll-free telephone number, or to develop other means, 
to receive reports of potential violations. Calls would be screened by 
DOL staff, who would refer calls or inquiries to appropriate agencies 
within or outside the Department.

II. Overview of the Regulation

    In order to protect the integrity of the permanent labor 
certification program, reduce the incentives for fraud and abuse, and 
comply with the Department's statutory obligation to protect the wages 
and working conditions of U.S. workers, the Department proposed in the 
NPRM a number of regulatory changes. As stated in the NPRM, the 
revisions were proposed in part in response to concerns raised 
historically by stakeholder agencies and individual program users. They 
also responded to the numerous substantive comments received to the May 
6, 2002 NPRM. At its essence, each change was motivated by our program 
experience and desire and responsibility under the authorizing statute 
to restore and maintain the integrity of the labor market test. The 
Department's regulations at 20 CFR part 656 establish the fact-finding 
process designed to develop information sufficient to support the 
Secretary of Labor's determination, required under the statute, of the 
availability of or adverse impact to U.S. workers. The labor market 
test forms the basis for notice to U.S. workers of the job vacancy, for 
the recruitment process through which U.S. workers have the opportunity 
to apply and be considered for each job, and for employer attestations 
related to key terms and conditions of employment. While we remain 
sensitive to concerns raised by employers and others over the impact of 
these changes, we nonetheless have concluded, after careful review of 
comments on each proposal, that the identification and deterrence of 
fraud and the broader integrity of the program require a strong, 
comprehensive approach to which these regulatory reforms are critical. 
Accordingly, in this Final Rule the Department amends part 656 to add 
fraud prevention and redressive measures in the key areas identified in 
the proposed rule, as follows.
    Substitution--Consistent with the proposed rule, this Final Rule 
adds a new Sec.  656.11 to prohibit the substitution of alien 
beneficiaries as of the effective date of the Final Rule. This 
prohibition will apply to all pending permanent labor certification 
applications and to approved permanent labor certifications, whether 
the application was filed under the provisions of 20 CFR part 656 in 
effect before March 28, 2005, or on or after March 28, 2005. 
Additionally, as proposed, the Final Rule revises Sec.  656.30(c) to 
provide that a certification resulting from an application filed under 
20 CFR part 656 in effect before March 28, 2005, or on or after March 
28, 2005, is only valid for the alien named on the original permanent 
labor certification application. These regulatory changes do not affect 
substitutions approved by the Department or DHS under either regulation 
prior to this Final Rule's effective date. They also do not affect 
substitution requests in progress as of this rule's effective date. Due 
to the considerable evidence of past and continuing fraud in the 
permanent labor certification process, DOL through this Final Rule, 
among other measures, is eliminating the practice of substitution. The 
Department will work with the Departments of Justice and Homeland 
Security to explore appropriate circumstances under which substitution 
could be reinstated. We anticipate that there may come a time when all 
affected agencies are satisfied that there are sufficient anti-fraud 
protections to alleviate the concerns motivating this rule.

[[Page 27907]]

    Modifications to applications--This Final Rule finalizes with minor 
changes the provision in the proposed rule prohibiting modifications to 
permanent labor certification applications once such applications are 
filed with the Department. The Department has implemented technological 
changes in the PERM program to alert applicants to technical grounds 
for deniability, thus eliminating the need for many modifications. 
Section 656.11(b) clarifies that requests for modifications to an 
application, where the application was filed after this Final Rule's 
effective date, will not be accepted. To comport with this 
clarification while ensuring due process, the Final Rule revises Sec.  
656.24(g) to more precisely define what evidence may be submitted with 
an employer's request for reconsideration.
    Validity period--Although the Department had originally proposed 
permanent labor certifications be filed with DHS within 45 calendar 
days, this Final Rule extends that period to 180 calendar days. 
Accordingly, all permanent labor certifications approved on or after 
the effective date of this Final Rule will expire 180 calendar days 
after certification, whether the original application was filed under 
20 CFR part 656 in effect prior to or after March 28, 2005, unless 
filed prior to expiration in support of a Form I-140 petition with DHS. 
Likewise, all certifications approved prior to this Final Rule's 
effective date will expire 180 calendar days after the Final Rule's 
effective date unless filed in support of a Form I-140 petition with 
DHS prior to the expiration date.
    Ban on sale, barter, purchase, and certain payments--This Final 
Rule prohibits the sale, barter, and purchase of applications and 
approved labor certifications, as well as certain payments to employers 
in compensation or reimbursement for the employer's costs incurred to 
obtain labor certification. This ban will apply to all such 
transactions on or after the effective date of This Final Rule 
regardless of whether the labor certification application involved was 
filed under 20 CFR part 656 in effect before March 28, 2005, or on or 
after March 28, 2005. In consideration of comments, the Final Rule more 
precisely describes the payments being prohibited. Proposed Sec.  
656.12(b), now Sec.  656.12(b) and (c), has been revised to reflect 
this approach and definitions have been added to Sec.  656.3.
    Debarment and program integrity--Finally, the Final Rule institutes 
several enforcement mechanisms as described in the proposed rule, with 
revisions to clarify procedures and address comments received in 
response to the NPRM. On or after the effective date of this Final 
Rule, the Department may debar an employer, attorney or agent based 
upon certain enumerated actions such as fraud, willful provision of 
false statements, or a pattern or practice of noncompliance with PERM 
requirements, regardless of whether the labor certification application 
involved was filed under the prior or current regulation. In addition, 
other provisions related to all applications filed under 20 CFR part 
656 in effect before March 28, 2005, or on or after March 28, 2005, 
highlight existing law pertaining to submission of fraudulent or false 
information and clarify our procedures for responding to possible 
fraud.
    As proposed, this Final Rule extends from 90 to 180 days the period 
during which the Department may suspend processing of applications 
under criminal investigation. In addition, in response to comments 
requesting a materiality standard for the various debarment provisions, 
the Final Rule adds an intent requirement (``willful'') to the false 
information section; to be actionable, the employer must willfully 
provide false or inaccurate information to the Department. The Final 
Rule also raises the standard for debarment based on failure to comply 
with the terms of Forms ETA 9089 or 750, failure to comply with the 
permanent labor certification program's audit process, or failure to 
comply with the program's supervised recruitment requirements, to 
require there must be a pattern or practice of noncompliance in each 
case. These changes in the standard for debarment at Sec.  656.31(f) 
work in tandem with the revision to Sec.  656.26(a)(1). The new Sec.  
[acute]656.26(a)(1) expands the existing provision for a right to 
review the Department's denial of an application or revocation of a 
certification, to encompass a right to review of a debarment action. 
The request for review would be made to, and in appropriate cases a 
concomitant hearing would be held by, the Board of Alien Labor 
Certification Appeals (BALCA).

III. Discussion of Comments on Proposed Rule

    The Department received a total of 489 comments from attorneys, 
educational institutions, trade associations, individuals, and 
businesses. Many of the comments were duplicative in nature and have 
been grouped together for discussion purposes. Although most of the 
commenters were critical of one or more of the proposed changes, they 
also supported the Department's efforts to deter fraud in the permanent 
labor certification program. Several commenters suggested alternatives 
for improving the fraud rule, while some suggested abandonment of the 
proposed rule entirely.

A. Prohibition of Substitution or Change to the Identity of Alien 
Beneficiaries on Permanent Labor Certifications and Applications

    The proposed rule prohibited the substitution of alien 
beneficiaries on pending applications for permanent labor certification 
and on approved labor certifications. The comments we received on the 
prohibition of substitution raised concerns in a number of key areas: 
the Department's authority to make the rule change; the nexus between 
the proposed ban and the incidence and types of fraud that have 
occurred; the Department's premise that substitution is no longer 
needed, both because the new, automated system has significantly 
reduced processing time and because the backlog of permanent labor 
certification applications filed prior to March 28, 2005, will be 
eliminated by September 30, 2007; the application of the ban to all 
pending applications and approved certifications; and the hardships 
that employers would suffer and costs they would incur as a result of 
such a ban.
    We address the comments bearing on each of these issues below. 
However, after thoughtfully reviewing and deliberating over the 
concerns raised, we continue to find that the public benefit of 
eliminating substitution on permanent labor certifications and 
applications outweighs any potential disadvantages to individual 
program users. Consequently, as originally proposed in the NPRM, the 
Final Rule includes a new Sec.  656.11 providing that, as of the 
effective date of the Final Rule, substitution of alien beneficiaries 
will be prohibited: (1) On all pending permanent labor certification 
applications; and (2) on certifications, regardless of whether the 
application was filed under 20 CFR part 656 in effect before or on or 
after March 28, 2005. Likewise, once this Final Rule takes effect, the 
revised Sec.  656.30(c) makes a certification valid only for the alien 
named on the original application.
    As explained in the NPRM, this regulatory change has no retroactive 
effect on substitutions approved by the Department or DHS prior to this 
Final Rule's effective date. As made implicit by the new Sec.  
656.11(a), this Final Rule also has no retroactive effect on 
substitution requests in progress (submitted) prior to this rule taking

[[Page 27908]]

effect. These and the other regulatory changes promulgated in this 
Final Rule modify the statement in the preamble to the December 27, 
2004, PERM Final Rule that applications filed before that Final Rule's 
effective date would continue to be processed and governed by the then-
current regulation. 69 FR 77326 (Dec. 27, 2004).
1. Statutory Authority
    Several commenters questioned the Department's authority under the 
INA to eliminate substitution of aliens on certifications and 
applications.
    Statutory authority relative to qualifications and identity of 
alien--Many commenters opposed the ban on substitution as being 
overbroad and overreaching. Commenters referred to the plain language 
of the authorizing statute and opposed the elimination of substitution 
on grounds that DOL's jurisdiction, based on 8 U.S.C. 1182(a)(5), stops 
with determining worker unavailability and adverse impact and does not 
extend to activities related to worker identity or qualifications. 
Commenters stated that the authority to scrutinize the qualifications 
of the alien named on the petition rests solely with USCIS.
    More specifically, commenters questioned the Department's authority 
to join the labor certification application to a specific alien, 
asserting labor certifications are related to the job opportunity, not 
the employee. They argued that the identity of the specific alien 
employee, whether the original beneficiary or a substituted 
beneficiary, is not relevant to a good faith labor market test. One 
commenter stated that the elimination of substitution, requiring a 
second labor market test for the position, contravenes what it believes 
is the legislative intent that the labor certification process require 
only a single labor market test.
    With respect to the statutory requirement that U.S. workers be 
unavailable, one commenter stated that the identity of the alien is not 
relevant to the labor market test, as long as he or she qualified for 
the job opportunity when the labor certification application was filed. 
With respect to the requirement of no adverse impact, the commenter 
stated that the alien's identity is also not relevant as long as the 
qualified alien is offered the appropriate wages and working 
conditions. The commenter raised concern that this rule would refocus 
labor certification from the job opportunity to the identity of the 
sponsored alien, and would do so without statutory change, evidence of 
fraud, or analysis of the increased costs to the employer. In fact, 
this commenter stated that given the automated, largely attestation-
based nature of PERM, DOL is clearly unprepared and lacking in 
resources to evaluate evidence bearing on whether the alien is 
qualified for the job.
    The Department's authority to regulate and ban the substitution of 
aliens on labor certifications and applications is clear. The INA 
treats each alien individually and, for employment-based immigration 
requiring labor certification, makes every alien inadmissible, absent 
the Secretary of Labor's determination on U.S. worker availability and 
adverse impact. The trigger for such a determination has always been, 
at its core, the existence of a vacancy that an employer wishes to fill 
with an alien, and the burden of proof is always upon the petitioning 
employer to overcome the presumption of the inadmissibility of an 
individual intended immigrant employee through a test of the labor 
market.
    The statute itself could not be clearer that the labor 
certification process is alien specific. In defining the Department's 
role in the admission of an alien for employment-based permanent 
residence, INA section 212(a)(5)(i) ties the required certification to 
``the place where the (emphasis added) alien is to perform such skilled 
or unskilled labor[,]'' and the necessity of certifying that ``the 
employment of such (emphasis added) alien will not adversely affect the 
wages * * *.'' The plain language of these provisions (i.e., the use of 
terms such as ``the alien'' and ``such alien'') is meant to focus not 
on the process but solely on its use to admit one, specific alien.
    It is this Department's responsibility to judge how and under what 
circumstances a labor market determination should be made, and what 
constitutes the employer's actual minimum requirements for performance 
of the job. It is appropriate and consistent with the broader statutory 
and programmatic intent to apply these requirements any time a position 
that is the subject of a labor certification application is or becomes 
vacant, regardless of whether the application covering it was 
previously in process and for how long. The labor market changes 
rapidly, and it is consistent with the Department's obligation to 
protect the jobs, wages and working conditions of U.S. workers to 
require that there be another labor market test when the job 
opportunity effectively changes through the unavailability of the 
original alien worker.
    The Department's regulations authorize it to closely review the 
information provided on the application with respect to the named 
alien. Our authority to examine the stated qualifications of the alien 
named on the application also extends to our determination of whether 
an employer has accurately stated the minimum qualifications necessary 
to perform the job, or has inflated or misstated job requirements. 56 
FR 54920 (Oct. 23, 1991); see 20 CFR 656.17(i).
    Nevertheless, the Department does not undertake in this Final Rule 
to determine the visa eligibility of individual aliens. This rule 
governs the processing of labor certification applications, the 
validity of approved certifications, and other Department of Labor 
activities implementing relevant INA provisions and 20 CFR part 656; it 
does not speak to activities by the Departments of Homeland Security or 
State conducted under their respective authorities and jurisdiction. 
Further, the Department's focus is not on the identity of the 
individual alien but on the employer's failure to conduct a second 
labor market test for available U.S. workers when the original alien 
beneficiary becomes unavailable and, subsequently, when an employer 
seeks substitution. As stated in the NPRM, if the original alien 
beneficiary is no longer available, then the employer must use some 
means to fill that job opportunity. Clearly, the employer used some 
recruitment tool to find the new foreign worker for that newly opened 
job opportunity. Prohibiting substitution will ensure the employer 
again makes the reopened employment opportunity available to U.S. 
workers. In the event another alien is again the only qualified person 
available, then it is consistent with this program's purpose and the 
statute's plain language to require that the employer file a new 
application reflecting the new recruitment undertaken.
    The Medellin decision--A number of commenters cited the decision in 
Medellin v. Bustos, 854 F.2d 795 (5th Cir. 1988) in support of the 
argument that the Department lacks authority to prohibit substitution. 
The commenters argue that in Medellin, the Fifth Circuit held that the 
Department's administrative decision (based on operational guidance to 
program staff) to revoke a permanent labor certification based on the 
employer's substitution of another alien in place of the named alien 
more than six months after the certification was granted was not in 
accordance with applicable law. The commenters further argued that 
limiting a labor certification to ``the alien for

[[Page 27909]]

whom the certification was granted'' ran contrary to both the INA 
provisions (now at INA section 212(a)(5)) stating the Secretary of 
Labor's authority to determine worker availability and adverse impact, 
and the Department of Labor's own regulations, which provided that a 
labor certification was valid indefinitely, hence disconnecting 
validity and any time limitations.
    We carefully considered the Fifth Circuit's opinion in Medellin 
prior to the issuance of the NPRM and concluded that the dictum relied 
upon by commenters in the decision was not so compelling as to overcome 
the strong argument, based on the Department's authority and 
experience, that supports the elimination of substitution. We have 
reviewed that matter again as a result of comments and reach the same 
conclusion for a number of reasons.
    First, the ultimate basis for the Medellin decision was an 
administrative law issue not relevant to this rulemaking. Medellin 
involved a challenge to provisions in an ETA Technical Assistance Guide 
(TAG) that permitted the substitution of an alien on an approved labor 
certification only for the first six months after issuance. As the 
Medellin court correctly noted, the TAG was not published using notice 
and comment rulemaking procedures. Further, the six-month limitation 
was inconsistent with the then regulation at 20 CFR 656.30(a) that made 
labor certifications valid indefinitely. This rulemaking directly 
addresses the administrative law problem identified in Medellin by 
clarifying, after notice-and-public comment rulemaking, that a labor 
certification is valid only for the alien who was the beneficiary of 
the original application and only for a limited time, 180 days.
    The discussion in the Medellin decision about the relative 
responsibilities of DOL and INS in the labor certification process is 
dictum and clearly is not the legal grounds for the court's decision. 
Further, the reasoning in that dictum is not compelling and reflects an 
overly narrow view of the Department's role in the immigration process. 
Under the INA, the Department is responsible for requiring a labor 
market test that is the statutory prerequisite to the granting of a 
labor certification. Banning substitution enhances protections for U.S. 
workers by offering U.S. workers another chance when a job that was the 
subject of a labor certification once again becomes available through 
the departure of the alien employee.
    Section 212(a)(5) of the INA makes a foreign worker inadmissible 
unless, as one condition precedent, the Department determines there is 
no able, willing, and qualified domestic worker available to fill the 
position for which the foreign worker's admission is sought. Judicial 
interpretation of the word ``willing'' led to the creation of the 
process that has been in place since 1978, whereby the certification 
approval is predicated on an employer's demonstrated unsuccessful 
efforts to recruit a domestic worker. See Production Tool Corporation 
v. Employment and Training Administration, 688 F. 2d 1161 (7th Cir. 
1982). The position that the job opportunity for which certification is 
being sought must be a job that a domestic worker can actually fill has 
been affirmed by two appellate courts subsequent to the Medellin 
decision. Bulk Farms v. Martin, 963 F. 2d 1286 (9th Cir. 1992); Hall v. 
McLaughlin, 864 F. 2d 868 (D.C. Cir. 1989).
    Given these considerations, it is perfectly reasonable for the 
Department to require the employer to conduct a new test of the labor 
market, and file a new labor certification application, every time the 
job opportunity becomes vacant. The Medellin litigation simply did not 
take place in a context that allowed the Department's concerns 
regarding the new test of the labor market to be adequately addressed.
    Relationship to DHS regulations--One commenter supported the ban on 
substitution but expressed concern that the impact of the change may be 
quite limited until DHS adopts corresponding regulations to prohibit 
the substitution of aliens. Another commenter argued that the public 
should not be placed in the position of dealing with competing and 
possibly inconsistent regulations issued by different agencies and 
suggested that DOL should withdraw its proposal until DHS signals its 
equivalent concern.
    DOL disagrees that there is a likelihood of competing or 
inconsistent regulations between DOL and DHS. No DHS regulations 
address or authorize substitution of alien beneficiaries on labor 
certifications. Rather, at present, DHS permits substitution on 
permanent labor certifications through a delegation of authority from 
DOL. See March 7, 1996 Memorandum of Understanding between the 
Immigration and Naturalization Service (INS) and Employment and 
Training Administration (signed by Louis D. Crocetti, Jr., Associate 
Commissioner, Examinations, and Raymond Uhalde, Deputy Assistant 
Secretary for Employment and Training). INS (the portion of that agency 
that provided immigration benefits) later became U.S. Citizenship and 
Immigration Services (USCIS) at the Department of Homeland Security. 
Pursuant to that 1996 MOU, when substitution is requested, DHS requires 
employers to submit a new (employer-completed but not processed) DOL 
permanent labor certification application form with the name of the 
substituted alien, along with the approved labor certification in the 
name of the original alien beneficiary. See USCIS Adjudicator's Field 
Manual, Sec. 22.2(b)(6) (Sept. 12, 2006). This Final Rule alters the 
current practice by providing that labor certifications, once approved, 
are valid only for the alien named in the original application and that 
substitution of alien names on the certification is prohibited. DOL and 
DHS have agreed that DOL will rescind the delegation of authority 
contained in the 1996 MOU consistent with the terms of this Final Rule 
and effective on the same date as this Final Rule. Because substitution 
of aliens on labor certifications has occurred pursuant to DOL 
authority, regulatory action by DHS is not necessary to implement a 
termination of its delegated authority with respect to DOL permanent 
labor certifications.
    Thus, following the effective date of this rule, employers will 
face a consistent approach to labor certifications: Substitution of the 
alien beneficiary on a permanent labor certification application or on 
the resulting certification is prohibited. As reflected throughout this 
Final Rule, the Department has determined that this prohibition on 
substitution is consistent with its statutory responsibilities and is 
necessary to achieve important objectives. DOL is responsible for 
administering the labor certification process and is authorized and 
accountable for improvements to the program, independent of employment-
based immigration programs overseen by other Federal agencies. 
Therefore, although we have closely coordinated with DHS, DOL OIG, DOJ, 
and other appropriate agencies in this rulemaking and other fraud 
prevention efforts, DOL has determined, in light of the evidence of 
fraud and the continued concerns about fraud and program integrity 
raised by many sources, and the Department's statutory responsibility 
to U.S. workers, that it is appropriate to issue this regulation 
governing the part of the employment-based immigration process for 
which we are responsible. The Department has authority to administer, 
enforce, and reform programs under its jurisdiction, including to 
regulate the meaning and nature of a permanent labor certification 
issued under 20 CFR part 656. Nothing in this Final Rule in

[[Page 27910]]

any fashion interferes with DHS' authority or its ability to address 
fraud issues through a rulemaking process of its own.
    Entitlement to substitution--Many commenters asserted that since 
the practice of substitution has been permitted by DOL for several 
decades, the statute and regulations provide entitlement to 
substitution. One commenter asserted that the Department, under its 
current regulations at 20 CFR 656.30(c)(2), effectively provides that 
the labor certification application can be valid for any qualified 
worker, which the commenter interpreted to include a substituted 
worker. 20 CFR 656.30(c)(2). Another commenter opined that the absence 
of statutory entitlement to substitution is irrelevant to the clear 
value of substitution, which in its view far outweighs the perceived or 
potential benefits from reducing incentives for fraud.
    The Department disagrees with these comments. While substitution 
has been a long-standing practice at the Department and by delegation 
to DHS, the statutory framework to allow the permanent admission of 
foreign nationals to perform work was deliberately protective of U.S. 
workers and contains nothing approaching an entitlement to 
substitution. It is consistent with the statute's presumption of alien 
inadmissibility that admissibility must be demonstrated by each 
employer for each alien and that the statute does not provide for 
substitution of individual aliens on labor certifications or 
applications. This regulatory action is also consistent with the 
Congressional intent to grant the Secretary of Labor broad discretion 
in implementation of the permanent labor certification program. Nor is 
it surprising that the practice of substitution has not been authorized 
or addressed in DOL's regulations. Substitution has been permitted 
simply as a procedural accommodation to employer-applicants. The 
Department recognizes that this accommodation has had a distinct 
benefit to employers and applicants in allowing them to retain an 
earlier priority date and apply the results of a completed labor market 
test. However, as discussed later in this Preamble, the equities do not 
support retention of the earlier priority date. Accordingly, in light 
of the evidence that substitution is an important contributor to fraud 
in the labor certification program and of DOL's statutory interest in 
protecting U.S. workers by reestablishing worker unavailability 
whenever a position once again becomes vacant, the demonstrated ``black 
market'' in labor certifications, and the significant number of 
prosecutions for fraudulent activity related to the program, we 
conclude the benefits to elimination outweigh the potential 
disadvantages. As stated previously, the Department will continue to 
work with other Federal agencies with an interest in the employment-
based immigration system to explore, under appropriate circumstances, 
potential alternatives to the current practice.
2. Evidence of Fraud
    Several commenters mentioned that the Department has not provided 
evidence of or statistics on widespread labor certification fraud or 
abuse and needs to consider the benefits of substitution against 
relatively few abuses. One commenter opined that elimination is 
appropriate only when a policy is commonly or largely misused. It 
stated the burden is on the Department to show the connection between 
fraud and substitution, and to establish that its elimination will not 
impede legitimate business practices.
    Some commenters questioned the effectiveness of eliminating 
substitution; they were concerned the rule does not target the most 
common sources of abuse or deter persons with intent to defraud. One 
commenter suggested that persons intending to engage in these abuses 
will find the substitution prohibition does not provide a significant 
obstacle to their endeavors. It stated such persons will remain free to 
file fraudulent applications naming the intended beneficiary and that 
substitution elimination will only succeed in moving the initiation of 
the fraudulent transaction with the foreign national back to a point in 
time before the filing of the application. The commenter asserted it is 
highly questionable whether such a minor achievement justifies the harm 
done to legitimate employers by the prohibition of substitution. Some 
commenters claimed the substitution prohibition will do little to 
eliminate the filing of applications without the knowledge of the 
employer, and the filing of applications by employers who are paid to 
engage in a fraudulent scheme and who have no intention of filling the 
job opportunity described in the application. Citing U.S. v. Kooritzky, 
No. 02-502-A (E.D. Va. 2003), they observed those who are determined to 
commit fraud will find a way to commit fraud.
    The NPRM detailed the reasons for our proposal to eliminate the 
practice of substitution. Our experience with the failures of this 
practice is longstanding and shared by other Federal agencies. The 
Department disagrees that eliminating substitution contributes only a 
``minor'' achievement to addressing the realm of abuses over which the 
Department has control. The fraud cases prosecuted even within the 
recent past indicate a significant number of instances where 
substitution played a role in fraudulent activity in obtaining an 
immigrant benefit. See, e.g., U.S. v. Yum (E.D. Va. 2006); U.S. v. 
Mandalapa, No. 205-NJ-03117-PS (D.N.J. 2006).
    The Department continues to believe, based on the activity in these 
and other cases, that fraudulent substitution is a core contributor to 
the marketability of labor certifications because it is only if one can 
substitute that one can benefit from a certified application naming 
another individual. This marketability results in the use of labor 
certifications for fraudulent purposes--by aliens and employers with no 
intent to have a legitimate employment relationship.
    We agree there are numerous sources of fraud in employment-based 
immigration programs government-wide, and individuals intent on 
committing fraud and abusing the system may still find a way to do so. 
However, the existence of other types of fraud, separate from that 
generated by the practice of substitution, does not obviate the need to 
address the documented fraud related to alien substitution. As 
described earlier, the Department has instituted specific checks and 
balances in the PERM process to address and prevent the filing of 
applications without the employer's knowledge. For example, the 
National Processing Centers contact the employer directly to confirm it 
is aware of the application and is sponsoring the alien, and the ETA 
Form 9089 requires distinct contact information for the employer and 
the attorney or agent filing the application. The substitution 
prohibition enhances and supplements existing anti-fraud and program 
integrity measures.
    Alternatives to a regulatory ban on substitution, including 
limiting or tailoring the option to substitute--One commenter asserted 
the elimination of substitution in no way facilitates the 
identification of fraudulent labor certification applications, and this 
rule instead takes a ``shotgun'' approach at the expense of legitimate 
program users. The comment stated the goal of reduced fraud is better 
achieved by heightened enforcement measures, which it states the 
Department has already put in place in the PERM program. The commenter 
also pointed to traditional law enforcement measures, like the

[[Page 27911]]

discernment of patterns in groups of applications filed by a given 
employer or attorney, to ferret out fraud and abuse. One commenter 
argued existing regulations provide a sufficient basis to prosecute 
employers, employees, and attorneys alike who engage in fraudulent 
activity associated with the permanent labor certification process. 
Others also suggested there is no need to ban substitution because of 
the additional provisions prohibiting the sale, barter, or purchase of 
labor certifications at Sec.  656.12; the safeguards already in place 
at the Backlog Processing Centers to confirm the bona fide nature of 
applications; and the PERM program's strict employer registration 
requirements. Another commenter stated it is concerned about the 
elimination of substitution in small town or rural areas where 
employers have great difficulty finding qualified engineers, and 
requested the Department relax its requirements for rural or small town 
situations.
    One commenter suggested that in order to limit occurrences of 
fraud, DOL should limit the prohibition on substitutions to filings 
made under section 245(i) of the INA. As an alternative, the commenter 
suggested the establishment of an exception to the rule for large 
corporations. The commenter also suggested the Department could 
establish appropriate criteria to allow employers who, for example, 
have a demonstrated record of filing appropriate labor certification 
applications to use substitutions.
    The Department disagrees with these comments. The heightened 
enforcement measures in the PERM program are designed to catch fraud 
``in process'' and do not address fraudulent activity that transpires 
thereafter, as the new substitution policy will. Further, the 
prohibition on substitution is not designed as a fraud detection 
mechanism, but rather as one of several protective measures to 
altogether prevent fraud related to this activity by preventing the 
commodification of labor certifications. The prohibition will be more 
effective because it will cover applications filed under 20 CFR part 
656 in effect before and after March 28, 2005. Further, while we agree 
that other fraud prevention and detection methods may be available, the 
effectiveness of those other methods does not remove the need for 
additional, targeted techniques like those instituted in this Final 
Rule. For example, we are well aware of other laws, such as those 
governing perjury, that support detection and prosecution of fraud. 
However, such statutes are not always sufficient to prevent, deter and/
or redress unlawful conduct. By removing the opportunity to engage in 
the fraudulent activity, this rule permits existing investigative and 
prosecutorial resources to be better focused, and frees resources 
across government agencies for other pressing needs.
    We have no programmatic evidence that applications filed under 
section 245(i) are particular sources of fraud. In addition, this 
suggested alternative would result in a one-time solution, since the 
INA section 245(i) cases have already been filed and are being 
processed in the Department's Backlog Processing Centers. Further, such 
a policy would establish unequal rules for employers based upon the 
unsupported assumption that applications filed under section 245(i) are 
the only ones in which substitution fraud occurs. Labor certifications 
issued for 245(i) cases are indistinguishable from others and require 
the same steps of employers; absent a strong rationale, they should not 
be subject to different conditions or limitations than the limitations 
that attach to other labor certifications.
    We also do not agree that exceptions for large corporations or for 
rural areas are warranted. Exceptions for certain categories of 
employers, as suggested by commenters, do not further the Department's 
obligation to ensure a sufficient test of the labor market for the 
admission of each alien each time a job opportunity opens. We also have 
determined that it is not wise to establish a list of pre-approved 
employers, in part because the types of fraud we are targeting by this 
Final Rule are in some cases committed by attorneys and agents without 
the knowledge of the employer named on the application.
3. Change in Conditions That Originally Warranted Allowance of the 
Practice
    Various organizations provided comments concerning current 
processing times and the Department's remaining backlog of permanent 
labor certification applications in relation to the proposed ban on 
substitution. These commenters generally took issue with the 
Department's premise that substitutions are no longer needed to 
accommodate application processing delays. Some commenters questioned 
the premise based on the number of applications pending at the 
Department's Backlog Processing Centers and experiences to date with 
applications filed under the PERM system. They stated even if the 
Backlog Processing Centers meet what appears to be an unrealistic 
backlog elimination goal, the premise is quite obviously false.
    For example, one commenter stated it has 1,100 pending, 
unadjudicated labor certification applications and that, in many cases, 
because of the multi-year adjudication times for these applications, 
the original alien beneficiary has already moved on to a new position 
and the employee currently in the position has become the new intended 
beneficiary of the application. Another commenter referred to over 
1,000 Reduction-in-Recruitment applications pending at the Department's 
Backlog Processing Centers, and stated about half of all of its PERM 
applications still remain pending for up to five months from date of 
submission. Both commenters suggested the Department should continue 
its efforts to eliminate the backlog and to speed up the PERM process 
prior to considering changes to the practice of substitution.
    The Department disagrees. The agency operating conditions under 
which alien substitution was initially permitted have noticeably 
changed. The Department acknowledged in the preamble of the proposed 
rule that the strongest historical argument in support of substitution 
has been the length of time it once took to obtain a permanent labor 
certification. 71 FR at 7656, 7659 (February 13, 2006). However, the 
Department also noted the streamlined process introduced by the PERM 
regulation has significantly reduced the labor certification processing 
time for applications filed under the new system. Since the PERM 
program began accepting applications on March 28, 2005, 68 percent of 
the certified applications have been processed in less than 60 days. 
And in FY 2006 alone, approximately 75 percent of the certified 
applications were approved in 60 days or less. In addition, the PERM 
system will continue to improve as we gather baseline information from 
which to implement process improvements. In other words, we expect 
applications to be adjudicated at least as quickly in the future as the 
system builds upon its knowledge base.
    With respect to the pending applications at our Backlog Processing 
Centers, we have significantly reduced the number of backlogged 
applications from an estimated 365,000 to less than half that number. 
This effort places us on target to meet our goal of eliminating the 
backlog by September 30, 2007. Thus, the argument in support of 
allowing substitutions to continue because of long processing delays 
has been appropriately addressed by both the new, streamlined PERM 
process and the large reduction in backlogged applications. In light of 
these changes,

[[Page 27912]]

we believe it is imprudent to wait to adopt this rule, as some 
commenters suggest, until all backlogs are completely eliminated, thus 
giving those who wish to fraudulently use substitutions additional time 
to do so.
4. Extending Regulation to Pending Applications for Permanent Labor 
Certification and to Approved Certifications
    The Department received a number of comments opposing the 
application of the substitution ban to applications filed under 20 CFR 
part 656 in effect either before March 28, 2005, or on or after March 
28, 2005, and to certifications already granted. These commenters urged 
the prohibition on substitution should be limited to only those 
applications filed under the current streamlined regulation and should 
not encompass any applications filed under the 20 CFR part 656 in 
effect before March 28, 2005.
    Commenters stated employers and employees across the country have 
made critical hiring and transfer decisions in reliance on the 
availability of substitution. They stated that by applying the rule 
change to all substitutions except those approved by the effective date 
of the Final Rule, the Department would be setting itself up for 
further challenges and pressures. The commenters cited Bowen v. 
Georgetown Univ. Hospital, 488 U.S. 204 (1988), asserting it supported 
their contention that a Federal agency lacks the power to issue 
retroactive rules absent a statutory grant of authority. They contended 
it is unfair, and most likely unlawful, for the Department to change 
the rules midstream, and that any change in the rules governing 
substitution should only be prospective in effect.
    Others commented that the Department's proposed regulation 
constitutes a retroactive ban that raises legal questions. Some stated 
the proposed rule improperly seeks to retroactively invalidate approved 
labor certification applications, when such approval was obtained under 
the current rule that such certifications are ``valid indefinitely.'' 
Others stated the proposed application is contrary to the prohibition 
on retroactive agency rules as found in the Administrative Procedure 
Act (APA). They noted that, under the APA, a rule is defined as the 
whole or part of an ``agency statement of general or particular 
applicability and future [emphasis added] effect designed to implement, 
interpret, or prescribe law or policy.'' Commenters stated the 
Department would need specific authority from the Congress to 
promulgate retroactive regulations. Several commenters referenced 
Health Ins. Assn. of America, Inc. v. Shalala, 23 F.3d 412, 423 (D.C. 
Cir. 1994) for the proposition that, under the APA, rules may only have 
future effect. The court cited Justice Scalia's concurrence in Bowen v. 
Georgetown Univ. Hosp., 488 U.S. 204, 216-23 (1988), which interpreted 
the APA to mean that a rule is a statement that has legal consequences 
only for the future and found that a rule that alters a future 
regulation in a manner that makes worthless substantial past investment 
incurred in reliance upon the prior rule may for that reason be found 
``arbitrary'' or ``capricious.'' One commenter asserted the proposed 
provisions eliminating substitution would be illegal retroactive 
rulemaking because employers have filed applications with the 
expectation of substitution as a potentially significant benefit should 
the original beneficiary drop out, and this benefit is a form of a 
property right.
    One commenter argued the application of the rule prohibiting 
substitution to backlogged applications under the pre-PERM regulation 
was retroactive in nature and could be read as an attempt to force the 
time and expense of the new application under the PERM process on 
employers who already have an investment in applications in the 
backlog. The commenter said this would amount to a taking of a business 
investment without just compensation. Similarly, another commenter 
asserted the elimination of substitution constitutes a ``taking without 
compensation'' of an employer's significant investment in the 
preparation and filing of pending and approved labor certification 
applications. The commenter stated the prevention of an unknown and 
possibly insignificant level of fraud and abuse does not justify this 
devaluation of a company's investment. The commenter went on to observe 
that eliminating substitution would disproportionately impact large 
high-tech employers, which file large numbers of applications. Finally, 
this commenter stated years of processing delays have spurred employers 
to build substitution into a business practice as part of their 
respective programs.
    In a similar vein, other commenters stated the prohibition of 
substitution is detrimental to parties who have relied on the current 
practice. Estoppel, they said, warrants that a person who has 
rightfully relied on a practice should get the benefit of that 
reliance. Employers and beneficiaries have depended on the ability to 
substitute and have foregone filing new applications because they 
planned to use an application for a previous employee for a current 
employee.
    One commenter argued that due process considerations of fair 
notice, reasonable reliance, and settled expectations, affirmed in 
Immigration and Naturalization Service v. St. Cyr, 533 U.S. 289 (2001), 
should compel the Department to strip from the rule any provision 
applying the ban on substitution retroactively. This commenter asserted 
that, based on that case law, the 1996 Memorandum of Understanding 
between the Department and the Immigration and Naturalization Service 
delegating to INS responsibility for substituting a named beneficiary 
on a labor certification, and longstanding agency practice, the Labor 
Department may not now retroactively divest USCIS and employers with 
pending labor certification applications of the legal right to engage 
in the practice of substituting alien beneficiaries. This commenter 
further stated that if a case has not yet been adjudicated, it is 
difficult to imagine any harm resulting from a legitimate employer 
substituting a new beneficiary on the pending application.
    Other commenters also pointed out the hardship that the ban on 
substitution would cause to certain aliens. They stated prohibiting 
substitution on applications pending prior to the effective date of the 
rule will render countless beneficiaries who are subject to the 
American Competitiveness in the Twenty-First Century Act (AC21), Public 
Law 106-313 (October 17, 2000), stranded and unable to extend their 
current stays, since such extensions depend on the existence of either 
a permanent labor certification application that has been pending for 
365 days or more or a pending Form I-140 petition.
    As an alternative to the proposal, one commenter recommended that 
substitution remain available for all cases currently pending at a 
Backlog Processing Center. The commenter also recommended substitution 
remain available for all cases as long as the employer can demonstrate 
it has engaged in some additional recruitment and can document there 
are no qualified U.S. workers available. One commenter recommended the 
substituted beneficiary should be assigned the priority date of the 
date of substitution or, in the event substitution is prohibited, that 
the prohibition start with the effective date of the rule, and not be 
applied retroactively. One commenter suggested a grace period prior to 
the ban becoming effective.

[[Page 27913]]

    We have carefully reviewed these comments and find they do not 
present sufficient grounds to overcome the rationale reflected in the 
NPRM to prohibit the practice of substitution on all labor 
certifications issued after the effective date of this Final Rule. 
Assertions that the prospective ban on substitution of aliens is, 
instead, a retrospective ban are misplaced. Past substitution requests 
that already have been approved are unaffected by this rule. Current 
substitution requests pending on the effective date of this rule will 
continue to be processed. Even though substitution will not be 
permitted with respect to labor certifications granted prior to this 
rule's effective date and may upset expectations based on part 656 as 
it previously read, that does not make the ban retrospective.
    The question of whether a rulemaking activity has a ``retroactive'' 
impact that renders that rule invalid is more complex than the 
commenters suggest. The United States Supreme Court has ruled that 
``[a] statute does not operate `retroactively' merely because it is 
applied in case arising from conduct antedating the statute's 
enactment.'' Landgraf v. USI Film Products, 511 U.S. 244, 269 (1994). 
The Court went on to note that determining whether a statute is 
improperly retroactive requires the application of ``familiar 
considerations of fair notice, reasonable reliance, and settled 
expectations. * * *'' Id. at 270. Application of the Landgraf 
principles led the Court to reject a retroactivity challenge to the 
application of the Foreign Sovereign Immunities Act to wrongdoing that 
occurred prior to that law's enactment. Republic of Austria v. Altman, 
541 U.S. 677 (2004). These same principles recently led an en banc 
Sixth Circuit to uphold the application of a change in Social Security 
Administration disability regulations to pending cases. Combs v. 
Commissioner of Social Security, 459 F.3d 640 (6th Cir. 2006). The 
Sixth Circuit followed the same approach in finding that there was no 
impermissible retroactive effect in applying certain amendments to the 
INA relating to the discretionary removal of relatives to aliens in the 
U.S. who sought to invoke the prior procedure. Patel v. Gonzales, 432 
F.3d 685 (6th Cir. 2005). After applying these principles to the 
current rulemaking, the Department has determined its proposal is 
appropriate.
    An application for permanent alien labor certification is filed at 
DOL with the employer-applicant's expectation that it will satisfy the 
exclusionary provision in 8 U.S.C. 1182(a)(5)(A), so as to support a 
petition to DHS to import the alien beneficiary of the certification. 
That remains unchanged by this rule.
    The Department has provided ample notice of its intention to 
eliminate substitution, sufficient for employers and their 
representatives to reduce or eliminate continued reliance on the 
practice. As early as 1991, we indicated our intention to discontinue 
the practice. 59 FR at 54920, 54925-54926 (Oct. 23, 1991). When the 
PERM Final Rule was published in 2004, its preamble discussed at some 
length questions relating to the practice of substitution, the 
Department's findings of an emerging market for fraudulent sale of 
labor certifications, and DOL's intent to examine the practice and 
``explor[e] in the near future regulatory solutions to address this 
issue.'' 69 FR at 77363 (Dec. 27, 2004). In the NPRM to this Final 
Rule, the Department again announced its intent to eliminate 
substitution. Thus, we are confident public notice and comment has been 
fair, open, and consistent with the Administrative Procedure Act. Any 
employer who has an application pending but who is either unable or 
unwilling to continue to sponsor the original alien has had more than 
sufficient opportunity to identify a new alien and take advantage of 
the past procedures.
    We have determined that employers cannot demonstrate they 
reasonably relied on the prior practice. In filing an application for 
permanent labor certification, an employer is expressing its intent to 
and expectation that it will hire the alien named on that document if 
the application is approved. An employer's hypothetical need to 
substitute, should the first alien no longer be available, is not 
tantamount to detrimental reliance on an ability to do so. Commenters 
offered no explanation of how an employer's initial filing can be made 
in reliance on a future ability to[acute]substitute. The risk any 
employer sponsoring an alien takes is that the alien will not remain an 
employee through the entire permanent residence process, or at the end 
of that process, and the option of simply inserting another alien has 
never been an entitlement. The INA's rule of inadmissibility of 
immigrant workers without a test of the labor market for available U.S. 
workers, the statute's requirement that admissibility be determined for 
each alien individually, and the statute's overall protection of 
employment rights of U.S. workers, each further supports the 
Department's position.
    With respect to the claim of employer expectations of an option to 
substitute, the statute makes clear that an employer has no absolute 
right to a labor certification, and certainly no property interest in 
one. Employers, particularly regular users of the system, have known 
about the Department's intent to end the practice of substitution since 
the publication of the PERM regulations in 2004. No employer could 
after that date have had any reasonable expectation that the practice 
would be indefinitely available. Several commenters appear to argue 
that once they have applied for or secured a labor certification for a 
particular alien in a particular job, they have a right to bring in any 
alien they choose for that job. The statutory scheme, with its focus on 
individual aliens and presumption of each alien's inadmissibility, 
belies that argument.
    Further, it is appropriate to apply the prohibition on substitution 
to the cases in our Backlog Processing Centers to ensure these needed 
fraud protections are applied throughout all permanent labor 
certification cases, regardless of where they reside in terms of 
processing. Accordingly, the Department has determined that, following 
the effective date of this Final Rule, the elimination of alien 
substitution will apply to all permanent labor certification 
applications pending with the Department and to all permanent labor 
certifications issued under the current or prior regulation. This Final 
Rule does not nullify substitutions already made or in progress, 
whether by the Department or DHS, but rather prohibits substitutions in 
the future, substitutions which employers presumably do not anticipate 
and are not planned and, hence, to which there is no right or 
reasonable expectation. No labor certification may be the subject of a 
substitution request submitted on or after the effective date of this 
rule.
    This rule places no additional responsibilities on recipients of 
labor certifications approved prior to the effective date. At the time 
of certification a benefit was granted; none was waived. The required 
wage rate remains unchanged for employers. No further recruitment for 
U.S. workers is required of the employers under approved labor 
certifications. Once the certification is filed with DHS in support of 
a visa petition, and if the employer and alien comply with all other 
applicable provisions of the immigration laws, the alien beneficiary 
will be admitted as a permanent resident.
    All that is changed is that the employer now will be encouraged to 
retain its original alien beneficiary (perhaps to that alien's benefit) 
or will

[[Page 27914]]

have to file a new application on behalf of a new alien. An employer 
seeking to substitute, in fact, always has had to engage in a limited 
test of the labor market. When the original alien beneficiary no longer 
is available for the job opportunity, the employer has had to recruit 
the substitute alien, either domestically among nonimmigrants, or 
abroad to import a new foreign worker. This rule would make that labor 
market test include not just foreign workers, but also U.S. workers, at 
prevailing wages and working conditions.
    The standards in 8 U.S.C. 1182(a)(5)(A) ``are quite broad. The 
Secretary must decide whether there are sufficient U.S. workers who are 
`able, willing, qualified, and available,' and whether the alien's 
employment would `adversely affect the wages and working conditions' of 
these workers. The statute leaves to the Department a broad area for 
the exercise of its discretion in issuing labor certificates.'' 
Industrial Holographics, Inc. v. Donovan, 722 F.2d 1362, 1365-1366 (7th 
Cir 1983). In the exercise of her discretion to issue labor 
certifications, the Secretary is within the extensive bounds created by 
the INA. Id. If the employer files a new application, it will be 
considered fairly and on its own merits. If approved, the new labor 
certification will be for a more current wage rate and subject to a 
more current labor market test, to the benefit of the new alien and/or 
U.S. workers similarly employed. This is within the intent of the 
statute, and is an appropriate preventative measure given the 
deleterious effect caused by substitution in the past. Given the 
Department's expressed concerns about fraud in the labor certification 
process, particularly with respect to substitution, and the emerging 
``black market'' in status as a beneficiary of a labor certification, 
DOL sees a compelling need to protect the program's integrity 
regardless of the processing status of a certification on the effective 
date of the final rule. The Department's duty also to protect job 
opportunities for U.S. workers, and the welfare of both U.S. and 
foreign workers, makes it necessary to end the process of substitution 
after the effective date. See section I.D of this preamble, above.
    Effect on aliens who are H-1Bs and not entitled to benefit from 
substitution after the fifth year--The Department also received 
comments regarding the effect of the substitution ban on nonimmigrant 
aliens on whose behalf viable labor certifications have not been filed 
by the end of their fifth year in H-1B status, and specifically on 
these aliens' ability to adjust their status to that of immigrants. 
Under current law, nonimmigrant H-1B visa holders in their sixth year 
of H-1B status who are named on permanent labor certification 
applications that have been pending for 365 days or more qualify--upon 
petition to USCIS--for extension of their H-1B status in one-year 
increments. AC21, section 106(a). Currently, USCIS allows visa holders 
in H-1B status who are substituted into labor certification 
applications by the end of their fifth year to extend their 
nonimmigrant status beyond the normal six-year maximum. Commenters 
argued H-1B visa holders who are unable either to have a permanent 
labor certification application filed on their behalf or to be 
substituted into an existing application by that time will lose the 
opportunity for additional extensions of H-1B status.
    The Department understands concerns that, as a result of this rule, 
H-1B nonimmigrant aliens who, after five years of employment in the 
United States, are not yet the beneficiary of a permanent labor 
certification application might not be permitted by USCIS to further 
extend their H-1B status prior to obtaining U.S. permanent resident 
status. However, the Department finds that continuing substitution as 
an accommodation to this small group of individuals, a group whose 
numbers and participation in the program are both speculative, is 
disproportionate to the adverse consequences of continuing the 
substitution practice which creates both an incentive and opportunity 
for fraud, and which deprives U.S. workers of job opportunities.
    Some commenters have suggested that since AC21 increased the 
portability of H-1B visas, allowing such nonimmigrants to change 
employers, substitution by these foreign workers should continue to be 
allowed. Public Law 106-313, sec. 105. The Department sees no reason, 
as a general matter, to permit one type of nonimmigrant to continue 
benefiting from the practice of substitution over other nonimmigrants. 
The portability provision seeks to increase flexibility for a specific 
group of nonimmigrants--H-1B aliens--under a specific set of 
circumstances; it governs transfers between positions which aliens fill 
on a temporary basis, and is triggered by the filing of a new LCA and 
petition. It does not address, and does not extend to, substitution, 
which is a function of the permanent residence process. The statutory 
permission to move from one employer to another as a procedural 
accommodation does not in turn mandate increased flexibility through 
substitution in the permanent residence process.
    These commenters' analysis incorrectly pairs portability with the 
extension beyond the six-year H-1B employment limit allowed by section 
106(a) of AC21. The Department finds that analysis flawed. The INA 
dictates that after six years, H-1B status must terminate. The specific 
exceptions to that termination are linked by AC21 to harm resulting 
from permanent residence backlogs, including backlogs in the permanent 
labor certification program. The extension beyond six years is intended 
by the statute to benefit an H-1B worker when 365 days or more have 
elapsed since the filing of a permanent labor certification application 
``on the alien's behalf (if such certification is required for the 
alien to obtain status under such [INA] section 203(b)) * * *.'' Public 
Law 106-313 section 106(a)(1). Clearly, the alien intended to be helped 
by this provision is the alien who may have been prejudiced by the 
backlog in processing labor certification applications under DOL's pre-
PERM regulations. An H-1B worker seeking substitution may have 
benefited by working in the U.S. for six or more years, but has not 
necessarily been affected by the backlog at all. It is not inconsistent 
with the statutory intent of AC21 to limit the ability of that alien to 
continue his or her nonimmigrant status to a labor certification filed 
on his or her behalf rather than on someone else's behalf.
    The Department recognizes that those aliens who fall outside the 
five-year mark will potentially be unable to extend beyond the sixth 
year of H-1B status and otherwise might have been able to do so through 
substitution. This small group of affected individuals, however, does 
not present sufficient equities to persuade the Department to carve out 
an exception to the prohibition on substitution, since employers in 
such situations have had upwards of five years in which to initiate 
permanent resident status on their behalf.
    Further, extension of an alien's nonimmigrant visa status is the 
province of USCIS, not the Department of Labor. The Department's 
mandate is not to preserve the opportunity or further the potential 
opportunity in all circumstances for an employer to hire an immigrant 
worker, nor is it a process driven by the interests of any or all 
aliens who may wish to enter the U.S. through employment-based 
immigration. The Department's mandate, rather, is to design and 
implement a secure framework within which an employer with legitimate 
business needs may determine the availability of U.S. workers and, if 
such

[[Page 27915]]

workers are not found, bring in a foreign worker. Moreover, because the 
Final Rule prohibits only substitutions which have not yet been made, 
aliens who have not otherwise begun the permanent residence process 
before the end of the fifth year of H-1B status presumably do not 
anticipate and therefore cannot claim a reasonable expectation of 
benefiting from substitution.
5. Effect of the Elimination of Substitution on Employers
    The Department received many comments addressing the perceived 
hardships employers would suffer if substitution were prohibited.
    Added cost and burden--Employers were concerned about loss of their 
investment in the first application; the loss of an important employee 
retention and recruitment tool; added cost and burden from a new 
application, including advertising and recruiting costs, staff time, 
legal fees; inherent delays to getting a new worker in place, and 
potential processing delays with the Department or other agencies; 
additional costs from other parts of the petitioning and visa 
application process; loss of place in the queue given visa 
retrogression; and retardation of business growth and loss of 
competitiveness from potential delays in getting products to market. 
Some pointed to the potential negative impact on special groups, such 
as high-tech employers, nonprofits, or businesses located in rural 
areas. One commenter stated that each set of costs should not be viewed 
in isolation, but rather multiplied by the number of applications for 
each employer, and the large number of employers that must respond to 
labor mobility and unforeseen business changes.
    Despite a lack of consistent information from commenters on the 
additional costs associated with new filings, the Department is aware 
of and sensitive to the time and expense employers absorb to recruit 
and retain a qualified workforce. However, the costs associated with 
the employment-based immigration process, including the costs incurred 
by employers requesting permanent labor certification, have been an 
accepted part of the labor certification process for almost 30 years 
and are not unanticipated by the statute. The INA presumes 
inadmissibility of each alien, and requires the presumption be overcome 
for each foreign worker through, in part, the Secretary of Labor's 
determination. A demonstration of worker unavailability is inherent to 
the process of filing a labor certification application, and it is not 
unreasonable or inconsistent with the INA to require recruitment every 
time an employer seeks to bring in a new foreign worker. Recruitment 
activities and the costs associated with them are equally as 
appropriate for the would-be substituted foreign worker as they were 
for the originally named alien. Accordingly, while we are sensitive to 
employers' concerns, we must nevertheless conclude that elimination of 
the current substitution practice is amply justified notwithstanding.
    In addition, the Department fully recognizes that substitution has 
become a tool to address visa retrogression. However, the Department is 
not convinced it should retain a policy on substitution that gives rise 
to significant fraud and may adversely affect U.S. workers as a means 
to cope with the visa cap issue, or to support any unintended cost 
savings for employers that may have resulted from this practice.
    Loss of priority date--Many commenters expressed concern over the 
loss of the visa priority date when a new application is required to 
hire a new alien. Our program experience indicates that the priority 
date plays a defining role in the commoditization of labor 
certifications; substitution enhances the labor certification's 
marketability. Commoditization stems from the ability to substitute 
aliens on labor certifications, which are valid indefinitely, while 
maintaining the priority date of the original filing. Indeed, the 
priority date is often a prime motivator for the marketability and 
added value of labor certifications. It is also not necessarily true 
that the availability of substitution is beneficial to aliens as a 
class. As stated in the NPRM, under the substitution process currently 
in place, the new alien beneficiary is inserted into an in-process 
application or certification initially filed for a different alien and 
with a filing date that is often years earlier than the substituted 
alien would have received if named in a newly filed application.
    We are aware of concerns that these practices make substitution 
fundamentally unfair to other aliens (and their petitioning employers) 
seeking to immigrate to the U.S. who remain below the substituted 
worker in the visa priority date queue, as well as to U.S. workers. See 
71 FR 7656 (Feb. 13, 2006) and 56 FR 54920 (Oct. 23, 1991). The need 
for a new labor market test and the Department's interest in removing 
aspects of the current process creating incentives for fraud, combined 
with the inequity to other aliens waiting in the visa queue who have 
not been substituted in, outweigh the harm to an individual employer 
and alien from the loss of a priority date on a given application. In 
addition, the reasoning that the employer suffers a hardship from the 
inability to apply an earlier priority date to a subsequent application 
rests on an unsupported assumption that another test of the labor 
market would not yield a qualified and willing U.S. worker. We do not 
agree with this reasoning and find it contrary to our statutory 
responsibility to protect U.S. workers, as well as virtually impossible 
to legitimately accommodate in the administration of the permanent 
labor certification program.

B. Prohibition of Modifications to Applications

    The proposed rule sought to clarify procedures for modifying 
applications filed under the new permanent labor certification 
regulation and, in particular, to prohibit modifications to 
applications once filed with the Department. We received numerous 
comments raising concern over this new provision. After careful 
consideration of these comments and for the reasons set forth below, 
this Final Rule codifies the new provision at Sec.  656.11(b) with 
slight changes from the NPRM, clarifying that requests for 
modifications to an application submitted under the PERM regulation 
will not be accepted where the application was filed after this Final 
Rule's effective date. In considering how to implement the ``no 
modification'' provision, while ensuring due process to applicants for 
labor certification, we have determined that it is advisable to revise 
the language of Sec.  656.24(g) to more precisely define what 
documentation may be submitted with a request for reconsideration.
    Codifying the ``no amendments'' requirement through notice and 
comment--As explained in the NPRM, the clarification made by this Final 
Rule is consistent with the streamlined labor certification procedures 
governed by the regulation that went into effect March 28, 2005. 
Nothing in the regulation contemplates permitting employers to make 
changes to applications after filing. That practice was one the 
Department specifically sought to change through the Final Rule 
implementing the re-engineered PERM program. The re-engineered program 
is designed to streamline the process, and an open amendment process 
that either freely allows changes on applications or results in 
continual back and forth exchange between the employer and the 
Department regarding amendment requests is inconsistent with that goal. 
Further, the re-engineered certification

[[Page 27916]]

process has eliminated the need for changes.
    The Department has instituted screening and guideposts for 
electronic permanent labor certification applications. The online 
application system, especially in light of the technological 
enhancements described below, allows the user to proofread, revise, and 
save the application prior to submission, and the Department expects 
users will do so. ETA has received frequent, positive feedback from 
stakeholders on what they have found to be the time and cost-saving 
nature of this review.
    Moreover, in signing the application, the employer declares under 
penalty of perjury that it has read and reviewed the application and 
the submitted information is true and accurate to the best of its 
knowledge. In the event of an inadvertent error or any other need to 
refile, an employer can withdraw an application, make the corrections 
and file again immediately. Similarly, if an employer receives a denial 
under the new system, it can choose to correct the application and file 
again immediately if it does not seek reconsideration or appeal.
    Immediate feedback on deficiencies or deniability prior to 
submission of an application--Prohibiting the modification of 
applications will allow the Department to process employer applications 
more quickly and support greater uniformity and consistency in their 
adjudication. However, as part of our continuing upgrades to PERM 
processing capabilities, as well as in response to comments on the NPRM 
and the suggestion by the BALCA in its decision in In the Matter of 
HealthAmerica, No. 2006-PER-1 (July 18, 2006), we have dramatically 
increased the nature and number of system ``prompts'' and warnings in 
an effort to provide employers and others with additional opportunities 
for correction prior to submission of an application.
    The Department has added system capabilities in the form of ``pop-
up'' edit alerts to notify each applicant when a response to a question 
is technically in conflict with either the PERM regulation or certain 
of the formal instructions for completion of the form. The applicant is 
allowed to continue, but with full warning of possible deniability. The 
system permits submission of the application, but the applicant assumes 
the risk that the application will be denied based on the failure to 
fully comply with the technical requirements and alerts of the program. 
This electronic advisory system is much more detailed and more robust 
than anything available previously to online users, and it is 
continuing to reduce the type of automated denials that gave rise to 
HealthAmerica.
    The majority of form preparation errors that have occurred to date 
will now generate an automated prompt, warning the filer that it may 
have entered erroneous information that may cause a denial of the 
application. As described above, similar manual mechanisms are in place 
to detect and correct errors on mailed applications. The Department 
reiterates, however, the fundamental responsibility to submit an 
application which does not contain typographical or similar errors 
remains with program users.
    Under the system upgrades now in place, applications containing 
errors in contravention of system alerts are denied. Consistent with 
the ``no modifications'' policy codified by this rule and the 
evidentiary parameters of the revised Sec.  656.24(g) described below, 
requests for reconsideration based on such denials will not be granted, 
where an application filed after this rule's effective date is at 
issue. Requests for reconsideration based on such denials involving 
applications filed prior to this rule's effective date will be reviewed 
on a case-by-case basis; they will be placed in the appropriate queue 
and reviewed on a ``first in, first out'' basis and as workload 
permits.
    Evidence in support of requests for reconsideration and amendment 
of Sec.  656.24(g)--We have made one change from the NPRM in this Final 
Rule based on the BALCA's decision in HealthAmerica. Among other 
issues, the Board addressed the meaning of the current Sec.  656.24(g) 
governing requests for reconsideration. That section provides that 
reconsideration requests ``may not include evidence not previously 
submitted.'' The Board concluded that evidence ``previously submitted'' 
encompassed material in the possession of the employer at the time of 
filing. That reasoning was the basis for the Board's decision that 
allowed the employer to modify its application to correct a mistake. To 
the extent the BALCA favored allowing the employer in HealthAmerica to 
present evidence that effectively changed the response to a question on 
the application, the BALCA's approach is inconsistent with the 
Department's objective and the NPRM proposal that applications cannot 
be changed or modified after submission.
    However, the Department recognizes that there will be situations 
where--although an employer will not be permitted to amend its response 
to a question as it did in HealthAmerica--it may nonetheless be 
appropriate to consider information not previously in the Certifying 
Officer's (CO's) physical possession in order to provide appropriate 
evaluation of the employer's request for reconsideration. The 
Department has determined an approach that allows for submission with a 
motion to reconsider of documentation in existence at the time of 
filing and held by an employer as part of its compliance 
responsibilities under the PERM recordkeeping requirements is 
appropriate. Accordingly, we have adopted a modified approach to that 
proposed in the NPRM, continuing to prohibit application modifications 
but recognizing the appropriateness of an opportunity to present and 
consider evidence that was generated to comply with record retention 
requirements of the PERM program.
    Accordingly, the Department is including as part of this Final Rule 
a revised Sec.  656.24(g) setting the new standard for applications 
filed on or after the effective date of this Final Rule. The new Sec.  
656.24(g) describes the evidence that can be submitted with a motion to 
reconsider and clarifies the interplay with the no-modification 
provision of Sec.  656.11(b). The revised Sec.  656.24(g) limits 
evidence submitted at reconsideration to documentation that the 
Department actually received from the employer in response to a request 
from the Certifying Officer to the employer; or documentation that the 
employer did not have an opportunity to present to the Certifying 
Officer, but that existed at the time the application was filed, and 
was maintained by the employer to support the application for permanent 
labor certification to meet the documentation requirements of Sec.  
656.10(f). Revised Sec.  656.24(g) also provides that the Department 
will not grant motions to reconsider where the deficiency that caused 
denial resulted from the applicant's disregard of a system prompt or 
other direct instruction. These changes together adequately ensure that 
employers and others have sufficient opportunity to present evidence on 
salient points, even if denied that opportunity during the 
application's consideration, while enabling the PERM program to 
function in its intended streamlined manner.
1. Issues Raised by Public Comments
    Authority to limit modifications to an Application for Permanent 
Employment Certification--Many commenters questioned the Department's 
authority to limit and prohibit an employer's ability to modify a Form 
ETA 9089, Application for Permanent Employment Certification. We 
disagree. Federal

[[Page 27917]]

agencies have the authority, and sometimes the necessity, to write 
strict procedural rules in order to manage their respective 
responsibilities. HealthAmerica, slip op. at 17. Our past practice and 
program experience led us to make regulatory changes in the nature of 
the permanent labor certification program, changes that were publicized 
through extensive stakeholder outreach and during numerous public 
meetings across the country. The resulting efficiency and effectiveness 
measures have contributed to overall program productivity increases and 
have reinforced, among other factors, the critical need to discontinue 
what has historically been continual, unduly time-consuming 
communication between ETA Certifying Officers and employers or their 
representatives.
    The Department recognizes that the accountability-based standard it 
put in place in PERM was, at least for purposes of the modifications 
issue, not made sufficiently clear in the text or preamble to the 
original December 27, 2004 Final Rule. The BALCA pointed out in its 
HealthAmerica decision that a requirement for precise filing can be 
imposed with proper notice, citing Glaser v. FCC, 20 F.3d 1184, 1186 
(D.C. Cir. 1994); Salzer v. FCC, 778 F.2d 869, 875 (D.C. Cir. 1985); 
JEM Broadcasting Co., Inc. v. FCC, 22 F.3d 320 (D.C. Cir. 1994); 
Florida Cellular Mobil Communications Corp. v. FCC, 28 F.3d 191 (D.C. 
Cir. 1994). In these cases, the D.C. Circuit found the FCC could 
appropriately and legitimately write regulations requiring certain 
license applications be ``letter-perfect'' (i.e., complete and 
sufficient) when submitted because the requirement was provided for in 
agency regulations that had been subject to notice and comment. The 
BALCA noted the issuance of the NPRM as evidence that such a ``letter-
perfect'' requirement did not exist under the PERM regulations as 
initially issued. This rulemaking satisfies public notice and comment 
objectives.
    Relationship to fraud--One commenter suggested the Department is 
insinuating that any request for modification is grounded in fraud. We 
disagree. As we have stated, the ``no amendments'' clarification in 
this rule simply codifies a policy the Department assumed was part and 
parcel of the re-engineered program, and which was an (albeit unstated) 
assumption of the PERM Final Rule. The ``no modifications'' policy 
furthers administrative efficiency. In addition, it protects against 
certain program abuses, such as the submission of a form with 
incomplete or inaccurate information simply to save the priority date. 
Thus, the policy serves a number of purposes not limited to fraud 
prevention.
    Need for modifications--Many commenters stated modifications to 
applications were necessary because alleged errors made by the 
Department in reviewing mailed-in applications led to erroneous case 
denials. For example, the Department issued denials for failure to 
include the language that the employer would accept ``any suitable 
combination of education, training, or experience,'' when, in fact, the 
language was included in the application. Further, commenters stated 
other applications have been denied because the Department allegedly 
stated the alien did not possess the required academic credentials 
when, in fact, he or she did, and those credentials were clearly noted 
in the application in the appropriate place.
    Commenters suggested in the event of an inadvertent error, there 
are many reasons why refiling is not usually a viable alternative, thus 
making modifications necessary. For instance, they stated that often an 
application preparer is not aware an error has been made at the time 
the employer submits the electronic Form ETA 9089. Even if the mistake 
comes to light before the Department issues a denial, it may be too 
late to re-file because the recruitment may have become stale. Further, 
certain post-filing, pre-certification events, including but not 
limited to changes in corporate structure resulting in a change of 
employer name, tax identification number, or address, may require the 
amendment of the application. One commenter suggested the inability to 
modify inadvertent mistakes could have serious ramifications as such a 
mistake may result in an inability to refile the application, cause a 
denial of the application, or be construed as a false statement.
    The Department disagrees that these comments require alteration of 
the no-modifications policy reflected in the NPRM. As outlined above, 
going forward, electronic system prompts will most often alert the 
employer or its agent to the grounds for deniability, so a filer will 
be able to learn prior to submitting the application if the system 
would deny the application as currently completed. Further, as always, 
an employer has the right to seek reconsideration and beyond that, 
appeal to the BALCA, when it believes a denial was unjustified, without 
loss of the priority date which attached to the application. Hence, the 
``no modifications'' policy does not institute a standard not 
previously envisioned, and does nothing to limit or undermine employer 
due process rights.
    When filing the Application for Permanent Employment Certification, 
the employer certifies and declares under penalty of perjury that it 
has read and reviewed the application, and the information provided 
therein is true and accurate to the best of its knowledge. The 
Department understands that human error occurs in limited 
circumstances, which is why we have elected to increase our system 
``prompts'' to help avoid such errors. These additions sufficiently 
address commenter concerns. Further, the Department believes it is 
capable of distinguishing between typographical or inadvertent errors 
and willful false statements.
    Tailoring the ``no modifications'' policy--One commenter suggested 
the current regulations governing PERM should permit a single 
opportunity to the employer or agent to correct minor technical 
deficiencies. According to this commenter, applications should be 
decided based on their substantive merits instead of on non-material 
technical errors. The Department agrees that applications should be 
adjudicated upon their respective merits. However, typographical or 
similar errors are not immaterial if they cause an application to be 
denied based on regulatory requirements. The Department encourages 
those who submit applications to carefully review all information for 
completeness and accuracy and has modified the online application 
system to assist them to do so. Attentive filers will accrue the 
benefits of the new streamlined system, as ``clean'' applications are 
usually processed and adjudicated within 60 days of filing.
    Many commenters suggested it is highly unlikely that employers will 
need more than one opportunity to correct any minor technical 
deficiencies and the nature and number of technical errors is highly 
unlikely to have a significant detrimental impact on the overall 
efficiency of the PERM process. Commenters suggested the new system 
has, in fact, had a dramatic impact on the processing of applications 
for permanent labor certification through, among other things, 
centralization and implementation of new technology. According to these 
commenters, permitting a single opportunity to amend an application to 
overcome a non-substantive technical error will neither require 
substantial Department resources nor render the PERM system ineffective 
or inefficient.
    We disagree with the commenters'' premise that permitting 
modifications

[[Page 27918]]

will not negatively impact the processing and review of applications. 
The processing of requests for reconsideration of denials poses a 
significant, costly resource drain on the PERM case management system 
and staff. The opportunity cost and inequity to other employers are 
also high, as resources must be transferred from review of applications 
that do meet technical requirements to those that may not. Moreover, as 
we have discussed above, the alerts and prompts that we have built into 
the system will provide employers the opportunity to correct minor 
technical deficiencies before they ever submit their applications. This 
is a reasonable balancing of available resources. Therefore, the 
Department is finalizing the standard noted in the NPRM of not allowing 
modifications to an application. The revisions to Sec.  656.24(g) will 
enable employers to present evidence in a request for reconsideration 
that will permit filers the opportunity, if necessary, to present 
evidence outside the four corners of the application.
    Many commenters suggested it is reasonable to request that the 
modification prohibition, if adopted, should only apply to applications 
filed after publication of the Final Rule. We have adopted this 
suggestion. The changes to Sec. Sec.  656.11 and 656.24 contained in 
this rule apply only to applications filed after the effective date of 
the rule; they do not impact the processing of motions for 
reconsideration filed with respect to applications filed prior to that 
date.
    Concern prohibiting modifications will generate backlogs--One 
commenter suggested prohibiting modifications under proposed Sec.  
656.11(b) would be an open invitation to intractable increases in 
backlogged applications, rather than the radical reduction in pending 
applications and processing times contemplated by the PERM reforms. The 
efficiencies created by the new system prompts, which are proving to be 
an effective screen for program users against system-generated denials 
for technical errors, as well as the ``no modifications'' policy put in 
place by this rule, will allow us to significantly reduce the pending 
queues of denied applications and, consequently, to process all other 
applications more quickly and effectively.
    Distinguishing policies for backlog and PERM--One commenter 
suggested the Department should clarify its position on modifications 
under the new PERM streamlined system, relative to applications filed 
with the Backlog Processing Centers, by clearly explaining the 
difference in treatment in the regulatory text. As proposed in the 
NPRM, the ``no modifications'' policy in this Final Rule will apply 
only to the PERM program since only the PERM regulation is amended in 
this Final Rule. In addition, this preamble describes more fully the 
process the Department will follow in its review of applications filed 
up to the effective date of the rule. This information provides 
sufficient notice of the expectations for employers and their 
representatives regarding the treatment of technical and other 
modifications going forward.

C. Prohibition on the Sale, Barter, or Purchase of Applications for 
Permanent Labor Certifications and of Approved Permanent Labor 
Certifications, and Prohibition on Related Payments

    The proposed rule, at Sec.  656.12, prohibited the sale, barter, 
and purchase of applications and approved labor certifications, as well 
as other related payments. The Department received numerous comments on 
this proposal. Commenters overwhelmingly opposed Sec.  656.12(b), which 
would prohibit employers from seeking or receiving payment of any kind 
for any activity related to obtaining a permanent labor certification.
    After carefully considering comments received, the Department has 
decided to move forward on all provisions, but in response to comments 
has clarified the types of prohibited payments, as further described 
below. The prohibitions in this section will apply to all such 
transactions on or after the effective date of this Final Rule, 
regardless of whether the labor certification application involved was 
filed under the prior or current regulation implementing the permanent 
labor certification program.
1. Improper Commerce
    The proposed rule provided, at Sec.  656.12(a), that permanent 
labor certification applications and certifications are not articles of 
commerce and they may not be sold, bartered, or purchased by 
individuals or entities. The majority of comments favored the proposal, 
and only a few were in opposition. Some comments were ambiguous; it was 
not clear whether the commenters were commenting primarily on Sec.  
656.12(a), prohibiting commerce in labor certification applications and 
certifications, or on Sec.  656.12(b), which prohibits several types of 
payments related to labor certification applications and 
certifications.
    The Department's extensive experience in the administration of this 
program leaves no doubt that some labor certifications are treated as 
commodities and sold at substantial gain by those who wish to engage in 
the existing secondary market. In one example from 2005, a joint 
investigation with DHS' Immigration and Customs Enforcement (ICE), the 
Federal Bureau of Investigation, the Department of State OIG and the 
Internal Revenue Service resulted in several employers, agents and 
attorneys being convicted of numerous visa fraud schemes. See U.S. v. 
Ivanchukov et. al. (No. 04-421, E.D. Va. 2005); see also DOL OIG 
Semiannual Report (October 1, 2005-March 31, 2006) (available at http://www.oig.dol.gov/public/semiannuals/55.pdf
). In the Ivanchukov case, 

labor certifications were being sold for as much as $120,000.00. As a 
reminder of how common this activity has become, one commenter to the 
NPRM for this rulemaking provided the Department with a website that 
advertises the sale of pre-approved labor certifications. The 
Department has reasonably concluded that there is a need to prohibit 
improper commerce in permanent labor certifications.
    Sale, barter or purchase--Two commenters indicated that prohibiting 
sale, barter, and purchase was one of the most effective amendments the 
Department could promulgate to reduce fraud in the permanent labor 
certification program, as it removes the economic incentive for 
unscrupulous behavior. Some commenters indicated the terms ``sold,'' 
``bartered,'' and ``purchased'' were impermissibly vague. Other 
commenters stated the proposed ban on sale, barter, purchase, and 
related payments was overbroad and did not take into account that both 
employer and employee benefit when an employee obtains permanent 
residence. The Department acknowledges these concerns by adding 
definitions of the terms sale, barter, and purchase to the definitions 
at Sec.  656.3, and by specifying and clarifying what constitutes the 
ban on sale, barter, purchase, and related payments. A labor 
certification is a certification from the Department that there are no 
able, willing, and qualified U.S. workers available for the specific 
job opportunity stated on the employer's application. Converting this 
labor certification into a commodity is an example of selling, 
bartering, or purchasing.
    Many commenters suggested that if DOL wants to make selling labor 
certifications illegal, it should make such sales illegal and prosecute 
those who break the law rather than punishing everyone. We disagree 
that the rule punishes everyone; this aspect

[[Page 27919]]

of the rule only impacts an individual or employer when there is an 
actual sale. Further, our program experience clearly indicates that not 
``everyone'' uses the substitution accommodation or wishes to sell 
labor certifications.
    One commenter suggested we should remove institutions of higher 
education from the prohibition on barter, sale and purchase, suggesting 
that the prohibition be tailored to industries where the prohibited 
activity has been shown to occur. The Department's rationale for 
prohibiting the sale of labor certifications is based upon a broader 
policy concern than the commenter implies. Any such activity is 
contrary to the statutory purpose of the program. There is no basis 
upon which to exempt one industry sector or type of employer. Further, 
as other commenters have stated, there is no legitimate reason for an 
employer to sell or barter permanent labor certifications. Further, if 
such activity is not occurring in a particular industry, then employers 
in that industry will not be affected by the prohibition.
    Attorneys' fees for preparing and filing labor certification 
applications--Two commenters supported the improper commerce 
provisions, contingent upon clarification that attorneys' fees for 
preparing and filing an application would not be prohibited or deemed a 
sale or purchase. It is not the Department's intent to prohibit 
attorneys from charging fees for preparing and filing labor 
certification applications for employers or to deem such fees by 
themselves to be a sale or purchase of the application or resulting 
certification.
    Corporate restructuring--One commenter was troubled that the 
proposed rule could be construed broadly to prohibit transfer of a 
labor certification that arises as the consequence of a merger, 
acquisition, spin-off or other type of corporate restructuring. The 
commenter went on to say the proposed rule could be construed to 
contradict the intent of the Congress in stating in AC21 that corporate 
restructuring should not have any adverse impact on the immigration 
process. According to the commenter, in cases where one company is 
acquired by another, the acquiring company often compensates the 
acquired entity for the cost of pending labor certifications and other 
types of applications. In other cases, the employer filing the labor 
certification application may spin off part of the company and wish to 
sell the pending labor certification to the spun-off entity so that it 
can be used to obtain a green card for the original beneficiary, who 
now works for that spun-off entity. According to the commenter, the 
proposed rule is ambiguous with respect to both of the above factual 
situations. The commenter requested the rule be clarified to state that 
the prohibition against sale, barter or purchase of labor certification 
applications and certifications does not apply to transfers stemming 
from legitimate corporate restructuring activities such as mergers 
acquisitions, or spin-offs.
    The Department did not intend this provision to govern corporate 
restructuring or internal corporate accounting and finance practices 
which exist independently of the permanent labor certification program. 
The Department has determined that further clarification on this 
question is not necessary.
2. Prohibition on Employers Seeking or Receiving Certain Payments, 
Including Payment of Attorneys' Fees
    As proposed, the rule would have added a new Sec.  656.12(b) to 
prohibit employers from seeking or receiving payment of any kind, from 
any source, for filing a Form ETA 750 or a Form ETA 9089 or for other 
actions in connection with the permanent labor certification process. 
The Department proposed to include in this prohibition a ban on payment 
or reimbursement, directly or indirectly, of any employer-incurred 
attorneys' fees and other costs related to the preparing, filing, and 
obtaining of a labor certification, whether payment was by the alien or 
another individual or entity. The Department received numerous comments 
in response to this proposal, most in strong opposition to the 
proposal.
    Following careful review of comments and weighing our growing 
program experience with this issue, and for the reasons explained in 
detail below, the Department finds the need for program integrity 
outweighs any interest in the ability of the employer to receive 
payment or reimbursement from the alien or others in exchange for the 
filing of a labor certification application, especially when such 
payment or reimbursement has led to abuse of the process or 
exploitation of individual aliens. The Department's unique 
responsibility to reduce the incentive for fraud in the permanent labor 
certification program while simultaneously protecting the rights and 
working conditions of U.S. workers requires us to focus on the nature 
of the payment that an employer would receive from an alien or others 
for costs or fees relating to the preparation and filing of the labor 
certification application or obtaining permanent labor certification. 
The Department's concern, which is shared by other Federal agencies, is 
that such a payment undermines the labor certification process by 
potentially corrupting the search for qualified U.S. workers and 
creating serious doubt as to whether the employer is offering a bona 
fide job opportunity and making it available for U.S. workers.
    Accordingly, consistent with the proposed rule, the intent of this 
Final Rule is to make it clear that employers who submit applications 
for permanent labor certification do so with the full understanding 
that the costs they incur for the preparation and filing of the 
application and obtaining permanent labor certification are to be 
exclusively borne by the employer. Thus, the Final Rule prohibits an 
employer from receiving payment of any kind as an incentive or 
inducement to file, or in reimbursement of the costs of preparation or 
filing of, an application for labor certification, including covering 
the costs of the employer's attorneys' fees, except as specifically 
provided for certain third-party payments. The Final Rule also 
prohibits an employer filing an application for labor certification 
from reducing the wages, salary or benefits of an alien named on the 
application for any expense related to the preparation and filing of 
the application. This prohibition includes the payment by the alien of 
costs (for recruitment or other activities in furtherance of the labor 
certification) as well as the employer's attorneys' fees.
    In addition, this Final Rule prohibits employers engaged in the 
labor certification process from withholding from an alien's wages, 
either in increments or in lump sum, any payment in reimbursement to 
the employer for costs associated with that process.
    As first described in the NPRM, prohibited payments include, but 
are not limited to: Employer fees for hiring the alien beneficiary; 
receipt of ``kickbacks'' of part of the alien beneficiary's pay, 
whether through a payroll deduction or otherwise; reducing the alien 
beneficiary's pay for purposes of reimbursement or pre-payment; goods 
and services or other wage or employment concessions; kickbacks, bribes 
or tributes; or receipt of payment from aliens, attorneys, or agents 
for allowing a permanent labor certification application to be filed on 
behalf of the employer.
    There are strong and ample grounds upon which to prohibit these 
payments or arrangements, including the payment by the alien of the 
employer's attorneys'

[[Page 27920]]

fees. Permanent labor certification is an employer-driven process; 
employers, not aliens, must file permanent labor certification 
applications. To the extent the alien beneficiary who is the subject of 
the labor certification application and, later, the immigrant petition, 
is financially involved in the application process directly or 
indirectly, this involvement casts suspicion on the integrity of the 
process and the existence of a bona fide job opportunity. Payment by 
the alien of employer costs allows him or her some level of control 
over what must remain an employer-driven process. The degree of that 
control, at least at the labor certification stage, directly and unduly 
influences the legitimacy of the job opportunity and whether that 
opportunity has been and remains truly open to U.S. workers. In other 
words, as stated in the NPRM, alien subsidization of employer-incurred 
costs adversely affects the likelihood that a U.S. worker will be 
offered the job when, for example, the alien is paying for the 
recruitment effort.
    The essence of this aspect of this Final Rule is that expenses that 
rightfully belong with an employer should not be transferred to an 
alien beneficiary or others. An alien is free to retain counsel to 
represent his or her interests in the labor certification process and 
also to assume responsibility for those costs. This Final Rule does not 
seek to regulate or control payments to, or the identity of, the 
alien's attorney. However, to the extent that any attorney is preparing 
or filing a labor certification application and thus engaged by the 
employer as well as with the alien, the costs attributable to work for 
the employer must be paid by the employer. Costs for attorneys' fees 
outside the labor certification process are not part of this 
rulemaking.
    The Department is aware of the import of its position--the 
implications are at the center of the reasons we find the prohibition a 
necessity. We recognize the vast majority of aliens for whom permanent 
labor certifications are filed are already employed by the employer. In 
initiating the permanent residence process, the employer demonstrates a 
desire to retain the alien on a more permanent basis than permitted by 
his or her nonimmigrant status. The pre-existing relationship provides 
the employer with significant incentive to conduct the recruitment 
process in a manner that favors the alien. The cost incurred in the 
labor certification recruitment process by the employer serves as an 
identifiable disincentive to that outcome. It serves at least to make 
the employer examine the value it places on retaining the alien. By 
requiring employers to bear their own costs and expenses, including the 
representation of the employer, the Department is ensuring that the 
disincentive to pre-qualify the alien in the job opportunity--keeping 
the job open and the recruitment real--remains in the process. This 
enables the Department to remain in its statutory role as the arbiter 
of the presence of otherwise-eligible U.S. workers in relation to the 
admissibility of the alien.
    The complexities associated with multiple-party financial 
involvement in the labor certification process are not new. The 
provisions in this section work in concert with other parts of the 
regulation and reflect the Department's determination to keep the 
recruitment process open, fair and available to U.S. workers. For 
example, as stated in the preamble to the final PERM regulation, 
evidence that the employer, agent, or attorney required the alien to 
pay employer costs may be used under the regulation at Sec.  
656.10(c)(8) to determine whether the job has been and clearly is open 
to U.S. workers. The rule prohibiting the payment of an employer's fees 
or costs by the alien and the rule requiring the presence of a bona 
fide job offer, in turn, are consistent with the prohibition on sale 
and barter in the Final Rule, as they support the Department's desire 
to actively prevent and prohibit activities that directly commoditize 
permanent labor certifications.
    Under the authority of Sec.  656.10(c)(8) of the current 
regulation, Form ETA 9089 \2\ already requires employers to disclose 
and specify ``payment[s] of any kind [emphasis added] for the 
submission of [the] application.'' The decision to seek this disclosure 
as part of the information related specifically to recruitment reflects 
the Department's concern that such payments may adversely impact the 
availability of the job opportunity to the U.S. workforce. The 
provisions added by this Final Rule are simply a logical extension and 
clarification of the type of information the Department considers 
relevant to this concern.\3\
---------------------------------------------------------------------------

    \2\ Section ``I. Recruitment Information,'' Subsection ``e. 
General Information,'' Question 3.
    \3\ In the PERM regulation, the Department reserved the right to 
request any information the Certifying Officer deems relevant to a 
labor certification application. 20 CFR 656.20(d). The existence of 
a bona fide job opportunity and the disclosure of payments are 
always relevant to the application.
---------------------------------------------------------------------------

    This Final Rule clarifies the application of Sec.  656.10(c)(8) to 
the issue of alien payment. It prohibits employer practices that 
require an alien to pay employer labor certification costs, including 
prohibiting practices that require the alien beneficiary to cover all 
labor certification costs, requirements that an alien cover specific 
activity-related costs (all recruitment costs, all in-house legal 
expenses), and wage deductions to the alien's paycheck as reimbursement 
for or in anticipation of such costs, regardless of the labor 
certification activity they cover. As with the modifications policy, 
this Final Rule reinforces the PERM rule's policy; it also specifies in 
greater detail the specific activities the prohibition is meant to 
cover.
    As stated in the NPRM, the Department recognizes the possibility 
that legitimate employers may have a practice of seeking reimbursement 
from the aliens they hire for the expenses they incur in filing and 
obtaining the permanent labor certification. The Department has 
determined that any such reimbursement including, but not limited to, 
attorneys' fees to prepare an employer's application, recruitment 
expenses to determine whether domestic labor is available, or other 
such employer expenses, is contrary to the purpose of the labor 
certification program and such costs should be borne exclusively by the 
employer. An alien employee who reimburses his employer is effectively 
being paid a lower wage than agreed to by the employer on the labor 
certification, which undermines the Secretary's finding that the wages 
and working conditions of the job will not adversely affect U.S. 
workers and the Secretary's duty to protect U.S. workers.
3. Issues Raised by Comments on Attorneys' Fees
    The Department received a significant number of comments on the 
proposed prohibition on payment or reimbursement of the employer's 
attorneys' fees or other employer costs related to preparing and filing 
a permanent labor certification application and obtaining permanent 
labor certification. The overwhelming majority of the commenters were 
opposed to this proposal.
    Relationship of this prohibition to purpose of the rule--Commenters 
questioned the relationship between the prohibition against aliens 
paying or reimbursing the employer for expenses related to the labor 
certification application, including attorneys' fees, and the 
Department's efforts to limit the opportunities and incentives for 
fraud in the labor certification program. They believed the 
Department's statements in the preamble to the NPRM were vague and did 
not establish a logical relationship between illegal

[[Page 27921]]

merchandising of labor certifications and such payments or 
reimbursements. Commenters also questioned the reasoning behind the 
Department's statement in the NPRM at 71 FR at 7660, that an alien's 
payment of the employer's costs might indicate there is not a bona fide 
position and wage available to U.S. workers.
    The Department stands by its reasoning. An alien's reimbursement or 
payment to an employer for filing a labor certification on his behalf 
turns labor certifications into commodities, increases the likelihood 
that a prejudicial arrangement exists which precludes any consideration 
of U.S. workers, and undermines the integrity of the labor market test 
required for certification under Section 212(a)(5)(A) of the INA. An 
alien employee who reimburses his employer via deductions from his 
paycheck or a lump payment is effectively being paid a lower wage than 
agreed to by the employer on the labor certification. A U.S. worker is 
non-competitive with the alien worker unless he too accepts the actual 
lower wage. Therefore, the practice of aliens reimbursing employers for 
expenses the employer incurred in the labor certification process 
adversely affects the compensation of U.S. workers. Because the INA 
mandates that the Department may only approve a labor certification if 
there are not qualified U.S. workers for the position, and if the wages 
and working conditions of similarly employed U.S. workers are not 
adversely affected, the Department will not permit the practice of 
reimbursement of attorneys or other fees or costs associated with 
obtaining a labor certification. There is a direct correlation between 
an alien's financial participation in the labor certification process 
and the likelihood that an arrangement exists which precludes 
legitimate consideration of U.S. workers, affecting the integrity of 
the labor market test required by INA section 212(a)(5)(A). The statute 
charges the Department to ensure an adequate, good faith test of the 
labor market--that an alien will not be admitted for a job for which a 
qualified U.S. worker is available. It is, therefore, the Department's 
role and statutory responsibility to remove the potential for this 
undue influence.
    Authority--Many of the commenters questioned the Department's 
authority to dictate who should not pay attorneys' fees and other 
costs. They asserted that there is no statutory authority for such a 
rule and stated that had the Congress intended to give DOL the 
authority to regulate the attorney-client relationship and/or to set 
limits on the payment of attorneys' fees, it would have done so 
explicitly and unambiguously as it has in other contexts. They cited 
the authority in INA section 212(n) for the H-1B program as an example. 
Many commenters opined the proposed rule would be restrictive of 
freedom to contract.
    In addition, many commenters expressed the belief the Department 
was intruding into the licensing and regulation of attorneys. They 
stated this issue has been left exclusively to the states, which 
prescribe the qualifications for admission to practice and the 
standards of professional conduct and are responsible for attorney 
discipline. These commenters believed the Department has neither 
statutory nor other authority to regulate payments to the attorneys 
that parties to proceedings before the Department are entitled to 
retain. They further stated any changes to this complex relationship 
should be left to the regulatory bodies that traditionally make them--
states and their bar associations.
    The Department disagrees with those comments. This Final Rule's 
prohibition on improper payments governs employers and aliens engaged 
in the labor certification process, not the attorneys retained by the 
employer. The rule prohibits employers from receiving financial 
incentives or reimbursement for filing labor certification applications 
and from withholding payments from workers for that purpose (among 
other things). These are activities that undermine the legitimacy of 
the labor market test that is required to be conducted by the law 
before the Department may approve a labor certification. The 
Department's focus is not on attorneys' fees, but rather on the actual 
wage paid to the alien employee and the effect that a lower wage or 
reimbursement of costs has on the wages and opportunities available to 
U.S. workers. The transfer of the responsibility for payment of 
attorneys' fees or other costs associated with preparing, filing and 
obtaining labor certification from employer to alien (or others) 
signals preselection in the hiring decision, contrary to the 
requirement of an open recruitment process with full consideration of 
U.S. workers. The INA broadly empowers the Secretary to ensure that 
there is a bona fide job opportunity open to U.S. workers and that 
there is no adverse effect on the wages and working conditions of U.S. 
workers before approving a labor certification. As part of its 
statutory charge, the Department is responsible for eliminating factors 
which undermine the legitimacy of the job opening and of the 
recruitment process, including the improper allocation of costs and 
fees associated with labor certification. Prohibiting the alien, 
directly or indirectly, from paying the employer's attorneys' fees and 
other costs is a critical step toward ensuring employers or others do 
not degrade the validity of the labor market test. The fact that 
section 212(n)(2)(C)(vi)(II) of the INA prohibits an employer from 
accepting reimbursement from an alien employee for the fees for an H-1B 
nonimmigrant petition does not support the argument that the Department 
lacks authority to prohibit the reimbursement of attorneys' fees and 
other costs associated with permanent labor certifications. To the 
contrary, that specific prohibition in the nonimmigrant context 
highlights Congress' interest that the employer should bear the costs 
associated with hiring alien employees and not pass them onto the 
alien.
    It is well settled that an agency is empowered to take all 
reasonable actions, even if not particularly specified in the statute, 
to effect the objective and policy of the statute. The Department is 
charged with ensuring that an employer's hiring of an alien employee 
does not displace U.S. workers or distort wages and working conditions 
in the U.S. labor market before approving permanent labor 
certifications, and this prohibition against the reimbursement of 
attorneys fees and other costs directly furthers that mandate. The 
Final Rule in no way precludes an employer from hiring and paying an 
attorney for the services provided to the employer or an alien from 
hiring and paying an attorney for the services provided to the alien, 
or for that matter an employer paying for an attorney who exclusively 
represents the alien employee. The rule does not speak to the 
qualifications of an attorney or the professional standards with which 
the attorney practices. The rule simply seeks to ensure the integrity 
of the labor certification process by removing an incentive to 
manipulate that process in favor of an alien worker and against the 
interests of U.S. workers.
    Right to counsel; attorney-client relationship--Commenters also 
asserted that because the labor certification application is signed by 
both the employer and the alien, both are parties to the proceeding and 
both are exposing themselves to sanctions under the law for any 
misrepresentations made on the application. They maintained that each 
is entitled to counsel of his or her choosing and the Department may 
not limit the choice and interfere in the attorney-client relationship 
by regulating who may pay attorneys' fees. Some commenters included 
reasons as

[[Page 27922]]

to why the alien might want independent counsel and other commenters 
read the proposed rule to mean the alien could not have independent 
counsel. Some commenters also interpreted the proposed rule as 
prohibiting dual representation of both employer and alien by a single 
attorney.
    These commenters misconstrued the NPRM. The Department is not 
seeking to limit either party from choosing counsel. The act of seeking 
legal representation, the identity of legal counsel, and similar 
activities are all outside the scope of this regulation. As previously 
noted, the alien is free to retain counsel to represent his or her 
interests in the labor certification area or any other area in which 
the alien desires counsel. Nothing in this regulation prohibits the 
alien from hiring the same attorney as the employer. This regulation 
simply prohibits an employer from transferring his legal and other 
costs associated with procuring a permanent labor certification to the 
alien employee.
    Vagueness--Several commenters asserted the Department has not 
provided sufficient description of the conduct that it would deem to be 
a violation of this proposed rule. Commenters specifically identified 
the language in Sec.  656.12(b) stating, ``An employer shall not seek 
or receive payment of any kind for any activity related to obtaining a 
permanent labor certification'' as vague.
    In response to this concern, the Department has clarified the 
prohibited behavior in this Final Rule. The rule provides specific 
examples of prohibited transactions, including kickbacks, improper wage 
withholdings, bribes, and lump sum reimbursements. It also prohibits 
non-monetary transactions, such as free labor. Further, it exempts 
certain third-party payments from the prohibition, as discussed below, 
allowing these payments to be made in connection with labor 
certifications.
    To whom labor certification benefits accrue--Many commenters 
disagreed with the Department's premise that because the employer files 
the labor certification application, the employer should bear all of 
the costs. These commenters believed there is a benefit to both the 
employer and the alien from the labor certification and since both are 
interested parties, these parties should be free to negotiate payment 
arrangements. Some commenters also claimed that the permanent resident 
status is a benefit to the alien and only benefits the employer if the 
employee remains on the job beyond attaining permanent status. A 
significant number of commenters described agreements frequently used 
which require reimbursement if a foreign employee resigns upon being 
granted permanent residence or prior to a specified length of time 
after obtaining permanent residence status. They compared these 
reimbursement arrangements to widely used employer-employee agreements 
linking relocation costs or training and education costs incurred by an 
employer to an employee commitment to remain in a job for a specified 
period of time or otherwise reimburse a portion or all of the costs. 
Other commenters stated that, under section 204(j) of the INA, since 
the alien beneficiary now has the ability to move to another employer 
even before attaining permanent residence (as soon as 180 days after 
filing an adjustment application), the extent of the benefit realized 
has shifted even more substantially to the employee and increases the 
employer's need for the agreement described above.
    Several commenters claimed the interest in the labor certification 
application is weighted to the alien even more strongly. To support 
this argument, one commenter referenced DerKevorkian v. Lionbridge 
Technologies, No. 04-cv-01160-LTB-CBS, U.S. Dist. LEXIS 4191 (D. Colo. 
Jan. 26, 2006). In this unreported decision, the court held that an 
employer's promise to sponsor an alien employee for permanent residence 
created claims for promissory estoppel and breach of fiduciary duty by 
the employee against the employer. Some commenters asserted that this 
decision supports the proposition that an employee has legal rights in 
the labor certification process, even when an application has yet to be 
filed with the Department. The commenters further asserted this case 
could stand for the proposition that an employer may limit its legal 
liability by requiring an alien to retain his own attorney. 
Additionally, commenters referenced various provisions for continued 
employment rights for H-1B nonimmigrants which purport to recognize the 
alien's rights and interests in the labor certification process.
    Others believed the alien should rightfully participate in paying 
some or all of the costs related to the labor certification application 
because the recruitment process and completion of the application is, 
in reality, an ``artificial'' recruitment being conducted solely to 
satisfy the Department's requirements. They maintained the actual 
recruitment that was paid for by the employer is the recruitment which 
produced the non-U.S. worker, and therefore, the need for the 
recruitment used in the labor certification process is directly tied to 
the alien employee and the alien should be able to contribute to the 
payment of the employer's costs. Further, many permanent alien workers 
are first hired by employers under H-1B or other nonimmigrant visas for 
which there is no requirement of a pre-employment labor market test to 
determine whether U.S. workers are available.
    We disagree with the commenters' assumption that an alien's 
interest in labor certification warrants payment by the alien of the 
employer's expenses. For purposes of employment-based visas requiring 
labor certification, the application to the Department of Labor and the 
Secretary of Labor's determination initiate a much broader, multi-
agency process whose function is to consider and complete a specified 
alien's entry into the United States for the sole purpose of filling an 
employer's job vacancy. First, the unreported DerKevorkian decision 
merely suggests that an alien may have a private right of action 
against an employer for failure to properly proceed after agreeing to 
sponsor an alien for permanent residence. The court did not hold that 
an alien has a legal interest against the Department in the approval of 
a labor certification. Second, an alien does not apply to the 
Department for approval of a labor certification, the employer does. 
Finally, the purpose of the labor certification is not to provide an 
alien with permanent residence, rather it is to certify that the 
alien's admission into the United States to work in a particular 
position will neither displace a U.S. worker nor distort the U.S. labor 
market. The fact that aliens may leave employment early or change 
employers is a risk which is no different from the risk of hiring any 
U.S. worker and which should be duly considered by employers as they 
carefully consider whether to invest the resources they believe are 
required to pursue an employment-based immigration solution to their 
workforce shortage. This rule does not seek to govern the large 
majority of employment agreements between employers and alien workers--
those that may require reimbursement to the employer for travel, moving 
expenses, loans and other expenditures that apply equally to both U.S. 
and foreign workers and can be shown were made directly for the benefit 
of that worker. The Department must weigh the undeniable benefit to the 
employer and the alien of sharing certification costs against the 
interests of U.S. workers who must, under the statute, be considered 
for that job

[[Page 27923]]

opportunity before it can be offered to the alien.
    Payment by the employer of the costs associated with the 
preparation, filing and obtaining a labor certification keeps the alien 
outside the process and insulates the process from financial 
relationships that would subvert the permanent labor certification 
process' goal of protecting U.S. workers. The Department has decided 
its statutory mandate is best served by removing this incentive for a 
less-than-valid test of the labor market. Under the terms of the labor 
certification program, the protection of U.S. workers outweighs any 
employer interest in obtaining financial remuneration from alien 
employees for the costs associated with labor certifications.
    As stated, the Department is not seeking to prohibit, limit, or 
regulate dual legal representation of alien and employer in the 
permanent residence process. However, it is the Department's 
expectation that in such situations attorneys' fees and costs 
associated with the preparation, filing and obtaining of the labor 
certification are to be borne by the employer. Various Federal, state 
and local laws regulate payment of wages, prohibit or restrict 
deductions from wages, outlaw ``kickbacks,'' restrain assignments, and 
otherwise govern the frequency and manner of paying wages. In accord 
with the restrictions promulgated in this rule, any attempt by an 
employer to recover labor certification costs from an employee through 
deductions from wages, uncompensated additional work by the employee, 
or otherwise, would be considered an attempt to circumvent the rule and 
could result in the debarment of the employer from the program as 
provided in the rule, as well as subject the employer to appropriate 
enforcement actions for violations under other applicable authorities.
    Disparate treatment--Several commenters were concerned the proposed 
rule would result in disparate treatment of nonprofit organizations, 
hospitals, public universities, and small businesses. According to 
these commenters, these organizations may not have in-house counsel or 
the resources to hire counsel and have traditionally negotiated a cost-
sharing agreement with the alien employee. Commenters also claimed the 
proposed rule would penalize those same institutions--nonprofit 
research organizations and institutions of higher education--that the 
Congress has expressly recognized as worthy of support. The different 
standard for prevailing wages and the exemption from training fees 
under the H-1B program were cited as examples of Congressional intent. 
These commenters believed the effect of the rule would be to move the 
program to the exclusive domain of highly profitable employers in the 
United States.
    Commenters also stated disparate treatment of workers could result. 
They asserted if employers were to be required to pay the fees for 
labor certification, the end result would be that the alien employees 
would receive a specific benefit and better treatment (i.e., payment of 
legal fees) than similarly situated U.S. workers. Other commenters were 
concerned the rule as proposed would have a disparate impact on alien 
workers, some of whom would be given access to employer funds for legal 
costs and some of whom would not, based on budgetary allocations, the 
type of benefit sought, or other factors. One commenter suggested that 
this would have a disparate effect on professors and researchers in 
universities that, for various reasons, require their in-house or 
outside counsel to file labor certifications, resulting in a different 
outcome than their colleagues who were considered ``outstanding'' and 
thus able to bypass the labor certification process.
    The Department disagrees. The recruitment, legal, and other costs 
associated with labor certification are transaction costs necessary for 
or, in the case of legal fees, desired by the employer to complete the 
labor market test, allow the Department of Labor to make its 
determination, and enable the employer to move to the next step of the 
hiring process, a step it will complete with DHS. The employer's 
responsibility to pay these costs exists separate and apart from any 
benefit to the alien from his or her eventual entry as an immigrant. 
Moreover, employers may legitimately offer benefits to employees on a 
selective basis in almost all areas--educational benefits offered to 
certain sectors of a workforce but not to others, relocation expenses 
offered to those at certain geographic distances but not others, 
training offered to managers but not to nonexempt employees, to name 
just a few examples. The costs involved in a labor certification are 
just one instance where benefits may be, at the employer's option, 
extended to some employees or classes of employees but not to others. 
The same is true of those who bypass the labor certification process 
entirely and who are able to file an immigrant petition directly with 
DHS, such as the outstanding professors and researchers noted by the 
commenters. The Department reminds employers, especially those small 
employers and non-profits who commented on this issue, that there is no 
statutory or regulatory requirement that an application for permanent 
labor certification be prepared by and/or submitted by an attorney, nor 
is the Department setting any standards for what such costs should be.
    Third party situations--Commenters have raised questions about 
payments by third parties and asserted that, by deeming attorneys' fees 
to be only the employer's expense, the Department was forbidding the 
employer from passing the expense to another party. These commenters 
suggested the Department is also prohibiting third party payments 
directly to the attorney, even though such payment is not a 
reimbursement of the employer's expenses.
    Commenters also described purportedly common situations that 
involve the payment of attorneys' fees by entities other than ``the 
employer.'' As an example, one commenter stated physicians frequently 
have split appointments between a Veterans Affairs Medical Center 
(VAMC) and an affiliated institution of higher education. In these 
cases, although there is one ``employer of record'' who files the labor 
certification application, the university reimburses the VAMC for the 
proportion of the fees commensurate with the proportion of the work 
week spent at the university.
    The Department finds these comments largely meritorious and has 
revised the regulation at Sec.  656.12(b) to recognize such situations. 
It is not our intent to look behind the employment that is the subject 
of the labor certification to ascertain the legitimacy of the employer 
vis-a-vis other entities with a legitimate interest in the alien. Where 
there is a legitimate third-party relationship in which the payment by 
the third party of the fees and costs that should be borne by the 
employer would not contravene the intent of the program, the payment 
does not adversely affect the fairness of the labor market test. In 
cases where there is a legitimate, pre-existing business relationship 
between the employer and the third party, and the work to be performed 
will benefit that third party, the employer is not influenced to the 
point of preselection of the alien worker in the labor market test. By 
requiring that the relationship be a business interest that predates 
the labor certification process, the Department is protecting against 
fraudulent relationships.
    The Department also received comments regarding money paid to a 
trust fund established by a union for defraying the costs of legal 
services for

[[Page 27924]]

employees, their families, and dependents. The proposed rule, the 
commenters maintained, would prohibit payment of attorneys' fees and 
costs for an alien employee by such a union fund because payment would 
not be coming from the employer. These commenters believed the proposed 
rule may contravene Supreme Court cases confirming a union's First and 
Fourteenth Amendment right to assert legal rights. This comment is 
misplaced. To the extent such a trust fund is reimbursing a worker for 
the worker's legitimate costs and not for the employer's costs, 
reimbursement is not prohibited by the Final Rule.
    The Department reiterates that this Final Rule seeks to require the 
employer to pay its own costs, including attorneys' fees, for its own 
activities related to obtaining permanent labor certification, which is 
an employer-driven process. However, this rule does not regulate 
payment by an alien or others of their own costs, attorneys' fees or 
other expenses. Nor does this rule regulate contract arrangements, cost 
allocation and financial transactions within a corporation or its 
affiliates, between an entity and its insurers or legal service 
providers, or between and among entities engaged in a joint enterprise.
    Employer paying alien's attorney--Another commenter described a 
scenario in which an alien retains his or her own attorney separately 
from counsel retained by his or her employer and the employer is 
willing to pay the attorneys' fee, but the attorney may be prohibited 
from accepting such a payment under state bar rules. As previously 
noted, this rule does not regulate the attorney-client relationship or 
the alien's retention of counsel. Neither does this rule prohibit 
payment by the employer of costs beyond those that are exclusively the 
employer's--payment, for example, of the alien's attorneys' fees or 
other costs attributed solely to the alien. Finally, nothing in this 
regulation regulates payment by an alien, or others, of their own 
attorneys' fees or other expenses.

D. Labor Certification Validity and Filing Period

    The Department received numerous comments about the proposed 
language at Sec.  656.30(b) establishing a validity period of 45 
calendar days for permanent labor certifications. Although some 
commenters asserted the Department lacks the authority to define a 
validity period, the majority of commenters focused instead on 
proposing alternative time periods ranging from ninety days to five 
years. Some cited possible delays in both DOL and DHS processes, which 
they claimed would make the filing of an immigrant visa petition with 
DHS within the 45-day time period impractical, if not impossible.
    Commenters provided very similar if not identical lists of reasons 
why a validity period of only 45 days would be inadequate. The reasons 
included: Untimely receipt of labor certifications from DOL; a 
prolonged absence of the individual, or individuals, necessary to the 
I-140 and I-485 filing processes; unavailability of documentation; and 
general, unforeseeable delays. Opportunities for delays 
notwithstanding, many commenters did not oppose a validity period and 
some expressly supported the concept of a labor certification being 
valid for only a finite length of time. Most, however, believed a 
longer time period was warranted. Others opposed a finite validity 
period but were willing to accept such a period only if it was for a 
time longer than 45 days.
    After reviewing the arguments, considering the reasons presented 
for needing a longer validity period, and weighing the merits of 
alternative time periods, the Department, in this Final Rule, increases 
the validity period for a permanent labor certification from 45 to 180 
days. The Department has determined that increasing the validity period 
to 180 calendar days is a reasonable alternative, in that it provides 
additional time to accommodate possible delays, while maintaining the 
integrity of the labor market test and the security of the labor 
certification. Labor market conditions are subject to rapid change, and 
it is consistent with DOL's mandate under INA section 212(a)(5)(A) to 
require a retest of the market after the passage of that time.
    The question of the appropriate validity period directly addresses 
the reliability of the information that underlies and supports the 
Secretary's determinations of the availability of U.S. workers and 
whether the job opportunity's wages and working conditions will 
adversely affect the wages and working conditions of U.S. workers. The 
Department's certification speaks to the unavailability of U.S. workers 
and, hence, extends only to the point (either because of the passage of 
time or because, as in the case of substitution, the circumstances 
surrounding the job opportunity have changed) at which point 
availability again comes into question. The PERM regulation reflects 
the determination, made by the Department when the new program was 
instituted, that 180 days is the maximum window for the viability of 
labor market information. Consistent with this determination, the 
current regulation, at Sec.  656.17(1)(i) and (ii), requires that 
mandatory recruitment be conducted no more than 180 calendar days prior 
to filing. A 180-day validity period after certification aligns 
programmatically with this recruitment requirement and follows a 
similar rationale.
    The Department has determined that 180 days provides sufficient 
time for an employer to move to the next step in the permanent 
residence process while minimizing the risk of potential changes in 
local economies. Taken together, the timeframe as currently conceived 
(i.e., recruitment within six months of submission of the application, 
PERM's average processing time which is greatly improved and generally 
within 60 days, and a 180-day validity period) will all provide as 
valid and timely a picture of the labor market as current program 
parameters will allow while providing sufficient flexibility for 
contingencies in the employment-based immigration process.
1. Statutory Authority
    Some commenters opposing imposition of a validity period claimed 
the Department is exceeding its statutory authority under INA section 
212(a)(5)(A) which requires the Secretary of Labor's determination on 
U.S. worker availability and adverse impact on wages and working 
conditions. Most asserted that although the statute does not expressly 
provide for a validity period, it does refer to DOL's determination 
being used ``at the time of application for a visa.'' The Department 
does not agree it lacks the authority. To the contrary, by limiting the 
period of validity of the labor market test that underlies the 
Secretary's determination, the Department more closely adheres to the 
letter of the law. The statute requires the Secretary to make the 
certification as a function of evaluating the introduction of the alien 
immigrant into the workforce; the Secretary's determination is to be 
made at the time of the application for admission. A validity period 
serves to forge a closer temporal link between the determination and 
the admission.
    One commenter argued that the INA limits the Department's authority 
to an assessment of the employment opportunity, i.e., the test of the 
labor market, in order to make a determination of whether or not to 
certify. No such limiting language exists in the INA. The test of the 
labor market was instituted by the Department as a means by which to 
implement the

[[Page 27925]]

requirements of the statute. Procedures for the examination of the 
labor market and the larger labor certification process of which it is 
a part have varied, but the labor market test has always functioned as 
a prerequisite to the employment-based admission of an alien. The 
imposition of a validity period is a logical mechanism by which the 
Department can ensure that the information upon which a determination 
was based remains legitimate.
2. Delays in Processing of Applications and Receipt of Labor 
Certifications
    Some commenters attempted to establish a nexus between the long 
processing times at both DOL and DHS and a validity period. They 
contended the Department's argument that a certification grows stale 
with the passage of time is disingenuous, given the extremely long 
processing times and resultant staleness of at least some information 
in applications submitted years earlier, and implied the Department's 
argument is not justifiable. The Department disagrees. The Final Rule 
addresses the question of validity post-certification. While questions 
of wages and recruitment are adjudicated on an individual basis as 
applications come up for review in our Backlog Processing Centers--
independent of how long each of those applications has been pending--
the Department must determine how long it will stand behind those 
certifications once issued, and when it is appropriate to once again 
test the market. The question of a validity period addresses these 
broader concerns.
    We also note the PERM system was implemented in direct response to 
the long processing times experienced under the previous program model, 
and we have already significantly reduced processing times from years 
to months. The reduction in time provides the Department assurance that 
the information upon which a determination is based is current and 
valid.
    Commenters also complained of frequent and long delays in the 
receipt of granted labor certifications and suggested that another 
basis, other than the date of issuance, should be the starting point 
from which the time period begins to run. While it is true that delays 
in delivery, when they occur, negatively impact timely filing with DHS, 
these comments were based on the experiences at the outset of the new 
PERM program. Labor certifications are now being adjudicated in a more 
timely manner. Moreover, the longer validity period of 180 days serves 
to provide the time necessary to accommodate any delay that may occur 
in certification receipt.
3. Relationship to Fraud
    Some comments in support of a validity period argued that 
indefinite validity allows some unscrupulous companies to stall the 
filing with DHS as a means of preventing the worker from leaving their 
employ, and that it also allows employers so disposed to prolong non-
payment of the wage indicated on the application. One commenter opposed 
to a validity period hypothesized that an employer might not want to 
file the I-140 within an imposed validity period if it would be unable 
to demonstrate to DHS the ability to pay the wages attested to on the 
Form ETA 9089. We agree that indefinite validity may contribute to a 
variety of undesirable or unlawful behaviors and, further, that the 
longer the period of time the labor certification is in circulation, 
the greater the probability that the information on the application, 
not only that pertaining to recruiting, is stale or increasingly less 
relevant.
    Some commenters pointed to other provisions currently in place or 
proposed in the NPRM, including the elimination of substitution, which 
serve to protect against fraud and argued that more fraud protection is 
unnecessary and merely prejudices the honest employer. As stated above 
with respect to the elimination of substitution, while we do not doubt 
that other fraud prevention and detection methods are available, the 
appropriateness or effectiveness of those other methods does not 
obviate the need for additional, targeted techniques to address the 
problems generated by a specific issue, such as, in this case, the 
indefinite validity periods for labor certifications. It is difficult 
to see how a reasonable validity period prejudices honest employers who 
presumably wish to obtain the admission of the alien worker they have 
sponsored as quickly as possible. The revised validity period 
accommodates the need for a reasonable period of time in which to 
submit the I-140.
4. Increased Burden at DOL Due to Untimely Filings and at DHS Due to 
Incomplete or Inaccurate I-140 Filings
    Several commenters argued that imposing the requirement that a Form 
I-140 petition be filed within a limited period of time will result in 
increased burdens for both DOL and DHS. That likelihood is overstated. 
Commenters posited that DOL will likely see an increase in filings due 
to the re-submission of applications to replace labor certifications 
that expire before the Form I-140 can be filed, which will, in turn, 
result in filing backlogs. This claim does not take into consideration 
the efficiency of the PERM system. Moreover, given the importance of 
the labor certification for both the employer and the alien, it is 
unlikely that a significant number of labor certifications will be 
allowed to expire. Similarly, the claim that a ``rush to file'' the 
Form I-140 will result in inaccurate and incomplete Form I-140 filings 
is also difficult to envision, given the significance of the filing. 
DOL expects that employers, attorneys and agents will be thoughtful and 
careful as they complete each labor certification application and 
immigrant petition and that at least some preparation for the entire 
permanent residence process would have taken place in advance of 
certification. Furthermore, the lengthening of the validity period from 
45 to 180 days will provide the employer a reasonable period of time in 
which to ensure that all documentation and information necessary are 
accurate and complete prior to filing.

E. Program Integrity and Debarment

    The preamble to the PERM Final Rule indicated the Department would 
consider the imposition of stricter remedial measures in any future 
rulemaking involving the permanent program. Consistent with this 
intent, the NPRM to this Final Rule contained several provisions to 
promote the program's integrity and assist the Department in obtaining 
compliance with the proposed amendments and existing program 
requirements. The Department proposed several revisions to Sec.  
656.31, the regulatory section governing the Department's response to 
instances of potential fraud or misrepresentation, including extending 
the time for potential suspension of processing for applications filed 
by certain employers, attorneys, or agents. In addition, the NPRM made 
the section applicable to applications filed under the current 
regulation and the regulation in effect prior to March 28, 2005. This 
Final Rule adopts the provisions on suspension of applications and 
notice to employers largely as proposed in the NPRM.
    As stated in the proposed rule, given the breadth and increased 
sophistication of the immigration fraud that has been identified in the 
recent past, the Department requires added flexibility to respond to 
potential improprieties in permanent labor certification filings. While 
the Department already has the authority, this Final Rule clarifies

[[Page 27926]]

Sec.  656.31(a) to state the Department may deny any application for 
permanent labor certification which contains false statements, is 
fraudulent, or otherwise was submitted in violation of the permanent 
labor certification program regulations.
    The Department received a variety of comments on the proposed 
amendments to Sec.  656.31. While we carefully considered these 
comments, we have elected to keep the provisions largely as proposed. 
However, in response to comments, the Final Rule amends the debarment 
provisions to clarify the intent requirements (``willful'') and other 
review standards applicable to debarment.
1. When an Employer, Attorney, or Agent Is Involved in Possible Fraud 
or Willful Misrepresentation
    In Sec.  656.31(b), the Final Rule revises what was Sec.  656.31(a) 
in the NPRM and current regulation to clarify that if an employer, 
attorney, or agent connected to a permanent labor certification 
application is involved in either possible fraud or willful 
misrepresentation, the Department may, for up to 180 days, suspend the 
processing of any permanent labor certification application involving 
that employer, attorney, or agent. Thereafter, the Certifying Officer 
may either continue to process some or all of the applications or 
extend the suspension until completion of any investigation and/or 
judicial proceeding.
    ``Possible fraud'' standard--One commenter maintained Sec.  
656.31(b) (Sec.  656.31(a) in the NPRM) proposed a new legal standard 
of ``possible fraud.'' The discovery of ``possible fraud or willful 
misrepresentation'' is not a new legal standard. This basic provision, 
allowing applications to be suspended for a period of time if the 
Department discovers possible fraud or willful misrepresentation 
involving a labor certification, has been in the permanent labor 
certification regulations since 1977 (see 42 FR 3449 (January 18, 
1977)). The Final Rule continues the use of the language ``discovers * 
* * possible fraud or willful misrepresentation.''
    Use of ``knowing'' instead of ``willful''--One commenter suggested 
using ``knowing'' instead of ``willful'' in the phrase ``willful 
misrepresentation'' in Sec.  656.31(b) (proposed as Sec.  656.31(a)). 
The Department should be required to prove, the commenter continued, 
that the employer, attorney, or agent knew the nature of his acts, and 
that he or she knew his acts violated the regulation; and to promote 
fair notice and minimize risk of arbitrary enforcement, there should be 
an opportunity for persons to present an affirmative defense that they 
mistakenly believed their conduct was allowed.
    As always, applicants must remain aware of their responsibilities 
under the permanent labor certification process and of the consequences 
of submitting false or misleading information to a Federal agency. The 
application form makes it clear that the person signing the form is 
certifying, under penalty of perjury, to the accuracy of the 
information contained in the application. No one who signs an 
application should be confused about the capacity in which he or she 
signs it.
    After review of the comments, the Department has decided to retain 
the use of ``willful'' as the more appropriate terminology. Black's Law 
Dictionary provides that a ``[w]illful act may be described as one done 
intentionally, knowingly, and purposely'' [emphasis supplied]. Hence, 
the phrase ``willful misrepresentation'' as used in the permanent labor 
certification program regulations means a person who intentionally and 
knowingly meant to make a misrepresentation.
    Suspension of case processing for 180 days--The Department proposed 
to increase the initial suspension of case processing in Sec.  
656.31(b) (Sec.  656.31(a) in the proposed rule) from 90 to 180 days 
and to allow the suspension of any permanent labor certification 
application involving such employer, attorney, or agent until 
completion of any investigation and/or judicial proceeding. The 
Department also proposed to revise Sec.  656.31(b) and (c) (Sec.  
656.31(a) and (b) in the NPRM)) to clarify the Department may suspend 
processing of any permanent labor certification application if an 
employer, attorney or agent connected to the application is involved in 
either possible fraud or willful misrepresentation or is named in a 
criminal indictment or information related to the permanent labor 
certification program. Virtually all commenters objected to these 
proposals.
    The Department has concluded that, in view of the extensive history 
of fraud in the permanent labor certification program, the need to 
promulgate what are now paragraphs (b) and (c) of Sec.  656.31--
concerning initially suspending applications for 180 days and 
clarifying the Department's authority as to which permanent labor 
certification applications may be suspended--outweighs the concerns 
raised by the commenters. Our responsibility as a government agency to 
cooperate with law enforcement agencies in the investigation and 
prosecution of possible criminal activity supports this position. In 
addition, after due consideration, the Department has concluded the 
proposed provisions extending the suspension period are exempt from the 
notice and comment provision of the Administrative Procedure Act as 
matters of agency practice and procedure and as part of the agency's 
inherent authority to effectuate the labor certification review 
process. See 5 U.S.C. 553(b). Accordingly, this Final Rule includes the 
provisions allowing the Department to suspend, initially for up to 180 
days, the processing of any application relating to an employer, 
attorney, or agent involved in possible fraud or willful 
misrepresentation.
    Terms recommended for deletion and/or considered inappropriate in 
Sec.  656.31(a)--In this Final Rule, the Department has taken the last 
sentence of proposed Sec.  656.31(a) and finalized it as the entirety 
of Sec.  656.31(a), moving the remainder of the proposed text to Sec.  
656.31(b). One commenter took issue with the portion of Sec.  656.31(a) 
which reads: ``A Certifying Officer may deny any application for 
permanent labor certification if the officer finds the application 
contains false statements, is fraudulent, or was otherwise submitted in 
violation of the DOL permanent labor certification regulations.'' This 
commenter recommended the phrases ``false statements'' and ``or was 
otherwise submitted in violation of the regulations'' should be deleted 
from Sec.  656.31(a). According to the commenter, the term ``false 
statements'' should be removed because attorneys, aliens, employers, or 
agents may inadvertently make mistakes on the labor certification 
application about minor details, or omit inconsequential information. 
The commenter believed it improper to equate such ``innocent errors or 
omissions'' with fraud, and insisted the section improperly imposed 
penalties for innocent errors. The phrase ``or was otherwise submitted 
in violation of the regulations,'' according to the commenter, is 
overbroad and simply too vague to be understood or fairly applied. 
Because other sections of the regulations already explain when denial 
is appropriate, the commenter recommended that Sec.  656.31 should only 
focus on fraud and willful misrepresentation.
    The technological enhancements to the PERM system discussed above 
make it difficult to have inadvertent errors or omissions, and those 
few that will be made despite these enhancements may still not rise to 
the level of a false statement. The provision is not designed to impose 
penalties for innocent errors

[[Page 27927]]

not in the control of the submitter but is applicable to any material 
inaccuracy. Although a false statement may not rise to the level of 
fraud, the statement may involve information or a subject matter that 
is material to the application. The phrase ``or was otherwise submitted 
in violation of the regulations'' is in large measure merely a 
restatement of the authority already provided in Sec.  656.24(b)(1) of 
the current permanent labor certification regulations. Section 
656.24(b)(1) provides, in relevant part, that one of the factors the 
Certifying Officer considers in making a determination to either grant 
or deny a certification is whether or not the employer has met the 
requirements of part 656.
    As stated in the NPRM, we have added the above sentence to clarify 
the Department's authority. As a further clarification, the Department 
has removed the last sentence from Sec.  656.31(a) as published in the 
NPRM and has placed it alone as the first paragraph and designated it 
Sec.  656.31(a). The other paragraphs are redesignated accordingly.
2. When an Employer, Attorney, or Agent Is the Subject of a Criminal 
Indictment or Information
    With minor changes from the proposed rule, the Final Rule revises 
Sec.  656.31(c) (Sec.  656.31(b) in the NPRM) to clarify that, if the 
Department learns an employer, attorney, or agent is named in a 
criminal indictment or information in connection with the permanent 
labor certification program, it may suspend the processing of any 
applications related to that employer, attorney, or agent until the 
judicial process is completed. Further, the regulation provides that, 
unless the investigatory or prosecuting agency requests otherwise, the 
Department must provide written notification to the employer of the 
suspension in processing.
    Provision of notice--One commenter objected that, under this 
section as proposed, no notice of an investigation was to be provided 
to the employer, attorney or agent. As noted above, the Final Rule does 
provide for limited notice to employers whose applications are impacted 
by an investigation of an agent or attorney. Our program experience has 
shown that notifying parties under investigation can impede the 
effectiveness and outcome of investigations that are initiated or 
ongoing, and the rule accordingly provides that an investigating or 
prosecuting agency, which is in the best position to judge the adverse 
impact of notice, can request that notification not be made.
    Another commenter recommended that, when providing notice to 
employers not under investigation that processing of their applications 
has been suspended, the notice clarify for the employer receiving the 
notice that it is not under investigation. The Department will provide 
appropriate notice in cooperation with the investigatory and 
prosecuting agencies.
    Notification by employer within 30 days when attorney or agent has 
committed fraud--In the case of a pending application involving a 
finding of fraud or willful misrepresentation by the employer's 
attorney or agent, Sec.  656.31(e)(3) (Sec.  656.31(d)(3) in the NPRM) 
provides that the Department will notify the employer and allow 30 days 
for the employer to notify the Department, in writing, that the 
employer will withdraw the application, designate a new attorney or 
agent, or continue the application without representation. If the 
employer elects to continue representation by the attorney or agent, 
the Department shall suspend processing of affected applications.
    One commenter maintained that 30 days was not a reasonable 
timeframe for notification. The commenter noted the decisions are 
complex, it takes time just to receive DOL's decisions, and time may be 
required to secure second opinions, decide whether to secure other 
representation, and provide the Department with a response.
    We disagree. The 30 days required for notification is the same as 
the time provided for employers to submit requests for reconsideration 
pursuant to Sec.  656.24(g) or review by the BALCA under Sec.  
656.26(a). Such requests for reconsideration or review involve making 
decisions similar to those involved in furnishing the notice required 
under the section now redesignated as Sec.  656.31(e)(3). Like the 
Sec.  656.31(e)(3) notice, the BALCA requests also require complex 
decisions to be made; time elapses between the mailing of the denial 
and its receipt by the employer; second opinions may be sought; a 
request for review must be prepared and submitted; and the employer may 
prepare a detailed brief of the matter. Accordingly, the Department has 
concluded 30 days is sufficient time for the employer to provide the 
notification required by Sec.  656.31(e).
3. Determination of Fraud or Willful Misrepresentation
    As proposed, Sec.  656.31(d) (Sec.  656.31(c) in the NPRM) 
continues to provide the Certifying Officer will decide each 
application on its merits where the employer, attorney, or agent is 
acquitted of wrongdoing or if criminal charges otherwise fail to result 
in a finding of fraud or willful misrepresentation. The Department did 
not receive comments on these provisions and, consequently, is 
implementing the language as noted above in this Final Rule. Where a 
court, DHS, DOS, or another body finds the employer, attorney, or agent 
did commit fraud or willful misrepresentation, redesignated Sec.  
656.31(e), as revised in the Final Rule, provides that any pending 
applications related to the employer, attorney, or agent will be 
decided on their respective merits and may be denied in accordance with 
Sec.  656.24 and Sec.  656.31(a).
4. Debarment Proceedings
    Commenters generally expressed concern that, as proposed, the 
debarment provisions of Sec.  656.31(f)(1) (Sec.  656.31(e)(1) in the 
NPRM) failed to set a materiality standard and, hence, left employers 
and attorneys open to consequences that were inconsistent with the 
individual's intent and disproportionate to the violation's impact or 
importance. With respect to the various grounds for debarment, 
generally, commenters stated concern that the rule would impose a 
severe penalty for relatively minor and likely inadvertent offenses.
    After reviewing the comments, we have modified the proposed rule to 
add in this Final Rule an intent requirement (``willfully''). The Final 
Rule revises the provisions on failure to comply with the terms of the 
form, failure to comply with the audit process, and failure to comply 
with Certifying Officer-ordered supervised recruitment by adding a 
requirement that, for there to be a basis for debarment, there must be 
a pattern or practice of misconduct. As elsewhere in the Final Rule, 
the determination of when debarment is appropriate is made by the 
Administrator, Office of Foreign Labor Certification, a nomenclature 
change from the proposed rule, which named the Chief of the former 
Division.
    Improper or prohibited--One commenter maintained the term 
``improper'' is impermissibly vague in the portion of Sec.  
656.31(f)(1) (Sec.  656.31(e)(1) of the NPRM) that provides for 
debarment from the program based upon any action that was improper or 
prohibited at the time the action occurred. The term improper is a 
broad term and does not necessarily imply illegality or an action that 
was in violation of the permanent labor certification program 
regulations. Accordingly, the Department has removed the term from 
Sec.  656.31(f)(1).
    Time limits to pursue debarment--A commenter maintained most 
punitive laws include a statute of limitations,

[[Page 27928]]

beyond which violations cannot be prosecuted or pursued. Further, 
according to this commenter, statutes of limitations are promulgated 
because evidence and recollections fade with time. Conceivably, DOL 
could pursue debarment 20 years after an application is filed. In this 
connection, the commenter noted the H-1B program imposes a one-year 
time limit to lodge a complaint.
    The Department has concluded it would be appropriate to include a 
provision limiting the time in which to initiate debarment actions 
against employers, attorneys or agents. We considered requiring 
initiation of an investigation any time within the five years the 
employer is required to retain copies of applications for permanent 
employment certification filed with the Department and all supporting 
documentation from the date of filing the labor certification 
application (see Sec.  656.10(f) at 69 FR 77390 (Dec. 27, 2004)), or 
within a reasonable time thereafter. Since investigations can be time 
consuming, we have provided in Sec.  656.31(f)(1) of this Final Rule 
that debarment actions must be formally initiated within six years of 
the original filing date of the labor certification application on 
which the debarment action is based. For purposes of a pattern or 
practice, the statute of limitations will start to run with the last or 
most recent application that demonstrates or constitutes the pattern.
    Mandatory and permanent debarment--One commenter proposed that 
debarment be mandatory rather than permissive. After carefully 
considering this option, the Department has concluded it should retain 
discretion in the administration of the debarment provision. Debarment 
is a serious remedial measure not to be undertaken lightly. Discretion 
is also necessary to administer the debarment provision in the manner 
stated above and in the preamble to the proposed rule at 71 FR 7660 
(Feb. 13, 2006). As a result, we conclude the debarment provision in 
the Final Rule should remain discretionary rather than mandatory.
    The same commenter proposed that repeat offenders should be 
permanently debarred from the program following a second offense. The 
Department has concluded that we should gain operational experience 
with the debarment provision in this Final Rule before considering a 
provision to make debarment permanent following a second or later 
offense. Further, the Department is of the opinion that notice and 
comment rulemaking should be undertaken before promulgating a 
regulation allowing for permanent debarment.
    Requested changes to debarment proceedings--More than one commenter 
maintained debarment proceedings should include the right to 
specifically articulated charges; the right to request a hearing before 
an Administrative Law Judge (ALJ); the ability to present and confront 
witnesses; a transcript; and a stay of debarment upon timely appeal.
    With respect to the request for clearly articulated charges, Sec.  
656.31(f)(2), as redesignated in this Final Rule, has been amended to 
provide that a notice of debarment must include a detailed explanation 
of how the employer, attorney, and/or agent has participated in or 
facilitated one or more of the bases for debarment listed in paragraphs 
(f)(1)(i) through (f)(1)(v) of Sec.  656.31.
    With respect to the right to request a hearing before an ALJ, this 
Final Rule provides, at Sec.  656.26(a)(1), for the right to a review 
by the BALCA upon filing a written request with the Administrator, 
Office of Foreign Labor Certification, within 30 days of the date of 
the debarment. Section 656.27(e) authorizes the BALCA to hold hearings 
governed by the Rules of Practice and Procedure for Administrative 
Hearings before the Office of Administrative Law Judges, found at 29 
CFR part 18, encompassing both the right to present evidence and 
confront witnesses. While historically the ALJs have held very few 
hearings in permanent labor certification cases, we assume the BALCA 
will order hearings in appropriate cases.
    With respect to the ability to present and confront witnesses, the 
procedures outlined in 29 CFR part 18, which govern the Office of 
Administrative Law Judges and apply to the BALCA proceedings, establish 
the right to examine and cross-examine witnesses. 29 CFR 18.34. With 
respect to the right to a transcript, the BALCA procedures already 
provide for a hearing transcript. With respect to the right of a stay 
of debarment upon a timely appeal, the regulation at Sec.  656.26(a) of 
this Final Rule has been amended to provide that debarment is stayed 
upon receipt of the request for review.
5. Debarment of Attorneys and Agents
    Many commenters maintained the Department lacks the statutory 
authority to debar attorneys or agents. They argued, for example, that 
INA section 212(a)(5) relates solely to the admissibility of an alien 
coming to work in the United States and does not grant authority to 
legislate a system of penalties against an employer or its attorney or 
agent. Further, commenters suggested that, because the Congress did not 
explicitly establish debarment authority for the permanent labor 
certification program as it did in the H-1B and H-2A programs, the 
Department has no authority to create debarment mechanisms by this 
rule.
    The Department has considered the comments and has decided to 
retain the proposed remedial measure of debarment for employers, 
attorneys and agents in the Final Rule. There is extensive case law 
establishing that Federal agencies have the authority to determine who 
can practice and participate in administrative proceedings before them. 
The general authority of an agency to prescribe its own rules of 
procedure is sufficient authority for an agency to determine who may 
practice and participate in administrative proceedings before it, even 
in the absence of an express statutory provision authorizing that 
agency to prescribe the qualifications of those individuals or 
entities. Koden v. United States Department of Justice, 546 F.2d 228, 
232-233 (7th Cir. 1977) (citing Goldsmith v. United States Board of Tax 
Appeals, 270 U.S. 117 (1926)). See also Schwebel v. Orrick, 153 F. 
Supp. 701, 704 (D.D.C. 1957) (``The Securities and Exchange Commission 
has implied authority under its general statutory power to make rules 
and regulations necessary for the execution of its functions[,] to 
establish qualifications for the attorneys practicing before it and to 
take disciplinary action against attorneys found guilty of unethical or 
improper professional conduct''). In addition, an agency with the power 
to determine who may practice before it also has the authority to debar 
or discipline such individuals for unprofessional conduct. See Koden, 
564 F. 2d at 233. Further, as the Department has the authority to 
prescribe regulations for the performance of its business (as is the 
case with all executive departments under 5 U.S.C. 301), it likewise 
has the authority to determine who may practice or participate in 
administrative proceedings before it and may debar or discipline those 
individuals engaging in unprofessional conduct. The Department has 
exercised such authority in the past in prescribing the qualifications, 
and procedures for denying the appearance, of attorneys and other 
representatives before the Department's Office of Administrative Law 
Judges under 29 CFR 18.34(g). See also Smiley v. Director, Office of 
Workers' Compensation Programs, 984 F.2d 278, 283 (9th Cir. 1993).

[[Page 27929]]

6. Debarment of Employers
    At the time of the NPRM on the PERM program, some commenters 
recommended enhancing program integrity by establishing suspension and 
debarment procedures for employers that engage in fraudulent labor 
certification activities, prohibited transactions, or otherwise abuse 
the permanent certification process. In the NPRM to this rulemaking, 
the Department proposed establishing debarment procedures as an 
important part of efforts to avoid fraud, enhance and protect program 
integrity, and protect U.S. workers.
    Many comments on the NPRM expressed support for the Department's 
effort to debar from the permanent alien labor certification program 
employers and others who defraud or abuse the system. However, similar 
to comments received on the debarment of attorneys and agents, some 
commenters questioned the Department's authority to debar employers.
    The Department has carefully considered the comments on the 
proposal to debar employers and has determined that the availability of 
suspension of case processing and debarment mechanisms for employers, 
attorneys and agents is necessary to maintain program integrity. 
Therefore, these provisions are included in this Final Rule. The 
suspension and debarment of entities from participating in a Government 
program is an inherent part of an agency's responsibility to maintain 
the integrity of that program. As the Second Circuit found in Janik 
Paving & Construction, Inc. v. Brock, 828 F.2d 84 (2d Cir. 1987), the 
Department possesses an inherent authority to refuse to provide a 
benefit or lift a restriction for an employer that has acted contrary 
to the welfare of U.S. workers. In assessing DOL's authority to debar 
violators, the court found that ``[t]he Secretary may * * * make such 
rules and regulations allowing reasonable variations, tolerances, and 
exemptions to and from any or all provisions * * * as [s]he may find 
necessary and proper in the public interest to prevent injustice or 
undue hardship or to avoid serious impairment of the conduct of 
Government business.'' Id. at 89. In that case, the implied authority 
to debar existed even though the statute in question ``specifically 
provided civil and criminal sanctions for violations of overtime work 
requirements but failed to mention debarment.'' Id. The court held that 
debarment may be necessary to ``effective enforcement of a statute.''
    In order to encourage compliance, the regulatory scheme for PERM 
relies on attestations, audits and, through this Final Rule, the 
remedial measures of suspension and debarment proceedings to assure 
compliance. Use of debarment as a mechanism to encourage compliance has 
been endorsed in the INA for a number of foreign labor certification 
and attestation programs, e.g., the H-1A, H-1B, H-1C, H-2A and D visa 
programs. INA sections 212(m)(2)(E)(iv) and (v), 212(n)(2)(C), 
218(b)(2), and 258(c)(4)(B).
    In those programs, the Congress has chosen to delineate and 
establish limits on the manner in which debarment is imposed. 
Consequently, the H-1A, H-1B, and H-1C programs, under section 
212(m)(2)(E) and (n)(2)(D) of the INA, impose specific penalties on 
employers who willfully make a misrepresentation of a material fact in 
an application. See Immigration Act of 1990, Public Law 101-649, 104 
Stat. 104-4978 (1990); Immigration Nursing Relief Act of 1989, Public 
Law 101-238, 103 Stat. 2099 (1989); Nursing Relief for Disadvantaged 
Areas Act of 1999, Public Law 106-95, 113 Stat. 1312 (1999); and 
Nursing Relief for Disadvantaged Areas Reauthorization Act of 2005, 
Public Law 109-423, 120 Stat. 2900 (2006); see also INA section 258 
(regarding penalties in the program for nonimmigrant maritime 
crewmembers performing longshore work). In each of these programs, 
Congress took for granted the Department's authority to debar, but 
acted to limit or expand that inherent authority to enforce compliance 
in the employment-based immigration programs under the Department's 
jurisdiction. In the case of the H-2A program, the Congress elevated 
existing practice to express statutory status. Immigration Reform and 
Control Act of 1986, Public Law 99-603, 100 Stat. 3359 (1986).
    Beyond DOL's inherent authority to ensure compliance with the 
permanent alien labor certification program, there is an implied grant 
of statutory authority in section 122(b) of the Immigration Act of 
1990, which requires the Secretary to accept reports from the public on 
violations of the terms and conditions of a permanent alien labor 
certification.\4\ By specifically directing DOL to accept such reports, 
the Congress indicated its intent that DOL take action based on that 
information to address reported problems.
---------------------------------------------------------------------------

    \4\ The Secretary of Labor shall provide, in the labor 
certification process under section 212(a)(5)(A) of [the Act] that--
    (2) any person may submit documentary evidence bearing on the 
application for certification (such as information on available 
workers, information on wages and working conditions, and 
information on the employer's failure to meet terms and conditions 
with respect to the employment of alien workers and co-workers). 
[Pub. L. 101-619, sec. 122(b), Nov. 29, 1990, 104 Stat. 4995.]
---------------------------------------------------------------------------

    Ensuring the integrity of a statutory program enacted to protect 
U.S. workers is an important part of the Department's mission. The 
Department was established, ``to foster, promote, and develop the 
welfare of the wage earners of the United States, to improve their 
working conditions, and to advance their opportunities for profitable 
employment [Act of Feb. 14, 1903, Pub. L. 62-426, sec. 1, 37 Stat. 736] 
* * *.'' See also Janik Paving & Construction, Inc. v. Brock, supra.
    In December 2004, DOL changed, by regulation, the operation of the 
permanent labor certification program. Under the current regulation at 
20 CFR part 656, employers may attest to compliance with requirements 
to recruit U.S. workers rather than engaging in all cases in 
supervised, post-filing recruitment. Essential to maintaining the 
integrity of the new, streamlined process is a need to audit 
compliance, already included in the regulations, and a remedial measure 
for continued and serious non-compliance, which is included in this 
Final Rule. A system of attestation and audit, relying heavily on the 
veracity of employer submissions, requires a system for ``effective 
enforcement,'' as described in the Janik Paving holding, supra.
    For the above reasons, the remedial measure of debarment, modified 
as discussed above, is retained in this Final Rule as it applies to 
employers.
7. Provision of False or Inaccurate Information
    Consistent with complaints about the other terms for debarment, 
many commenters expressed concern the rule would impose a severe 
penalty for providing false information that was, all things 
considered, minor, immaterial, or not meaningful. Numerous commenters 
submitted identical comments listing specific circumstances they 
believed could lead to unjustified debarment and unfair punishment of 
attorneys, including: (1) Typographical errors in the application 
regarding the alien's date of birth; (2) an inaccuracy in the foreign 
national's job history due to someone's faulty memory; (3) employer's 
relationship to the alien; or (4) an inadvertent mistake in the number 
of workers or the Federal Employer Identification Number (FEIN). Some 
commenters opined that attorneys should be allowed to rely on 
information provided by clients unless there is a clear indication of 
fraud, and that ``no conduct of any attorney in any

[[Page 27930]]

setting is punishable without the elements of materiality and fraud.''
    Some commenters raised due process concerns. One commenter believed 
that existing mechanisms, e.g., denial of an application or imposition 
of supervised recruitment (but in future filings), were more viable 
options than what the commenter interpreted as indefinite suspension.
    The Department has concluded that Sec.  656.31(f)(1)(ii) (Sec.  
656.31(e)(1)(ii) in the NPRM) should be modified to address the 
commenters' concerns. Accordingly, the term ``willful'' has been added 
to this section so this Final Rule now applies to ``the willful 
provision or willful assistance in the provision of false or inaccurate 
information in applying for permanent labor certification.'' The 
Department wants to make clear it views debarment as an extraordinary 
remedy and does not intend to invoke it except under the most serious 
of circumstances.
    Authority to prohibit false or inaccurate information on an 
Application for Permanent Employment Certification--Commenters further 
argued the Department lacks the authority to regulate the information 
provided on an Application for Permanent Employment Certification. One 
commenter insisted the Department lacked the authority to prohibit an 
employer from providing false information on an application. As stated 
above, the authority given to the Department under the INA to approve 
applications carries with it the authority to regulate the program, 
debar abusers, and prohibit false or inaccurate information.
8. Failure To Comply With the Terms of the Labor Certification 
Application
    Proposed Sec.  656.31(f)(1)(iii) (Sec.  656.31(e)(1)(iii) in the 
NPRM) provided that failure to comply with the terms of the ETA 9089 or 
ETA 750 will be a factor in determining whether to issue a notice of 
debarment. Some commenters argued that such a rule would make the 
attorney the guarantor of the accuracy of the Application for Permanent 
Employment Certification. The Department disagrees. Section 656.3(f)(1) 
provides that a notice of debarment from the permanent labor 
certification program may be provided to an employer, attorney, agent, 
or any combination thereof. As stated in the preamble to the proposed 
rule the Department acknowledges that not all debarment triggers should 
be treated equally and will, therefore, take steps to ensure that any 
debarment is reasonable and proportionate to the improper activity.
    Further, the attorney does not have to sign the application unless 
he or she is the ``preparer'' in Section M of the application. 
Presumably, the attorney will take reasonably prudent steps to apprise 
him or herself of the facts before signing the application. However, to 
allay any fears the regulated community may have concerning the 
Department's possible use of the debarment provision, the Department 
has added the requirement that there must be a pattern or practice with 
respect to failure to comply with the terms of the labor certification 
application (either Form ETA 9089 or Form ETA 750). A similar 
requirement for a pattern or practice has been added to Sec.  
656.31(f)(1)(iv), failure to comply in the audit process, and to Sec.  
656.31(f)(1)(v), failure to comply with the Certifying Officer-ordered 
supervised recruitment process.
    Commenters asserted the provision discussing the failure to comply 
with the terms of the Form ETA 9089 or Form ETA 750 is vague or needs 
further clarification. We disagree. The terms and areas the Department 
is interested in are best represented in the certification sections of 
the two application forms, specifically, Section N, Employer 
Certifications, on the Form ETA 9089, and item 23, Employer 
Certifications, on the Form ETA 750. More detailed information on the 
employer certifications listed on the Form ETA 9089 in Section N of the 
application can be found in Sec.  656.10(c) of the current regulation 
and in the preamble thereto at 69 FR 77389 (Dec. 27, 2004). Detailed 
information on the employer certifications listed in item 23, Form ETA 
750, can be found in the former labor certification regulations at 
Sec.  656.20 (2004), ``General filing instructions'' and in Technical 
Assistance Guide No. 656 Labor Certifications. These resources provide 
ample guidance to the information sought in these sections and no 
further clarification is required.
9. Failure To Comply in the Audit or Supervised Recruitment Process
    Some commenters sought clarification of the provisions at Sec.  
656.31(f)(1)(iv) and (v) (Sec.  656.31(e)(1)(iv) and (v) in the NPRM) 
that failure to comply with the audit and supervised recruitment 
processes may be a factor in issuing a debarment. Section 
656.31(f)(1)(iv) and (v) will not normally apply to applications 
submitted under the former permanent labor certification regulations 
(20 CFR part 656 (2004)), because audit and supervised recruitment are 
not procedures currently in place under the backlog program. The 
Department has determined that these debarment provisions are 
appropriate to apply to conduct under the streamlined PERM processes 
because that system depends on ensuring employers furnish the required 
documentation within the required timeframes, as required by Sec. Sec.  
656.20 and 656.21 (69 FR 77396 (Dec. 27, 2004)). Further, a repeated 
failure to comply with core program requirements signals not only 
disregard for the process, but an intentional abuse of valuable, 
limited administrative resources, a practice the Department cannot 
tolerate.
    Some commenters provided scenarios in which an employer might fail 
to comply with audit or supervised recruitment requirements because the 
employer no longer wishes to go forward with the application, for 
example: (1) The employer has terminated the alien and, therefore, does 
not wish to respond to the audit request; (2) after an employer is 
requested to engage in supervised recruitment, its human resources 
office decides to terminate the application process; or (3) the 
employer decides to terminate the process after an audit when the 
employee resigns.
    These comments do not warrant removal from this Final Rule of the 
(f)(1)(iv) and (f)(1)(v) bases for debarment. We recognize that there 
are legitimate reasons for terminating an application during the audit 
or supervised recruitment processes and do not intend that these 
reasons should provide a basis for debarment.\5\ There are, however, 
cases in which the persistent failure to cooperate in the audit or 
supervised recruitment processes is evidence of an intent to avoid the 
discovery of serious violations of the regulations. Thus, the fact 
patterns these commenters cite must be considered individually as they 
arise. The existence of legitimate reasons to discontinue an 
application does not

[[Page 27931]]

moot the need for these debarment provisions.
---------------------------------------------------------------------------

    \5\ The Department reminds users of the labor certification 
program of the importance of the audit process to maintaining the 
integrity of PERM. As the Department stated in the 2004 preamble to 
the Final Permanent Labor Certification Regulation, we will 
``minimize'' the impact of non-meritorious applications by adjusting 
the audit mechanism in the new system as needed. We have the 
authority under the regulations to increase the number of random 
audits or change the criteria for targeted audits. As we gain 
program experience, we will adjust the audit mechanism as necessary 
to maintain program integrity. We note that under Sec.  656.21(a), 
the Certifying Officer has the authority to order supervised 
recruitment ``when he or she determines it to be appropriate.'' 69 
FR 77329 (Dec. 27, 2004). It should also be noted that Sec.  
656.10(f) requires employers to maintain copies of applications and 
supporting documentation for up to five years from the date of the 
submission of the application.
---------------------------------------------------------------------------

F. Other Objections and Comments

    Investigation of past substitution cases--Another commenter 
suggested that DOL investigate all past substitution cases with the 
help of USCIS. DOL does not have primary responsibility for 
investigation of past substitutions that were made after certification. 
The Department has participated in investigations and criminal 
prosecutions in appropriate cases involving substitution, and we will 
continue to work with DHS, DOL OIG, and DOJ when there are indications 
of possible fraud.
    Adequacy of current fraud safeguards--According to one commenter, 
the PERM system's vulnerability to fraud provides insufficient 
justification for DOL's proposals as articulated in the proposed rule. 
A certain amount of fraud should be tolerated, the commenter insisted, 
citing Medicare, credit card systems, and the entire tax system as 
processes in which some level of fraud is simply accepted by society. 
This commenter invited DOL to ignore the PERM system's vulnerability to 
fraud as the price to be paid for offering what the commenter 
characterized as a ``benefit'' to all. Having acknowledged fraud 
exists, the commenter next pointed to the design of the PERM system 
itself as containing built-in fraud protection mechanisms. As examples, 
the commenter cited built-in safeguards to detect fraud prior to filing 
such as: Initial establishment of the PERM account; verification of 
employer's existence; establishment of PINs; and limiting changes to 
accounts and sub-accounts. Finally, the commenter viewed Federal 
prosecutions as significant in preventing fraud or abuse.
    The Department declines the commenter's suggestion to simply 
acquiesce in a certain amount of fraud by those seeking certification. 
No regulatory scheme can eliminate all possibilities of fraud, but, as 
a matter of good government, the Department must make every reasonable 
effort to eliminate fraud. DOL takes its role and its statutory 
authority under the INA quite seriously and will continue to look for 
ways to eliminate fraud and the enticements to fraud in the permanent 
labor certification system. This Final Rule's elimination of 
substitution and of indefinite certification validity bolster fraud 
protection and reduce incentives and opportunities to commit fraud. The 
need to protect the system from fraud and eliminate vulnerabilities is 
clearly within DOL's authority and furthers the INA's statutory 
purpose.
    While fraud cases arising under the new PERM system were not 
described in the NPRM, this should not be taken as proof that fraud is 
not occurring under the system. The system is new and has not had the 
full opportunity for investigation and prosecution as has occurred 
under the previous regulation. In fact, the Department is aware of and 
has referred cases of possible fraud for investigation under the new 
PERM system. Further, we disagree that the issue of fraud in the 
permanent labor certification program lies solely in the Backlog 
Processing Centers or that the fraud detection examples provided by the 
Department indicate we are asserting that fraud cannot or will not 
occur under the new re-engineered PERM program. We disagree that not 
providing anecdotal evidence of fraud under the new PERM program is 
proof that no fraud is being conducted by some employers, agents or 
attorneys.
    PERM introduced many important safeguards that will help deter and 
detect fraud. However, these protections are insufficient to eliminate 
the incidence and incentives for fraud in the permanent labor 
certification program. The existence of some anti-fraud measures does 
not preclude the agency from initiating and establishing additional 
fraud detection and avoidance mechanisms, particularly when considering 
the value of such mechanisms against their relatively small costs. Our 
Federal partner agencies have demonstrated through investigations and 
prosecutions that the level of fraud today is far more advanced and 
sophisticated than it was 10 years ago and that it continues to evolve 
and become even more sophisticated. It is incumbent upon the Department 
to remain aware of these trends and to strengthen the program to 
withstand the changing nature of fraud being committed against it. 
Because the Department has direct experience with how fraudulent 
behavior within the permanent labor certification process is pervasive 
throughout the process and detrimental to the purpose and intent of the 
process, we can assess what systems and/or procedures are adequately 
detecting fraud and where improvements are needed.
    Many commenters stated that because we currently possess the 
authority to invalidate an application for labor certification up to 
five years after it has been certified, we already have sufficient 
safeguards in the permanent labor certification program. We 
respectfully disagree. The invalidation of an application is what 
happens to an application once the Department has detected fraud and 
found the employer, agent or attorney willfully engaged in such 
fraudulent behavior. It remedies a particular instance of fraud, but it 
does not, in and of itself, deter or prevent the increasing fraud 
occurring in the program.
    For the reasons stated throughout this preamble, the measures 
instituted by this Final Rule--eliminating substitution, limiting the 
validity period of a permanent labor certification, prohibiting sale of 
labor certifications, prohibiting employers from recouping recruitment 
costs and attorney fees from aliens, and prohibiting violators from 
using the permanent labor certification program--will deter and redress 
fraud and abuse in the permanent labor certification program. For the 
same reasons, the rule also clarifies the Department's authority to 
deny an Application for Permanent Employment Certification when we find 
an employer, agent or attorney has provided false information to us.

G. Comments Outside the Scope of the Rule

    The Department received a number of comments not directly related 
to the issues raised by the NPRM. These comments generally addressed 
the following topic areas:
     Lack of consistency between agencies, especially related 
to the need for labor certifications in light of USCIS policies 
limiting the availability of National Interest Waivers when the need 
for the individual stems from a labor shortage.
     Suggestions of other measures the Department should 
consider related to the permanent labor certification program, 
including conducting more investigations of suspected fraud, 
eliminating the authority of agents to represent employers or aliens in 
labor certification cases, fixing problems in the PERM software, and 
revising current requirements for advertising.
     Descriptions of personal experiences with the immigration 
process generally provided as examples of fraud and abuse.
     Comments concerning delays in the processing centers and, 
specifically, delays resulting from the audit process.
    We do not respond here to these issues individually, as they fall 
outside the scope of this rulemaking.

H. Other Amendments

    In addition to the specific revisions described above, the 
Department has made other minor, technical, and editorial changes to 
the regulatory text, as appropriate.

[[Page 27932]]

IV. Required Administrative Information

A. Regulatory Flexibility Act

    In crafting this Final Rule and reviewing public comments, the 
Department conferred with the Office of the Chief Counsel for Advocacy, 
Small Business Administration (SBA), as required by the Regulatory 
Flexibility Act (RFA), 5 U.S.C. 609(b). This impact analysis reflects 
those consultations and generally incorporates the Chief Counsel's 
comments. Based on the analysis detailed below, the Department submits 
that this Final Rule will not have a significant economic impact on a 
substantial number of small entities.
    In this rule, the Department takes measures to enhance program 
integrity and reduce the incentives and opportunities for fraud and 
abuse in the permanent employment of aliens in the United States. The 
rule's limitations on the acquisition and use of permanent labor 
certification applications and permanent labor certifications will have 
an economic effect on only those employers seeking DOL certification to 
hire foreign workers for permanent positions. The prohibition against 
substitution on the employer's permanent labor certification 
application and the validity period of 180 days on approved 
certifications each trigger a retest of the labor market (when original 
alien becomes unavailable a certification expires) to ensure that no 
U.S. workers are qualified and available to fill the job opportunity, 
carrying with it an economic cost. Employers' compliance with the 
procedures set forth in the Final Rule will not require completion of 
additional preprinted forms or the collection of information beyond 
that already required by Form ETA 9089, Application for Permanent 
Employment Certification.
    In Program Year (PY) 2005 (July 1, 2005--June 30, 2006), the 
Department received approximately 115,952 applications from employers 
seeking labor certification under the PERM program. Because the Final 
Rule would also impact permanent labor certification applications being 
processed and certifications issued through ETA's Backlog Processing 
Centers, the Department also included in its analysis 176,496 
backlogged applications in process as of September 7, 2006.\6\
---------------------------------------------------------------------------

    \6\ Reserved.
---------------------------------------------------------------------------

    To conduct its analysis, the Department looked to the major 
industries that PERM program data showed had applied for permanent 
labor certification in PY 2005, then applied a similar distribution 
(same industries and general percentages) to applications currently 
being processed through the Backlog Processing Centers.
    Although some, but not all, employers will file multiple 
applications with the Department in a given year, the Department's 
analysis treated each application as a separate economic impact on the 
employer and, consequently, the estimated impacts of the Final Rule may 
be overstated. Based on anecdotal evidence, and in the absence of 
precise historical data to accurately track substitution requests, the 
analysis also assumed that 10 percent of all employer applications will 
request substitution of the alien on the permanent labor certification 
application prior to implementation of this Final Rule, even though the 
historical practice of alien substitution by employers participating in 
the Department's permanent labor certification process is far less. The 
analysis does not attempt to quantify lost productivity costs employers 
could potentially incur after the loss of an alien worker for whom a 
permanent labor certification application has been filed and for whom 
substitution is no longer permitted. In the Department's experience, 
such costs are believed to be negligible, since the overwhelming 
majority of applications filed are for nonimmigrants already working in 
the United States and in the position that is the subject of the 
application.
    Under the Small Business Administration Act, a small business is 
one that is ``independently owned and operated and which is not 
dominant in its field of operation.'' The definition of small business 
varies from industry to industry to the extent necessary to properly 
reflect industry size differences.
    The Department conducted its size standard analysis based on 13 CFR 
part 121, which describes the SBA's size standards for businesses in 
various industries. To group employers by size, the Department relied 
on information submitted by each employer on the permanent labor 
certification application, which provides data on the total number of 
employees in the area of intended employment for each application. 
Because the Department does not collect information with respect to the 
annual receipts of employers, it used the average employment level of 
firms in each industry that predominates in the permanent labor 
certification program as the size standard for small businesses in each 
of those industries.
    To estimate the cost of the Final Rule on small businesses, the 
Department calculated each employer would likely pay in the range of 
$300 to $1,500 to meet the advertising and recruitment requirements for 
a job opportunity, and take one hour to prepare the recruitment report 
required for each application. The cost range for advertising and 
recruitment is taken from a recent (September 2006) sample of 
newspapers in various urban and rural U.S. cities, and reflects 
approximate costs for placing two 10-line advertisements in those 
newspapers. The cost to prepare the recruitment report is based on the 
median hourly wage rate for a Human Resources Manager ($36.52), as 
published by the U.S. Department of Labor's Occupational Information 
Network, O*Net OnLine, and increased by a factor of 1.42 to account for 
employee benefits and other compensation.\7\
---------------------------------------------------------------------------

    \7\ The O*Net OnLine summary information on Human Resources 
Manager positions may be found at http://online.onetcenter.org/link/summary/11-3040.00
.

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    The Department determined the following industries predominate in 
the permanent labor certification program: (1) Professional, 
Scientific, and Technical Services; (2) Manufacturing; (3) 
Accommodation and Food Services; (4) Healthcare and Social Assistance; 
(5) Educational Services; and (6) Construction. The Department has 
reviewed the data from each of these industries as described below to 
determine there is no significant impact on small businesses.
    The U.S. Census Bureau's 2002 Economic Census reported that 
approximately 602,578 employer establishments were operating year-round 
in the Professional, Scientific, and Technical Services Industry, and 
96.7 percent of those employed less than 50 employees. In PY 2005, 
13,286 PERM applications were filed with the Department by employers 
who indicated they employed less than 50 workers in the area of 
intended employment for positions in this industry. We estimate 
approximately 20,223 of the backlogged applications currently in 
process were submitted by similarly sized employers in this industry 
sector. Assuming employers will attempt to substitute the alien on 10 
percent of applications filed with the Department, we estimate the 
annual number of employer applications in this industry that may be 
impacted by the Final Rule is 3,351 at a cost range of $1,346,597 to 
$5,200,161.
    The U.S. Census Bureau's 2002 Economic Census reported that

[[Page 27933]]

approximately 350,828 employer establishments were operating in the 
Manufacturing Industry, and 98.9 percent of those employed less than 
500 employees. In PY 2005, 9,342 PERM applications were filed with the 
Department by employers who indicated they employed less than 500 
workers in the area of intended employment for positions in this 
industry. We estimate approximately 14,220 of the backlogged 
applications currently in process were submitted by similarly sized 
employers in this industry sector. Assuming employers will attempt to 
substitute the alien on 10 percent of applications filed with the 
Department, we estimate the annual number of employer applications in 
this industry that may be impacted by the Final Rule is 2,356 at a cost 
range of $946,855 to $3,656,473.
    The U.S. Census Bureau's 2002 Economic Census reported that 
approximately 456,856 employer establishments were operating year-round 
in the Accommodation and Food Services Industry, and 90.8 percent of 
those employed less than 50 employees. In PY 2005, 7,478 PERM 
applications were filed with the Department by employers who indicated 
they employed less than 50 workers in the area of intended employment 
for positions in this industry. We estimate approximately 11,383 of the 
backlogged applications currently in process were submitted by 
similarly sized employers in this industry sector. Assuming employers 
will attempt to substitute the alien on 10 percent of applications 
filed with the Department, we estimate the annual number of employer 
applications in this industry that may be impacted by the Final Rule is 
1,886 at a cost range of $757,930 to $2,926,901.
    The U.S. Census Bureau's 2002 Economic Census reported that 
approximately 619,517 employer establishments were operating year-round 
in the Healthcare and Social Assistance Industry, and 93 percent of 
those employed less than 50 employees. In PY 2005, 4,216 PERM 
applications were filed with the Department by employers who indicated 
they employed less than 50 workers in the area of intended employment 
for positions in this industry. We estimate approximately 6,417 of the 
backlogged applications currently in process were submitted by 
similarly sized employers in this industry sector. Assuming employers 
will attempt to substitute the alien on 10 percent of applications 
filed with the Department, we estimate the annual number of employer 
applications in this industry that may be impacted by the Final Rule is 
1,063 at a cost range of $427,311 to $1,650,149.
    The U.S. Census Bureau's 2002 Economic Census reported that 
approximately 38,293 employer establishments were operating year-round 
in the Educational Services Industry, and 98.9 percent of those 
employed less than 100 employees. In PY 2005, 1,336 PERM applications 
were filed with the Department by employers who indicated they employed 
less than 100 workers in the area of intended employment for positions 
in this industry. We estimate approximately 2,034 of the backlogged 
applications currently in process were submitted by similarly sized 
employers in this industry sector. Assuming employers will attempt to 
substitute the alien on 10 percent of applications filed with the 
Department, we estimate the annual number of employer applications in 
this industry that may be impacted by the Final Rule is 337 at a cost 
range of $135,410 to $522,912.
    The U.S. Census Bureau's 2002 Economic Census reported that 
approximately 710,307 employer establishments were operating in the 
Construction Industry, and 99.9 percent of those employed less than 500 
employees. In PY 2005 PERM, 5,579 PERM applications were filed with the 
Department by employers who indicated they employed less than 500 
workers in the area of intended employment for positions in this 
industry. We estimate approximately 8,492 of the backlogged 
applications currently in process were submitted by similarly sized 
employers in this industry sector. Assuming employers will attempt to 
substitute the alien on 10 percent of applications filed with the 
Department, we estimate the annual number of employer applications in 
this industry that may be impacted by the Final Rule is 1,407 at a cost 
range of $565,457 to $2,183,629.
    Several commenters maintained the rule would have a significant 
impact on a substantial number of small entities. One commenter 
challenged the analysis used by the Department to support its statement 
that the rule's impact on small business will be immaterial. The 
commenter maintained that although less than one percent of all small 
businesses would be affected, the appropriate universe to consider 
would consist only of those small businesses that wish to hire a 
foreign worker using the labor certification process. According to the 
commenter, the rule would not affect those businesses that do not 
submit applications. The commenter also suggested other measures of 
materiality, including: (1) Comparing the number of small businesses 
that have applied under the PERM and prior programs to the total number 
of businesses that have applied under those programs; and (2) comparing 
the number of labor certification applications filed by small 
businesses to the number filed by all businesses.
    Several commenters focused on the impact on small businesses of the 
prohibitions on substitution and reimbursement as a subset of the costs 
incurred by small businesses in successfully obtaining labor 
certifications. One commenter described the steps employers take when 
submitting labor certification applications, including verifying the 
job skills and cultural fit of the worker, conducting labor market 
tests, and determining future needs based on demand. Another commenter 
described the requirement to advertise positions in print, along with 
other recruiting activities. One commenter estimated the cost for each 
application was approximately $10,000, based on informal conversations 
with others. The same commenter said the costs for applications were at 
least $1,000 each. Commenters claimed the costs to small businesses 
were substantial.
    As described above, the Department's analysis focused only on those 
small businesses that filed or are likely to file applications for 
permanent labor certification, and accounts for costs of advertising 
and related recruitment activities. As stated in the section of the 
preamble addressing substitution, these are not costs unanticipated by 
the statute. Also, the Form ETA 9089 may be filed electronically and 
does not require a filing fee. The Department's analysis does not 
estimate reimbursement amounts, as the Department has always assumed an 
employer is not entitled to reimbursement; as explained in the section 
governing payments, above, the costs of labor certification are 
generally the employer's, and this rule simply codifies that 
responsibility. Our analysis leads us to conclude this rule's economic 
impact will not be significant.

B. Unfunded Mandates Reform Act of 1995

    This Final Rule will not result in the expenditure by state, local, 
and tribal governments, in the aggregate, or by the private sector, of 
$100 million or more in any one year, and it will not significantly or 
uniquely affect small governments. Therefore, no action is necessary 
under the provisions of the Unfunded Mandates Reform Act of 1995.

[[Page 27934]]

    One commenter stated this rule would amount to an unfunded mandate 
because it would be difficult to enforce and would require ETA to 
employ a large police force to monitor compliance. The Department 
disagrees with this comment. We do not anticipate significant 
additional costs to State, local, or tribal governments as a result of 
this rule. Although we do not speak here to any budgetary implications 
of the rule, additional costs, if any, to ETA as a result of this 
regulation are strictly Federal and attendant to the Department's 
responsibility in administering the permanent labor certification 
program. The Unfunded Mandates Reform Act does not cover costs to 
Federal agencies.

C. Executive Order 12866

    This Final Rule has been drafted and reviewed in accordance with 
Executive Order 12866, section 1(b), Principles of Regulation. The 
Department has determined, based on its benefit-cost analysis \8\ of 
the key provisions of the regulation, that the rule is not an 
``economically significant'' regulatory action within the meaning of 
section 3(f)(1) of the Executive Order. This rule will not have an 
annual effect on the economy of $100 million or more, nor will it 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities. We estimate the Final Rule's quantified benefits to be 
$64.3 million per year and the quantified costs to be $39.8 million per 
year. The Department made every effort, where feasible, to quantify and 
monetize the benefits and costs of this Final Rule. Where we could not 
quantify them--for example, due to data limitations--we described 
benefits and costs qualitatively. In such cases, the Department has 
provided a comprehensive qualitative discussion of the impacts of the 
rule. Finally, the Department has concluded, after consideration of 
both the quantitative and qualitative impacts of the rulemaking, that 
the benefits of the rule justify the costs.
---------------------------------------------------------------------------

    \8\ The Department's analysis followed the guidelines provided 
by the Office of Management and Budget (OMB) in Circular A-4. This 
circular constitutes OMB's guidance to Federal agencies governing 
regulatory analysis pursuant to Executive Order 12866 and other 
statutes and authorities. It is available online at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf
.

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    Overall, the analysis estimated the benefits and costs associated 
with the Final Rule compared to the baseline, that is, the permanent 
labor certification application process before implementation of the 
rule. For a proper evaluation of the benefits and costs of the rule and 
its alternatives, we explain how the actions the rule requires of 
workers, employers, government agencies, and others are linked to the 
expected benefits. We also identify expected undesirable side effects 
of the Final Rule and the alternatives considered.
    Following OMB Circular A-4, this analysis focuses primarily on 
benefits and costs that accrue to citizens and permanent residents of 
the United States; it does not factor in benefits and costs to aliens 
who, for example, may be named on labor certification applications but 
are not yet U.S. citizens or lawful permanent residents. As explained 
in greater detail below, to the extent this Final Rule's economic costs 
or benefits are affected by the existence of foreign workers who are 
already here in the United States and part of the economy, the analysis 
considers those costs or benefits to be transfers between U.S. and 
foreign workers and not measurably impacting the rule's net economic 
impact.
    In most cases, this benefit-cost analysis covers 10 years to ensure 
it captures all major benefits and costs with respect to key entities 
and programmatic activities. For purposes of this analysis, the 10-year 
period starts in the next fiscal year on October 1, 2007. The analysis 
does not include permanent labor certification applications filed under 
the regulation in effect prior to March 28, 2005 and pending at the 
Department's Backlog Processing Centers. As stated above, we expect to 
eliminate the backlog by September 30, 2007. In the unlikely even that 
the Department does not completely eliminate the backlog by September 
30, 2007, the costs of the rulemaking may be slightly underestimated.
    With respect to immigrant worker petitions currently pending and 
open to substitution at the Department of Homeland Security, the 
analysis assumes a one-time impact (rather than recurring impact over 
10 years) until those applications are adjudicated. As this preamble 
states earlier in response to commenter concerns about application of 
the rule to pending applications, program users have had sufficient 
notice of the Department's intent to eliminate the practice of 
substitution; therefore, we believe that employers have had the 
opportunity to act on any substitution requests they know to be 
required but remain outstanding and not yet submitted to DOL or DHS,\9\ 
thus minimizing or eliminating impact of the prohibition on those 
employers for purposes of those applications.\10\ Nonetheless, in 
acknowledgment of the multi-agency process required for employment-
based immigration, the analysis makes a good faith attempt to quantify 
the most salient (potential) costs and benefits to employers with 
substitutable petitions currently pending at DHS, regardless of when 
filed. For purposes of a cost estimate, this analysis assumes that any 
employer who may find itself in need of substitution after the 
prohibition is in place could, in order to fill the vacancy, incur 
certain additional costs not required if substitution were still an 
option.
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    \9\ This Final Rule's prohibition on substitution does not cover 
substitution requests submitted by the rule's effective date. 
Separately, the rule establishes a 180-day validity period for labor 
certifications not filed with DHS. Although we anticipate there are 
employers who--prior to the effective date of the rule--may either 
request substitutions they already know to be required or seek to 
file old but unused labor certifications in support of I-140 
petitions with DHS, this analysis does not quantify the number of 
employers or labor certifications in these categories. There is 
simply no information from which to draw conclusions, and any such 
estimate would be at best speculative.
    \10\ This analysis assumes one substitution over the life of a 
labor certification application.
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    Because up-front, one-time costs associated with reading and 
understanding the Final Rule would not result in significant costs to 
employers or government agencies, we did not include them in our 
analysis. In addition, we assumed that annual costs would be the same 
each year. Following OMB guidance, we used discount rates of seven 
percent and three percent.
    The Department separately analyzed the benefits and costs of the 
major provisions of the Final Rule. The Department's analysis 
(elimination of substitution, establishment of a validity period, etc.) 
and response to public comments are set forth below. The size of the 
net benefits, the absolute difference between the projected benefits 
and costs, indicates whether one policy is more efficient than another. 
We estimated that total 10-year discounted quantified and monetized 
benefits range from $445.0 to $540.4 million and the total 10-year 
discounted quantified and monetized cost ranges from $279.5 to $339.4 
million for a net present value of the benefits of $165.5 to $201.0 
million.
1. Employer Costs and Burden Generally
    Some commenters maintained the proposed rule is a ``significant'' 
regulatory action within the meaning of Executive Order 12866 for 
several reasons, including its overall cost to

[[Page 27935]]

employers and its potential impact on the U.S. economy. These 
commenters based their concerns on the process they say employers 
generally undertake in successfully applying for a certification and 
their estimate of costs incurred by employers in pursuing those 
applications. One commenter pointed out the certification application 
is only one of several steps in hiring a foreign worker. In addition, 
according to the commenter, the employer must verify the job skills and 
cultural fit of the worker, conduct a labor market test, and determine 
its hiring and training needs based on demand. Another commenter made 
similar points, noting that it engages in required print advertising 
and other recruiting activities at a cost of more than $200,000 
annually. It also reviews resumes, interviews candidates, and engages 
legal counsel to assist in preparing and reviewing materials required 
for the application. Although none of the commenters provided detailed 
figures for each of their activities, at least one commenter estimated, 
based largely on feedback it states it received from other companies, 
that the cost for each application was approximately $10,000.
    Several commenters made broad observations related to the general 
burdens that the proposed rule would impose. One commenter stated the 
proposed rule is burdensome because the labor certification process 
itself has numerous requirements and is difficult to understand. Two 
other commenters argued the proposed rule is likely to curb business 
growth, inhibit job creation, and encourage employers to move jobs and 
operations offshore. Another commenter stated its concern that the rule 
would punish nonprofit research institutions due to the costs of 
compliance. One commenter suggested the rule could result in a 
reduction of foreign workers, which in itself would have an impact on 
the economy because foreign workers themselves create demand in the 
economy for housing, food and other essentials. Finally, one commenter 
protested that the rule will impose significant additional costs on the 
many employers who are honest in their acquisition and use of 
certifications, based on the misdeeds of a small number of employers 
who have abused the process.
    The Department agrees with the commenters that this rule is a 
significant regulatory action under EO 12866, and has been submitted to 
OMB for review. While the commenters express general concern over 
possible harm to employers, however, they failed to articulate how the 
rule itself will adversely affect the economy in a material way within 
the meaning of Executive Order 12866. Moreover, the commenters made 
little effort to explain how costs associated with the rule could 
result in an annual effect on the economy of $100 million or more. 
Instead, the commenters took issue with the individual, activity-based 
costs and economic impact of the labor certification process itself.
    The Department readily acknowledges that employers incur various 
costs associated with the decision to hire alien workers. The labor 
certification process, by its very nature, imposes costs to employers 
to establish, to the Secretary of Labor's satisfaction, the 
unavailability of and no adverse impact on U.S. workers. Since the 
costs are standard to the labor certification process, we do not 
consider these costs as incremental to the rulemaking.
    Further, as detailed in each of the sections below, the 
Department's analysis reveals the Final Rule's quantified and monetized 
benefits outweigh costs, and will impose no significant economic impact 
or material adverse effect within the meaning of Section 3(f)(1) of 
Executive Order 12866.
2. Ban on Alien Substitution
    Before this Final Rule takes effect, employers may substitute a 
different alien on a permanent labor certification application if the 
original alien named on the certification application is no longer 
available. Under the Final Rule, employers may not substitute the alien 
named on the application. Separately, the rule prohibits employers from 
amending any information on the application once it is submitted to the 
Department. If an alien is no longer available for the job described on 
the application, an employer must conduct a new labor market test, and 
if this test indicates no qualified U.S. workers are available and the 
only qualified worker is an alien, then the employer must submit a new 
permanent labor certification application.
    We estimate the 10-year discounted quantified and monetized 
benefits associated with this provision of the Final Rule will be 
between $177.4 and $215.5 million, and total quantified and monetized 
costs will be between $147.0 and $178.6 million. Thus, the quantified 
benefits exceed the quantified costs, and the net present value over a 
10-year time horizon will range from $30.4 to $36.9 million.

Benefits

    The ban on alien substitution has several important benefits to 
society: improved program integrity, increased employment opportunities 
for U.S. workers, cost-savings to employers in the form of reduced 
staff time and incidental costs, cost savings to State governments in 
the form of reduced unemployment insurance benefits, and cost savings 
to the Federal Government in the form of reduced staff time resulting 
from a reduction in processing substitution requests.
    The current practice of allowing substitution of alien 
beneficiaries provides a strong incentive for the filing of fraudulent 
labor certification applications. If substitution is permitted, 
permanent labor certification applications or resulting certifications 
can be marketed to aliens who are willing to pay a considerable sum of 
money to be substituted for the named aliens on the applications or 
certifications. The substitution ban increases program integrity by 
reducing the incentives or opportunities for fraud through the lawful 
permanent resident process. Due to a lack of adequate data, however, we 
were not able to quantify or monetize this important benefit.
    Banning substitution will deter unscrupulous employers, attorneys, 
or agents from filing permanent labor certification applications simply 
to sell them later for profit, and reduce the number of fraudulent 
applications received by the Department. We estimate the cost savings 
achieved from recovery of processing resources by multiplying the 
number of fraudulent substitutions (assume a subset of the total number 
of substitution requests received) by the average number of hours spent 
by our staff on each fraudulent substitution, by the average 
compensation of our staff reviewing fraudulent substitutions. We 
estimate the annual cost saving to the Department at $2.8 million per 
year.\11\ This analysis captures savings specifically linked to 
applications we estimate involve fraudulent substitutions, rather than 
all fraudulent applications (that is, applications employing fraud, 
regardless of type).
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    \11\ As described above, the Department estimated the annual 
number of substitutions to be approximately 11,595 and estimated 
that 10 percent of these substitutions are fraudulent. Average DOL 
staff time per fraudulent substitution is estimated at 40 hours and 
their average hourly salary (staff with pay grade GS 14, step 5) is 
$42.24, which was increased by 1.42 to account for employee 
benefits.
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    An important purpose of the substitution ban is to ensure that if 
an alien is no longer available, the employer will conduct a new labor 
market test to determine whether a suitable U.S. worker is available. 
Since labor market dynamics can change in a matter of months, it is 
possible that

[[Page 27936]]

when the alien on a permanent labor certification is no longer 
available, and the employer conducts new recruiting efforts, qualified 
U.S. workers will be identified. Some U.S. workers hired would have 
otherwise remained unemployed.
    Without the ban on substitution and required labor market test, the 
employer may not be aware that U.S. workers became available since 
their original test of the labor market, and may have otherwise hired 
an alien.\12\ Therefore, the second labor market test required by the 
Final Rule should result in increased employment opportunities for U.S. 
workers. We estimate the monetary value of this benefit by examining 
the compensation earned by U.S. workers that would not have otherwise 
been hired. To estimate this benefit, we accounted for the number of 
U.S. workers that would be favored by requiring employers to conduct 
new labor market tests and the compensation of these workers, which 
includes both their salaries and benefits, and reflects the decrease in 
time that those workers would have stayed unemployed. We estimate this 
benefit to be $21.3 million per year.\13\
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    \12\ For purposes of this analysis, the Department assumed that 
U.S. workers favored by the new labor market tests were unemployed. 
However, a benefit to U.S. workers could still exist even if these 
workers were employed elsewhere: their departure from their old jobs 
would open up new employment opportunities for other U.S. workers 
and potentially result in higher wages being earned.
    \13\ The Department estimated that of the 115,952 PERM 
applications filed between July 1, 2005 and June 30, 2006, 10 
percent requested a substitution. This is also the Department's 
estimate of percentage of substitution requests in cases filed under 
the preceding regulations. This analysis estimates 15 percent of 
labor market tests favor U.S. workers. The average annual wage on 
permanent labor certifications applications in the PERM database is 
$69,000 per year. The average wage was increased by 1.42 to account 
for employee benefits (source: Bureau of Labor Statistics). DOL 
assumed that workers would have been unemployed for an additional 
1.5 months. There may be some portion of these jobs filled by U.S. 
workers already employed. For these employees the range of benefits 
may, as a result of their being employed when taking the new 
opportunity, be less than the full salary and benefits accounted for 
in this range found in this analysis. This analysis does not 
quantify that lesser amount.
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    The analysis assumes the U.S. workers hired who were previously 
unemployed will no longer be required to seek unemployment insurance 
benefits. Therefore, other things being constant, as an added benefit 
we estimate the states will experience a reduction in unemployment 
insurance expenditures as a consequence of U.S. workers being hired 
after labor market tests are conducted. The Department, however, was 
not able to quantify this important benefit for lack of adequate data.
    Further, because the employer would have otherwise hired an alien 
if it had not conducted the labor market test, the employer will 
experience cost savings by not continuing with the permanent labor 
certification application process. We estimate this cost savings by 
calculating the monetary value of the decrease in employer staff time 
for preparing, filing, and tracking labor certification applications; 
preparing and maintaining the recruitment report and submitting the 
recruitment report (to comply with an audit, where requested). We 
estimate this cost savings by multiplying the staff time required to 
conduct such activities by the staff compensation, by the number of 
U.S. workers hired as a result of labor market tests. It is important 
to note that this cost savings to employers partially offsets the costs 
of compliance to employers discussed below. The cost of compliance to 
employers outweighs this partial cost-savings. We also account for the 
incidental costs (such as delivery, copying, and telephone charges) 
incurred by employers. We estimate the annual cost savings to employers 
to be $1.2 million.\14\
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    \14\ The Department estimated that employers spend 10 staff 
hours on average preparing, filing, and tracking the labor 
certifications. As stated in the preamble to the PERM Final Rule, it 
takes on average one (1) hour for an employer to prepare a 
recruitment report for each application it files. We estimated that 
10 percent of these applications are audited, which will require an 
additional hour for the employer to submit the report. We assumed 
that Human Resources Managers (or their equivalent) conduct this 
activity for the employer and that their median hourly wage is 
$36.52, which we increased by 1.42 to account for employee benefits 
(source: Bureau of Labor Statistics). The Department estimated that 
employers spend $100 in incidental costs per application.
---------------------------------------------------------------------------

    In addition, we anticipate other cost savings or benefits 
associated with the ban on substitution will have a ripple effect 
through the publicly administered immigration system. We believe cost 
savings could be realized in the following areas: reduction in the 
Department of Labor's Office of Inspector General (OIG) staff time 
required to review or investigate potentially fraudulent substitutions; 
reduced DHS staff time to review I-140 immigrant petitions; reduced DHS 
staff time to review I-485 applications; a reduction in DOS staff time 
resulting from a need to conduct fewer interviews with aliens seeking 
permanent residence; and less DOJ staff time spent on investigation and 
prosecution of fraudulent substitutions. We believe that deterring and 
preventing substitution-related fraud will have an important and 
visible impact on other Federal agencies involved in the immigration 
system. However, due to a lack of adequate data, we were not able to 
quantify or monetize these benefits to society.

Costs

    The ban on substitution does impose several costs to society: 
additional job advertising and recruitment by employers, increased 
employer staff time for filing labor certification applications, and 
increased staff time in State Workforce Agencies (SWAs) and the 
Department, all described in greater detail below. We estimate the 10-
year discounted cost to society to be between $147.0 and $178.6 
million.
    If the employer's second labor market test indicates that no 
qualified U.S. workers are available, then the employer must submit a 
new permanent labor certification application with the name of the new 
alien. However, to fill the position, employers who otherwise might 
have substituted must test the market for U.S. workers and incur 
recruitment costs, independent of whether they eventually file a 
permanent labor certification application. To the extent an employer 
finds a qualified U.S. worker to fill the position, it is inappropriate 
to attribute those costs to the labor certification process, as in 
those cases the need for labor certification has been removed.
    The main cost to employers associated with the substitution ban is 
the increase in employer staff time to prepare, file, and track labor 
certification applications. We estimate this cost by multiplying the 
number of substitutions leading to labor market tests not favoring U.S. 
workers by the number of employer staff hours to prepare, file, and 
track the labor certifications, by the compensation of the employer 
staff undertaking these activities.
    Another cost to employers of the substitution ban results from the 
additional recruiting efforts, in particular job advertising, as well 
as the increased employer staff time to arrange for and track 
recruiting efforts and for receiving, compiling, interviewing, 
analyzing, and reporting the results of the recruitment.\15\ The 
Department

[[Page 27937]]

included in its cost estimate the time spent to comply in excess of the 
time the employer would normally spend in recruiting efforts. We 
estimate the recruiting costs by examining what recruiting efforts were 
reported by employers filing PERM applications and by surveying local 
newspapers, websites, and SWAs to determine the costs associated with 
these activities.\16\ We estimate the costs for filing applications and 
preparing recruitment reports by multiplying the staff time required to 
conduct such activities by the staff's compensation by the annual 
number of additional labor certification applications.\17\ We estimated 
the total annual cost to employers to process and track labor 
certification applications and conduct additional recruitment efforts 
to be $19.8 million per year.\18\
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    \15\ It is possible some employers would not have conducted any 
recruiting activities to locate a second applicant if substitution 
were allowed (e.g., if a qualified alien was already working for the 
employer under a temporary H1B visa). If an employer would normally 
hire another alien that is already employed by the employer, then 
most of the recruiting activities required by PERM would be 
additional cost. If the employer would normally conduct an extensive 
recruiting effort to find a new qualified employee, few of the PERM 
required recruiting activities would constitute an additional cost. 
For the purposes of this analysis, DOL assumed that on average, an 
employer would place an ad in a Sunday paper and conduct other 
recruiting efforts, such as placing a notice on the organization's 
website or attending a job fair.
    \16\ The Department estimated that the cost of an advertisement 
in a Sunday paper is $750. DOL also estimated it would take an 
employer 0.5 hours to place the advertisement with the Sunday paper 
and 0.5 hours to place a job order with the SWA. In addition, this 
analysis assumes an employer would spend 10 hours to arrange for and 
track recruiting efforts and an additional 10 hours for receiving, 
compiling, interviewing, analyzing, and reporting the results of the 
recruitment.
    \17\ According to the preamble to the PERM Final Rule, it takes 
on average one (1) hour for an employer to prepare a recruitment 
report for each application it files. DOL estimated that 10 percent 
of these applications are audited, which will require an additional 
hour for the employer to submit the report. DOL assumed that Human 
Resources Managers (or their equivalent) conduct this activity for 
the employer.
    \18\ As mentioned above, the Department estimated that employers 
spend 10 staff hours on average preparing, filing, and tracking the 
labor certifications. DOL assumed Human Resources Managers (or their 
equivalent) conduct this work for the employer and that the median 
hourly wage for Human Resource Managers is $36.52, which DOL 
increased by 1.42 to account for employee benefits. This analysis 
assumes 85 percent of the required labor market tests favor aliens, 
and that employers request substitutions on 10 percent of the 
115,952 applications submitted per year, resulting in approximately 
9,856 additional permanent labor certification applications to be 
filed with DOL each year.
---------------------------------------------------------------------------

    SWAs also experience an additional cost. The substitution ban may 
increase the number of applications filed by employers, which requires 
employers to place a job order with the SWA serving the area of 
intended employment for a period of 30 days. Employers must also obtain 
a prevailing wage determination from the SWA. SWAs will incur some 
additional costs associated with increased SWA staff time to process 
job orders and provide employers with prevailing wage determinations. 
We estimate this cost by multiplying the SWA staff time to process job 
orders and determine the prevailing wage by the compensation of the 
staff, by the annual number of substitution requests. We estimate the 
annual costs to SWAs to be $0.5 million per year.\19\
---------------------------------------------------------------------------

    \19\ The Department estimated SWA staff spend one (1) hour on 
average to process job orders and determine the prevailing wage. We 
also estimated the hourly rate for SWA staff to be $34.94 per hour, 
which was increased by 1.42 to account for employee benefits 
(source: Bureau of Labor Statistics).
---------------------------------------------------------------------------

    The primary cost government-wide is the increased staff time to 
review additional labor certification applications, immigrant 
petitions, etc., that may be submitted when a legitimate change in the 
alien beneficiary is necessary. If employers must resubmit labor 
certification applications when the original alien becomes unavailable, 
then Department of Labor staff will spend that much more time reviewing 
applications. We estimate this cost to the Department by multiplying 
the time spent reviewing each application by the compensation of our 
analysts, by the increased number of applications.\20\
---------------------------------------------------------------------------

    \20\ The Department estimated that 70 percent of applications 
are ``clean'' and do not raise any audit flags. ``Clean'' 
applications require 0.25 hours of DOL staff time. We assumed that 
the remaining applications raise audit flags and must be reviewed 
manually, requiring four (4) hours of DOL staff time. We estimated 
that the median hourly wage for DOL reviewers is $30.06 (GS 12, step 
5, which was increased by 1.42 to account for employee benefits 
(source: Bureau of Labor Statistics). As explained above, DOL 
assumed that approximately 9,856 additional permanent labor 
certification applications will be filed with DOL each year.
---------------------------------------------------------------------------

    Another related cost to the Federal Government is the increased 
Departmental staff time to audit an increased number of recruitment 
reports. We estimate this cost by multiplying the time spent auditing 
each recruitment report by the average compensation of one of our 
analysts, by the increased number of recruitment reports that will be 
audited.\21\ We estimated the total annual Departmental costs to be 
$0.7 million per year.
---------------------------------------------------------------------------

    \21\ The Department assumed auditors spend two (2) hours to 
audit recruitment reports. We assumed the median hourly wage for DOL 
auditors is $30.06 (GS 12, step 5; source: DOL), which DOL increased 
by 1.42 to account for employee benefits (source: Bureau of Labor 
Statistics). As explained above, DOL assumed that approximately 
9,856 additional permanent labor certification applications will be 
filed with DOL each year.
---------------------------------------------------------------------------

    In addition, the Department considered potential costs to employers 
associated with a later priority date and a longer wait for an alien 
who would otherwise be the beneficiary of a substitution. However, this 
analysis does not quantify such costs. As stated previously, to the 
extent such costs are quantifiable, they are potentially negligible 
since most substituted jobs are already held by the alien to be 
substituted. To the extent they stem from a longer wait, or backlogs at 
other Federal agencies, the number of factors bearing on such costs 
(variables determining time in respective queues, mitigating factors 
such as options for interim sources of labor, etc.), and the relative 
impact of each factor, are simply too speculative for the Department to 
be able to accurately measure.

Impact of Prohibition Based on Availability of Alien

    As stated above, the analysis assumes 10% of employers may require 
substitution at the labor certification stage (11,595 applications). 
The analysis assumes all of those applications will require a second 
market test, 15% (1,739 applications) of which will favor U.S. workers. 
As stated, in that 15% of cases in which an employer finds a qualified 
U.S. worker, recruitment costs related to the labor certification 
process should not be attributed to this rulemaking. In the remaining 
9,856 cases, the analysis already includes the costs of the second 
labor market test and other costs of the labor certification process, 
including average filing and application management expenditures 
(recruitment, staff time, etc.) for each employer.
    As a refinement on this estimate, it is possible to make some broad 
assumptions about impact on different categories of employers holding 
those remaining 9,856 applications. We may assume, broadly and based on 
our programmatic experience, that approximately 80% of employers (7,885 
applications) have replacements at the ready (at their own place of 
business or another U.S. establishment), and the remaining 20% (1,971 
applications, or 1.7% of total applications processed in the system) 
must reach outside the country when the original alien becomes 
unavailable.\22\
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    \22\ The Department's longstanding programmatic experience, both 
under the previous regulation and the more current PERM rule, is 
that a significant percentage of applications for permanent labor 
certification name aliens already here and participating in another 
visa program. Recent program data indicate approximately 80% name 
aliens on H-1B visas.
---------------------------------------------------------------------------

    As a general proposition, an employer who now has the option to 
substitute but would normally have another alien at the ready (thereby 
incurring no need to advertise) would incur additional recruitment 
costs after the substitution prohibition to meet the requirement for a 
second labor market test. An employer who can now substitute but must 
generally look outside the country to fill vacancies may not 
necessarily incur additional costs specifically for

[[Page 27938]]

recruitment as a result of the prohibition (assuming even with 
substitution, there would be similar costs associated with foreign 
recruiters and locating another worker abroad). For both groups of 
employers--those with ready candidates and without--the analysis 
assumes expenses associated with beginning the process anew, and builds 
in costs in addition to recruitment. Accordingly, as described in the 
main costs discussion above, the analysis already accounts for an 
average cost across employers for labor certification expenses in the 
absence of substitution (e.g., preparation, filing and tracking of a 
second labor certification). To the extent that potentially there is 
greater incremental impact at the labor certification stage to 
employers who, in the event they must substitute, must seek workers 
outside the country--over and above the diverse costs already included 
and explained above--there is insufficient data to quantify it. 
Additional impact to these employers may be captured in the discussion 
below, covering substitutable petitions pending at DHS.

Application of the Prohibition to Pending Applications

    As explained above, this analysis considers the additional, one-
time impact of this rulemaking on employers with substitutable 
immigrant worker petitions currently pending at DHS. As DHS is a 
separate Federal agency, and as employer decisionmaking, unique case 
circumstances, and agency processing dynamics at the I-140 stage are 
not within either the Department of Labor's expertise or, even more 
importantly, its influence, this analysis can make only the broadest of 
assumptions. The Department cannot estimate with precision this rule's 
benefits or costs to those employers or to DHS program activities. 
However, these data limitations notwithstanding, we have included in 
this analysis an estimate of the potential impact on employers. Noting 
that the rule does not impact labor certifications already filed with 
DHS, the prohibition on substitution will impact DHS processing at 
least to some extent going forward.
    The extensive benefits of the substitution prohibition described 
above apply equally to those labor certification applications currently 
in the immigrant petition backlog at DHS, and are also deemed part of 
this one-time impact. In addition to other benefits described above, 
DHS's workload would benefit from a reduction, as some of those 
abandoned immigrant petitions would not be replaced with foreign 
workers but with U.S. workers. Potential costs specifically to 
employers with petitions pending with DHS are described in greater 
detail below. These benefits and costs are in addition to the overall 
regulatory impact estimates provided above.
    As of April 2007, a total of approximately 70,000 immigrant 
petitions were pending at USCIS in immigrant preferences categories 
that were identified by DHS as dependent upon a labor certification. 
The Department assumed the same 10 percent substitution rate for labor 
certification applications now attached to a pending immigrant petition 
at DHS that would be prohibited from a future substitution. The 
analysis accordingly assumes all of the 7,000 applications identified 
will require a second test of the labor market. As above, the 
Department has assumed that 15% of these applications (1,050 
applications) will favor U.S. workers, and thus recruitment costs are 
not attributable. The costs of the labor certification process leading 
to labor market tests not favoring U.S. workers, including average 
filing and application management expenditures (staff time as indicated 
by staff compensation, costs of additional recruitment, etc.) for each 
employer, are then attributed to the remaining 5,950 applications for a 
total of $10.62 million. The Department is mindful that amount 
represents a one-time expense for a discrete group of applications and 
is, moreover, not discounted by the likelihood that some percentage of 
these applications that would otherwise be substituted would be too far 
into the adjudicatory process at DHS to be the subject of a future 
substitution.\23\
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    \23\ For example, no discounting has been applied to remove 
labor certification applications from the calculation that are part 
of a filing which includes an adjustment application and for which a 
visa is immediately available, which would greatly reduce the 
chances that a substitution to benefit another alien would follow.
---------------------------------------------------------------------------

Transfer

    To the extent the ban on substitution will have an economic impact 
on foreign labor--that impact could be a carve-out from the overall 
economic impact of the rule as measured in this analysis, and not an 
additive. The foreign worker who is substituted has by definition 
become unavailable for the position for reasons unrelated to this 
rulemaking, and therefore does not incur either a cost or benefit in 
this analysis. The vacancy created results in both costs and benefits 
for the employer, U.S. workers, and foreign workers. Costs are 
associated with recruitment; we assume the employer will take steps 
necessary to fill the vacancy, whether with a foreign or U.S. worker. 
Benefits result from long-term stability and productivity gains to the 
employer from filling the vacancy, and pay and satisfaction to a new 
worker from a permanent position. The potential benefit to the 
employer--and the economy--from filling the vacancy would not change 
significantly whether the new worker is a U.S. or foreign worker; 
assuming a qualified individual fills the slot, the worker is meeting 
the same legitimate business need, and the employer incurs similar 
costs for comparable fringe benefits and compensation. The analysis 
already discusses the potential impact and assumptions associated with 
filling the vacancy with a U.S. worker. If, alternatively, the vacancy 
is filled with a second foreign worker--and to the extent foreign 
workers physically in the country and working are deemed part of the 
U.S. economy--the potential benefit to U.S. workers would be decreased 
by that number of slots and transferred to foreign workers who now 
enter the stream for permanent residency. So although total economic 
benefits do not change, their relative allocation does transfer between 
foreign and domestic workers, depending on who is awarded the permanent 
position. And in fact, non-material benefits to foreign workers may 
even be higher than to U.S. workers, were the analysis to factor in the 
positive impact that comes with a permanent residency-bound immigration 
track.

Issues Raised by Public Comment

    Several commenters argued the rule's prohibition of substitution of 
alien beneficiaries will create significant economic impact. One 
commenter, presuming direct employer costs per application of $10,000, 
stated the impact would be at least $1 billion if employers could no 
longer substitute beneficiaries. Another commenter focused on the 
effect it believed the substitution prohibition could have on the 
recruitment of workers. Noting that backlogs have reached 4.5 to five 
years at times, the commenter claimed the application process, which he 
characterized as lengthy, makes it imperative that employers be 
permitted to use certifications that are ``abandoned.'' One commenter 
stated the substitution prohibition would increase the likelihood that 
employers would take jobs offshore because they would be unable to 
recruit and obtain certification for foreign workers in a timely 
manner. The same commenter also suggested that a few plant closings or 
other business disruption could

[[Page 27939]]

easily result in an economic impact in excess of $100 million.
    One commenter focused on the costs and expenses of abandoning and 
reapplying for a labor certification due solely to the unavailability 
of a foreign worker. Noting the costs of advertising, market surveys, 
attorneys and recruitment, the commenter also pointed out the loss in 
productivity from delayed approval of applications, all of which it 
said results in thousands of dollars in employer expenses. The 
commenter argued that substitution is and should remain ``perfectly 
legitimate'' because it ``mitigates the employer's investment risk in 
an employment-based immigration visa process that still takes (and will 
likely continue to take) many years to complete.'' In addition to 
claiming the economic impact was significant, the commenter asserted 
the rule's substitution prohibition was an attempt to eliminate an 
unknown, but likely insignificant, quantum of fraud. Finally, the 
commenter stated that the impact on high technology industry employers 
would be substantial because such employers must recruit foreign 
nationals, often from U.S. universities, given the limited supply of 
U.S. citizens available for technical positions.
    The commenters have failed to explain how the elimination of the 
practice of substitution itself will result in material adverse impact, 
let alone economic impact exceeding $100 million. While some commenters 
estimated the costs of obtaining a new certification at nearly $10,000, 
the Department finds no support for that claim, and has estimated the 
costs as much lower as noted above.
    As stated elsewhere, the INA's treatment of employment-based 
immigration is designed to protect the wages and working conditions of 
U.S. workers. The Department meets the requirements of the statute 
through the labor certification process. As the administrator of that 
process, the Department has an obvious interest in and responsibility 
to identify, address and eliminate fraud, which is what the Final Rule 
will accomplish. The Department's experience, as articulated and 
discussed herein, resulted in the PERM process, which increased fraud 
protection. The Department's experience also shows the practice of 
substitution leaves the process susceptible to fraud.
    As discussed extensively throughout this Final Rule, the Department 
is concerned that various immigration practices, including the 
substitution of alien beneficiaries and the indefinite validity of 
permanent labor certifications, were subject to a significant degree of 
fraud and abuse. The purpose of this Final Rule is to impose clear 
limitations on the acquisition and use of permanent labor 
certifications in order to reduce incentives and opportunities for 
fraud and abuse, and enhance the integrity of the permanent labor 
certification program to the benefit of the U.S. workforce.
    The ban on substituting alien beneficiaries reduces the incentives 
and opportunities for fraud in important ways. First, absent this 
regulatory action, employers possess incomplete information about the 
current availability of qualified U.S. workers in the labor market. 
Because labor markets are inherently dynamic, even well informed 
employers may not keep abreast of changes in worker availability after 
their initial recruitment for a job opportunity. In addition, 
information may not always be accurate or widely available if it is 
costly to produce, analyze, or disseminate. Banning substitution 
``remedies'' the problem of imperfect information, consistent with the 
statutory intent to protect U.S. workers, by requiring employers to go 
back to the labor market a second time when the original alien becomes 
unavailable. This measure improves employer decision-making with 
respect to filling critical job openings, and improves the probability 
that a qualified U.S. worker will be selected for the job.
    Second, the ban on alien substitution significantly reduces the 
incidence of ``overconsumption,'' where unscrupulous employers, 
attorneys, or agents submit large numbers of applications for 
processing and, once certified, sell the certification to a different 
alien at prices that grossly exceed marginal costs. This 
overconsumption is driven by the exchangeability of the alien name on 
the certification, which in turn increases the document's 
transferability. In the absence of this Final Rule, a certification 
that was granted to be used to benefit or name one alien and no one 
other than the parties originally named for purposes of filing with DHS 
(in economic terms, a ``rivalrous and excludable good''), can be used 
by another alien simply by exchanging the name (in economic terms, a 
``rivalrous and non-excludable good'').
    These individuals or entities are not equating marginal social 
costs with marginal benefits, but rather marginal private costs with 
marginal benefits; hence, they overconsume from the permanent labor 
certification program. In other words, unscrupulous employers or 
attorneys have no incentive to consider the marginal social costs of 
filing the next fraudulent labor certification applications as long as 
the marginal private benefits (i.e., revenue from selling the labor 
certifications to a different alien) continue to exceed the marginal 
private costs (i.e., costs to process and track the labor 
certification) of the transaction.
    By eliminating alien substitution, this rule seeks to restore to 
certifications their rivalrous and excludable qualities, in that they 
may no longer be transferred, sold, bartered, or purchased; the 
employer, job opportunity, and alien beneficiary on the application are 
exclusive and cannot be transferred to a different alien beneficiary. 
By requiring appropriate, timely market tests; promoting better 
information on market conditions and worker availability; and restoring 
the exclusivity and integrity of labor certifications, we believe this 
regulatory action will more effectively align the marginal social costs 
of processing permanent labor certifications with the marginal 
benefits.
3. Validity Period
    Permanent labor certifications have thus far been valid 
indefinitely, and employers have been free to submit a permanent labor 
certification to DHS at any time. At least one commenter argued that a 
45-day proposed validity period such as that proposed in the NPRM would 
result in a significant impact. The Department disagrees with this 
conclusion. However, in response to other comments and our own 
analysis, we have lengthened the validity period to 180 days. Under 
this Final Rule, all permanent labor certifications will expire after 
180 calendar days of certification unless filed in support of an I-140 
immigrant petition with DHS.
    The 180-day period in which a permanent labor certification can be 
filed in connection with the I-140 petition to the DHS effectively 
limits the time in which certifications may be marketed. The ban on 
substitution and the establishment of a finite validity period, when 
taken together, effectively reduce the likelihood of validating stale 
recruitment while simultaneously eliminating ``rent-seeking'' behavior 
on the part of unscrupulous employers, attorneys, and agents in selling 
these certifications to uninformed alien beneficiaries. We estimate the 
cost impact of a 180-day validity period will be insignificant because 
sufficient time is provided to put the certification to use, since it 
is granted to the employer under the presumption that there is a 
critical need for the foreign worker and no qualified U.S. workers are 
available.

[[Page 27940]]

    This analysis does not quantify the marginal value of eliminating 
indefinite validity of labor certifications--that is, the value of 
establishing a limited validity period over and above the value gained 
from prohibiting substitution. The commoditization of labor 
certifications is a function of the availability of substitution and 
the absence of a finite expiration date. As this Final Rule eliminates 
both root causes, the analysis assumes most if not all quantifiable 
benefits are captured by the analysis above with respect to 
substitution.
    The analysis does measure two major benefits associated with a 
defined validity period. First, a validity period ensures labor market 
information is current, the prevailing wage recorded on the permanent 
labor certification is current and accurate, and the bona fide job 
opportunity exists as it appeared on the original application. When a 
certification becomes invalid, an employer must conduct new recruiting 
efforts that may indicate qualified U.S. workers are available and open 
that job opportunity for their consideration. Second, a validity period 
will slow the ``black market'' in approved labor certifications.
    As discussed in the benefit-cost analysis below, enforcing a 
validity period will increase costs for employers that do not file with 
DHS prior to the end of the validity period. In these cases, the 
employer must conduct a new labor market test and submit a new 
permanent labor certification application to the Department. The 
Department's costs will also increase, since it will review additional 
applications that are submitted because the original certification 
expired.
    The Department considered two periods of validity, 45 days and 180 
days. Both alternatives are discussed further below.

3(A). Validity Period of 180 Days

    We estimate that the 10-year discounted quantified benefits 
associated with this provision of the Final Rule will be between $74.8 
and $90.9 million, and total quantified costs will be between $132.4 
and $160.8 million. Thus, the net present value over a 10-year time 
horizon will range from -$57.6 to -$70 million. Due to a lack of 
adequate data, we were not able to quantify or monetize some important 
benefits of this provision of the Final Rule.

Benefits

    The 180-day validity period has several important benefits to 
society: Increased employment opportunities for U.S. workers, improved 
program integrity, and cost savings to the Federal Government resulting 
from positions filled with U.S. workers.
    An important purpose of the 180-day validity is to ensure that the 
certified job opportunity still exists as described on the initial 
application. If an employer files with DHS 180 days or more after the 
certification was approved by the Department, the passage of time may 
have impacted worker availability for purposes of the job opportunity 
that is the subject of the certification. This provision requires 
employers to conduct new labor market tests and submit a new 
application to the Department once validity expires.
    As with the benefits discussed under the substitution section, 
above, the Department estimates that without the 180-day validity 
period and required labor market test, the employer may not be aware 
that U.S. workers are available, and may have otherwise hired an 
alien.\24\ Therefore, the second labor market test required by the 
Final Rule may favor and result in increased employment opportunities 
for U.S. workers. As under the substitution section above, we estimated 
the monetary value of this benefit by examining the compensation earned 
by U.S. workers that would not have otherwise been hired. To estimate 
this benefit, we accounted for the number of U.S. workers that would be 
favored by requiring employers to conduct new labor market tests and 
the compensation of these workers, which includes both their salaries 
and benefits, and reflects the decrease in time that the U.S. workers 
favored by the 180-day validity period stay unemployed. We estimate 
this benefit to be $10.7 million per year.\25\
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    \24\ For purposes of this analysis, the Department assumed that 
U.S. workers favored by the new labor market tests were unemployed. 
However, a benefit to U.S. workers could still exist even if these 
workers were employed elsewhere; their departure from their old jobs 
would open up new employment opportunities for other U.S. workers 
and a move to a new job may imply a higher wage for the U.S. worker.
    \25\ The Department assumed that of the 115,952 PERM 
applications filed between July 1, 2005 and June 30, 2006, five (5) 
percent would expire prior to filing with DHS within 180 days. As 
before, we assumed 15 percent of the labor market tests favor U.S. 
workers. The average annual wage on permanent labor certifications 
applications in the PERM database is $69,000. The average wage was 
increased by 1.42 to account for employee benefits (source: Bureau 
of Labor Statistics). We assumed workers would have been unemployed 
for an additional 1.5 months.
---------------------------------------------------------------------------

    The 180-day validity period decreases the opportunity for fraud 
through the lawful permanent resident process. The current indefinite 
validity of approved permanent labor certifications has contributed, 
along with substitution, to the growth of a secondary market in 
approved labor certifications. A 180-validity period promotes more 
security in the labor market test conducted, adding significant 
protections for U.S. workers in the strength of the tests regarding 
availability and adverse effects of the test on wages and working 
conditions of the affected U.S. worker population. Having a defined 
validity period in combination with the elimination of substitution 
does not lessen fraud as much as it enhances the validity of the labor 
market test that was done. Due to a lack of adequate data, however, we 
were not able to quantify or monetize this important benefit.
    Enforcing a 180-day validity period will result in a small decrease 
in the number of applications dependent on a successful labor market 
test that are submitted to DHS and DOS. An employer that does not 
submit the permanent labor certification to DHS within 180 days will 
need to conduct a new labor market test and, if the test favors an 
alien, the employer must file a new application with the Department. If 
the test favors a U.S. worker, then the employer will not submit an 
application to the Department. Employers will submit fewer applications 
to DHS and DOS because after the original certifications expire, some 
of the new labor market tests will favor U.S. workers or may not be 
further pursued. In these cases, cost savings results from the reduced 
DHS staff time to review I-140 immigrant petitions and I-485 
applications to adjust to permanent resident status. In addition, DOS 
will have fewer interviews to conduct with aliens seeking a lawful 
immigrant visa to obtain permanent residence. Because of data 
limitations, we are not able to provide a quantitative or monetary 
value of these benefits.\26\
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    \26\ The 180-day validity period will help deter unscrupulous 
employers, attorneys, or agents filing permanent labor certification 
applications with DOL because there will be fewer opportunities to 
profit off of fraudulent applications. In addition, Department of 
Justice staff time can be expected to be reduced from avoided 
investigation and prosecution of fraudulent applications for 
positions filled by U.S. workers.
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Costs

    The 180-day validity period imposes several costs to society: 
Additional job advertising and recruiting from employers, increased 
employer staff time for filing labor certification applications, and 
increased staff time at the Department. In addition, a 180-day validity 
period requires employers to conduct labor market tests that will favor 
U.S. workers in some cases, which

[[Page 27941]]

results in a small reduction in revenue to DHS from I-140 petitions and 
I-485 applications and to DOS from immigrant visa applications. We 
estimate the 10-year discounted costs to society to range between 
$132.4 and $160.8 million.
    As described above, approved permanent labor certifications will 
expire if employers do not file the labor certification in support of 
an immigrant petition with DHS within 180 calendar days of the date the 
Department grants certification. If the certification expires, the 
employer must conduct a new labor market test if it chooses to pursue 
the foreign labor option. If the test favors a U.S. worker, then the 
employer will hire a U.S. worker. If the labor market test indicates 
that no qualified U.S. workers are available, then the employer must 
resubmit a permanent labor certification application.
    A significant cost to employers of the 180-day validity period is 
the increase in employer staff time to prepare, file, and track labor 
certification applications. We estimate this cost by multiplying the 
number of expired certifications leading to labor market tests not 
favoring U.S. workers by the number of employer staff hours to prepare, 
file, and track the labor certifications, by the compensation of the 
employer staff undertaking these activities.\27\
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    \27\ As mentioned above, the Department estimated that employers 
spend 10 staff hours on average preparing, filing, and tracking the 
labor certifications. We assumed that Human Resource Managers (or 
their equivalent) conduct this activity for the employer and that 
their media hourly wage is $36.52, which was increased by 1.42 to 
account for employee benefits (source: Bureau of Labor Statistics). 
We assumed that five (5) percent of all certifications will expire 
and that 85 percent of the required labor market tests favor aliens, 
resulting in an additional 4,928 permanent labor certification 
applications to be filed with DOL.
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    Another significant cost to employers of the 180-day validity 
period is the additional recruitment efforts, in particular job 
advertising, as well as the increased employer staff time to arrange 
for and track recruitment efforts and for receiving, compiling, 
interviewing, analyzing, and reporting the results of the recruitment. 
We estimate the costs for preparing recruitment reports by multiplying 
the staff time required to conduct such activities by the staff's 
compensation, by the annual number of additional labor certification 
applications.\28\ We estimated the total annual costs to employers for 
processing labor certifications and additional recruitment efforts to 
be $18.5 million per year.
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    \28\ The Department estimated the cost of a Sunday paper 
advertisement is $750. We also estimated it would take an employer 
0.5 hours to place the advertisement with the Sunday paper and 0.5 
hours to place a job order with the SWA, and 1.5 hours to conduct 
additional recruiting, as required by PERM. In addition, DOL 
estimated that the employer would spend 25 hours to arrange for and 
track recruiting efforts and for receiving, compiling, interviewing, 
analyzing, and reporting the results of the recruitment. According 
to the preamble to the PERM Final Rule, it takes an average of one 
(1) hour for an employer to prepare a recruitment report for each 
application it files. For purposes of this analysis, we estimated 
that 10 percent of these applications are audited, which will 
require an additional hour for the employer to submit the report. We 
assumed that Human Resources Managers (or their equivalent) conduct 
this work for the employer and that their median hourly wage is 
$36.52, which was increased by 1.42 to account for benefits (source: 
Bureau of Labor Statistics). This analysis assumes five (5) percent 
of all certifications will expire and that 85 percent of the 
required labor market tests favor aliens, resulting in an additional 
4,928 permanent labor certification applications to be filed with 
DOL.
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    A small cost to the Federal Government resulting from the 180-day 
validity period is the increased time for Departmental staff time to 
review the relatively small number of applications that are resubmitted 
if the original certification expired and subsequent labor market tests 
favor an alien. If employers resubmit applications, then our staff must 
spend additional time reviewing an increased number of applications. We 
estimated this cost by multiplying the time spent reviewing each 
application by the compensation of a foreign labor certification 
analyst, by the increased number of applications.\29\ We also factored 
in the potential increase in our staff time to audit additional 
recruitment reports. We estimated this cost by multiplying the time 
spent auditing each recruitment report by the average compensation of a 
DOL auditor by the increased number of recruitment reports that will be 
audited.\30\ We estimated the total annual costs to the Federal 
government to be $0.3 million per year.
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    \29\ The Department estimated that 70 percent of applications 
are ``clean'' and do not raise any audit flags. ``Clean'' 
applications require 0.25 hours of our staff time. We assumed that 
the remaining applications raise audit flags and must be reviewed 
manually, requiring 4 hours of our staff time. We estimated that the 
median hourly wage for our staff analysts is $30.06 (GS 12, step 5, 
which was escalated by 1.42 to account for employee benefits 
(source: Bureau of Labor Statistics). As explained above, we 
estimated that approximately 4,928 additional permanent labor 
certification applications will be filed with the Department each 
year as a result of this provision.
    \30\ The Department assumed auditors spend two (2) hours to 
audit recruitment reports. We assumed the median hourly wage for DOL 
auditors is $30.06 (GS 12, step 5), which was increased by 1.42 to 
account for employee benefits (source: Bureau of Labor Statistics). 
As explained above, we assumed approximately 4,928 additional 
permanent labor certification applications will be filed with DOL 
each year as a result of this provision.
---------------------------------------------------------------------------

    Finally, DHS and DOS will experience small decreases in revenue 
from application fees. Since employers must conduct a labor market test 
after a certification expires and since some of the labor market tests 
will favor U.S. workers, there will be a slight decrease in the number 
of Forms I-140 and I-485 that would have been submitted to DHS and 
immigrant visa applications that would have been submitted to DOS. 
Because these forms have application fees, DHS and DOS will experience 
a small decrease in revenue.\31\ Due to a lack of adequate data, we 
could not quantify or monetize these costs.
---------------------------------------------------------------------------

    \31\ At time of publication, the DHS form I-140 immigrant 
petition filing fee is $195 and the immigrant visa application 
processing fee charged by DOS is $335 per person.
---------------------------------------------------------------------------

3(B). Validity Period of 45 Days

    In the proposed rule, the Department proposed a validity period of 
45 calendar days. In response to public comments regarding the 
hardships associated with a 45-day validity period, we increased the 
validity period to 180 calendar days. The most important benefit of the 
validity period is increased employment opportunities for U.S. workers, 
and the primary cost is to employers that must conduct new labor market 
tests and file new applications with the Department if approved 
certifications are not filed with DHS within the validity period and 
the labor market test favors an alien.
    In the section below, the Department analyzed the major benefits 
and costs. We assumed that twice as many certifications would expire 
before reaching DHS with a 45-day validity period as compared to a 180-
day validity period. We estimated the 10-year discounted benefits 
associated with a 45-day validity period to be between $149.6 and 
$181.7 million, and the total costs to be between $264.9 and $321.7 
million. Thus, the net present value over a 10-year time horizon will 
range from -$115.2 to -$140.0 million.

Benefits

    We estimate the monetary value of this benefit by examining the 
compensation earned by U.S. workers that would not have otherwise been 
hired. To estimate this benefit, we account for the number of U.S. 
workers that would be favored by requiring employers to conduct new 
labor market tests and the compensation of these workers, which 
includes both their salaries and benefits and reflects the decrease in 
time that those workers stay unemployed. We estimate this benefit to be 
$21.3 million per year.\32\
---------------------------------------------------------------------------

    \32\ The Department estimated of the 115,952 PERM applications 
filed between July 1, 2005 and June 30, 2006, 10 percent would 
expire prior to filing with DHS. In addition, we estimated 15 
percent of labor market tests favor U.S. workers. The average annual 
wage on permanent labor certifications applications in the PERM 
database is $69,000, which was increased by 1.42 to account for 
employee benefits (source: Bureau of Labor Statistics). We assumed 
workers would have been unemployed for an additional 1.5 months.

---------------------------------------------------------------------------

[[Page 27942]]

Costs

    The Department assumed that twice as many applications would expire 
under a 45-day validity period as compared to the 180-day validity 
period. The Department estimated the costs for a 45-day validity period 
by assuming the cost per application would be the same but the number 
of applications submitted by employers would double. We estimate the 
annual cost to employers to be $37 million per year. This cost includes 
additional job advertising, and employer staff time to arrange for and 
track recruiting efforts, prepare and file certification applications, 
and prepare and maintain recruitment reports.
    The 45-day validity period imposes a cost to the Department 
resulting from the need for increased foreign labor certification staff 
time to review additional applications resulting from expired 
applications. We estimated this cost to be $0.7 million per year. Also, 
if employers rush to file the I-140 to satisfy a 45-day rule, this will 
slow processing at DHS and increase the number of requests for 
additional evidence issued by that agency. However, due to a lack of 
adequate data, we were unable to quantify or monetize this cost.
4. Prohibition on the Sale, Barter, or Purchase of Applications for 
Permanent Labor Certification and of Approved Permanent Labor 
Certifications, and on Related Payments
    The Department is prohibiting improper commerce and certain 
payments related to permanent labor certification applications and 
certifications. We estimate that the 10-year discounted benefits 
associated with this provision of the Final Rule will be between $16.9 
and $20.5 million. Due to a lack of adequate data, we were unable to 
specifically quantify the costs to this provision of the Final Rule.

Benefits

    The prohibition on the sale, barter, or purchase of applications or 
certifications has several important benefits to society: Improved 
program integrity, a small cost savings to employers in the form of 
increased staff time to clear up their names when they are unknowingly 
used for fraudulent applications, and cost savings to the Federal 
Government in the form of reduced staff time resulting from the 
reduction in fraudulent applications. We estimate the cost savings to 
be $2.4 million per year.
    On the ``black market,'' employers or agents agree to broker 
applications for permanent labor certification on behalf of aliens in 
exchange for payment. Such payments are not compatible with the 
purposes of the permanent labor certification program and may indicate 
a lack of a bona fide job opportunity that is and has been truly open 
to U.S. workers. The Department is instituting this ban because 
allowing the sale of a government benefit to continue is simply bad 
government. Due to a lack of adequate data, we were not able to 
quantify or monetize the benefits to society of increased program 
integrity as a result of this provision of the Final Rule.
    The Department of Justice, DHS and DOL OIG spend a significant 
amount of time and resources to investigate fraudulent applications. 
Some of these applications are submitted by unscrupulous attorneys or 
agents filing on behalf of an alien, although the business named on the 
application did not provide authorization and may not even have been 
aware that its name was being used. When the Federal Government 
determines the application is fraudulent, the employer is often placed 
in an uncomfortable, precarious position and required to explain to the 
Department that it did not authorize the use of its name in the 
application.
    We estimate this cost savings by calculating the monetary value of 
the increase in employer staff time to discuss the findings and write 
an explanation to the Department. We estimate this cost savings by 
multiplying the staff time required to conduct such activities by the 
staff compensation, by the number of fraudulent applications submitted 
to the Department. We estimate the annual cost savings to employers to 
be $2.4 million per year.\33\
---------------------------------------------------------------------------

    \33\ The Department estimated that 10 percent of applications 
are fraudulent and that half of these fraudulent applications 
involve businesses whose names are used without authorization. We 
also estimated that a Human Resources Manager or their equivalent 
staff spends on average eight (8) hours to discuss the findings and 
write a letter to DOL. This analysis assumes Human Resources 
Managers (or their equivalent) conduct this work for the employer 
and that their median hourly wage is $36.52, which we increased by 
1.42 to account for employee benefits (source: Bureau of Labor 
Statistics).
---------------------------------------------------------------------------

    Enforcing a prohibition on the sale, barter, or purchase of 
applications of permanent labor certifications or approved permanent 
labor certifications will deter unscrupulous attorneys, employers, and 
agents from submitting fraudulent applications. Thus, all else being 
equal, the prohibition will result in fewer applications that are 
submitted to the Department, DHS, and DOS. Cost savings result from 
reduced OIG staff time to review and audit permanent labor 
certification applications and reduced DHS staff time to review I-140 
and I-485 applications. In addition, DOS will have fewer interviews to 
conduct with aliens seeking permanent residence. Finally, DOJ staff 
time can be expected to be reduced from avoided investigation and 
prosecution of fraudulent applications (for example, under existing 
racketeering laws). Because of data limitations, we were not able to 
quantify or monetize this important benefit.

Costs

    The prohibition of the sale, barter, or purchase of permanent labor 
applications and certifications imposes several costs to the Federal 
Government in terms of increased DOJ staff time to prosecute 
unscrupulous agents, attorneys, or employers that submit fraudulent 
applications, and a small reduction in revenue to DHS from I-140 
petitions and I-485 applications and to DOS from immigrant visa 
applications. Due to a lack of adequate data, we were unable to 
quantify the costs to this provision of the Final Rule.
    The main cost to the Federal Government is the increased DOJ staff 
time to investigate and prosecute unscrupulous agents, attorneys, or 
employers suspected of violating this prohibition. In addition, DHS and 
DOS will experience small decreases in revenue from application fees. 
Since unscrupulous agents, employers, and attorneys will no longer 
submit fraudulent applications to the Department, there will be a 
slight decrease in the number of I-140 petitions and I-485 applications 
that would have been submitted to DHS and an immigrant visa application 
that would have been submitted to DOS. Because both these forms have 
application fees, DHS and DOS will experience small decreases in 
revenue.\34\
---------------------------------------------------------------------------

    \34\ The DHS form I-140 application fee is $195 per application 
and the immigrant visa application processing fee is $335 per 
person. The Department did not monetize the total estimated 
reduction in revenue to DHS and DOS due to data limitations. In 
addition, the costs may be offset by the cost savings, since staff 
at DHS and DOS will spend less time processing applications.

---------------------------------------------------------------------------

[[Page 27943]]

Issues Raised by Public Comment

    At least two commenters stated that a large financial impact would 
result from the proposed rule's prohibition on payment or reimbursement 
of the employer's attorneys' fees or other employer costs. One of those 
commenting reported that it ``heard [f]rom several large companies and 
universities'' that the application process may cost as much as $15,000 
to $20,000, including attorneys' fees, although it conceded that the 
numbers were informal and not based on systematic research.
    The Department has considered comments from several sources 
regarding the prohibition on payment or reimbursement by alien workers 
of the employer's expenses. We believe there are compelling reasons to 
maintain in substantial part the prohibitions proposed in the NPRM, 
including the prohibition against employers seeking reimbursement of 
employers' attorneys' fees. The Department has detailed these reasons 
above. We reiterate, in addition, that assistance of counsel is at the 
employer's option, and not a requirement of the program.
    The ban on sale, barter, purchase and certain payments related to 
permanent labor certifications is also justified for its social 
purpose, which is to prevent labor certifications from becoming a 
commodity that can be sold by unscrupulous employers, attorneys, and 
agents to aliens seeking a ``green card.'' The public disclosure that 
permanent labor certifications cannot be sold, bartered, or purchased 
reduces information asymmetry in the sense that alien beneficiaries are 
now informed that they should no longer be purchasing these 
certifications under any circumstances.
5. Debarment
    The Department may suspend processing of any permanent labor 
certification application if an employer, attorney, or agent connected 
to that application is involved in either possible fraud or willful 
misrepresentation or is named in a criminal indictment or information 
related to the permanent labor certification program. The Department 
has instituted a public debarment mechanism to effectively deter 
individuals or entities from engaging in fraudulent permanent labor 
certification activities or prohibited transactions, and provide 
employers who seek assistance from attorneys or agents with better 
information about which individuals or entities have committed fraud or 
abuse. In addition, this regulatory action will increase government 
efficiency in processing legitimate permanent labor certification 
applications as debarred employers, attorneys, or agents are prevented 
from participating in the program for a specified period of time (i.e., 
up to three years).
    We estimate that the 10-year discounted benefits associated with 
this provision of the Final Rule ranges from $175.9 to $213.6 million. 
Due to a lack of adequate data, we were unable to quantify the costs to 
this provision of the Final Rule.

Benefits

    The debarment provision has several important benefits to society, 
including improved program integrity and cost savings to the Federal 
Government in the form of reduced staff time resulting from the 
reduction in fraudulent applications.
    We are implementing this provision to promote the program's 
integrity and to assist the Department in obtaining compliance with 
existing program requirements and this rulemaking. Given the breadth 
and increased sophistication of the immigration fraud that has been 
identified in the recent past, the Department added this provision to 
attain the necessary flexibility to respond to potential improprieties 
in labor certification filings.
    Debarring unscrupulous employers, attorneys, or agents who 
willfully or repeatedly violate program requirements will prevent such 
conduct in the future. To the extent that these provisions deter, 
prevent, or forestall inaccurate, inappropriate, or fraudulent 
applications, debarment will reduce the number of applications received 
by the Department, all other factors being constant. We estimate this 
cost savings by multiplying the number of fraudulent applications 
submitted by the average number of hours spent by foreign labor 
certification staff on each fraudulent application, by the average 
compensation of staff reviewing fraudulent applications. We estimate 
the annual cost savings to the Federal Government associated with 
debarment to be $25 million per year.\35\
---------------------------------------------------------------------------

    \35\ The benefits estimated by the section of this analysis 
covering the elimination of substitution assume only the fraud 
associated with substitution and thereby eliminated by prohibiting 
the practice. The benefits estimated by this section--covering the 
institution of debarment--considers the benefits of eliminating non-
substitution fraud as well as the benefits from the substitution 
analysis. The Department estimated that 10 percent of applications 
are fraudulent and would not be filed because the employer or 
attorney/agent would be debarred from filing applications. We 
estimated the cost savings by multiplying the number of fraudulent 
applications that were not fraudulent substitutions by the average 
review time per fraudulent application (40 hours). This estimate 
does not include cost savings from the decrease in fraudulent 
substitutions to avoid double counting the cost savings that are 
already accounted for in the first provision of this rule, the ban 
on substitution. The average compensation of DOL staff reviewing the 
fraudulent applications (staff with pay grade GS 14, step 5) is 
$42.24, which was increased by 1.42 to account for employee 
benefits.
---------------------------------------------------------------------------

    In addition, the Department anticipates that there will be other 
cost savings associated with the debarment provision but, because of 
data limitations, no quantitative or monetary values could be provided. 
One portion of cost savings results from reduced DHS staff time to 
review I-140 petitions and I-485 applications. In addition, DOS will 
have fewer interviews to conduct with aliens seeking lawful residence.

Costs

    The debarment provision imposes a small cost to the Federal 
Government in the form of reduced revenue to DHS and DOS related to 
fewer I-140 petitions and I-485 applications and immigrant visa 
applications. We were unable to monetize these costs because of 
inadequate data.
    The cost to the Department associated with debarment can be 
expected to be low, since we have experience creating and implementing 
electronic tracking systems to prevent debarred individuals from filing 
applications with the Department. For example, the Department's H-1B 
Labor Condition Application (LCA) System already includes a 
``debarment'' table that is automatically updated with the names of 
debarred individuals. LCAs filed by individuals on the list are 
electronically flagged, and there is minimal staff time associated with 
this process. Although the Department does not possess data to estimate 
this cost, we do not believe that enforcing the debarment provisions in 
this rule will require a significant amount of resources.
    Finally, DHS and DOS will experience small decreases in revenue 
from application fees. Debarred individuals will not be able to submit 
applications to the Department, and thus will be unable to proceed to 
the next steps of the process in DHS and DOS. Because these forms have 
application fees, DHS and DOS will experience a small decrease in 
revenue.\36\ The Department does not have sufficient data to estimate 
this cost.
---------------------------------------------------------------------------

    \36\ The DHS Form I-140 immigrant petition filing fee is $195, 
and the Form I-485 filing fee is $395. The immigrant visa 
application processing fee charged by DOS is $335 per person.

---------------------------------------------------------------------------

[[Page 27944]]

D. Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by section 804 of the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). 
The standards for determining whether a rule is a major rule as defined 
by section 804 of SBREFA are similar to those used to determine whether 
a rule is an ``economically significant rule under Executive Order 
12866.'' Because we certified that this is not a major rule under 
Executive Order 12866, we also certify it is not a major rule under 
SBREFA. The rule will not result in an annual effect on the economy of 
$100 million or more; a major increase in costs or prices; or 
significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
companies to compete with foreign-based companies in domestic and 
export markets.
    One commenter took the position that the rule would constitute a 
``major rule'' within the meaning of SBREFA. The commenter assumed that 
employers must spend approximately $10,000 for each new application 
that must be submitted in light of the substitution prohibition. Based 
on that analysis, and noting that as many 100,000 applications are 
filed each year, the commenter argues that the impact could amount to 
$1 billion.
    While we are aware of and sensitive to the costs employers incur as 
part of the labor certification process, our regulatory analysis, as 
detailed above, indicates the rule will not have a significant economic 
effect. Separately, as pointed out earlier in this preamble, the costs 
borne by employers are not unanticipated by the statute. Therefore, 
under SBREFA, the rule is not ``major.''

E. Executive Order 13132

    This Final Rule will not have a substantial direct effect on the 
states, on the relationship between the Federal Government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, we have determined this rule does not have sufficient 
federalism implications to warrant the preparation of a summary impact 
statement. The Department received no comments that addressed Executive 
Order 13132.

F. Executive Order 12988

    This regulation meets the applicable standards set forth in 
sections 3(a) and 3(b)(2) of Executive Order 12988. The Department 
received no comments regarding this Executive Order.

G. Paperwork Reduction Act

    The collection of information under part 656 is currently approved 
under OMB control number 1205-0015. This Final Rule does not include a 
substantive or material modification of that collection of information, 
because it will not add to or change paperwork requirements for 
employers applying for permanent labor certification. The only 
consequence of this amendment eliminating the current practice allowing 
substitution of alien beneficiaries on applications and approved 
permanent labor certifications is to require those relatively few 
employers that could have availed themselves of the substitution 
practice to file new applications on behalf of alien beneficiaries. The 
Department does not anticipate any paperwork burden resulting from the 
creation of a 180-day validity period for approved certifications, the 
prohibition on sale, purchase, and barter of applications and labor 
certifications and on related payments, the ban on changes to 
applications filed under the new streamlined permanent labor 
certification procedures, nor the additional enforcement mechanisms in 
this Final Rule. The Department anticipates an insignificant increase 
in volume of permanent labor certification applications filed as a 
result of either employers withdrawing and then filing a corrected 
application or employers allowing a certification to expire and then 
filing a new application. In either situation, employers could avoid 
the need to file additional applications by proofreading and complying 
with regulatory requirements. The Department did not receive comments 
related to this section.

H. Assessment of Federal Regulations and Policies on Families

    This Final Rule does not affect family well-being. The Department 
did not receive any comments related to this section.

I. Administrative Procedure Act (APA)

    The Department has made this regulation available for notice and 
comment and, consequently, has complied with the relevant provisions of 
the Administrative Procedure Act.

J. Catalog of Federal Domestic Assistance Number

    This program is listed in the Catalog of Federal Domestic 
Assistance at Number 17.203, ``Certification for Immigrant Workers.''

List of Subjects in 20 CFR Part 656

    Administrative practice and procedure, Aliens, Employment, 
Employment and training, Enforcement, Fraud, Health professions, 
Immigration, Labor, Passports and visas, Penalties, Reporting and 
recordkeeping requirements, Unemployment, Wages, Working conditions.


0
Accordingly, for the reasons stated in the preamble, part 656 of 
Chapter V, Title 20, Code of Federal Regulations, is amended as 
follows:

PART 656--LABOR CERTIFICATION PROCESS FOR PERMANENT EMPLOYMENT OF 
ALIENS IN THE UNITED STATES

0
1. The authority citation for part 656 is revised to read as follows:

    Authority: 8 U.S.C. 1182(a)(5)(A), 1189(p)(1); section 122, Pub. 
L. 101-649, 109 Stat. 4978; and Title IV, Pub. L. 105-277, 112 Stat. 
2681.


0
2. Amend Sec.  656.3 to add the following definitions:


Sec.  656.3  Definitions, for purposes of this part, of terms used in 
this part.

* * * * *
    Barter, for purposes of an Application for Permanent Employment 
Certification (Form ETA 9089) or an Application for Alien Labor 
Certification (Form ETA 750), means the transfer of ownership of a 
labor certification application or certification from one person to 
another by voluntary act or agreement in exchange for a commodity, 
service, property or other valuable consideration.
* * * * *
    Purchase, for purposes of an Application for Permanent Employment 
Certification (Form ETA 9089) or an Application for Alien Labor 
Certification (Form ETA 750), means the transfer of ownership of a 
labor certification application or certification from one person to 
another by voluntary act and agreement, based on a valuable 
consideration.
    Sale, for purposes of an Application for Permanent Employment 
Certification (Form ETA 9089) or an Application for Alien Labor 
Certification (Form ETA 750), means an agreement between two parties, 
called, respectively, the seller (or vendor) and the buyer (or 
purchaser) by which the seller, in consideration of the payment or 
promise of payment of a certain price in money terms, transfers 
ownership of a labor certification application or certification to the 
buyer.
* * * * *


0
3. Add Sec.  656.11 to read as follows:

[[Page 27945]]

Sec.  656.11  Substitutions and modifications to applications.

    (a) Substitution or change to the identity of an alien beneficiary 
on any application for permanent labor certification, whether filed 
under this part or 20 CFR part 656 in effect prior to March 28, 2005, 
and on any resulting certification, is prohibited for any request to 
substitute submitted after July 16, 2007.
    (b) Requests for modifications to an application will not be 
accepted for applications submitted after July 16, 2007.


0
4. Add Sec.  656.12 to read as follows:


Sec.  656.12  Improper commerce and payment.

    The following provision applies to applications filed under both 
this part and 20 CFR part 656 in effect prior to March 28, 2005, and to 
any certification resulting from those applications:
    (a) Applications for permanent labor certification and approved 
labor certifications are not articles of commerce. They shall not be 
offered for sale, barter or purchase by individuals or entities. Any 
evidence that an application for permanent labor certification or an 
approved labor certification has been sold, bartered, or purchased 
shall be grounds for investigation under this part and may be grounds 
for denial under Sec.  656.24, revocation under Sec.  656.32, debarment 
under Sec.  656.31(f), or any combination thereof.
    (b) An employer must not seek or receive payment of any kind for 
any activity related to obtaining permanent labor certification, 
including payment of the employer's attorneys' fees, whether as an 
incentive or inducement to filing, or as a reimbursement for costs 
incurred in preparing or filing a permanent labor certification 
application, except when work to be performed by the alien in 
connection with the job opportunity would benefit or accrue to the 
person or entity making the payment, based on that person's or entity's 
established business relationship with the employer. An alien may pay 
his or her own costs in connection with a labor certification, 
including attorneys' fees for representation of the alien, except that 
where the same attorney represents both the alien and the employer, 
such costs shall be borne by the employer. For purposes of this 
paragraph (b), payment includes, but is not limited to, monetary 
payments; wage concessions, including deductions from wages, salary, or 
benefits; kickbacks, bribes, or tributes; in kind payments; and free 
labor.
    (c) Evidence that an employer has sought or received payment from 
any source in connection with an application for permanent labor 
certification or an approved labor certification, except for a third 
party to whose benefit work to be performed in connection with the job 
opportunity would accrue, based on that person's or entity's 
established business relationship with the employer, shall be grounds 
for investigation under this part or any appropriate Government 
agency's procedures, and may be grounds for denial under Sec.  656.32, 
revocation under Sec.  656.32, debarment under Sec.  656.31(f), or any 
combination thereof.

0
5. Amend Sec.  656.24 by revising paragraph (g) to read as follows:


Sec.  656.24  Labor certification determinations.

* * * * *
    (g)(1) The employer may request reconsideration within 30 days from 
the date of issuance of the denial.
    (2) For applications submitted after July 16, 2007, a request for 
reconsideration may include only:
    (i) Documentation that the Department actually received from the 
employer in response to a request from the Certifying Officer to the 
employer; or
    (ii) Documentation that the employer did not have an opportunity to 
present previously to the Certifying Officer, but that existed at the 
time the Application for Permanent Labor Certification was filed, and 
was maintained by the employer to support the application for permanent 
labor certification in compliance with the requirements of Sec.  
656.10(f).
    (3) Paragraphs (g)(1) and (2) of this section notwithstanding, the 
Certifying Officer will not grant any request for reconsideration where 
the deficiency that caused denial resulted from the applicant's 
disregard of a system prompt or other direct instruction.
    (4) The Certifying Officer may, in his or her discretion, 
reconsider the determination or treat it as a request for review under 
Sec.  656.26(a).

0
6. Amend Sec.  656.26 by revising paragraph (a) and adding a new 
paragraph (c), to read as follows:


Sec.  656.26  Board of Alien Labor Certification Appeals review of 
denials of labor certification.

    (a) Request for review. (1) If a labor certification is denied, if 
a labor certification is revoked pursuant to Sec.  656.32, or if a 
debarment is issued under Sec.  656.31(f), a request for review of the 
denial, revocation, or debarment may be made to the Board of Alien 
Labor Certification Appeals by the employer or debarred person or 
entity by making a request for such an administrative review in 
accordance with the procedures provided in paragraph (a) of this 
section. In the case of a finding of debarment, receipt by the 
Department of a request for review, if made in accordance with this 
section, shall stay the debarment until such time as the review has 
been completed and a decision rendered thereon.
    (2) A request for review of a denial or revocation:
    (i) Must be sent within 30 days of the date of the determination to 
the Certifying Officer who denied the application or revoked the 
certification;
    (ii) Must clearly identify the particular labor certification 
determination for which review is sought;
    (iii) Must set forth the particular grounds for the request; and
    (iv) Must include a copy of the Final Determination.
    (3) A request for review of debarment:
    (i) Must be sent to the Administrator, Office of Foreign Labor 
Certification, within 30 days of the date of the debarment 
determination;
    (ii) Must clearly identify the particular debarment determination 
for which review is sought;
    (iii) Must set forth the particular grounds for the request; and
    (iv) Must include a copy of the Notice of Debarment.
    (4)(i) With respect to a denial of the request for review, 
statements, briefs, and other submissions of the parties and amicus 
curiae must contain only legal argument and only such evidence that was 
within the record upon which the denial of labor certification was 
based.
    (ii) With respect to a revocation or a debarment determination, the 
BALCA proceeding may be de novo.
* * * * *
    (c) Debarment Appeal File. Upon the receipt of a request for review 
of debarment, the Administrator, Office of Foreign Labor Certification, 
immediately must assemble an indexed Appeal File:
    (1) The Appeal File must be in chronological order, must have the 
index on top followed by the most recent document, and must have 
consecutively numbered pages. The Appeal File must contain the request 
for review, the complete application file(s), and copies of all written 
materials, such as pertinent parts and pages of surveys and/or reports 
or documents received from any court, DHS, or the Department of State, 
upon which the debarment was based.

[[Page 27946]]

    (2) The Administrator, Office of Foreign Labor Certification, must 
send the Appeal File to the Board of Alien Labor Certification Appeals, 
Office of Administrative Law Judges, 800 K St., NW., Suite 400-N, 
Washington, DC 20001-8002.
    (3) The Administrator, Office of Foreign Labor Certification, must 
send a copy of the Appeal File to the debarred person or entity. The 
debarred person or entity may furnish or suggest directly to the Board 
of Alien Labor Certification Appeals the addition of any documentation 
that is not in the Appeal File. The debarred person or entity must 
submit such documentation in writing, and must send a copy to the 
Associate Solicitor for Employment and Training Legal Services, Office 
of the Solicitor, U.S. Department of Labor, 200 Constitution Ave., NW., 
Washington, DC 20210.

0
7. Amend Sec.  656.30 by: revising paragraphs (a), (b), and (c); and 
adding a new paragraph (e)(3), to read as follows:


Sec.  656.30  Validity of and invalidation of labor certifications.

    (a) Priority Date. (1) The filing date for a Schedule A occupation 
or sheepherders is the date the application was dated by the 
Immigration Officer.
    (2) The filing date, established under Sec.  656.17(c), of an 
approved labor certification may be used as a priority date by the 
Department of Homeland Security and the Department of State, as 
appropriate.
    (b) Expiration of labor certifications. For certifications 
resulting from applications filed under this part and 20 CFR part 656 
in effect prior to March 28, 2005, the following applies:
    (1) An approved permanent labor certification granted on or after 
July 16, 2007 expires if not filed in support of a Form I-140 petition 
with the Department of Homeland Security within 180 calendar days of 
the date the Department of Labor granted the certification.
    (2) An approved permanent labor certification granted before July 
16, 2007 expires if not filed in support of a Form I-140 petition with 
the Department of Homeland Security within 180 calendar days of July 
16, 2007.
    (c) Scope of validity. For certifications resulting from 
applications filed under this part or 20 CFR part 656 in effect prior 
to March 28, 2005, the following applies:
    (1) A permanent labor certification for a Schedule A occupation or 
sheepherders is valid only for the occupation set forth on the 
Application for Alien Employment Certification (Form ETA 750) or the 
Application for Permanent Employment Certification (Form ETA 9089) and 
only for the alien named on the original application, unless a 
substitution was approved prior to July 16, 2007. The certification is 
valid throughout the United States unless the certification contains a 
geographic limitation.
    (2) A permanent labor certification involving a specific job offer 
is valid only for the particular job opportunity, the alien named on 
the original application (unless a substitution was approved prior to 
July 16, 2007), and the area of intended employment stated on the 
Application for Alien Employment Certification (Form ETA 750) or the 
Application for Permanent Employment Certification (Form ETA 9089).
* * * * *
    (e)* * *
    (3) A duplicate labor certification shall be issued by the 
Certifying Officer with the same filing and expiration dates, as 
described in paragraphs (a) and (b) of this section, as the original 
approved labor certification.

0
8. Revise Sec.  656.31 to read as follows:


Sec.  656.31  Labor certification applications involving fraud, willful 
misrepresentation, or violations of this part.

    The following provisions apply to applications filed under both 
this part and 20 CFR part 656 in effect prior to March 28, 2005, and to 
any certifications resulting from those applications.
    (a) Denial. A Certifying Officer may deny any application for 
permanent labor certification if the officer finds the application 
contains false statements, is fraudulent, or was otherwise submitted in 
violation of the Department's permanent labor certification 
regulations.
    (b) Possible fraud or willful misrepresentation. (1) If the 
Department learns an employer, attorney, or agent is involved in 
possible fraud or willful misrepresentation in connection with the 
permanent labor certification program, the Department will refer the 
matter to the Department of Justice, Department of Homeland Security, 
or other government entity, as appropriate, for investigation, and send 
a copy of the referral to the Department of Labor's Office of Inspector 
General (OIG). In these cases, or if the Department learns an employer, 
attorney, or agent is under investigation by the Department of Justice, 
Department of Homeland Security, or other government entity for 
possible fraud or willful misrepresentation in connection with the 
permanent labor certification program, the Department may suspend 
processing of any permanent labor certification application involving 
such employer, attorney, or agent until completion of any investigation 
and/or judicial proceedings. Unless the investigatory agency, in 
writing, requests the Department to do otherwise, the Department shall 
provide written notification to the employer of the suspension in 
processing.
    (2) A suspension pursuant to paragraph (b)(1) of this section may 
last initially for up to 180 days. No later than 180 days after the 
suspension began, if no criminal indictment or information has been 
issued, or judicial proceedings have not been concluded, the National 
Certifying Officer may resume processing some or all of the 
applications, or may extend the suspension in processing until 
completion of any investigation and/or judicial proceedings.
    (c) Criminal indictment or information. If the Department learns 
that an employer, attorney, or agent is named in a criminal indictment 
or information in connection with the permanent labor certification 
program, the processing of applications related to that employer, 
attorney, or agent may be suspended until the judicial process is 
completed. Unless the investigatory or prosecutorial agency, in 
writing, requests the Department to do otherwise, the Department shall 
provide written notification to the employer of the suspension in 
processing.
    (d) No finding of fraud or willful misrepresentation. If an 
employer, attorney, or agent is acquitted of fraud or willful 
misrepresentation charges, or if such criminal charges are withdrawn or 
otherwise fail to result in a finding of fraud or willful 
misrepresentation, the Certifying Officer shall decide each pending 
permanent labor certification application related to that employer, 
attorney, or agent on the merits of the application.
    (e) Finding of fraud or willful misrepresentation. If an employer, 
attorney, or agent is found to have committed fraud or willful 
misrepresentation involving the permanent labor certification program, 
whether by a court, the Department of State or DHS, as referenced in 
Sec.  656.30(d), or through other proceedings:
    (1) Any suspension of processing of pending applications related to 
that employer, attorney, or agent will terminate.
    (2) The Certifying Officer will decide each such application on its 
merits, and may deny any such application as provided in Sec.  656.24 
and in paragraph (a) of this section.

[[Page 27947]]

    (3) In the case of a pending application involving an attorney or 
agent found to have committed fraud or willful misrepresentation, DOL 
will notify the employer associated with that application of the 
finding and require the employer to notify DOL in writing, within 30 
days of the notification, whether the employer will withdraw the 
application, designate a new attorney or agent, or continue the 
application without representation. Failure of the employer to respond 
within 30 days of the notification will result in a denial. If the 
employer elects to continue representation by the attorney or agent, 
DOL will suspend processing of affected applications while debarment 
proceedings are conducted under paragraph (f) of this section.
    (f) Debarment. (1) No later than six years after the date of filing 
of the labor certification application that is the basis for the 
finding, or, if such basis requires a pattern or practice as provided 
in paragraphs (f)(1)(iii), (iv), and (v) of this section, no later than 
six years after the date of filing of the last labor certification 
application which constitutes a part of the pattern or practice, the 
Administrator, Office of Foreign Labor Certification, may issue to an 
employer, attorney, agent, or any combination thereof a Notice of 
Debarment from the permanent labor certification program for a 
reasonable period of no more than three years, based upon any action 
that was prohibited at the time the action occurred, upon determining 
the employer, attorney, or agent has participated in or facilitated one 
or more of the following:
    (i) The sale, barter, or purchase of permanent labor applications 
or certifications, or any other action prohibited under Sec.  656.12;
    (ii) The willful provision or willful assistance in the provision 
of false or inaccurate information in applying for permanent labor 
certification;
    (iii) A pattern or practice of a failure to comply with the terms 
of the Form ETA 9089 or Form ETA 750;
    (iv) A pattern or practice of failure to comply in the audit 
process pursuant to Sec.  656.20;
    (v) A pattern or practice of failure to comply in the supervised 
recruitment process pursuant to Sec.  656.21; or
    (vi) Conduct resulting in a determination by a court, DHS or the 
Department of State of fraud or willful misrepresentation involving a 
permanent labor certification application, as referenced in Sec.  
656.31(e).
    (2) The Notice of Debarment shall be in writing; shall state the 
reason for the debarment finding, including a detailed explanation of 
how the employer, attorney or agent has participated in or facilitated 
one or more of the actions listed in paragraphs (f)(1)(i) through (v) 
of this section; shall state the start date and term of the debarment; 
and shall identify appeal opportunities under Sec.  656.26. The 
debarment shall take effect on the start date identified in the Notice 
of Debarment unless a request for review is filed within the time 
permitted by Sec.  656.26. DOL will notify DHS and the Department of 
State regarding any Notice of Debarment.
    (g) False Statements. To knowingly and willfully furnish any false 
information in the preparation of the Application for Permanent 
Employment Certification (Form ETA 9089) or the Application for Alien 
Employment Certification (Form ETA 750) and any supporting 
documentation, or to aid, abet, or counsel another to do so is a 
Federal offense, punishable by fine or imprisonment up to five years, 
or both under 18 U.S.C. 2 and 1001. Other penalties apply as well to 
fraud or misuse of ETA immigration documents and to perjury with 
respect to such documents under 18 U.S.C. 1546 and 1621.

    Signed in Washington, DC, this 1st day of May, 2007.
Emily Stover DeRocco,
Assistant Secretary, Employment and Training Administration.
[FR Doc. E7-9250 Filed 5-16-07; 8:45 am]
BILLING CODE 4510-FP-P



[Federal Register: May 17, 2007 (Volume 72, Number 95)]
[Rules and Regulations]               
[Page 27903-27947]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17my07-15]                         


[[Page 27903]]

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Part II





Department of Labor





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Employment and Training Administration



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20 CFR Part 656



Labor Certification for the Permanent Employment of Aliens in the 
United States; Reducing the Incentives and Opportunities for Fraud and 
Abuse and Enhancing Program Integrity; Final Rule


[[Page 27904]]


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DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Part 656

RIN 1205-AB42

 
Labor Certification for the Permanent Employment of Aliens in the 
United States; Reducing the Incentives and Opportunities for Fraud and 
Abuse and Enhancing Program Integrity

AGENCY: Employment and Training Administration, Department of Labor.

ACTION: Final Rule.

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SUMMARY: The Department of Labor (DOL or Department) is amending its 
regulations to enhance program integrity and reduce the incentives and 
opportunities for fraud and abuse related to the permanent employment 
of aliens in the United States.
    This Final Rule includes several major provisions. It prohibits the 
substitution of alien beneficiaries on permanent labor certification 
applications and resulting certifications. The Final Rule provides a 
180-day validity period for approved labor certifications; employers 
will have 180 calendar days within which to file an approved permanent 
labor certification in support of a Form I-140 Immigrant Petition for 
Alien Worker (Form I-140 hereafter) with the Department of Homeland 
Security (DHS). The rule prohibits the sale, barter or purchase of 
permanent labor certifications and applications. In addition, this rule 
requires employers to pay the costs of preparing, filing and obtaining 
certification. An employer's transfer to the alien beneficiary of the 
employer's costs incurred in the labor certification or application 
process is strictly prohibited. The rule makes clear an alien may pay 
his or her own legitimate costs in the permanent labor certification 
process, including attorneys' fees for representation of the alien. The 
rule also reinforces existing law pertaining to the submission of 
fraudulent or false information and clarifies current DOL procedures 
for responding to incidents of possible fraud. Finally, the rule 
establishes procedures for debarment from the permanent labor 
certification program.
    Consistent with the proposed rule, the provisions in this Final 
Rule apply to permanent labor certification applications and approved 
certifications filed under both the Program Electronic Review 
Management (PERM) program regulation effective March 28, 2005, and 
prior regulations implementing the permanent labor certification 
program. This rule also clarifies the Department's ``no modifications'' 
policy for applications filed on or after March 28, 2005, under the 
new, streamlined PERM process.

DATES: This Final Rule is effective July 16, 2007.

FOR FURTHER INFORMATION CONTACT: William L. Carlson, Administrator, 
Office of Foreign Labor Certification, Employment and Training 
Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Room C-4312, Washington, DC 20210. Telephone: (202) 693-3010 (this is 
not a toll-free number).
    Individuals with hearing or speech impairments may access the 
telephone number above via TTY by calling the toll-free Federal 
Information Relay Service at (800) 877-8339 (this is a toll-free 
number).

SUPPLEMENTARY INFORMATION

I. Background

    The purpose of this Final Rule is to impose clear limitations on 
the acquisition and use of permanent labor certification applications 
and permanent labor certifications in order to reduce incentives and 
opportunities for fraud and abuse in the permanent labor certification 
program. It also promulgates key measures to enhance the integrity of 
the permanent labor certification program. This Final Rule continues 
efforts the Department initiated several years ago to construct a 
deliberate, coordinated fraud reduction and prevention framework within 
the permanent labor certification program. The Department laid the 
groundwork for greater integrity and security during the planning and 
promulgation of the 2004 Final Rule to implement the re-engineered PERM 
system. While fraud prevention has always been a goal of the 
Department's labor certification programs, our continuing program 
experience and that of other Federal agencies has demonstrated the need 
to focus on the specific opportunities for fraud and abuse addressed in 
this rule.

A. Statutory Standard and Current Department of Labor Regulations

    Under section 212(a)(5)(A) of the Immigration and Nationality Act 
(INA or Act) (8 U.S.C. 1182(a)(5)(A)), before the Department of 
Homeland Security (DHS) may approve petition requests and the 
Department of State (DOS) may issue visas and admit certain immigrant 
aliens to work permanently in the United States (U.S.), the Secretary 
of Labor (Secretary) must certify to the Secretary of Homeland Security 
and the Secretary of State that:
    (a) There are not sufficient U.S. workers who are able, willing, 
qualified, and available at the time of the application for a visa and 
admission into the United States and at the place where the alien is to 
perform the work; and
    (b) The employment of the alien will not adversely affect the wages 
and working conditions of similarly employed U.S. workers.
    If the Secretary of Labor, through the Employment and Training 
Administration (ETA), is satisfied in his or her review of a sponsoring 
employer's application for certification that these two requirements 
have been met, he or she so certifies by granting a permanent labor 
certification. If DOL cannot make both of the above findings, the 
application for permanent labor certification is denied. The Department 
of Labor's regulation at 20 CFR part 656 governs the labor 
certification process for the permanent employment of immigrant aliens 
and sets forth the responsibilities of employers who wish to employ 
immigrant aliens permanently in the United States.
    The INA does not specifically address substitution of aliens in the 
permanent labor certification process. Similarly, the Department of 
Labor's regulations are silent on the question of substitution.
    On May 6, 2002, the Department published a Notice of Proposed 
Rulemaking (NPRM) to streamline the permanent labor certification 
program. 67 FR 30466 (May 6, 2002). A Final Rule implementing the 
streamlined permanent labor certification program through revisions to 
20 CFR part 656 was published on December 27, 2004, and took effect on 
March 28, 2005. 69 FR 77326 (Dec. 27, 2004). The prior 20 CFR part 656 
(2004) governs processing of permanent labor certification applications 
filed prior to March 28, 2005, except where certain provisions of this 
Final Rule will impact such applications. Previously filed applications 
may be refiled under the new PERM rule.

B. General Immigration Process Involving Permanent Labor Certifications

    To obtain permanent alien workers, U.S. employers generally must 
engage in a multi-step process that involves DOL and DHS and, in some 
instances, DOS. The INA classifies employment-based (EB) immigrant 
workers into categories, e.g., EB-2 and EB-3, based on the general job 
requirements and the perceived benefit to American society.

[[Page 27905]]

U.S. employers must demonstrate that the requested job requirements, 
and in some cases the alien, fit into one of these classifications. The 
first step in the process for the EB-2 and EB-3 classifications, 
further described below, generally begins with the U.S. employer filing 
a labor certification application with DOL in accordance with 20 CFR 
part 656. The U.S. employer must demonstrate to DOL, through a test of 
the labor market, that there are no U.S. workers able, willing, 
qualified, and available at the time of the application for a visa and 
admission to the United States and at the place where the alien is to 
perform the work. The employer must also demonstrate that the 
employment of the alien will not adversely affect the wages and working 
conditions of similarly employed U.S. workers. Following review of the 
permanent labor certification application, DOL will either certify or 
deny the application.
    The Immigrant Petition for Alien Worker (Form I-140) is a petition 
filed with the United States Citizenship and Immigration Services 
(USCIS), within DHS, by a U.S. employer for a prospective permanent 
alien employee. Most Form I-140 petitions filed under section 203(b)(2) 
and (3) of the Act, the EB-2 and EB-3 classifications, must be 
accompanied by an approved labor certification issued by DOL. DHS has 
established procedures for filing Form I-140 petitions under 8 CFR 
204.5.
    DHS reviews the approved labor certification in conjunction with 
the Form I-140 petition and other supporting documents to evaluate 
whether the position being offered to the alien named in the petition 
is the same as the position specified on the labor certification and 
whether the employment qualifies for the immigrant classification 
requested by the employer. In addition, DHS evaluates the alien's 
education, training, and work experience to determine whether the 
particular alien meets the job requirements specified on the labor 
certification. The approved labor certification is also used to 
establish the priority date for which an immigrant visa will be made 
available to the alien, based on the date the labor certification 
application was originally filed.

C. Current ETA Practices Involving Permanent Labor Certifications

    Although not mentioned in 20 CFR part 656, ETA has for years 
informally allowed employers to substitute an alien named on a pending 
or approved labor certification with another prospective alien 
employee. Labor certification substitution has occurred either while 
the permanent labor certification application is pending at DOL or--by 
DOL's delegation to DHS--while a Form I-140 petition, filed with an 
approved labor certification, is pending with DHS. Historically, this 
substitution practice was permitted as an accommodation to U.S. 
employers due to the length of time it took to obtain a permanent labor 
certification or receive approval of the Form I-140 petition.
    Currently, the regulations do not set any validity period on a 
permanent labor certification and, thus, permanent labor certifications 
are valid indefinitely. Also, DOL regulations do not address payments 
related to the permanent labor certification program or debarment 
authority. In this Final Rule, the Department addresses problems that 
have arisen related to substitution, lack of a validity period for 
certifications, and financial transactions related to the permanent 
labor certification program.

D. Issues Arising From Current Practices

    For more than 15 years, the Department has expressed concern that 
various immigration practices, including substitution, were subject to 
a high degree of fraud and abuse. See, e.g., Interim Final Rule, 56 FR 
54920 (October 23, 1991).\1\ This concern was heightened by a number of 
recent criminal prosecutions by the Department of Justice (DOJ) as well 
as recommendations from the Department of Justice and the Department of 
Labor's Office of Inspector General (OIG), and public comments 
concerning fraud received in response to the May 6, 2002, NPRM on PERM. 
See, e.g., 69 FR at 77328, 77329, 77363, and 77364 (Dec. 27, 2004).
---------------------------------------------------------------------------

    \1\ The 1991 Interim Final Rule included a provision prohibiting 
substitution. That provision was overturned by the U.S. Court of 
Appeals for the D.C. Circuit on Administrative Procedure Act 
procedural grounds. Kooritzky v. Reich, 17 F.3d 1509 (D.C. Cir. 
1994). DOL addressed the court's concern through publication of the 
NPRM for notice and comment on February 13, 2006, consideration of 
comments received and development of this Final Rule. 71 FR 7656 
(Feb. 13, 2006). It is of no small significance that the plaintiff 
in that suit, an attorney, was later convicted for the criminal sale 
of fraudulent labor certifications used for substitution. U.S. v. 
Kooritzky, No. 02-502-A (E.D. Va. 2003).
---------------------------------------------------------------------------

    The Department's review of recent prosecutions by DOJ, in 
particular, revealed that the ability to substitute alien beneficiaries 
has turned labor certifications into commodities which can be sold by 
unscrupulous employers, attorneys, or agents to those seeking a ``green 
card.'' Similarly, the ability to sell labor certifications has been 
greatly enhanced by their current open-ended validity, providing a 
lengthy period during which a certification may be marketed. In many of 
these applications, the job offer was fictitious. In others, the job in 
question existed but was never truly open to U.S. workers. Rather, the 
job was steered to a specific alien in return for a substantial fee or 
``kickback.'' The Federal Government has prosecuted a number of cases 
resulting from employers, agents, or attorneys seeking to fraudulently 
profit from the substitution of aliens on approved labor certifications 
and applications. One attorney filed approximately 2,700 fraudulent 
applications with DOL for fees of up to $20,000 per application. Many 
of these applications were filed for the sole purpose of later being 
sold to aliens who would be substituted for named beneficiaries on the 
approved labor certifications. See U.S. v. Kooritzky, No. 02-502-A 
(E.D. Va. 2003). Additional prosecutions have also involved the sale of 
fraudulent applications or certifications. See, e.g., U.S. v. 
Ivanchukov, et al., No. 04-421 (E.D. Va. 2005); U.S. v. Mir, No. 8:03-
CR-00156-AW-ALL (D. Md. 2003); U.S. v. Fredman, et al., No. WMN-05-198 
(D. Md.); U.S. v. Lee, No. 03-947-M (E.D. Va.); U.S. v. Mederos, No. 
04-314-A (E.D. Va.); U.S. v. Yum (E.D. Va. 2006); U.S. v. Mandalapa, 
No. 205-NJ-03117-PS (D. N.J. 2006); U.S. v. Heguman, No. CR 04-1635(A)-
RSWL (C.D. Cal. 2007). Our program experience confirms that such 
fraudulent activity adds to the cost of foreign labor certification 
programs--for example, resources spent processing fraudulent 
applications, anticipating and combating unscrupulous conduct, and 
assisting debarments or prosecutions after the fact.
    The Final Rule implementing the streamlined permanent labor 
certification program also discussed DOL's and others' concerns about 
fraud in the program and the steps the Department would be taking to 
minimize the filing of fraudulent or non-meritorious applications. 69 
FR at 77328, 77329, and 77363 (Dec. 27, 2004). As implemented, the 
basic labor certification process under the new PERM system 
incorporates fraud detection measures targeting areas that have 
historically shown vulnerability. These measures include system and 
manual checks in key areas, as well as the use of auditing triggers and 
techniques, both targeted and random, which can be adjusted as 
appropriate to maintain security and integrity in the process.
    Personal Identification Numbers (PINs) and passwords for 
registration into the automated filing system are assigned to accounts 
issued to

[[Page 27906]]

sponsoring employers, who may then create sub-accounts for attorneys or 
agents who represent the employer. The initial stages of registration 
and application include system checks to verify the employer-applicant 
is a bona fide business entity. Once DOL's initial review of a filed 
application shows it to be technically acceptable for processing, the 
application transfers to a substantive review queue, where it may be 
selected for audit either randomly or based on specific criteria that 
tie closely to program requirements. Staff at ETA's National Processing 
Centers, where PERM applications are processed, also confirm 
information directly with employers, for example, to ensure each 
employer is aware an application has been filed on its behalf and is, 
in fact, sponsoring the alien named on the application.
    While these measures are targeted based on our program experience, 
they focus largely on discrete activities (employer verification, 
sponsorship, etc.) or on program requirements as reflected in questions 
throughout the application, and do not address broader labor 
certification policies historically of concern to the Department. For 
example, in the Final Rule to implement the PERM program, the 
Department noted the practice of allowing the substitution of alien 
beneficiaries may provide an incentive for fraudulent applications to 
be filed. 69 FR at 77363 (Dec. 27, 2004). The Department also concluded 
in that Final Rule that the emerging ``black market'' for purchase and 
sale of approved labor certifications is not consistent with the 
purpose of the labor certification statute at section 212(a)(5)(A) of 
the INA. While DOL was not able to address many of these fraud issues 
in the PERM Final Rule because they arguably went beyond the scope of 
the proposals contained in the PERM NPRM, the Department clearly 
indicated it would be exploring regulatory solutions to address these 
issues. 69 FR at 77328, 77329, and 77363 (Dec. 27, 2004).
    Similarly, the Department determined that additional regulatory 
action was required to reinforce and clarify core program components, 
both to strengthen fraud prevention and enhance program integrity. For 
example, a prohibition on modifications to applications was an original 
assumption of the PERM program and having such a clear, enforceable 
prohibition is critical to its long-term efficiency and effectiveness. 
A prohibition against the transfer of labor certification costs from 
sponsoring employers to alien beneficiaries keeps legitimate business 
costs with the employer, minimizes improper financial involvement by 
aliens in the labor certification process, and strengthens the 
enforceability of the bona fide job opportunity requirement.
    Accordingly, on February 13, 2006, the Department published in the 
Federal Register a Notice of Proposed Rulemaking to amend its 
regulations governing the permanent labor certification process to curb 
fraud and abuse and strengthen program integrity. 71 FR 7656. As 
proposed, the rule prohibited substitution of aliens not originally 
named on applications for permanent labor certification; limited the 
period of validity of a permanent labor certification to 45 calendar 
days; prohibited certain financial transactions or activities related 
to permanent labor certifications; and took other steps to enhance 
program integrity and reduce or avert fraud.
    This Final Rule builds on the foundation laid in the 2004 Final 
Rule implementing the streamlined permanent program and follows through 
on the strong commitment reflected in the NPRM for this rulemaking, 
culminating a multi-year effort to enhance integrity and fraud 
prevention mechanisms in the permanent labor certification program.
    To assist compliance and enforcement under this rule, the 
Department is reviewing available resources to determine its ability to 
establish a new toll-free telephone number, or to develop other means, 
to receive reports of potential violations. Calls would be screened by 
DOL staff, who would refer calls or inquiries to appropriate agencies 
within or outside the Department.

II. Overview of the Regulation

    In order to protect the integrity of the permanent labor 
certification program, reduce the incentives for fraud and abuse, and 
comply with the Department's statutory obligation to protect the wages 
and working conditions of U.S. workers, the Department proposed in the 
NPRM a number of regulatory changes. As stated in the NPRM, the 
revisions were proposed in part in response to concerns raised 
historically by stakeholder agencies and individual program users. They 
also responded to the numerous substantive comments received to the May 
6, 2002 NPRM. At its essence, each change was motivated by our program 
experience and desire and responsibility under the authorizing statute 
to restore and maintain the integrity of the labor market test. The 
Department's regulations at 20 CFR part 656 establish the fact-finding 
process designed to develop information sufficient to support the 
Secretary of Labor's determination, required under the statute, of the 
availability of or adverse impact to U.S. workers. The labor market 
test forms the basis for notice to U.S. workers of the job vacancy, for 
the recruitment process through which U.S. workers have the opportunity 
to apply and be considered for each job, and for employer attestations 
related to key terms and conditions of employment. While we remain 
sensitive to concerns raised by employers and others over the impact of 
these changes, we nonetheless have concluded, after careful review of 
comments on each proposal, that the identification and deterrence of 
fraud and the broader integrity of the program require a strong, 
comprehensive approach to which these regulatory reforms are critical. 
Accordingly, in this Final Rule the Department amends part 656 to add 
fraud prevention and redressive measures in the key areas identified in 
the proposed rule, as follows.
    Substitution--Consistent with the proposed rule, this Final Rule 
adds a new Sec.  656.11 to prohibit the substitution of alien 
beneficiaries as of the effective date of the Final Rule. This 
prohibition will apply to all pending permanent labor certification 
applications and to approved permanent labor certifications, whether 
the application was filed under the provisions of 20 CFR part 656 in 
effect before March 28, 2005, or on or after March 28, 2005. 
Additionally, as proposed, the Final Rule revises Sec.  656.30(c) to 
provide that a certification resulting from an application filed under 
20 CFR part 656 in effect before March 28, 2005, or on or after March 
28, 2005, is only valid for the alien named on the original permanent 
labor certification application. These regulatory changes do not affect 
substitutions approved by the Department or DHS under either regulation 
prior to this Final Rule's effective date. They also do not affect 
substitution requests in progress as of this rule's effective date. Due 
to the considerable evidence of past and continuing fraud in the 
permanent labor certification process, DOL through this Final Rule, 
among other measures, is eliminating the practice of substitution. The 
Department will work with the Departments of Justice and Homeland 
Security to explore appropriate circumstances under which substitution 
could be reinstated. We anticipate that there may come a time when all 
affected agencies are satisfied that there are sufficient anti-fraud 
protections to alleviate the concerns motivating this rule.

[[Page 27907]]

    Modifications to applications--This Final Rule finalizes with minor 
changes the provision in the proposed rule prohibiting modifications to 
permanent labor certification applications once such applications are 
filed with the Department. The Department has implemented technological 
changes in the PERM program to alert applicants to technical grounds 
for deniability, thus eliminating the need for many modifications. 
Section 656.11(b) clarifies that requests for modifications to an 
application, where the application was filed after this Final Rule's 
effective date, will not be accepted. To comport with this 
clarification while ensuring due process, the Final Rule revises Sec.  
656.24(g) to more precisely define what evidence may be submitted with 
an employer's request for reconsideration.
    Validity period--Although the Department had originally proposed 
permanent labor certifications be filed with DHS within 45 calendar 
days, this Final Rule extends that period to 180 calendar days. 
Accordingly, all permanent labor certifications approved on or after 
the effective date of this Final Rule will expire 180 calendar days 
after certification, whether the original application was filed under 
20 CFR part 656 in effect prior to or after March 28, 2005, unless 
filed prior to expiration in support of a Form I-140 petition with DHS. 
Likewise, all certifications approved prior to this Final Rule's 
effective date will expire 180 calendar days after the Final Rule's 
effective date unless filed in support of a Form I-140 petition with 
DHS prior to the expiration date.
    Ban on sale, barter, purchase, and certain payments--This Final 
Rule prohibits the sale, barter, and purchase of applications and 
approved labor certifications, as well as certain payments to employers 
in compensation or reimbursement for the employer's costs incurred to 
obtain labor certification. This ban will apply to all such 
transactions on or after the effective date of This Final Rule 
regardless of whether the labor certification application involved was 
filed under 20 CFR part 656 in effect before March 28, 2005, or on or 
after March 28, 2005. In consideration of comments, the Final Rule more 
precisely describes the payments being prohibited. Proposed Sec.  
656.12(b), now Sec.  656.12(b) and (c), has been revised to reflect 
this approach and definitions have been added to Sec.  656.3.
    Debarment and program integrity--Finally, the Final Rule institutes 
several enforcement mechanisms as described in the proposed rule, with 
revisions to clarify procedures and address comments received in 
response to the NPRM. On or after the effective date of this Final 
Rule, the Department may debar an employer, attorney or agent based 
upon certain enumerated actions such as fraud, willful provision of 
false statements, or a pattern or practice of noncompliance with PERM 
requirements, regardless of whether the labor certification application 
involved was filed under the prior or current regulation. In addition, 
other provisions related to all applications filed under 20 CFR part 
656 in effect before March 28, 2005, or on or after March 28, 2005, 
highlight existing law pertaining to submission of fraudulent or false 
information and clarify our procedures for responding to possible 
fraud.
    As proposed, this Final Rule extends from 90 to 180 days the period 
during which the Department may suspend processing of applications 
under criminal investigation. In addition, in response to comments 
requesting a materiality standard for the various debarment provisions, 
the Final Rule adds an intent requirement (``willful'') to the false 
information section; to be actionable, the employer must willfully 
provide false or inaccurate information to the Department. The Final 
Rule also raises the standard for debarment based on failure to comply 
with the terms of Forms ETA 9089 or 750, failure to comply with the 
permanent labor certification program's audit process, or failure to 
comply with the program's supervised recruitment requirements, to 
require there must be a pattern or practice of noncompliance in each 
case. These changes in the standard for debarment at Sec.  656.31(f) 
work in tandem with the revision to Sec.  656.26(a)(1). The new Sec.  
[acute]656.26(a)(1) expands the existing provision for a right to 
review the Department's denial of an application or revocation of a 
certification, to encompass a right to review of a debarment action. 
The request for review would be made to, and in appropriate cases a 
concomitant hearing would be held by, the Board of Alien Labor 
Certification Appeals (BALCA).

III. Discussion of Comments on Proposed Rule

    The Department received a total of 489 comments from attorneys, 
educational institutions, trade associations, individuals, and 
businesses. Many of the comments were duplicative in nature and have 
been grouped together for discussion purposes. Although most of the 
commenters were critical of one or more of the proposed changes, they 
also supported the Department's efforts to deter fraud in the permanent 
labor certification program. Several commenters suggested alternatives 
for improving the fraud rule, while some suggested abandonment of the 
proposed rule entirely.

A. Prohibition of Substitution or Change to the Identity of Alien 
Beneficiaries on Permanent Labor Certifications and Applications

    The proposed rule prohibited the substitution of alien 
beneficiaries on pending applications for permanent labor certification 
and on approved labor certifications. The comments we received on the 
prohibition of substitution raised concerns in a number of key areas: 
the Department's authority to make the rule change; the nexus between 
the proposed ban and the incidence and types of fraud that have 
occurred; the Department's premise that substitution is no longer 
needed, both because the new, automated system has significantly 
reduced processing time and because the backlog of permanent labor 
certification applications filed prior to March 28, 2005, will be 
eliminated by September 30, 2007; the application of the ban to all 
pending applications and approved certifications; and the hardships 
that employers would suffer and costs they would incur as a result of 
such a ban.
    We address the comments bearing on each of these issues below. 
However, after thoughtfully reviewing and deliberating over the 
concerns raised, we continue to find that the public benefit of 
eliminating substitution on permanent labor certifications and 
applications outweighs any potential disadvantages to individual 
program users. Consequently, as originally proposed in the NPRM, the 
Final Rule includes a new Sec.  656.11 providing that, as of the 
effective date of the Final Rule, substitution of alien beneficiaries 
will be prohibited: (1) On all pending permanent labor certification 
applications; and (2) on certifications, regardless of whether the 
application was filed under 20 CFR part 656 in effect before or on or 
after March 28, 2005. Likewise, once this Final Rule takes effect, the 
revised Sec.  656.30(c) makes a certification valid only for the alien 
named on the original application.
    As explained in the NPRM, this regulatory change has no retroactive 
effect on substitutions approved by the Department or DHS prior to this 
Final Rule's effective date. As made implicit by the new Sec.  
656.11(a), this Final Rule also has no retroactive effect on 
substitution requests in progress (submitted) prior to this rule taking

[[Page 27908]]

effect. These and the other regulatory changes promulgated in this 
Final Rule modify the statement in the preamble to the December 27, 
2004, PERM Final Rule that applications filed before that Final Rule's 
effective date would continue to be processed and governed by the then-
current regulation. 69 FR 77326 (Dec. 27, 2004).
1. Statutory Authority
    Several commenters questioned the Department's authority under the 
INA to eliminate substitution of aliens on certifications and 
applications.
    Statutory authority relative to qualifications and identity of 
alien--Many commenters opposed the ban on substitution as being 
overbroad and overreaching. Commenters referred to the plain language 
of the authorizing statute and opposed the elimination of substitution 
on grounds that DOL's jurisdiction, based on 8 U.S.C. 1182(a)(5), stops 
with determining worker unavailability and adverse impact and does not 
extend to activities related to worker identity or qualifications. 
Commenters stated that the authority to scrutinize the qualifications 
of the alien named on the petition rests solely with USCIS.
    More specifically, commenters questioned the Department's authority 
to join the labor certification application to a specific alien, 
asserting labor certifications are related to the job opportunity, not 
the employee. They argued that the identity of the specific alien 
employee, whether the original beneficiary or a substituted 
beneficiary, is not relevant to a good faith labor market test. One 
commenter stated that the elimination of substitution, requiring a 
second labor market test for the position, contravenes what it believes 
is the legislative intent that the labor certification process require 
only a single labor market test.
    With respect to the statutory requirement that U.S. workers be 
unavailable, one commenter stated that the identity of the alien is not 
relevant to the labor market test, as long as he or she qualified for 
the job opportunity when the labor certification application was filed. 
With respect to the requirement of no adverse impact, the commenter 
stated that the alien's identity is also not relevant as long as the 
qualified alien is offered the appropriate wages and working 
conditions. The commenter raised concern that this rule would refocus 
labor certification from the job opportunity to the identity of the 
sponsored alien, and would do so without statutory change, evidence of 
fraud, or analysis of the increased costs to the employer. In fact, 
this commenter stated that given the automated, largely attestation-
based nature of PERM, DOL is clearly unprepared and lacking in 
resources to evaluate evidence bearing on whether the alien is 
qualified for the job.
    The Department's authority to regulate and ban the substitution of 
aliens on labor certifications and applications is clear. The INA 
treats each alien individually and, for employment-based immigration 
requiring labor certification, makes every alien inadmissible, absent 
the Secretary of Labor's determination on U.S. worker availability and 
adverse impact. The trigger for such a determination has always been, 
at its core, the existence of a vacancy that an employer wishes to fill 
with an alien, and the burden of proof is always upon the petitioning 
employer to overcome the presumption of the inadmissibility of an 
individual intended immigrant employee through a test of the labor 
market.
    The statute itself could not be clearer that the labor 
certification process is alien specific. In defining the Department's 
role in the admission of an alien for employment-based permanent 
residence, INA section 212(a)(5)(i) ties the required certification to 
``the place where the (emphasis added) alien is to perform such skilled 
or unskilled labor[,]'' and the necessity of certifying that ``the 
employment of such (emphasis added) alien will not adversely affect the 
wages * * *.'' The plain language of these provisions (i.e., the use of 
terms such as ``the alien'' and ``such alien'') is meant to focus not 
on the process but solely on its use to admit one, specific alien.
    It is this Department's responsibility to judge how and under what 
circumstances a labor market determination should be made, and what 
constitutes the employer's actual minimum requirements for performance 
of the job. It is appropriate and consistent with the broader statutory 
and programmatic intent to apply these requirements any time a position 
that is the subject of a labor certification application is or becomes 
vacant, regardless of whether the application covering it was 
previously in process and for how long. The labor market changes 
rapidly, and it is consistent with the Department's obligation to 
protect the jobs, wages and working conditions of U.S. workers to 
require that there be another labor market test when the job 
opportunity effectively changes through the unavailability of the 
original alien worker.
    The Department's regulations authorize it to closely review the 
information provided on the application with respect to the named 
alien. Our authority to examine the stated qualifications of the alien 
named on the application also extends to our determination of whether 
an employer has accurately stated the minimum qualifications necessary 
to perform the job, or has inflated or misstated job requirements. 56 
FR 54920 (Oct. 23, 1991); see 20 CFR 656.17(i).
    Nevertheless, the Department does not undertake in this Final Rule 
to determine the visa eligibility of individual aliens. This rule 
governs the processing of labor certification applications, the 
validity of approved certifications, and other Department of Labor 
activities implementing relevant INA provisions and 20 CFR part 656; it 
does not speak to activities by the Departments of Homeland Security or 
State conducted under their respective authorities and jurisdiction. 
Further, the Department's focus is not on the identity of the 
individual alien but on the employer's failure to conduct a second 
labor market test for available U.S. workers when the original alien 
beneficiary becomes unavailable and, subsequently, when an employer 
seeks substitution. As stated in the NPRM, if the original alien 
beneficiary is no longer available, then the employer must use some 
means to fill that job opportunity. Clearly, the employer used some 
recruitment tool to find the new foreign worker for that newly opened 
job opportunity. Prohibiting substitution will ensure the employer 
again makes the reopened employment opportunity available to U.S. 
workers. In the event another alien is again the only qualified person 
available, then it is consistent with this program's purpose and the 
statute's plain language to require that the employer file a new 
application reflecting the new recruitment undertaken.
    The Medellin decision--A number of commenters cited the decision in 
Medellin v. Bustos, 854 F.2d 795 (5th Cir. 1988) in support of the 
argument that the Department lacks authority to prohibit substitution. 
The commenters argue that in Medellin, the Fifth Circuit held that the 
Department's administrative decision (based on operational guidance to 
program staff) to revoke a permanent labor certification based on the 
employer's substitution of another alien in place of the named alien 
more than six months after the certification was granted was not in 
accordance with applicable law. The commenters further argued that 
limiting a labor certification to ``the alien for

[[Page 27909]]

whom the certification was granted'' ran contrary to both the INA 
provisions (now at INA section 212(a)(5)) stating the Secretary of 
Labor's authority to determine worker availability and adverse impact, 
and the Department of Labor's own regulations, which provided that a 
labor certification was valid indefinitely, hence disconnecting 
validity and any time limitations.
    We carefully considered the Fifth Circuit's opinion in Medellin 
prior to the issuance of the NPRM and concluded that the dictum relied 
upon by commenters in the decision was not so compelling as to overcome 
the strong argument, based on the Department's authority and 
experience, that supports the elimination of substitution. We have 
reviewed that matter again as a result of comments and reach the same 
conclusion for a number of reasons.
    First, the ultimate basis for the Medellin decision was an 
administrative law issue not relevant to this rulemaking. Medellin 
involved a challenge to provisions in an ETA Technical Assistance Guide 
(TAG) that permitted the substitution of an alien on an approved labor 
certification only for the first six months after issuance. As the 
Medellin court correctly noted, the TAG was not published using notice 
and comment rulemaking procedures. Further, the six-month limitation 
was inconsistent with the then regulation at 20 CFR 656.30(a) that made 
labor certifications valid indefinitely. This rulemaking directly 
addresses the administrative law problem identified in Medellin by 
clarifying, after notice-and-public comment rulemaking, that a labor 
certification is valid only for the alien who was the beneficiary of 
the original application and only for a limited time, 180 days.
    The discussion in the Medellin decision about the relative 
responsibilities of DOL and INS in the labor certification process is 
dictum and clearly is not the legal grounds for the court's decision. 
Further, the reasoning in that dictum is not compelling and reflects an 
overly narrow view of the Department's role in the immigration process. 
Under the INA, the Department is responsible for requiring a labor 
market test that is the statutory prerequisite to the granting of a 
labor certification. Banning substitution enhances protections for U.S. 
workers by offering U.S. workers another chance when a job that was the 
subject of a labor certification once again becomes available through 
the departure of the alien employee.
    Section 212(a)(5) of the INA makes a foreign worker inadmissible 
unless, as one condition precedent, the Department determines there is 
no able, willing, and qualified domestic worker available to fill the 
position for which the foreign worker's admission is sought. Judicial 
interpretation of the word ``willing'' led to the creation of the 
process that has been in place since 1978, whereby the certification 
approval is predicated on an employer's demonstrated unsuccessful 
efforts to recruit a domestic worker. See Production Tool Corporation 
v. Employment and Training Administration, 688 F. 2d 1161 (7th Cir. 
1982). The position that the job opportunity for which certification is 
being sought must be a job that a domestic worker can actually fill has 
been affirmed by two appellate courts subsequent to the Medellin 
decision. Bulk Farms v. Martin, 963 F. 2d 1286 (9th Cir. 1992); Hall v. 
McLaughlin, 864 F. 2d 868 (D.C. Cir. 1989).
    Given these considerations, it is perfectly reasonable for the 
Department to require the employer to conduct a new test of the labor 
market, and file a new labor certification application, every time the 
job opportunity becomes vacant. The Medellin litigation simply did not 
take place in a context that allowed the Department's concerns 
regarding the new test of the labor market to be adequately addressed.
    Relationship to DHS regulations--One commenter supported the ban on 
substitution but expressed concern that the impact of the change may be 
quite limited until DHS adopts corresponding regulations to prohibit 
the substitution of aliens. Another commenter argued that the public 
should not be placed in the position of dealing with competing and 
possibly inconsistent regulations issued by different agencies and 
suggested that DOL should withdraw its proposal until DHS signals its 
equivalent concern.
    DOL disagrees that there is a likelihood of competing or 
inconsistent regulations between DOL and DHS. No DHS regulations 
address or authorize substitution of alien beneficiaries on labor 
certifications. Rather, at present, DHS permits substitution on 
permanent labor certifications through a delegation of authority from 
DOL. See March 7, 1996 Memorandum of Understanding between the 
Immigration and Naturalization Service (INS) and Employment and 
Training Administration (signed by Louis D. Crocetti, Jr., Associate 
Commissioner, Examinations, and Raymond Uhalde, Deputy Assistant 
Secretary for Employment and Training). INS (the portion of that agency 
that provided immigration benefits) later became U.S. Citizenship and 
Immigration Services (USCIS) at the Department of Homeland Security. 
Pursuant to that 1996 MOU, when substitution is requested, DHS requires 
employers to submit a new (employer-completed but not processed) DOL 
permanent labor certification application form with the name of the 
substituted alien, along with the approved labor certification in the 
name of the original alien beneficiary. See USCIS Adjudicator's Field 
Manual, Sec. 22.2(b)(6) (Sept. 12, 2006). This Final Rule alters the 
current practice by providing that labor certifications, once approved, 
are valid only for the alien named in the original application and that 
substitution of alien names on the certification is prohibited. DOL and 
DHS have agreed that DOL will rescind the delegation of authority 
contained in the 1996 MOU consistent with the terms of this Final Rule 
and effective on the same date as this Final Rule. Because substitution 
of aliens on labor certifications has occurred pursuant to DOL 
authority, regulatory action by DHS is not necessary to implement a 
termination of its delegated authority with respect to DOL permanent 
labor certifications.
    Thus, following the effective date of this rule, employers will 
face a consistent approach to labor certifications: Substitution of the 
alien beneficiary on a permanent labor certification application or on 
the resulting certification is prohibited. As reflected throughout this 
Final Rule, the Department has determined that this prohibition on 
substitution is consistent with its statutory responsibilities and is 
necessary to achieve important objectives. DOL is responsible for 
administering the labor certification process and is authorized and 
accountable for improvements to the program, independent of employment-
based immigration programs overseen by other Federal agencies. 
Therefore, although we have closely coordinated with DHS, DOL OIG, DOJ, 
and other appropriate agencies in this rulemaking and other fraud 
prevention efforts, DOL has determined, in light of the evidence of 
fraud and the continued concerns about fraud and program integrity 
raised by many sources, and the Department's statutory responsibility 
to U.S. workers, that it is appropriate to issue this regulation 
governing the part of the employment-based immigration process for 
which we are responsible. The Department has authority to administer, 
enforce, and reform programs under its jurisdiction, including to 
regulate the meaning and nature of a permanent labor certification 
issued under 20 CFR part 656. Nothing in this Final Rule in

[[Page 27910]]

any fashion interferes with DHS' authority or its ability to address 
fraud issues through a rulemaking process of its own.
    Entitlement to substitution--Many commenters asserted that since 
the practice of substitution has been permitted by DOL for several 
decades, the statute and regulations provide entitlement to 
substitution. One commenter asserted that the Department, under its 
current regulations at 20 CFR 656.30(c)(2), effectively provides that 
the labor certification application can be valid for any qualified 
worker, which the commenter interpreted to include a substituted 
worker. 20 CFR 656.30(c)(2). Another commenter opined that the absence 
of statutory entitlement to substitution is irrelevant to the clear 
value of substitution, which in its view far outweighs the perceived or 
potential benefits from reducing incentives for fraud.
    The Department disagrees with these comments. While substitution 
has been a long-standing practice at the Department and by delegation 
to DHS, the statutory framework to allow the permanent admission of 
foreign nationals to perform work was deliberately protective of U.S. 
workers and contains nothing approaching an entitlement to 
substitution. It is consistent with the statute's presumption of alien 
inadmissibility that admissibility must be demonstrated by each 
employer for each alien and that the statute does not provide for 
substitution of individual aliens on labor certifications or 
applications. This regulatory action is also consistent with the 
Congressional intent to grant the Secretary of Labor broad discretion 
in implementation of the permanent labor certification program. Nor is 
it surprising that the practice of substitution has not been authorized 
or addressed in DOL's regulations. Substitution has been permitted 
simply as a procedural accommodation to employer-applicants. The 
Department recognizes that this accommodation has had a distinct 
benefit to employers and applicants in allowing them to retain an 
earlier priority date and apply the results of a completed labor market 
test. However, as discussed later in this Preamble, the equities do not 
support retention of the earlier priority date. Accordingly, in light 
of the evidence that substitution is an important contributor to fraud 
in the labor certification program and of DOL's statutory interest in 
protecting U.S. workers by reestablishing worker unavailability 
whenever a position once again becomes vacant, the demonstrated ``black 
market'' in labor certifications, and the significant number of 
prosecutions for fraudulent activity related to the program, we 
conclude the benefits to elimination outweigh the potential 
disadvantages. As stated previously, the Department will continue to 
work with other Federal agencies with an interest in the employment-
based immigration system to explore, under appropriate circumstances, 
potential alternatives to the current practice.
2. Evidence of Fraud
    Several commenters mentioned that the Department has not provided 
evidence of or statistics on widespread labor certification fraud or 
abuse and needs to consider the benefits of substitution against 
relatively few abuses. One commenter opined that elimination is 
appropriate only when a policy is commonly or largely misused. It 
stated the burden is on the Department to show the connection between 
fraud and substitution, and to establish that its elimination will not 
impede legitimate business practices.
    Some commenters questioned the effectiveness of eliminating 
substitution; they were concerned the rule does not target the most 
common sources of abuse or deter persons with intent to defraud. One 
commenter suggested that persons intending to engage in these abuses 
will find the substitution prohibition does not provide a significant 
obstacle to their endeavors. It stated such persons will remain free to 
file fraudulent applications naming the intended beneficiary and that 
substitution elimination will only succeed in moving the initiation of 
the fraudulent transaction with the foreign national back to a point in 
time before the filing of the application. The commenter asserted it is 
highly questionable whether such a minor achievement justifies the harm 
done to legitimate employers by the prohibition of substitution. Some 
commenters claimed the substitution prohibition will do little to 
eliminate the filing of applications without the knowledge of the 
employer, and the filing of applications by employers who are paid to 
engage in a fraudulent scheme and who have no intention of filling the 
job opportunity described in the application. Citing U.S. v. Kooritzky, 
No. 02-502-A (E.D. Va. 2003), they observed those who are determined to 
commit fraud will find a way to commit fraud.
    The NPRM detailed the reasons for our proposal to eliminate the 
practice of substitution. Our experience with the failures of this 
practice is longstanding and shared by other Federal agencies. The 
Department disagrees that eliminating substitution contributes only a 
``minor'' achievement to addressing the realm of abuses over which the 
Department has control. The fraud cases prosecuted even within the 
recent past indicate a significant number of instances where 
substitution played a role in fraudulent activity in obtaining an 
immigrant benefit. See, e.g., U.S. v. Yum (E.D. Va. 2006); U.S. v. 
Mandalapa, No. 205-NJ-03117-PS (D.N.J. 2006).
    The Department continues to believe, based on the activity in these 
and other cases, that fraudulent substitution is a core contributor to 
the marketability of labor certifications because it is only if one can 
substitute that one can benefit from a certified application naming 
another individual. This marketability results in the use of labor 
certifications for fraudulent purposes--by aliens and employers with no 
intent to have a legitimate employment relationship.
    We agree there are numerous sources of fraud in employment-based 
immigration programs government-wide, and individuals intent on 
committing fraud and abusing the system may still find a way to do so. 
However, the existence of other types of fraud, separate from that 
generated by the practice of substitution, does not obviate the need to 
address the documented fraud related to alien substitution. As 
described earlier, the Department has instituted specific checks and 
balances in the PERM process to address and prevent the filing of 
applications without the employer's knowledge. For example, the 
National Processing Centers contact the employer directly to confirm it 
is aware of the application and is sponsoring the alien, and the ETA 
Form 9089 requires distinct contact information for the employer and 
the attorney or agent filing the application. The substitution 
prohibition enhances and supplements existing anti-fraud and program 
integrity measures.
    Alternatives to a regulatory ban on substitution, including 
limiting or tailoring the option to substitute--One commenter asserted 
the elimination of substitution in no way facilitates the 
identification of fraudulent labor certification applications, and this 
rule instead takes a ``shotgun'' approach at the expense of legitimate 
program users. The comment stated the goal of reduced fraud is better 
achieved by heightened enforcement measures, which it states the 
Department has already put in place in the PERM program. The commenter 
also pointed to traditional law enforcement measures, like the

[[Page 27911]]

discernment of patterns in groups of applications filed by a given 
employer or attorney, to ferret out fraud and abuse. One commenter 
argued existing regulations provide a sufficient basis to prosecute 
employers, employees, and attorneys alike who engage in fraudulent 
activity associated with the permanent labor certification process. 
Others also suggested there is no need to ban substitution because of 
the additional provisions prohibiting the sale, barter, or purchase of 
labor certifications at Sec.  656.12; the safeguards already in place 
at the Backlog Processing Centers to confirm the bona fide nature of 
applications; and the PERM program's strict employer registration 
requirements. Another commenter stated it is concerned about the 
elimination of substitution in small town or rural areas where 
employers have great difficulty finding qualified engineers, and 
requested the Department relax its requirements for rural or small town 
situations.
    One commenter suggested that in order to limit occurrences of 
fraud, DOL should limit the prohibition on substitutions to filings 
made under section 245(i) of the INA. As an alternative, the commenter 
suggested the establishment of an exception to the rule for large 
corporations. The commenter also suggested the Department could 
establish appropriate criteria to allow employers who, for example, 
have a demonstrated record of filing appropriate labor certification 
applications to use substitutions.
    The Department disagrees with these comments. The heightened 
enforcement measures in the PERM program are designed to catch fraud 
``in process'' and do not address fraudulent activity that transpires 
thereafter, as the new substitution policy will. Further, the 
prohibition on substitution is not designed as a fraud detection 
mechanism, but rather as one of several protective measures to 
altogether prevent fraud related to this activity by preventing the 
commodification of labor certifications. The prohibition will be more 
effective because it will cover applications filed under 20 CFR part 
656 in effect before and after March 28, 2005. Further, while we agree 
that other fraud prevention and detection methods may be available, the 
effectiveness of those other methods does not remove the need for 
additional, targeted techniques like those instituted in this Final 
Rule. For example, we are well aware of other laws, such as those 
governing perjury, that support detection and prosecution of fraud. 
However, such statutes are not always sufficient to prevent, deter and/
or redress unlawful conduct. By removing the opportunity to engage in 
the fraudulent activity, this rule permits existing investigative and 
prosecutorial resources to be better focused, and frees resources 
across government agencies for other pressing needs.
    We have no programmatic evidence that applications filed under 
section 245(i) are particular sources of fraud. In addition, this 
suggested alternative would result in a one-time solution, since the 
INA section 245(i) cases have already been filed and are being 
processed in the Department's Backlog Processing Centers. Further, such 
a policy would establish unequal rules for employers based upon the 
unsupported assumption that applications filed under section 245(i) are 
the only ones in which substitution fraud occurs. Labor certifications 
issued for 245(i) cases are indistinguishable from others and require 
the same steps of employers; absent a strong rationale, they should not 
be subject to different conditions or limitations than the limitations 
that attach to other labor certifications.
    We also do not agree that exceptions for large corporations or for 
rural areas are warranted. Exceptions for certain categories of 
employers, as suggested by commenters, do not further the Department's 
obligation to ensure a sufficient test of the labor market for the 
admission of each alien each time a job opportunity opens. We also have 
determined that it is not wise to establish a list of pre-approved 
employers, in part because the types of fraud we are targeting by this 
Final Rule are in some cases committed by attorneys and agents without 
the knowledge of the employer named on the application.
3. Change in Conditions That Originally Warranted Allowance of the 
Practice
    Various organizations provided comments concerning current 
processing times and the Department's remaining backlog of permanent 
labor certification applications in relation to the proposed ban on 
substitution. These commenters generally took issue with the 
Department's premise that substitutions are no longer needed to 
accommodate application processing delays. Some commenters questioned 
the premise based on the number of applications pending at the 
Department's Backlog Processing Centers and experiences to date with 
applications filed under the PERM system. They stated even if the 
Backlog Processing Centers meet what appears to be an unrealistic 
backlog elimination goal, the premise is quite obviously false.
    For example, one commenter stated it has 1,100 pending, 
unadjudicated labor certification applications and that, in many cases, 
because of the multi-year adjudication times for these applications, 
the original alien beneficiary has already moved on to a new position 
and the employee currently in the position has become the new intended 
beneficiary of the application. Another commenter referred to over 
1,000 Reduction-in-Recruitment applications pending at the Department's 
Backlog Processing Centers, and stated about half of all of its PERM 
applications still remain pending for up to five months from date of 
submission. Both commenters suggested the Department should continue 
its efforts to eliminate the backlog and to speed up the PERM process 
prior to considering changes to the practice of substitution.
    The Department disagrees. The agency operating conditions under 
which alien substitution was initially permitted have noticeably 
changed. The Department acknowledged in the preamble of the proposed 
rule that the strongest historical argument in support of substitution 
has been the length of time it once took to obtain a permanent labor 
certification. 71 FR at 7656, 7659 (February 13, 2006). However, the 
Department also noted the streamlined process introduced by the PERM 
regulation has significantly reduced the labor certification processing 
time for applications filed under the new system. Since the PERM 
program began accepting applications on March 28, 2005, 68 percent of 
the certified applications have been processed in less than 60 days. 
And in FY 2006 alone, approximately 75 percent of the certified 
applications were approved in 60 days or less. In addition, the PERM 
system will continue to improve as we gather baseline information from 
which to implement process improvements. In other words, we expect 
applications to be adjudicated at least as quickly in the future as the 
system builds upon its knowledge base.
    With respect to the pending applications at our Backlog Processing 
Centers, we have significantly reduced the number of backlogged 
applications from an estimated 365,000 to less than half that number. 
This effort places us on target to meet our goal of eliminating the 
backlog by September 30, 2007. Thus, the argument in support of 
allowing substitutions to continue because of long processing delays 
has been appropriately addressed by both the new, streamlined PERM 
process and the large reduction in backlogged applications. In light of 
these changes,

[[Page 27912]]

we believe it is imprudent to wait to adopt this rule, as some 
commenters suggest, until all backlogs are completely eliminated, thus 
giving those who wish to fraudulently use substitutions additional time 
to do so.
4. Extending Regulation to Pending Applications for Permanent Labor 
Certification and to Approved Certifications
    The Department received a number of comments opposing the 
application of the substitution ban to applications filed under 20 CFR 
part 656 in effect either before March 28, 2005, or on or after March 
28, 2005, and to certifications already granted. These commenters urged 
the prohibition on substitution should be limited to only those 
applications filed under the current streamlined regulation and should 
not encompass any applications filed under the 20 CFR part 656 in 
effect before March 28, 2005.
    Commenters stated employers and employees across the country have 
made critical hiring and transfer decisions in reliance on the 
availability of substitution. They stated that by applying the rule 
change to all substitutions except those approved by the effective date 
of the Final Rule, the Department would be setting itself up for 
further challenges and pressures. The commenters cited Bowen v. 
Georgetown Univ. Hospital, 488 U.S. 204 (1988), asserting it supported 
their contention that a Federal agency lacks the power to issue 
retroactive rules absent a statutory grant of authority. They contended 
it is unfair, and most likely unlawful, for the Department to change 
the rules midstream, and that any change in the rules governing 
substitution should only be prospective in effect.
    Others commented that the Department's proposed regulation 
constitutes a retroactive ban that raises legal questions. Some stated 
the proposed rule improperly seeks to retroactively invalidate approved 
labor certification applications, when such approval was obtained under 
the current rule that such certifications are ``valid indefinitely.'' 
Others stated the proposed application is contrary to the prohibition 
on retroactive agency rules as found in the Administrative Procedure 
Act (APA). They noted that, under the APA, a rule is defined as the 
whole or part of an ``agency statement of general or particular 
applicability and future [emphasis added] effect designed to implement, 
interpret, or prescribe law or policy.'' Commenters stated the 
Department would need specific authority from the Congress to 
promulgate retroactive regulations. Several commenters referenced 
Health Ins. Assn. of America, Inc. v. Shalala, 23 F.3d 412, 423 (D.C. 
Cir. 1994) for the proposition that, under the APA, rules may only have 
future effect. The court cited Justice Scalia's concurrence in Bowen v. 
Georgetown Univ. Hosp., 488 U.S. 204, 216-23 (1988), which interpreted 
the APA to mean that a rule is a statement that has legal consequences 
only for the future and found that a rule that alters a future 
regulation in a manner that makes worthless substantial past investment 
incurred in reliance upon the prior rule may for that reason be found 
``arbitrary'' or ``capricious.'' One commenter asserted the proposed 
provisions eliminating substitution would be illegal retroactive 
rulemaking because employers have filed applications with the 
expectation of substitution as a potentially significant benefit should 
the original beneficiary drop out, and this benefit is a form of a 
property right.
    One commenter argued the application of the rule prohibiting 
substitution to backlogged applications under the pre-PERM regulation 
was retroactive in nature and could be read as an attempt to force the 
time and expense of the new application under the PERM process on 
employers who already have an investment in applications in the 
backlog. The commenter said this would amount to a taking of a business 
investment without just compensation. Similarly, another commenter 
asserted the elimination of substitution constitutes a ``taking without 
compensation'' of an employer's significant investment in the 
preparation and filing of pending and approved labor certification 
applications. The commenter stated the prevention of an unknown and 
possibly insignificant level of fraud and abuse does not justify this 
devaluation of a company's investment. The commenter went on to observe 
that eliminating substitution would disproportionately impact large 
high-tech employers, which file large numbers of applications. Finally, 
this commenter stated years of processing delays have spurred employers 
to build substitution into a business practice as part of their 
respective programs.
    In a similar vein, other commenters stated the prohibition of 
substitution is detrimental to parties who have relied on the current 
practice. Estoppel, they said, warrants that a person who has 
rightfully relied on a practice should get the benefit of that 
reliance. Employers and beneficiaries have depended on the ability to 
substitute and have foregone filing new applications because they 
planned to use an application for a previous employee for a current 
employee.
    One commenter argued that due process considerations of fair 
notice, reasonable reliance, and settled expectations, affirmed in 
Immigration and Naturalization Service v. St. Cyr, 533 U.S. 289 (2001), 
should compel the Department to strip from the rule any provision 
applying the ban on substitution retroactively. This commenter asserted 
that, based on that case law, the 1996 Memorandum of Understanding 
between the Department and the Immigration and Naturalization Service 
delegating to INS responsibility for substituting a named beneficiary 
on a labor certification, and longstanding agency practice, the Labor 
Department may not now retroactively divest USCIS and employers with 
pending labor certification applications of the legal right to engage 
in the practice of substituting alien beneficiaries. This commenter 
further stated that if a case has not yet been adjudicated, it is 
difficult to imagine any harm resulting from a legitimate employer 
substituting a new beneficiary on the pending application.
    Other commenters also pointed out the hardship that the ban on 
substitution would cause to certain aliens. They stated prohibiting 
substitution on applications pending prior to the effective date of the 
rule will render countless beneficiaries who are subject to the 
American Competitiveness in the Twenty-First Century Act (AC21), Public 
Law 106-313 (October 17, 2000), stranded and unable to extend their 
current stays, since such extensions depend on the existence of either 
a permanent labor certification application that has been pending for 
365 days or more or a pending Form I-140 petition.
    As an alternative to the proposal, one commenter recommended that 
substitution remain available for all cases currently pending at a 
Backlog Processing Center. The commenter also recommended substitution 
remain available for all cases as long as the employer can demonstrate 
it has engaged in some additional recruitment and can document there 
are no qualified U.S. workers available. One commenter recommended the 
substituted beneficiary should be assigned the priority date of the 
date of substitution or, in the event substitution is prohibited, that 
the prohibition start with the effective date of the rule, and not be 
applied retroactively. One commenter suggested a grace period prior to 
the ban becoming effective.

[[Page 27913]]

    We have carefully reviewed these comments and find they do not 
present sufficient grounds to overcome the rationale reflected in the 
NPRM to prohibit the practice of substitution on all labor 
certifications issued after the effective date of this Final Rule. 
Assertions that the prospective ban on substitution of aliens is, 
instead, a retrospective ban are misplaced. Past substitution requests 
that already have been approved are unaffected by this rule. Current 
substitution requests pending on the effective date of this rule will 
continue to be processed. Even though substitution will not be 
permitted with respect to labor certifications granted prior to this 
rule's effective date and may upset expectations based on part 656 as 
it previously read, that does not make the ban retrospective.
    The question of whether a rulemaking activity has a ``retroactive'' 
impact that renders that rule invalid is more complex than the 
commenters suggest. The United States Supreme Court has ruled that 
``[a] statute does not operate `retroactively' merely because it is 
applied in case arising from conduct antedating the statute's 
enactment.'' Landgraf v. USI Film Products, 511 U.S. 244, 269 (1994). 
The Court went on to note that determining whether a statute is 
improperly retroactive requires the application of ``familiar 
considerations of fair notice, reasonable reliance, and settled 
expectations. * * *'' Id. at 270. Application of the Landgraf 
principles led the Court to reject a retroactivity challenge to the 
application of the Foreign Sovereign Immunities Act to wrongdoing that 
occurred prior to that law's enactment. Republic of Austria v. Altman, 
541 U.S. 677 (2004). These same principles recently led an en banc 
Sixth Circuit to uphold the application of a change in Social Security 
Administration disability regulations to pending cases. Combs v. 
Commissioner of Social Security, 459 F.3d 640 (6th Cir. 2006). The 
Sixth Circuit followed the same approach in finding that there was no 
impermissible retroactive effect in applying certain amendments to the 
INA relating to the discretionary removal of relatives to aliens in the 
U.S. who sought to invoke the prior procedure. Patel v. Gonzales, 432 
F.3d 685 (6th Cir. 2005). After applying these principles to the 
current rulemaking, the Department has determined its proposal is 
appropriate.
    An application for permanent alien labor certification is filed at 
DOL with the employer-applicant's expectation that it will satisfy the 
exclusionary provision in 8 U.S.C. 1182(a)(5)(A), so as to support a 
petition to DHS to import the alien beneficiary of the certification. 
That remains unchanged by this rule.
    The Department has provided ample notice of its intention to 
eliminate substitution, sufficient for employers and their 
representatives to reduce or eliminate continued reliance on the 
practice. As early as 1991, we indicated our intention to discontinue 
the practice. 59 FR at 54920, 54925-54926 (Oct. 23, 1991). When the 
PERM Final Rule was published in 2004, its preamble discussed at some 
length questions relating to the practice of substitution, the 
Department's findings of an emerging market for fraudulent sale of 
labor certifications, and DOL's intent to examine the practice and 
``explor[e] in the near future regulatory solutions to address this 
issue.'' 69 FR at 77363 (Dec. 27, 2004). In the NPRM to this Final 
Rule, the Department again announced its intent to eliminate 
substitution. Thus, we are confident public notice and comment has been 
fair, open, and consistent with the Administrative Procedure Act. Any 
employer who has an application pending but who is either unable or 
unwilling to continue to sponsor the original alien has had more than 
sufficient opportunity to identify a new alien and take advantage of 
the past procedures.
    We have determined that employers cannot demonstrate they 
reasonably relied on the prior practice. In filing an application for 
permanent labor certification, an employer is expressing its intent to 
and expectation that it will hire the alien named on that document if 
the application is approved. An employer's hypothetical need to 
substitute, should the first alien no longer be available, is not 
tantamount to detrimental reliance on an ability to do so. Commenters 
offered no explanation of how an employer's initial filing can be made 
in reliance on a future ability to[acute]substitute. The risk any 
employer sponsoring an alien takes is that the alien will not remain an 
employee through the entire permanent residence process, or at the end 
of that process, and the option of simply inserting another alien has 
never been an entitlement. The INA's rule of inadmissibility of 
immigrant workers without a test of the labor market for available U.S. 
workers, the statute's requirement that admissibility be determined for 
each alien individually, and the statute's overall protection of 
employment rights of U.S. workers, each further supports the 
Department's position.
    With respect to the claim of employer expectations of an option to 
substitute, the statute makes clear that an employer has no absolute 
right to a labor certification, and certainly no property interest in 
one. Employers, particularly regular users of the system, have known 
about the Department's intent to end the practice of substitution since 
the publication of the PERM regulations in 2004. No employer could 
after that date have had any reasonable expectation that the practice 
would be indefinitely available. Several commenters appear to argue 
that once they have applied for or secured a labor certification for a 
particular alien in a particular job, they have a right to bring in any 
alien they choose for that job. The statutory scheme, with its focus on 
individual aliens and presumption of each alien's inadmissibility, 
belies that argument.
    Further, it is appropriate to apply the prohibition on substitution 
to the cases in our Backlog Processing Centers to ensure these needed 
fraud protections are applied throughout all permanent labor 
certification cases, regardless of where they reside in terms of 
processing. Accordingly, the Department has determined that, following 
the effective date of this Final Rule, the elimination of alien 
substitution will apply to all permanent labor certification 
applications pending with the Department and to all permanent labor 
certifications issued under the current or prior regulation. This Final 
Rule does not nullify substitutions already made or in progress, 
whether by the Department or DHS, but rather prohibits substitutions in 
the future, substitutions which employers presumably do not anticipate 
and are not planned and, hence, to which there is no right or 
reasonable expectation. No labor certification may be the subject of a 
substitution request submitted on or after the effective date of this 
rule.
    This rule places no additional responsibilities on recipients of 
labor certifications approved prior to the effective date. At the time 
of certification a benefit was granted; none was waived. The required 
wage rate remains unchanged for employers. No further recruitment for 
U.S. workers is required of the employers under approved labor 
certifications. Once the certification is filed with DHS in support of 
a visa petition, and if the employer and alien comply with all other 
applicable provisions of the immigration laws, the alien beneficiary 
will be admitted as a permanent resident.
    All that is changed is that the employer now will be encouraged to 
retain its original alien beneficiary (perhaps to that alien's benefit) 
or will

[[Page 27914]]

have to file a new application on behalf of a new alien. An employer 
seeking to substitute, in fact, always has had to engage in a limited 
test of the labor market. When the original alien beneficiary no longer 
is available for the job opportunity, the employer has had to recruit 
the substitute alien, either domestically among nonimmigrants, or 
abroad to import a new foreign worker. This rule would make that labor 
market test include not just foreign workers, but also U.S. workers, at 
prevailing wages and working conditions.
    The standards in 8 U.S.C. 1182(a)(5)(A) ``are quite broad. The 
Secretary must decide whether there are sufficient U.S. workers who are 
`able, willing, qualified, and available,' and whether the alien's 
employment would `adversely affect the wages and working conditions' of 
these workers. The statute leaves to the Department a broad area for 
the exercise of its discretion in issuing labor certificates.'' 
Industrial Holographics, Inc. v. Donovan, 722 F.2d 1362, 1365-1366 (7th 
Cir 1983). In the exercise of her discretion to issue labor 
certifications, the Secretary is within the extensive bounds created by 
the INA. Id. If the employer files a new application, it will be 
considered fairly and on its own merits. If approved, the new labor 
certification will be for a more current wage rate and subject to a 
more current labor market test, to the benefit of the new alien and/or 
U.S. workers similarly employed. This is within the intent of the 
statute, and is an appropriate preventative measure given the 
deleterious effect caused by substitution in the past. Given the 
Department's expressed concerns about fraud in the labor certification 
process, particularly with respect to substitution, and the emerging 
``black market'' in status as a beneficiary of a labor certification, 
DOL sees a compelling need to protect the program's integrity 
regardless of the processing status of a certification on the effective 
date of the final rule. The Department's duty also to protect job 
opportunities for U.S. workers, and the welfare of both U.S. and 
foreign workers, makes it necessary to end the process of substitution 
after the effective date. See section I.D of this preamble, above.
    Effect on aliens who are H-1Bs and not entitled to benefit from 
substitution after the fifth year--The Department also received 
comments regarding the effect of the substitution ban on nonimmigrant 
aliens on whose behalf viable labor certifications have not been filed 
by the end of their fifth year in H-1B status, and specifically on 
these aliens' ability to adjust their status to that of immigrants. 
Under current law, nonimmigrant H-1B visa holders in their sixth year 
of H-1B status who are named on permanent labor certification 
applications that have been pending for 365 days or more qualify--upon 
petition to USCIS--for extension of their H-1B status in one-year 
increments. AC21, section 106(a). Currently, USCIS allows visa holders 
in H-1B status who are substituted into labor certification 
applications by the end of their fifth year to extend their 
nonimmigrant status beyond the normal six-year maximum. Commenters 
argued H-1B visa holders who are unable either to have a permanent 
labor certification application filed on their behalf or to be 
substituted into an existing application by that time will lose the 
opportunity for additional extensions of H-1B status.
    The Department understands concerns that, as a result of this rule, 
H-1B nonimmigrant aliens who, after five years of employment in the 
United States, are not yet the beneficiary of a permanent labor 
certification application might not be permitted by USCIS to further 
extend their H-1B status prior to obtaining U.S. permanent resident 
status. However, the Department finds that continuing substitution as 
an accommodation to this small group of individuals, a group whose 
numbers and participation in the program are both speculative, is 
disproportionate to the adverse consequences of continuing the 
substitution practice which creates both an incentive and opportunity 
for fraud, and which deprives U.S. workers of job opportunities.
    Some commenters have suggested that since AC21 increased the 
portability of H-1B visas, allowing such nonimmigrants to change 
employers, substitution by these foreign workers should continue to be 
allowed. Public Law 106-313, sec. 105. The Department sees no reason, 
as a general matter, to permit one type of nonimmigrant to continue 
benefiting from the practice of substitution over other nonimmigrants. 
The portability provision seeks to increase flexibility for a specific 
group of nonimmigrants--H-1B aliens--under a specific set of 
circumstances; it governs transfers between positions which aliens fill 
on a temporary basis, and is triggered by the filing of a new LCA and 
petition. It does not address, and does not extend to, substitution, 
which is a function of the permanent residence process. The statutory 
permission to move from one employer to another as a procedural 
accommodation does not in turn mandate increased flexibility through 
substitution in the permanent residence process.
    These commenters' analysis incorrectly pairs portability with the 
extension beyond the six-year H-1B employment limit allowed by section 
106(a) of AC21. The Department finds that analysis flawed. The INA 
dictates that after six years, H-1B status must terminate. The specific 
exceptions to that termination are linked by AC21 to harm resulting 
from permanent residence backlogs, including backlogs in the permanent 
labor certification program. The extension beyond six years is intended 
by the statute to benefit an H-1B worker when 365 days or more have 
elapsed since the filing of a permanent labor certification application 
``on the alien's behalf (if such certification is required for the 
alien to obtain status under such [INA] section 203(b)) * * *.'' Public 
Law 106-313 section 106(a)(1). Clearly, the alien intended to be helped 
by this provision is the alien who may have been prejudiced by the 
backlog in processing labor certification applications under DOL's pre-
PERM regulations. An H-1B worker seeking substitution may have 
benefited by working in the U.S. for six or more years, but has not 
necessarily been affected by the backlog at all. It is not inconsistent 
with the statutory intent of AC21 to limit the ability of that alien to 
continue his or her nonimmigrant status to a labor certification filed 
on his or her behalf rather than on someone else's behalf.
    The Department recognizes that those aliens who fall outside the 
five-year mark will potentially be unable to extend beyond the sixth 
year of H-1B status and otherwise might have been able to do so through 
substitution. This small group of affected individuals, however, does 
not present sufficient equities to persuade the Department to carve out 
an exception to the prohibition on substitution, since employers in 
such situations have had upwards of five years in which to initiate 
permanent resident status on their behalf.
    Further, extension of an alien's nonimmigrant visa status is the 
province of USCIS, not the Department of Labor. The Department's 
mandate is not to preserve the opportunity or further the potential 
opportunity in all circumstances for an employer to hire an immigrant 
worker, nor is it a process driven by the interests of any or all 
aliens who may wish to enter the U.S. through employment-based 
immigration. The Department's mandate, rather, is to design and 
implement a secure framework within which an employer with legitimate 
business needs may determine the availability of U.S. workers and, if 
such

[[Page 27915]]

workers are not found, bring in a foreign worker. Moreover, because the 
Final Rule prohibits only substitutions which have not yet been made, 
aliens who have not otherwise begun the permanent residence process 
before the end of the fifth year of H-1B status presumably do not 
anticipate and therefore cannot claim a reasonable expectation of 
benefiting from substitution.
5. Effect of the Elimination of Substitution on Employers
    The Department received many comments addressing the perceived 
hardships employers would suffer if substitution were prohibited.
    Added cost and burden--Employers were concerned about loss of their 
investment in the first application; the loss of an important employee 
retention and recruitment tool; added cost and burden from a new 
application, including advertising and recruiting costs, staff time, 
legal fees; inherent delays to getting a new worker in place, and 
potential processing delays with the Department or other agencies; 
additional costs from other parts of the petitioning and visa 
application process; loss of place in the queue given visa 
retrogression; and retardation of business growth and loss of 
competitiveness from potential delays in getting products to market. 
Some pointed to the potential negative impact on special groups, such 
as high-tech employers, nonprofits, or businesses located in rural 
areas. One commenter stated that each set of costs should not be viewed 
in isolation, but rather multiplied by the number of applications for 
each employer, and the large number of employers that must respond to 
labor mobility and unforeseen business changes.
    Despite a lack of consistent information from commenters on the 
additional costs associated with new filings, the Department is aware 
of and sensitive to the time and expense employers absorb to recruit 
and retain a qualified workforce. However, the costs associated with 
the employment-based immigration process, including the costs incurred 
by employers requesting permanent labor certification, have been an 
accepted part of the labor certification process for almost 30 years 
and are not unanticipated by the statute. The INA presumes 
inadmissibility of each alien, and requires the presumption be overcome 
for each foreign worker through, in part, the Secretary of Labor's 
determination. A demonstration of worker unavailability is inherent to 
the process of filing a labor certification application, and it is not 
unreasonable or inconsistent with the INA to require recruitment every 
time an employer seeks to bring in a new foreign worker. Recruitment 
activities and the costs associated with them are equally as 
appropriate for the would-be substituted foreign worker as they were 
for the originally named alien. Accordingly, while we are sensitive to 
employers' concerns, we must nevertheless conclude that elimination of 
the current substitution practice is amply justified notwithstanding.
    In addition, the Department fully recognizes that substitution has 
become a tool to address visa retrogression. However, the Department is 
not convinced it should retain a policy on substitution that gives rise 
to significant fraud and may adversely affect U.S. workers as a means 
to cope with the visa cap issue, or to support any unintended cost 
savings for employers that may have resulted from this practice.
    Loss of priority date--Many commenters expressed concern over the 
loss of the visa priority date when a new application is required to 
hire a new alien. Our program experience indicates that the priority 
date plays a defining role in the commoditization of labor 
certifications; substitution enhances the labor certification's 
marketability. Commoditization stems from the ability to substitute 
aliens on labor certifications, which are valid indefinitely, while 
maintaining the priority date of the original filing. Indeed, the 
priority date is often a prime motivator for the marketability and 
added value of labor certifications. It is also not necessarily true 
that the availability of substitution is beneficial to aliens as a 
class. As stated in the NPRM, under the substitution process currently 
in place, the new alien beneficiary is inserted into an in-process 
application or certification initially filed for a different alien and 
with a filing date that is often years earlier than the substituted 
alien would have received if named in a newly filed application.
    We are aware of concerns that these practices make substitution 
fundamentally unfair to other aliens (and their petitioning employers) 
seeking to immigrate to the U.S. who remain below the substituted 
worker in the visa priority date queue, as well as to U.S. workers. See 
71 FR 7656 (Feb. 13, 2006) and 56 FR 54920 (Oct. 23, 1991). The need 
for a new labor market test and the Department's interest in removing 
aspects of the current process creating incentives for fraud, combined 
with the inequity to other aliens waiting in the visa queue who have 
not been substituted in, outweigh the harm to an individual employer 
and alien from the loss of a priority date on a given application. In 
addition, the reasoning that the employer suffers a hardship from the 
inability to apply an earlier priority date to a subsequent application 
rests on an unsupported assumption that another test of the labor 
market would not yield a qualified and willing U.S. worker. We do not 
agree with this reasoning and find it contrary to our statutory 
responsibility to protect U.S. workers, as well as virtually impossible 
to legitimately accommodate in the administration of the permanent 
labor certification program.

B. Prohibition of Modifications to Applications

    The proposed rule sought to clarify procedures for modifying 
applications filed under the new permanent labor certification 
regulation and, in particular, to prohibit modifications to 
applications once filed with the Department. We received numerous 
comments raising concern over this new provision. After careful 
consideration of these comments and for the reasons set forth below, 
this Final Rule codifies the new provision at Sec.  656.11(b) with 
slight changes from the NPRM, clarifying that requests for 
modifications to an application submitted under the PERM regulation 
will not be accepted where the application was filed after this Final 
Rule's effective date. In considering how to implement the ``no 
modification'' provision, while ensuring due process to applicants for 
labor certification, we have determined that it is advisable to revise 
the language of Sec.  656.24(g) to more precisely define what 
documentation may be submitted with a request for reconsideration.
    Codifying the ``no amendments'' requirement through notice and 
comment--As explained in the NPRM, the clarification made by this Final 
Rule is consistent with the streamlined labor certification procedures 
governed by the regulation that went into effect March 28, 2005. 
Nothing in the regulation contemplates permitting employers to make 
changes to applications after filing. That practice was one the 
Department specifically sought to change through the Final Rule 
implementing the re-engineered PERM program. The re-engineered program 
is designed to streamline the process, and an open amendment process 
that either freely allows changes on applications or results in 
continual back and forth exchange between the employer and the 
Department regarding amendment requests is inconsistent with that goal. 
Further, the re-engineered certification

[[Page 27916]]

process has eliminated the need for changes.
    The Department has instituted screening and guideposts for 
electronic permanent labor certification applications. The online 
application system, especially in light of the technological 
enhancements described below, allows the user to proofread, revise, and 
save the application prior to submission, and the Department expects 
users will do so. ETA has received frequent, positive feedback from 
stakeholders on what they have found to be the time and cost-saving 
nature of this review.
    Moreover, in signing the application, the employer declares under 
penalty of perjury that it has read and reviewed the application and 
the submitted information is true and accurate to the best of its 
knowledge. In the event of an inadvertent error or any other need to 
refile, an employer can withdraw an application, make the corrections 
and file again immediately. Similarly, if an employer receives a denial 
under the new system, it can choose to correct the application and file 
again immediately if it does not seek reconsideration or appeal.
    Immediate feedback on deficiencies or deniability prior to 
submission of an application--Prohibiting the modification of 
applications will allow the Department to process employer applications 
more quickly and support greater uniformity and consistency in their 
adjudication. However, as part of our continuing upgrades to PERM 
processing capabilities, as well as in response to comments on the NPRM 
and the suggestion by the BALCA in its decision in In the Matter of 
HealthAmerica, No. 2006-PER-1 (July 18, 2006), we have dramatically 
increased the nature and number of system ``prompts'' and warnings in 
an effort to provide employers and others with additional opportunities 
for correction prior to submission of an application.
    The Department has added system capabilities in the form of ``pop-
up'' edit alerts to notify each applicant when a response to a question 
is technically in conflict with either the PERM regulation or certain 
of the formal instructions for completion of the form. The applicant is 
allowed to continue, but with full warning of possible deniability. The 
system permits submission of the application, but the applicant assumes 
the risk that the application will be denied based on the failure to 
fully comply with the technical requirements and alerts of the program. 
This electronic advisory system is much more detailed and more robust 
than anything available previously to online users, and it is 
continuing to reduce the type of automated denials that gave rise to 
HealthAmerica.
    The majority of form preparation errors that have occurred to date 
will now generate an automated prompt, warning the filer that it may 
have entered erroneous information that may cause a denial of the 
application. As described above, similar manual mechanisms are in place 
to detect and correct errors on mailed applications. The Department 
reiterates, however, the fundamental responsibility to submit an 
application which does not contain typographical or similar errors 
remains with program users.
    Under the system upgrades now in place, applications containing 
errors in contravention of system alerts are denied. Consistent with 
the ``no modifications'' policy codified by this rule and the 
evidentiary parameters of the revised Sec.  656.24(g) described below, 
requests for reconsideration based on such denials will not be granted, 
where an application filed after this rule's effective date is at 
issue. Requests for reconsideration based on such denials involving 
applications filed prior to this rule's effective date will be reviewed 
on a case-by-case basis; they will be placed in the appropriate queue 
and reviewed on a ``first in, first out'' basis and as workload 
permits.
    Evidence in support of requests for reconsideration and amendment 
of Sec.  656.24(g)--We have made one change from the NPRM in this Final 
Rule based on the BALCA's decision in HealthAmerica. Among other 
issues, the Board addressed the meaning of the current Sec.  656.24(g) 
governing requests for reconsideration. That section provides that 
reconsideration requests ``may not include evidence not previously 
submitted.'' The Board concluded that evidence ``previously submitted'' 
encompassed material in the possession of the employer at the time of 
filing. That reasoning was the basis for the Board's decision that 
allowed the employer to modify its application to correct a mistake. To 
the extent the BALCA favored allowing the employer in HealthAmerica to 
present evidence that effectively changed the response to a question on 
the application, the BALCA's approach is inconsistent with the 
Department's objective and the NPRM proposal that applications cannot 
be changed or modified after submission.
    However, the Department recognizes that there will be situations 
where--although an employer will not be permitted to amend its response 
to a question as it did in HealthAmerica--it may nonetheless be 
appropriate to consider information not previously in the Certifying 
Officer's (CO's) physical possession in order to provide appropriate 
evaluation of the employer's request for reconsideration. The 
Department has determined an approach that allows for submission with a 
motion to reconsider of documentation in existence at the time of 
filing and held by an employer as part of its compliance 
responsibilities under the PERM recordkeeping requirements is 
appropriate. Accordingly, we have adopted a modified approach to that 
proposed in the NPRM, continuing to prohibit application modifications 
but recognizing the appropriateness of an opportunity to present and 
consider evidence that was generated to comply with record retention 
requirements of the PERM program.
    Accordingly, the Department is including as part of this Final Rule 
a revised Sec.  656.24(g) setting the new standard for applications 
filed on or after the effective date of this Final Rule. The new Sec.  
656.24(g) describes the evidence that can be submitted with a motion to 
reconsider and clarifies the interplay with the no-modification 
provision of Sec.  656.11(b). The revised Sec.  656.24(g) limits 
evidence submitted at reconsideration to documentation that the 
Department actually received from the employer in response to a request 
from the Certifying Officer to the employer; or documentation that the 
employer did not have an opportunity to present to the Certifying 
Officer, but that existed at the time the application was filed, and 
was maintained by the employer to support the application for permanent 
labor certification to meet the documentation requirements of Sec.  
656.10(f). Revised Sec.  656.24(g) also provides that the Department 
will not grant motions to reconsider where the deficiency that caused 
denial resulted from the applicant's disregard of a system prompt or 
other direct instruction. These changes together adequately ensure that 
employers and others have sufficient opportunity to present evidence on 
salient points, even if denied that opportunity during the 
application's consideration, while enabling the PERM program to 
function in its intended streamlined manner.
1. Issues Raised by Public Comments
    Authority to limit modifications to an Application for Permanent 
Employment Certification--Many commenters questioned the Department's 
authority to limit and prohibit an employer's ability to modify a Form 
ETA 9089, Application for Permanent Employment Certification. We 
disagree. Federal

[[Page 27917]]

agencies have the authority, and sometimes the necessity, to write 
strict procedural rules in order to manage their respective 
responsibilities. HealthAmerica, slip op. at 17. Our past practice and 
program experience led us to make regulatory changes in the nature of 
the permanent labor certification program, changes that were publicized 
through extensive stakeholder outreach and during numerous public 
meetings across the country. The resulting efficiency and effectiveness 
measures have contributed to overall program productivity increases and 
have reinforced, among other factors, the critical need to discontinue 
what has historically been continual, unduly time-consuming 
communication between ETA Certifying Officers and employers or their 
representatives.
    The Department recognizes that the accountability-based standard it 
put in place in PERM was, at least for purposes of the modifications 
issue, not made sufficiently clear in the text or preamble to the 
original December 27, 2004 Final Rule. The BALCA pointed out in its 
HealthAmerica decision that a requirement for precise filing can be 
imposed with proper notice, citing Glaser v. FCC, 20 F.3d 1184, 1186 
(D.C. Cir. 1994); Salzer v. FCC, 778 F.2d 869, 875 (D.C. Cir. 1985); 
JEM Broadcasting Co., Inc. v. FCC, 22 F.3d 320 (D.C. Cir. 1994); 
Florida Cellular Mobil Communications Corp. v. FCC, 28 F.3d 191 (D.C. 
Cir. 1994). In these cases, the D.C. Circuit found the FCC could 
appropriately and legitimately write regulations requiring certain 
license applications be ``letter-perfect'' (i.e., complete and 
sufficient) when submitted because the requirement was provided for in 
agency regulations that had been subject to notice and comment. The 
BALCA noted the issuance of the NPRM as evidence that such a ``letter-
perfect'' requirement did not exist under the PERM regulations as 
initially issued. This rulemaking satisfies public notice and comment 
objectives.
    Relationship to fraud--One commenter suggested the Department is 
insinuating that any request for modification is grounded in fraud. We 
disagree. As we have stated, the ``no amendments'' clarification in 
this rule simply codifies a policy the Department assumed was part and 
parcel of the re-engineered program, and which was an (albeit unstated) 
assumption of the PERM Final Rule. The ``no modifications'' policy 
furthers administrative efficiency. In addition, it protects against 
certain program abuses, such as the submission of a form with 
incomplete or inaccurate information simply to save the priority date. 
Thus, the policy serves a number of purposes not limited to fraud 
prevention.
    Need for modifications--Many commenters stated modifications to 
applications were necessary because alleged errors made by the 
Department in reviewing mailed-in applications led to erroneous case 
denials. For example, the Department issued denials for failure to 
include the language that the employer would accept ``any suitable 
combination of education, training, or experience,'' when, in fact, the 
language was included in the application. Further, commenters stated 
other applications have been denied because the Department allegedly 
stated the alien did not possess the required academic credentials 
when, in fact, he or she did, and those credentials were clearly noted 
in the application in the appropriate place.
    Commenters suggested in the event of an inadvertent error, there 
are many reasons why refiling is not usually a viable alternative, thus 
making modifications necessary. For instance, they stated that often an 
application preparer is not aware an error has been made at the time 
the employer submits the electronic Form ETA 9089. Even if the mistake 
comes to light before the Department issues a denial, it may be too 
late to re-file because the recruitment may have become stale. Further, 
certain post-filing, pre-certification events, including but not 
limited to changes in corporate structure resulting in a change of 
employer name, tax identification number, or address, may require the 
amendment of the application. One commenter suggested the inability to 
modify inadvertent mistakes could have serious ramifications as such a 
mistake may result in an inability to refile the application, cause a 
denial of the application, or be construed as a false statement.
    The Department disagrees that these comments require alteration of 
the no-modifications policy reflected in the NPRM. As outlined above, 
going forward, electronic system prompts will most often alert the 
employer or its agent to the grounds for deniability, so a filer will 
be able to learn prior to submitting the application if the system 
would deny the application as currently completed. Further, as always, 
an employer has the right to seek reconsideration and beyond that, 
appeal to the BALCA, when it believes a denial was unjustified, without 
loss of the priority date which attached to the application. Hence, the 
``no modifications'' policy does not institute a standard not 
previously envisioned, and does nothing to limit or undermine employer 
due process rights.
    When filing the Application for Permanent Employment Certification, 
the employer certifies and declares under penalty of perjury that it 
has read and reviewed the application, and the information provided 
therein is true and accurate to the best of its knowledge. The 
Department understands that human error occurs in limited 
circumstances, which is why we have elected to increase our system 
``prompts'' to help avoid such errors. These additions sufficiently 
address commenter concerns. Further, the Department believes it is 
capable of distinguishing between typographical or inadvertent errors 
and willful false statements.
    Tailoring the ``no modifications'' policy--One commenter suggested 
the current regulations governing PERM should permit a single 
opportunity to the employer or agent to correct minor technical 
deficiencies. According to this commenter, applications should be 
decided based on their substantive merits instead of on non-material 
technical errors. The Department agrees that applications should be 
adjudicated upon their respective merits. However, typographical or 
similar errors are not immaterial if they cause an application to be 
denied based on regulatory requirements. The Department encourages 
those who submit applications to carefully review all information for 
completeness and accuracy and has modified the online application 
system to assist them to do so. Attentive filers will accrue the 
benefits of the new streamlined system, as ``clean'' applications are 
usually processed and adjudicated within 60 days of filing.
    Many commenters suggested it is highly unlikely that employers will 
need more than one opportunity to correct any minor technical 
deficiencies and the nature and number of technical errors is highly 
unlikely to have a significant detrimental impact on the overall 
efficiency of the PERM process. Commenters suggested the new system 
has, in fact, had a dramatic impact on the processing of applications 
for permanent labor certification through, among other things, 
centralization and implementation of new technology. According to these 
commenters, permitting a single opportunity to amend an application to 
overcome a non-substantive technical error will neither require 
substantial Department resources nor render the PERM system ineffective 
or inefficient.
    We disagree with the commenters'' premise that permitting 
modifications

[[Page 27918]]

will not negatively impact the processing and review of applications. 
The processing of requests for reconsideration of denials poses a 
significant, costly resource drain on the PERM case management system 
and staff. The opportunity cost and inequity to other employers are 
also high, as resources must be transferred from review of applications 
that do meet technical requirements to those that may not. Moreover, as 
we have discussed above, the alerts and prompts that we have built into 
the system will provide employers the opportunity to correct minor 
technical deficiencies before they ever submit their applications. This 
is a reasonable balancing of available resources. Therefore, the 
Department is finalizing the standard noted in the NPRM of not allowing 
modifications to an application. The revisions to Sec.  656.24(g) will 
enable employers to present evidence in a request for reconsideration 
that will permit filers the opportunity, if necessary, to present 
evidence outside the four corners of the application.
    Many commenters suggested it is reasonable to request that the 
modification prohibition, if adopted, should only apply to applications 
filed after publication of the Final Rule. We have adopted this 
suggestion. The changes to Sec. Sec.  656.11 and 656.24 contained in 
this rule apply only to applications filed after the effective date of 
the rule; they do not impact the processing of motions for 
reconsideration filed with respect to applications filed prior to that 
date.
    Concern prohibiting modifications will generate backlogs--One 
commenter suggested prohibiting modifications under proposed Sec.  
656.11(b) would be an open invitation to intractable increases in 
backlogged applications, rather than the radical reduction in pending 
applications and processing times contemplated by the PERM reforms. The 
efficiencies created by the new system prompts, which are proving to be 
an effective screen for program users against system-generated denials 
for technical errors, as well as the ``no modifications'' policy put in 
place by this rule, will allow us to significantly reduce the pending 
queues of denied applications and, consequently, to process all other 
applications more quickly and effectively.
    Distinguishing policies for backlog and PERM--One commenter 
suggested the Department should clarify its position on modifications 
under the new PERM streamlined system, relative to applications filed 
with the Backlog Processing Centers, by clearly explaining the 
difference in treatment in the regulatory text. As proposed in the 
NPRM, the ``no modifications'' policy in this Final Rule will apply 
only to the PERM program since only the PERM regulation is amended in 
this Final Rule. In addition, this preamble describes more fully the 
process the Department will follow in its review of applications filed 
up to the effective date of the rule. This information provides 
sufficient notice of the expectations for employers and their 
representatives regarding the treatment of technical and other 
modifications going forward.

C. Prohibition on the Sale, Barter, or Purchase of Applications for 
Permanent Labor Certifications and of Approved Permanent Labor 
Certifications, and Prohibition on Related Payments

    The proposed rule, at Sec.  656.12, prohibited the sale, barter, 
and purchase of applications and approved labor certifications, as well 
as other related payments. The Department received numerous comments on 
this proposal. Commenters overwhelmingly opposed Sec.  656.12(b), which 
would prohibit employers from seeking or receiving payment of any kind 
for any activity related to obtaining a permanent labor certification.
    After carefully considering comments received, the Department has 
decided to move forward on all provisions, but in response to comments 
has clarified the types of prohibited payments, as further described 
below. The prohibitions in this section will apply to all such 
transactions on or after the effective date of this Final Rule, 
regardless of whether the labor certification application involved was 
filed under the prior or current regulation implementing the permanent 
labor certification program.
1. Improper Commerce
    The proposed rule provided, at Sec.  656.12(a), that permanent 
labor certification applications and certifications are not articles of 
commerce and they may not be sold, bartered, or purchased by 
individuals or entities. The majority of comments favored the proposal, 
and only a few were in opposition. Some comments were ambiguous; it was 
not clear whether the commenters were commenting primarily on Sec.  
656.12(a), prohibiting commerce in labor certification applications and 
certifications, or on Sec.  656.12(b), which prohibits several types of 
payments related to labor certification applications and 
certifications.
    The Department's extensive experience in the administration of this 
program leaves no doubt that some labor certifications are treated as 
commodities and sold at substantial gain by those who wish to engage in 
the existing secondary market. In one example from 2005, a joint 
investigation with DHS' Immigration and Customs Enforcement (ICE), the 
Federal Bureau of Investigation, the Department of State OIG and the 
Internal Revenue Service resulted in several employers, agents and 
attorneys being convicted of numerous visa fraud schemes. See U.S. v. 
Ivanchukov et. al. (No. 04-421, E.D. Va. 2005); see also DOL OIG 
Semiannual Report (October 1, 2005-March 31, 2006) (available at http://www.oig.dol.gov/public/semiannuals/55.pdf
). In the Ivanchukov case, 

labor certifications were being sold for as much as $120,000.00. As a 
reminder of how common this activity has become, one commenter to the 
NPRM for this rulemaking provided the Department with a website that 
advertises the sale of pre-approved labor certifications. The 
Department has reasonably concluded that there is a need to prohibit 
improper commerce in permanent labor certifications.
    Sale, barter or purchase--Two commenters indicated that prohibiting 
sale, barter, and purchase was one of the most effective amendments the 
Department could promulgate to reduce fraud in the permanent labor 
certification program, as it removes the economic incentive for 
unscrupulous behavior. Some commenters indicated the terms ``sold,'' 
``bartered,'' and ``purchased'' were impermissibly vague. Other 
commenters stated the proposed ban on sale, barter, purchase, and 
related payments was overbroad and did not take into account that both 
employer and employee benefit when an employee obtains permanent 
residence. The Department acknowledges these concerns by adding 
definitions of the terms sale, barter, and purchase to the definitions 
at Sec.  656.3, and by specifying and clarifying what constitutes the 
ban on sale, barter, purchase, and related payments. A labor 
certification is a certification from the Department that there are no 
able, willing, and qualified U.S. workers available for the specific 
job opportunity stated on the employer's application. Converting this 
labor certification into a commodity is an example of selling, 
bartering, or purchasing.
    Many commenters suggested that if DOL wants to make selling labor 
certifications illegal, it should make such sales illegal and prosecute 
those who break the law rather than punishing everyone. We disagree 
that the rule punishes everyone; this aspect

[[Page 27919]]

of the rule only impacts an individual or employer when there is an 
actual sale. Further, our program experience clearly indicates that not 
``everyone'' uses the substitution accommodation or wishes to sell 
labor certifications.
    One commenter suggested we should remove institutions of higher 
education from the prohibition on barter, sale and purchase, suggesting 
that the prohibition be tailored to industries where the prohibited 
activity has been shown to occur. The Department's rationale for 
prohibiting the sale of labor certifications is based upon a broader 
policy concern than the commenter implies. Any such activity is 
contrary to the statutory purpose of the program. There is no basis 
upon which to exempt one industry sector or type of employer. Further, 
as other commenters have stated, there is no legitimate reason for an 
employer to sell or barter permanent labor certifications. Further, if 
such activity is not occurring in a particular industry, then employers 
in that industry will not be affected by the prohibition.
    Attorneys' fees for preparing and filing labor certification 
applications--Two commenters supported the improper commerce 
provisions, contingent upon clarification that attorneys' fees for 
preparing and filing an application would not be prohibited or deemed a 
sale or purchase. It is not the Department's intent to prohibit 
attorneys from charging fees for preparing and filing labor 
certification applications for employers or to deem such fees by 
themselves to be a sale or purchase of the application or resulting 
certification.
    Corporate restructuring--One commenter was troubled that the 
proposed rule could be construed broadly to prohibit transfer of a 
labor certification that arises as the consequence of a merger, 
acquisition, spin-off or other type of corporate restructuring. The 
commenter went on to say the proposed rule could be construed to 
contradict the intent of the Congress in stating in AC21 that corporate 
restructuring should not have any adverse impact on the immigration 
process. According to the commenter, in cases where one company is 
acquired by another, the acquiring company often compensates the 
acquired entity for the cost of pending labor certifications and other 
types of applications. In other cases, the employer filing the labor 
certification application may spin off part of the company and wish to 
sell the pending labor certification to the spun-off entity so that it 
can be used to obtain a green card for the original beneficiary, who 
now works for that spun-off entity. According to the commenter, the 
proposed rule is ambiguous with respect to both of the above factual 
situations. The commenter requested the rule be clarified to state that 
the prohibition against sale, barter or purchase of labor certification 
applications and certifications does not apply to transfers stemming 
from legitimate corporate restructuring activities such as mergers 
acquisitions, or spin-offs.
    The Department did not intend this provision to govern corporate 
restructuring or internal corporate accounting and finance practices 
which exist independently of the permanent labor certification program. 
The Department has determined that further clarification on this 
question is not necessary.
2. Prohibition on Employers Seeking or Receiving Certain Payments, 
Including Payment of Attorneys' Fees
    As proposed, the rule would have added a new Sec.  656.12(b) to 
prohibit employers from seeking or receiving payment of any kind, from 
any source, for filing a Form ETA 750 or a Form ETA 9089 or for other 
actions in connection with the permanent labor certification process. 
The Department proposed to include in this prohibition a ban on payment 
or reimbursement, directly or indirectly, of any employer-incurred 
attorneys' fees and other costs related to the preparing, filing, and 
obtaining of a labor certification, whether payment was by the alien or 
another individual or entity. The Department received numerous comments 
in response to this proposal, most in strong opposition to the 
proposal.
    Following careful review of comments and weighing our growing 
program experience with this issue, and for the reasons explained in 
detail below, the Department finds the need for program integrity 
outweighs any interest in the ability of the employer to receive 
payment or reimbursement from the alien or others in exchange for the 
filing of a labor certification application, especially when such 
payment or reimbursement has led to abuse of the process or 
exploitation of individual aliens. The Department's unique 
responsibility to reduce the incentive for fraud in the permanent labor 
certification program while simultaneously protecting the rights and 
working conditions of U.S. workers requires us to focus on the nature 
of the payment that an employer would receive from an alien or others 
for costs or fees relating to the preparation and filing of the labor 
certification application or obtaining permanent labor certification. 
The Department's concern, which is shared by other Federal agencies, is 
that such a payment undermines the labor certification process by 
potentially corrupting the search for qualified U.S. workers and 
creating serious doubt as to whether the employer is offering a bona 
fide job opportunity and making it available for U.S. workers.
    Accordingly, consistent with the proposed rule, the intent of this 
Final Rule is to make it clear that employers who submit applications 
for permanent labor certification do so with the full understanding 
that the costs they incur for the preparation and filing of the 
application and obtaining permanent labor certification are to be 
exclusively borne by the employer. Thus, the Final Rule prohibits an 
employer from receiving payment of any kind as an incentive or 
inducement to file, or in reimbursement of the costs of preparation or 
filing of, an application for labor certification, including covering 
the costs of the employer's attorneys' fees, except as specifically 
provided for certain third-party payments. The Final Rule also 
prohibits an employer filing an application for labor certification 
from reducing the wages, salary or benefits of an alien named on the 
application for any expense related to the preparation and filing of 
the application. This prohibition includes the payment by the alien of 
costs (for recruitment or other activities in furtherance of the labor 
certification) as well as the employer's attorneys' fees.
    In addition, this Final Rule prohibits employers engaged in the 
labor certification process from withholding from an alien's wages, 
either in increments or in lump sum, any payment in reimbursement to 
the employer for costs associated with that process.
    As first described in the NPRM, prohibited payments include, but 
are not limited to: Employer fees for hiring the alien beneficiary; 
receipt of ``kickbacks'' of part of the alien beneficiary's pay, 
whether through a payroll deduction or otherwise; reducing the alien 
beneficiary's pay for purposes of reimbursement or pre-payment; goods 
and services or other wage or employment concessions; kickbacks, bribes 
or tributes; or receipt of payment from aliens, attorneys, or agents 
for allowing a permanent labor certification application to be filed on 
behalf of the employer.
    There are strong and ample grounds upon which to prohibit these 
payments or arrangements, including the payment by the alien of the 
employer's attorneys'

[[Page 27920]]

fees. Permanent labor certification is an employer-driven process; 
employers, not aliens, must file permanent labor certification 
applications. To the extent the alien beneficiary who is the subject of 
the labor certification application and, later, the immigrant petition, 
is financially involved in the application process directly or 
indirectly, this involvement casts suspicion on the integrity of the 
process and the existence of a bona fide job opportunity. Payment by 
the alien of employer costs allows him or her some level of control 
over what must remain an employer-driven process. The degree of that 
control, at least at the labor certification stage, directly and unduly 
influences the legitimacy of the job opportunity and whether that 
opportunity has been and remains truly open to U.S. workers. In other 
words, as stated in the NPRM, alien subsidization of employer-incurred 
costs adversely affects the likelihood that a U.S. worker will be 
offered the job when, for example, the alien is paying for the 
recruitment effort.
    The essence of this aspect of this Final Rule is that expenses that 
rightfully belong with an employer should not be transferred to an 
alien beneficiary or others. An alien is free to retain counsel to 
represent his or her interests in the labor certification process and 
also to assume responsibility for those costs. This Final Rule does not 
seek to regulate or control payments to, or the identity of, the 
alien's attorney. However, to the extent that any attorney is preparing 
or filing a labor certification application and thus engaged by the 
employer as well as with the alien, the costs attributable to work for 
the employer must be paid by the employer. Costs for attorneys' fees 
outside the labor certification process are not part of this 
rulemaking.
    The Department is aware of the import of its position--the 
implications are at the center of the reasons we find the prohibition a 
necessity. We recognize the vast majority of aliens for whom permanent 
labor certifications are filed are already employed by the employer. In 
initiating the permanent residence process, the employer demonstrates a 
desire to retain the alien on a more permanent basis than permitted by 
his or her nonimmigrant status. The pre-existing relationship provides 
the employer with significant incentive to conduct the recruitment 
process in a manner that favors the alien. The cost incurred in the 
labor certification recruitment process by the employer serves as an 
identifiable disincentive to that outcome. It serves at least to make 
the employer examine the value it places on retaining the alien. By 
requiring employers to bear their own costs and expenses, including the 
representation of the employer, the Department is ensuring that the 
disincentive to pre-qualify the alien in the job opportunity--keeping 
the job open and the recruitment real--remains in the process. This 
enables the Department to remain in its statutory role as the arbiter 
of the presence of otherwise-eligible U.S. workers in relation to the 
admissibility of the alien.
    The complexities associated with multiple-party financial 
involvement in the labor certification process are not new. The 
provisions in this section work in concert with other parts of the 
regulation and reflect the Department's determination to keep the 
recruitment process open, fair and available to U.S. workers. For 
example, as stated in the preamble to the final PERM regulation, 
evidence that the employer, agent, or attorney required the alien to 
pay employer costs may be used under the regulation at Sec.  
656.10(c)(8) to determine whether the job has been and clearly is open 
to U.S. workers. The rule prohibiting the payment of an employer's fees 
or costs by the alien and the rule requiring the presence of a bona 
fide job offer, in turn, are consistent with the prohibition on sale 
and barter in the Final Rule, as they support the Department's desire 
to actively prevent and prohibit activities that directly commoditize 
permanent labor certifications.
    Under the authority of Sec.  656.10(c)(8) of the current 
regulation, Form ETA 9089 \2\ already requires employers to disclose 
and specify ``payment[s] of any kind [emphasis added] for the 
submission of [the] application.'' The decision to seek this disclosure 
as part of the information related specifically to recruitment reflects 
the Department's concern that such payments may adversely impact the 
availability of the job opportunity to the U.S. workforce. The 
provisions added by this Final Rule are simply a logical extension and 
clarification of the type of information the Department considers 
relevant to this concern.\3\
---------------------------------------------------------------------------

    \2\ Section ``I. Recruitment Information,'' Subsection ``e. 
General Information,'' Question 3.
    \3\ In the PERM regulation, the Department reserved the right to 
request any information the Certifying Officer deems relevant to a 
labor certification application. 20 CFR 656.20(d). The existence of 
a bona fide job opportunity and the disclosure of payments are 
always relevant to the application.
---------------------------------------------------------------------------

    This Final Rule clarifies the application of Sec.  656.10(c)(8) to 
the issue of alien payment. It prohibits employer practices that 
require an alien to pay employer labor certification costs, including 
prohibiting practices that require the alien beneficiary to cover all 
labor certification costs, requirements that an alien cover specific 
activity-related costs (all recruitment costs, all in-house legal 
expenses), and wage deductions to the alien's paycheck as reimbursement 
for or in anticipation of such costs, regardless of the labor 
certification activity they cover. As with the modifications policy, 
this Final Rule reinforces the PERM rule's policy; it also specifies in 
greater detail the specific activities the prohibition is meant to 
cover.
    As stated in the NPRM, the Department recognizes the possibility 
that legitimate employers may have a practice of seeking reimbursement 
from the aliens they hire for the expenses they incur in filing and 
obtaining the permanent labor certification. The Department has 
determined that any such reimbursement including, but not limited to, 
attorneys' fees to prepare an employer's application, recruitment 
expenses to determine whether domestic labor is available, or other 
such employer expenses, is contrary to the purpose of the labor 
certification program and such costs should be borne exclusively by the 
employer. An alien employee who reimburses his employer is effectively 
being paid a lower wage than agreed to by the employer on the labor 
certification, which undermines the Secretary's finding that the wages 
and working conditions of the job will not adversely affect U.S. 
workers and the Secretary's duty to protect U.S. workers.
3. Issues Raised by Comments on Attorneys' Fees
    The Department received a significant number of comments on the 
proposed prohibition on payment or reimbursement of the employer's 
attorneys' fees or other employer costs related to preparing and filing 
a permanent labor certification application and obtaining permanent 
labor certification. The overwhelming majority of the commenters were 
opposed to this proposal.
    Relationship of this prohibition to purpose of the rule--Commenters 
questioned the relationship between the prohibition against aliens 
paying or reimbursing the employer for expenses related to the labor 
certification application, including attorneys' fees, and the 
Department's efforts to limit the opportunities and incentives for 
fraud in the labor certification program. They believed the 
Department's statements in the preamble to the NPRM were vague and did 
not establish a logical relationship between illegal

[[Page 27921]]

merchandising of labor certifications and such payments or 
reimbursements. Commenters also questioned the reasoning behind the 
Department's statement in the NPRM at 71 FR at 7660, that an alien's 
payment of the employer's costs might indicate there is not a bona fide 
position and wage available to U.S. workers.
    The Department stands by its reasoning. An alien's reimbursement or 
payment to an employer for filing a labor certification on his behalf 
turns labor certifications into commodities, increases the likelihood 
that a prejudicial arrangement exists which precludes any consideration 
of U.S. workers, and undermines the integrity of the labor market test 
required for certification under Section 212(a)(5)(A) of the INA. An 
alien employee who reimburses his employer via deductions from his 
paycheck or a lump payment is effectively being paid a lower wage than 
agreed to by the employer on the labor certification. A U.S. worker is 
non-competitive with the alien worker unless he too accepts the actual 
lower wage. Therefore, the practice of aliens reimbursing employers for 
expenses the employer incurred in the labor certification process 
adversely affects the compensation of U.S. workers. Because the INA 
mandates that the Department may only approve a labor certification if 
there are not qualified U.S. workers for the position, and if the wages 
and working conditions of similarly employed U.S. workers are not 
adversely affected, the Department will not permit the practice of 
reimbursement of attorneys or other fees or costs associated with 
obtaining a labor certification. There is a direct correlation between 
an alien's financial participation in the labor certification process 
and the likelihood that an arrangement exists which precludes 
legitimate consideration of U.S. workers, affecting the integrity of 
the labor market test required by INA section 212(a)(5)(A). The statute 
charges the Department to ensure an adequate, good faith test of the 
labor market--that an alien will not be admitted for a job for which a 
qualified U.S. worker is available. It is, therefore, the Department's 
role and statutory responsibility to remove the potential for this 
undue influence.
    Authority--Many of the commenters questioned the Department's 
authority to dictate who should not pay attorneys' fees and other 
costs. They asserted that there is no statutory authority for such a 
rule and stated that had the Congress intended to give DOL the 
authority to regulate the attorney-client relationship and/or to set 
limits on the payment of attorneys' fees, it would have done so 
explicitly and unambiguously as it has in other contexts. They cited 
the authority in INA section 212(n) for the H-1B program as an example. 
Many commenters opined the proposed rule would be restrictive of 
freedom to contract.
    In addition, many commenters expressed the belief the Department 
was intruding into the licensing and regulation of attorneys. They 
stated this issue has been left exclusively to the states, which 
prescribe the qualifications for admission to practice and the 
standards of professional conduct and are responsible for attorney 
discipline. These commenters believed the Department has neither 
statutory nor other authority to regulate payments to the attorneys 
that parties to proceedings before the Department are entitled to 
retain. They further stated any changes to this complex relationship 
should be left to the regulatory bodies that traditionally make them--
states and their bar associations.
    The Department disagrees with those comments. This Final Rule's 
prohibition on improper payments governs employers and aliens engaged 
in the labor certification process, not the attorneys retained by the 
employer. The rule prohibits employers from receiving financial 
incentives or reimbursement for filing labor certification applications 
and from withholding payments from workers for that purpose (among 
other things). These are activities that undermine the legitimacy of 
the labor market test that is required to be conducted by the law 
before the Department may approve a labor certification. The 
Department's focus is not on attorneys' fees, but rather on the actual 
wage paid to the alien employee and the effect that a lower wage or 
reimbursement of costs has on the wages and opportunities available to 
U.S. workers. The transfer of the responsibility for payment of 
attorneys' fees or other costs associated with preparing, filing and 
obtaining labor certification from employer to alien (or others) 
signals preselection in the hiring decision, contrary to the 
requirement of an open recruitment process with full consideration of 
U.S. workers. The INA broadly empowers the Secretary to ensure that 
there is a bona fide job opportunity open to U.S. workers and that 
there is no adverse effect on the wages and working conditions of U.S. 
workers before approving a labor certification. As part of its 
statutory charge, the Department is responsible for eliminating factors 
which undermine the legitimacy of the job opening and of the 
recruitment process, including the improper allocation of costs and 
fees associated with labor certification. Prohibiting the alien, 
directly or indirectly, from paying the employer's attorneys' fees and 
other costs is a critical step toward ensuring employers or others do 
not degrade the validity of the labor market test. The fact that 
section 212(n)(2)(C)(vi)(II) of the INA prohibits an employer from 
accepting reimbursement from an alien employee for the fees for an H-1B 
nonimmigrant petition does not support the argument that the Department 
lacks authority to prohibit the reimbursement of attorneys' fees and 
other costs associated with permanent labor certifications. To the 
contrary, that specific prohibition in the nonimmigrant context 
highlights Congress' interest that the employer should bear the costs 
associated with hiring alien employees and not pass them onto the 
alien.
    It is well settled that an agency is empowered to take all 
reasonable actions, even if not particularly specified in the statute, 
to effect the objective and policy of the statute. The Department is 
charged with ensuring that an employer's hiring of an alien employee 
does not displace U.S. workers or distort wages and working conditions 
in the U.S. labor market before approving permanent labor 
certifications, and this prohibition against the reimbursement of 
attorneys fees and other costs directly furthers that mandate. The 
Final Rule in no way precludes an employer from hiring and paying an 
attorney for the services provided to the employer or an alien from 
hiring and paying an attorney for the services provided to the alien, 
or for that matter an employer paying for an attorney who exclusively 
represents the alien employee. The rule does not speak to the 
qualifications of an attorney or the professional standards with which 
the attorney practices. The rule simply seeks to ensure the integrity 
of the labor certification process by removing an incentive to 
manipulate that process in favor of an alien worker and against the 
interests of U.S. workers.
    Right to counsel; attorney-client relationship--Commenters also 
asserted that because the labor certification application is signed by 
both the employer and the alien, both are parties to the proceeding and 
both are exposing themselves to sanctions under the law for any 
misrepresentations made on the application. They maintained that each 
is entitled to counsel of his or her choosing and the Department may 
not limit the choice and interfere in the attorney-client relationship 
by regulating who may pay attorneys' fees. Some commenters included 
reasons as

[[Page 27922]]

to why the alien might want independent counsel and other commenters 
read the proposed rule to mean the alien could not have independent 
counsel. Some commenters also interpreted the proposed rule as 
prohibiting dual representation of both employer and alien by a single 
attorney.
    These commenters misconstrued the NPRM. The Department is not 
seeking to limit either party from choosing counsel. The act of seeking 
legal representation, the identity of legal counsel, and similar 
activities are all outside the scope of this regulation. As previously 
noted, the alien is free to retain counsel to represent his or her 
interests in the labor certification area or any other area in which 
the alien desires counsel. Nothing in this regulation prohibits the 
alien from hiring the same attorney as the employer. This regulation 
simply prohibits an employer from transferring his legal and other 
costs associated with procuring a permanent labor certification to the 
alien employee.
    Vagueness--Several commenters asserted the Department has not 
provided sufficient description of the conduct that it would deem to be 
a violation of this proposed rule. Commenters specifically identified 
the language in Sec.  656.12(b) stating, ``An employer shall not seek 
or receive payment of any kind for any activity related to obtaining a 
permanent labor certification'' as vague.
    In response to this concern, the Department has clarified the 
prohibited behavior in this Final Rule. The rule provides specific 
examples of prohibited transactions, including kickbacks, improper wage 
withholdings, bribes, and lump sum reimbursements. It also prohibits 
non-monetary transactions, such as free labor. Further, it exempts 
certain third-party payments from the prohibition, as discussed below, 
allowing these payments to be made in connection with labor 
certifications.
    To whom labor certification benefits accrue--Many commenters 
disagreed with the Department's premise that because the employer files 
the labor certification application, the employer should bear all of 
the costs. These commenters believed there is a benefit to both the 
employer and the alien from the labor certification and since both are 
interested parties, these parties should be free to negotiate payment 
arrangements. Some commenters also claimed that the permanent resident 
status is a benefit to the alien and only benefits the employer if the 
employee remains on the job beyond attaining permanent status. A 
significant number of commenters described agreements frequently used 
which require reimbursement if a foreign employee resigns upon being 
granted permanent residence or prior to a specified length of time 
after obtaining permanent residence status. They compared these 
reimbursement arrangements to widely used employer-employee agreements 
linking relocation costs or training and education costs incurred by an 
employer to an employee commitment to remain in a job for a specified 
period of time or otherwise reimburse a portion or all of the costs. 
Other commenters stated that, under section 204(j) of the INA, since 
the alien beneficiary now has the ability to move to another employer 
even before attaining permanent residence (as soon as 180 days after 
filing an adjustment application), the extent of the benefit realized 
has shifted even more substantially to the employee and increases the 
employer's need for the agreement described above.
    Several commenters claimed the interest in the labor certification 
application is weighted to the alien even more strongly. To support 
this argument, one commenter referenced DerKevorkian v. Lionbridge 
Technologies, No. 04-cv-01160-LTB-CBS, U.S. Dist. LEXIS 4191 (D. Colo. 
Jan. 26, 2006). In this unreported decision, the court held that an 
employer's promise to sponsor an alien employee for permanent residence 
created claims for promissory estoppel and breach of fiduciary duty by 
the employee against the employer. Some commenters asserted that this 
decision supports the proposition that an employee has legal rights in 
the labor certification process, even when an application has yet to be 
filed with the Department. The commenters further asserted this case 
could stand for the proposition that an employer may limit its legal 
liability by requiring an alien to retain his own attorney. 
Additionally, commenters referenced various provisions for continued 
employment rights for H-1B nonimmigrants which purport to recognize the 
alien's rights and interests in the labor certification process.
    Others believed the alien should rightfully participate in paying 
some or all of the costs related to the labor certification application 
because the recruitment process and completion of the application is, 
in reality, an ``artificial'' recruitment being conducted solely to 
satisfy the Department's requirements. They maintained the actual 
recruitment that was paid for by the employer is the recruitment which 
produced the non-U.S. worker, and therefore, the need for the 
recruitment used in the labor certification process is directly tied to 
the alien employee and the alien should be able to contribute to the 
payment of the employer's costs. Further, many permanent alien workers 
are first hired by employers under H-1B or other nonimmigrant visas for 
which there is no requirement of a pre-employment labor market test to 
determine whether U.S. workers are available.
    We disagree with the commenters' assumption that an alien's 
interest in labor certification warrants payment by the alien of the 
employer's expenses. For purposes of employment-based visas requiring 
labor certification, the application to the Department of Labor and the 
Secretary of Labor's determination initiate a much broader, multi-
agency process whose function is to consider and complete a specified 
alien's entry into the United States for the sole purpose of filling an 
employer's job vacancy. First, the unreported DerKevorkian decision 
merely suggests that an alien may have a private right of action 
against an employer for failure to properly proceed after agreeing to 
sponsor an alien for permanent residence. The court did not hold that 
an alien has a legal interest against the Department in the approval of 
a labor certification. Second, an alien does not apply to the 
Department for approval of a labor certification, the employer does. 
Finally, the purpose of the labor certification is not to provide an 
alien with permanent residence, rather it is to certify that the 
alien's admission into the United States to work in a particular 
position will neither displace a U.S. worker nor distort the U.S. labor 
market. The fact that aliens may leave employment early or change 
employers is a risk which is no different from the risk of hiring any 
U.S. worker and which should be duly considered by employers as they 
carefully consider whether to invest the resources they believe are 
required to pursue an employment-based immigration solution to their 
workforce shortage. This rule does not seek to govern the large 
majority of employment agreements between employers and alien workers--
those that may require reimbursement to the employer for travel, moving 
expenses, loans and other expenditures that apply equally to both U.S. 
and foreign workers and can be shown were made directly for the benefit 
of that worker. The Department must weigh the undeniable benefit to the 
employer and the alien of sharing certification costs against the 
interests of U.S. workers who must, under the statute, be considered 
for that job

[[Page 27923]]

opportunity before it can be offered to the alien.
    Payment by the employer of the costs associated with the 
preparation, filing and obtaining a labor certification keeps the alien 
outside the process and insulates the process from financial 
relationships that would subvert the permanent labor certification 
process' goal of protecting U.S. workers. The Department has decided 
its statutory mandate is best served by removing this incentive for a 
less-than-valid test of the labor market. Under the terms of the labor 
certification program, the protection of U.S. workers outweighs any 
employer interest in obtaining financial remuneration from alien 
employees for the costs associated with labor certifications.
    As stated, the Department is not seeking to prohibit, limit, or 
regulate dual legal representation of alien and employer in the 
permanent residence process. However, it is the Department's 
expectation that in such situations attorneys' fees and costs 
associated with the preparation, filing and obtaining of the labor 
certification are to be borne by the employer. Various Federal, state 
and local laws regulate payment of wages, prohibit or restrict 
deductions from wages, outlaw ``kickbacks,'' restrain assignments, and 
otherwise govern the frequency and manner of paying wages. In accord 
with the restrictions promulgated in this rule, any attempt by an 
employer to recover labor certification costs from an employee through 
deductions from wages, uncompensated additional work by the employee, 
or otherwise, would be considered an attempt to circumvent the rule and 
could result in the debarment of the employer from the program as 
provided in the rule, as well as subject the employer to appropriate 
enforcement actions for violations under other applicable authorities.
    Disparate treatment--Several commenters were concerned the proposed 
rule would result in disparate treatment of nonprofit organizations, 
hospitals, public universities, and small businesses. According to 
these commenters, these organizations may not have in-house counsel or 
the resources to hire counsel and have traditionally negotiated a cost-
sharing agreement with the alien employee. Commenters also claimed the 
proposed rule would penalize those same institutions--nonprofit 
research organizations and institutions of higher education--that the 
Congress has expressly recognized as worthy of support. The different 
standard for prevailing wages and the exemption from training fees 
under the H-1B program were cited as examples of Congressional intent. 
These commenters believed the effect of the rule would be to move the 
program to the exclusive domain of highly profitable employers in the 
United States.
    Commenters also stated disparate treatment of workers could result. 
They asserted if employers were to be required to pay the fees for 
labor certification, the end result would be that the alien employees 
would receive a specific benefit and better treatment (i.e., payment of 
legal fees) than similarly situated U.S. workers. Other commenters were 
concerned the rule as proposed would have a disparate impact on alien 
workers, some of whom would be given access to employer funds for legal 
costs and some of whom would not, based on budgetary allocations, the 
type of benefit sought, or other factors. One commenter suggested that 
this would have a disparate effect on professors and researchers in 
universities that, for various reasons, require their in-house or 
outside counsel to file labor certifications, resulting in a different 
outcome than their colleagues who were considered ``outstanding'' and 
thus able to bypass the labor certification process.
    The Department disagrees. The recruitment, legal, and other costs 
associated with labor certification are transaction costs necessary for 
or, in the case of legal fees, desired by the employer to complete the 
labor market test, allow the Department of Labor to make its 
determination, and enable the employer to move to the next step of the 
hiring process, a step it will complete with DHS. The employer's 
responsibility to pay these costs exists separate and apart from any 
benefit to the alien from his or her eventual entry as an immigrant. 
Moreover, employers may legitimately offer benefits to employees on a 
selective basis in almost all areas--educational benefits offered to 
certain sectors of a workforce but not to others, relocation expenses 
offered to those at certain geographic distances but not others, 
training offered to managers but not to nonexempt employees, to name 
just a few examples. The costs involved in a labor certification are 
just one instance where benefits may be, at the employer's option, 
extended to some employees or classes of employees but not to others. 
The same is true of those who bypass the labor certification process 
entirely and who are able to file an immigrant petition directly with 
DHS, such as the outstanding professors and researchers noted by the 
commenters. The Department reminds employers, especially those small 
employers and non-profits who commented on this issue, that there is no 
statutory or regulatory requirement that an application for permanent 
labor certification be prepared by and/or submitted by an attorney, nor 
is the Department setting any standards for what such costs should be.
    Third party situations--Commenters have raised questions about 
payments by third parties and asserted that, by deeming attorneys' fees 
to be only the employer's expense, the Department was forbidding the 
employer from passing the expense to another party. These commenters 
suggested the Department is also prohibiting third party payments 
directly to the attorney, even though such payment is not a 
reimbursement of the employer's expenses.
    Commenters also described purportedly common situations that 
involve the payment of attorneys' fees by entities other than ``the 
employer.'' As an example, one commenter stated physicians frequently 
have split appointments between a Veterans Affairs Medical Center 
(VAMC) and an affiliated institution of higher education. In these 
cases, although there is one ``employer of record'' who files the labor 
certification application, the university reimburses the VAMC for the 
proportion of the fees commensurate with the proportion of the work 
week spent at the university.
    The Department finds these comments largely meritorious and has 
revised the regulation at Sec.  656.12(b) to recognize such situations. 
It is not our intent to look behind the employment that is the subject 
of the labor certification to ascertain the legitimacy of the employer 
vis-a-vis other entities with a legitimate interest in the alien. Where 
there is a legitimate third-party relationship in which the payment by 
the third party of the fees and costs that should be borne by the 
employer would not contravene the intent of the program, the payment 
does not adversely affect the fairness of the labor market test. In 
cases where there is a legitimate, pre-existing business relationship 
between the employer and the third party, and the work to be performed 
will benefit that third party, the employer is not influenced to the 
point of preselection of the alien worker in the labor market test. By 
requiring that the relationship be a business interest that predates 
the labor certification process, the Department is protecting against 
fraudulent relationships.
    The Department also received comments regarding money paid to a 
trust fund established by a union for defraying the costs of legal 
services for

[[Page 27924]]

employees, their families, and dependents. The proposed rule, the 
commenters maintained, would prohibit payment of attorneys' fees and 
costs for an alien employee by such a union fund because payment would 
not be coming from the employer. These commenters believed the proposed 
rule may contravene Supreme Court cases confirming a union's First and 
Fourteenth Amendment right to assert legal rights. This comment is 
misplaced. To the extent such a trust fund is reimbursing a worker for 
the worker's legitimate costs and not for the employer's costs, 
reimbursement is not prohibited by the Final Rule.
    The Department reiterates that this Final Rule seeks to require the 
employer to pay its own costs, including attorneys' fees, for its own 
activities related to obtaining permanent labor certification, which is 
an employer-driven process. However, this rule does not regulate 
payment by an alien or others of their own costs, attorneys' fees or 
other expenses. Nor does this rule regulate contract arrangements, cost 
allocation and financial transactions within a corporation or its 
affiliates, between an entity and its insurers or legal service 
providers, or between and among entities engaged in a joint enterprise.
    Employer paying alien's attorney--Another commenter described a 
scenario in which an alien retains his or her own attorney separately 
from counsel retained by his or her employer and the employer is 
willing to pay the attorneys' fee, but the attorney may be prohibited 
from accepting such a payment under state bar rules. As previously 
noted, this rule does not regulate the attorney-client relationship or 
the alien's retention of counsel. Neither does this rule prohibit 
payment by the employer of costs beyond those that are exclusively the 
employer's--payment, for example, of the alien's attorneys' fees or 
other costs attributed solely to the alien. Finally, nothing in this 
regulation regulates payment by an alien, or others, of their own 
attorneys' fees or other expenses.

D. Labor Certification Validity and Filing Period

    The Department received numerous comments about the proposed 
language at Sec.  656.30(b) establishing a validity period of 45 
calendar days for permanent labor certifications. Although some 
commenters asserted the Department lacks the authority to define a 
validity period, the majority of commenters focused instead on 
proposing alternative time periods ranging from ninety days to five 
years. Some cited possible delays in both DOL and DHS processes, which 
they claimed would make the filing of an immigrant visa petition with 
DHS within the 45-day time period impractical, if not impossible.
    Commenters provided very similar if not identical lists of reasons 
why a validity period of only 45 days would be inadequate. The reasons 
included: Untimely receipt of labor certifications from DOL; a 
prolonged absence of the individual, or individuals, necessary to the 
I-140 and I-485 filing processes; unavailability of documentation; and 
general, unforeseeable delays. Opportunities for delays 
notwithstanding, many commenters did not oppose a validity period and 
some expressly supported the concept of a labor certification being 
valid for only a finite length of time. Most, however, believed a 
longer time period was warranted. Others opposed a finite validity 
period but were willing to accept such a period only if it was for a 
time longer than 45 days.
    After reviewing the arguments, considering the reasons presented 
for needing a longer validity period, and weighing the merits of 
alternative time periods, the Department, in this Final Rule, increases 
the validity period for a permanent labor certification from 45 to 180 
days. The Department has determined that increasing the validity period 
to 180 calendar days is a reasonable alternative, in that it provides 
additional time to accommodate possible delays, while maintaining the 
integrity of the labor market test and the security of the labor 
certification. Labor market conditions are subject to rapid change, and 
it is consistent with DOL's mandate under INA section 212(a)(5)(A) to 
require a retest of the market after the passage of that time.
    The question of the appropriate validity period directly addresses 
the reliability of the information that underlies and supports the 
Secretary's determinations of the availability of U.S. workers and 
whether the job opportunity's wages and working conditions will 
adversely affect the wages and working conditions of U.S. workers. The 
Department's certification speaks to the unavailability of U.S. workers 
and, hence, extends only to the point (either because of the passage of 
time or because, as in the case of substitution, the circumstances 
surrounding the job opportunity have changed) at which point 
availability again comes into question. The PERM regulation reflects 
the determination, made by the Department when the new program was 
instituted, that 180 days is the maximum window for the viability of 
labor market information. Consistent with this determination, the 
current regulation, at Sec.  656.17(1)(i) and (ii), requires that 
mandatory recruitment be conducted no more than 180 calendar days prior 
to filing. A 180-day validity period after certification aligns 
programmatically with this recruitment requirement and follows a 
similar rationale.
    The Department has determined that 180 days provides sufficient 
time for an employer to move to the next step in the permanent 
residence process while minimizing the risk of potential changes in 
local economies. Taken together, the timeframe as currently conceived 
(i.e., recruitment within six months of submission of the application, 
PERM's average processing time which is greatly improved and generally 
within 60 days, and a 180-day validity period) will all provide as 
valid and timely a picture of the labor market as current program 
parameters will allow while providing sufficient flexibility for 
contingencies in the employment-based immigration process.
1. Statutory Authority
    Some commenters opposing imposition of a validity period claimed 
the Department is exceeding its statutory authority under INA section 
212(a)(5)(A) which requires the Secretary of Labor's determination on 
U.S. worker availability and adverse impact on wages and working 
conditions. Most asserted that although the statute does not expressly 
provide for a validity period, it does refer to DOL's determination 
being used ``at the time of application for a visa.'' The Department 
does not agree it lacks the authority. To the contrary, by limiting the 
period of validity of the labor market test that underlies the 
Secretary's determination, the Department more closely adheres to the 
letter of the law. The statute requires the Secretary to make the 
certification as a function of evaluating the introduction of the alien 
immigrant into the workforce; the Secretary's determination is to be 
made at the time of the application for admission. A validity period 
serves to forge a closer temporal link between the determination and 
the admission.
    One commenter argued that the INA limits the Department's authority 
to an assessment of the employment opportunity, i.e., the test of the 
labor market, in order to make a determination of whether or not to 
certify. No such limiting language exists in the INA. The test of the 
labor market was instituted by the Department as a means by which to 
implement the

[[Page 27925]]

requirements of the statute. Procedures for the examination of the 
labor market and the larger labor certification process of which it is 
a part have varied, but the labor market test has always functioned as 
a prerequisite to the employment-based admission of an alien. The 
imposition of a validity period is a logical mechanism by which the 
Department can ensure that the information upon which a determination 
was based remains legitimate.
2. Delays in Processing of Applications and Receipt of Labor 
Certifications
    Some commenters attempted to establish a nexus between the long 
processing times at both DOL and DHS and a validity period. They 
contended the Department's argument that a certification grows stale 
with the passage of time is disingenuous, given the extremely long 
processing times and resultant staleness of at least some information 
in applications submitted years earlier, and implied the Department's 
argument is not justifiable. The Department disagrees. The Final Rule 
addresses the question of validity post-certification. While questions 
of wages and recruitment are adjudicated on an individual basis as 
applications come up for review in our Backlog Processing Centers--
independent of how long each of those applications has been pending--
the Department must determine how long it will stand behind those 
certifications once issued, and when it is appropriate to once again 
test the market. The question of a validity period addresses these 
broader concerns.
    We also note the PERM system was implemented in direct response to 
the long processing times experienced under the previous program model, 
and we have already significantly reduced processing times from years 
to months. The reduction in time provides the Department assurance that 
the information upon which a determination is based is current and 
valid.
    Commenters also complained of frequent and long delays in the 
receipt of granted labor certifications and suggested that another 
basis, other than the date of issuance, should be the starting point 
from which the time period begins to run. While it is true that delays 
in delivery, when they occur, negatively impact timely filing with DHS, 
these comments were based on the experiences at the outset of the new 
PERM program. Labor certifications are now being adjudicated in a more 
timely manner. Moreover, the longer validity period of 180 days serves 
to provide the time necessary to accommodate any delay that may occur 
in certification receipt.
3. Relationship to Fraud
    Some comments in support of a validity period argued that 
indefinite validity allows some unscrupulous companies to stall the 
filing with DHS as a means of preventing the worker from leaving their 
employ, and that it also allows employers so disposed to prolong non-
payment of the wage indicated on the application. One commenter opposed 
to a validity period hypothesized that an employer might not want to 
file the I-140 within an imposed validity period if it would be unable 
to demonstrate to DHS the ability to pay the wages attested to on the 
Form ETA 9089. We agree that indefinite validity may contribute to a 
variety of undesirable or unlawful behaviors and, further, that the 
longer the period of time the labor certification is in circulation, 
the greater the probability that the information on the application, 
not only that pertaining to recruiting, is stale or increasingly less 
relevant.
    Some commenters pointed to other provisions currently in place or 
proposed in the NPRM, including the elimination of substitution, which 
serve to protect against fraud and argued that more fraud protection is 
unnecessary and merely prejudices the honest employer. As stated above 
with respect to the elimination of substitution, while we do not doubt 
that other fraud prevention and detection methods are available, the 
appropriateness or effectiveness of those other methods does not 
obviate the need for additional, targeted techniques to address the 
problems generated by a specific issue, such as, in this case, the 
indefinite validity periods for labor certifications. It is difficult 
to see how a reasonable validity period prejudices honest employers who 
presumably wish to obtain the admission of the alien worker they have 
sponsored as quickly as possible. The revised validity period 
accommodates the need for a reasonable period of time in which to 
submit the I-140.
4. Increased Burden at DOL Due to Untimely Filings and at DHS Due to 
Incomplete or Inaccurate I-140 Filings
    Several commenters argued that imposing the requirement that a Form 
I-140 petition be filed within a limited period of time will result in 
increased burdens for both DOL and DHS. That likelihood is overstated. 
Commenters posited that DOL will likely see an increase in filings due 
to the re-submission of applications to replace labor certifications 
that expire before the Form I-140 can be filed, which will, in turn, 
result in filing backlogs. This claim does not take into consideration 
the efficiency of the PERM system. Moreover, given the importance of 
the labor certification for both the employer and the alien, it is 
unlikely that a significant number of labor certifications will be 
allowed to expire. Similarly, the claim that a ``rush to file'' the 
Form I-140 will result in inaccurate and incomplete Form I-140 filings 
is also difficult to envision, given the significance of the filing. 
DOL expects that employers, attorneys and agents will be thoughtful and 
careful as they complete each labor certification application and 
immigrant petition and that at least some preparation for the entire 
permanent residence process would have taken place in advance of 
certification. Furthermore, the lengthening of the validity period from 
45 to 180 days will provide the employer a reasonable period of time in 
which to ensure that all documentation and information necessary are 
accurate and complete prior to filing.

E. Program Integrity and Debarment

    The preamble to the PERM Final Rule indicated the Department would 
consider the imposition of stricter remedial measures in any future 
rulemaking involving the permanent program. Consistent with this 
intent, the NPRM to this Final Rule contained several provisions to 
promote the program's integrity and assist the Department in obtaining 
compliance with the proposed amendments and existing program 
requirements. The Department proposed several revisions to Sec.  
656.31, the regulatory section governing the Department's response to 
instances of potential fraud or misrepresentation, including extending 
the time for potential suspension of processing for applications filed 
by certain employers, attorneys, or agents. In addition, the NPRM made 
the section applicable to applications filed under the current 
regulation and the regulation in effect prior to March 28, 2005. This 
Final Rule adopts the provisions on suspension of applications and 
notice to employers largely as proposed in the NPRM.
    As stated in the proposed rule, given the breadth and increased 
sophistication of the immigration fraud that has been identified in the 
recent past, the Department requires added flexibility to respond to 
potential improprieties in permanent labor certification filings. While 
the Department already has the authority, this Final Rule clarifies

[[Page 27926]]

Sec.  656.31(a) to state the Department may deny any application for 
permanent labor certification which contains false statements, is 
fraudulent, or otherwise was submitted in violation of the permanent 
labor certification program regulations.
    The Department received a variety of comments on the proposed 
amendments to Sec.  656.31. While we carefully considered these 
comments, we have elected to keep the provisions largely as proposed. 
However, in response to comments, the Final Rule amends the debarment 
provisions to clarify the intent requirements (``willful'') and other 
review standards applicable to debarment.
1. When an Employer, Attorney, or Agent Is Involved in Possible Fraud 
or Willful Misrepresentation
    In Sec.  656.31(b), the Final Rule revises what was Sec.  656.31(a) 
in the NPRM and current regulation to clarify that if an employer, 
attorney, or agent connected to a permanent labor certification 
application is involved in either possible fraud or willful 
misrepresentation, the Department may, for up to 180 days, suspend the 
processing of any permanent labor certification application involving 
that employer, attorney, or agent. Thereafter, the Certifying Officer 
may either continue to process some or all of the applications or 
extend the suspension until completion of any investigation and/or 
judicial proceeding.
    ``Possible fraud'' standard--One commenter maintained Sec.  
656.31(b) (Sec.  656.31(a) in the NPRM) proposed a new legal standard 
of ``possible fraud.'' The discovery of ``possible fraud or willful 
misrepresentation'' is not a new legal standard. This basic provision, 
allowing applications to be suspended for a period of time if the 
Department discovers possible fraud or willful misrepresentation 
involving a labor certification, has been in the permanent labor 
certification regulations since 1977 (see 42 FR 3449 (January 18, 
1977)). The Final Rule continues the use of the language ``discovers * 
* * possible fraud or willful misrepresentation.''
    Use of ``knowing'' instead of ``willful''--One commenter suggested 
using ``knowing'' instead of ``willful'' in the phrase ``willful 
misrepresentation'' in Sec.  656.31(b) (proposed as Sec.  656.31(a)). 
The Department should be required to prove, the commenter continued, 
that the employer, attorney, or agent knew the nature of his acts, and 
that he or she knew his acts violated the regulation; and to promote 
fair notice and minimize risk of arbitrary enforcement, there should be 
an opportunity for persons to present an affirmative defense that they 
mistakenly believed their conduct was allowed.
    As always, applicants must remain aware of their responsibilities 
under the permanent labor certification process and of the consequences 
of submitting false or misleading information to a Federal agency. The 
application form makes it clear that the person signing the form is 
certifying, under penalty of perjury, to the accuracy of the 
information contained in the application. No one who signs an 
application should be confused about the capacity in which he or she 
signs it.
    After review of the comments, the Department has decided to retain 
the use of ``willful'' as the more appropriate terminology. Black's Law 
Dictionary provides that a ``[w]illful act may be described as one done 
intentionally, knowingly, and purposely'' [emphasis supplied]. Hence, 
the phrase ``willful misrepresentation'' as used in the permanent labor 
certification program regulations means a person who intentionally and 
knowingly meant to make a misrepresentation.
    Suspension of case processing for 180 days--The Department proposed 
to increase the initial suspension of case processing in Sec.  
656.31(b) (Sec.  656.31(a) in the proposed rule) from 90 to 180 days 
and to allow the suspension of any permanent labor certification 
application involving such employer, attorney, or agent until 
completion of any investigation and/or judicial proceeding. The 
Department also proposed to revise Sec.  656.31(b) and (c) (Sec.  
656.31(a) and (b) in the NPRM)) to clarify the Department may suspend 
processing of any permanent labor certification application if an 
employer, attorney or agent connected to the application is involved in 
either possible fraud or willful misrepresentation or is named in a 
criminal indictment or information related to the permanent labor 
certification program. Virtually all commenters objected to these 
proposals.
    The Department has concluded that, in view of the extensive history 
of fraud in the permanent labor certification program, the need to 
promulgate what are now paragraphs (b) and (c) of Sec.  656.31--
concerning initially suspending applications for 180 days and 
clarifying the Department's authority as to which permanent labor 
certification applications may be suspended--outweighs the concerns 
raised by the commenters. Our responsibility as a government agency to 
cooperate with law enforcement agencies in the investigation and 
prosecution of possible criminal activity supports this position. In 
addition, after due consideration, the Department has concluded the 
proposed provisions extending the suspension period are exempt from the 
notice and comment provision of the Administrative Procedure Act as 
matters of agency practice and procedure and as part of the agency's 
inherent authority to effectuate the labor certification review 
process. See 5 U.S.C. 553(b). Accordingly, this Final Rule includes the 
provisions allowing the Department to suspend, initially for up to 180 
days, the processing of any application relating to an employer, 
attorney, or agent involved in possible fraud or willful 
misrepresentation.
    Terms recommended for deletion and/or considered inappropriate in 
Sec.  656.31(a)--In this Final Rule, the Department has taken the last 
sentence of proposed Sec.  656.31(a) and finalized it as the entirety 
of Sec.  656.31(a), moving the remainder of the proposed text to Sec.  
656.31(b). One commenter took issue with the portion of Sec.  656.31(a) 
which reads: ``A Certifying Officer may deny any application for 
permanent labor certification if the officer finds the application 
contains false statements, is fraudulent, or was otherwise submitted in 
violation of the DOL permanent labor certification regulations.'' This 
commenter recommended the phrases ``false statements'' and ``or was 
otherwise submitted in violation of the regulations'' should be deleted 
from Sec.  656.31(a). According to the commenter, the term ``false 
statements'' should be removed because attorneys, aliens, employers, or 
agents may inadvertently make mistakes on the labor certification 
application about minor details, or omit inconsequential information. 
The commenter believed it improper to equate such ``innocent errors or 
omissions'' with fraud, and insisted the section improperly imposed 
penalties for innocent errors. The phrase ``or was otherwise submitted 
in violation of the regulations,'' according to the commenter, is 
overbroad and simply too vague to be understood or fairly applied. 
Because other sections of the regulations already explain when denial 
is appropriate, the commenter recommended that Sec.  656.31 should only 
focus on fraud and willful misrepresentation.
    The technological enhancements to the PERM system discussed above 
make it difficult to have inadvertent errors or omissions, and those 
few that will be made despite these enhancements may still not rise to 
the level of a false statement. The provision is not designed to impose 
penalties for innocent errors

[[Page 27927]]

not in the control of the submitter but is applicable to any material 
inaccuracy. Although a false statement may not rise to the level of 
fraud, the statement may involve information or a subject matter that 
is material to the application. The phrase ``or was otherwise submitted 
in violation of the regulations'' is in large measure merely a 
restatement of the authority already provided in Sec.  656.24(b)(1) of 
the current permanent labor certification regulations. Section 
656.24(b)(1) provides, in relevant part, that one of the factors the 
Certifying Officer considers in making a determination to either grant 
or deny a certification is whether or not the employer has met the 
requirements of part 656.
    As stated in the NPRM, we have added the above sentence to clarify 
the Department's authority. As a further clarification, the Department 
has removed the last sentence from Sec.  656.31(a) as published in the 
NPRM and has placed it alone as the first paragraph and designated it 
Sec.  656.31(a). The other paragraphs are redesignated accordingly.
2. When an Employer, Attorney, or Agent Is the Subject of a Criminal 
Indictment or Information
    With minor changes from the proposed rule, the Final Rule revises 
Sec.  656.31(c) (Sec.  656.31(b) in the NPRM) to clarify that, if the 
Department learns an employer, attorney, or agent is named in a 
criminal indictment or information in connection with the permanent 
labor certification program, it may suspend the processing of any 
applications related to that employer, attorney, or agent until the 
judicial process is completed. Further, the regulation provides that, 
unless the investigatory or prosecuting agency requests otherwise, the 
Department must provide written notification to the employer of the 
suspension in processing.
    Provision of notice--One commenter objected that, under this 
section as proposed, no notice of an investigation was to be provided 
to the employer, attorney or agent. As noted above, the Final Rule does 
provide for limited notice to employers whose applications are impacted 
by an investigation of an agent or attorney. Our program experience has 
shown that notifying parties under investigation can impede the 
effectiveness and outcome of investigations that are initiated or 
ongoing, and the rule accordingly provides that an investigating or 
prosecuting agency, which is in the best position to judge the adverse 
impact of notice, can request that notification not be made.
    Another commenter recommended that, when providing notice to 
employers not under investigation that processing of their applications 
has been suspended, the notice clarify for the employer receiving the 
notice that it is not under investigation. The Department will provide 
appropriate notice in cooperation with the investigatory and 
prosecuting agencies.
    Notification by employer within 30 days when attorney or agent has 
committed fraud--In the case of a pending application involving a 
finding of fraud or willful misrepresentation by the employer's 
attorney or agent, Sec.  656.31(e)(3) (Sec.  656.31(d)(3) in the NPRM) 
provides that the Department will notify the employer and allow 30 days 
for the employer to notify the Department, in writing, that the 
employer will withdraw the application, designate a new attorney or 
agent, or continue the application without representation. If the 
employer elects to continue representation by the attorney or agent, 
the Department shall suspend processing of affected applications.
    One commenter maintained that 30 days was not a reasonable 
timeframe for notification. The commenter noted the decisions are 
complex, it takes time just to receive DOL's decisions, and time may be 
required to secure second opinions, decide whether to secure other 
representation, and provide the Department with a response.
    We disagree. The 30 days required for notification is the same as 
the time provided for employers to submit requests for reconsideration 
pursuant to Sec.  656.24(g) or review by the BALCA under Sec.  
656.26(a). Such requests for reconsideration or review involve making 
decisions similar to those involved in furnishing the notice required 
under the section now redesignated as Sec.  656.31(e)(3). Like the 
Sec.  656.31(e)(3) notice, the BALCA requests also require complex 
decisions to be made; time elapses between the mailing of the denial 
and its receipt by the employer; second opinions may be sought; a 
request for review must be prepared and submitted; and the employer may 
prepare a detailed brief of the matter. Accordingly, the Department has 
concluded 30 days is sufficient time for the employer to provide the 
notification required by Sec.  656.31(e).
3. Determination of Fraud or Willful Misrepresentation
    As proposed, Sec.  656.31(d) (Sec.  656.31(c) in the NPRM) 
continues to provide the Certifying Officer will decide each 
application on its merits where the employer, attorney, or agent is 
acquitted of wrongdoing or if criminal charges otherwise fail to result 
in a finding of fraud or willful misrepresentation. The Department did 
not receive comments on these provisions and, consequently, is 
implementing the language as noted above in this Final Rule. Where a 
court, DHS, DOS, or another body finds the employer, attorney, or agent 
did commit fraud or willful misrepresentation, redesignated Sec.  
656.31(e), as revised in the Final Rule, provides that any pending 
applications related to the employer, attorney, or agent will be 
decided on their respective merits and may be denied in accordance with 
Sec.  656.24 and Sec.  656.31(a).
4. Debarment Proceedings
    Commenters generally expressed concern that, as proposed, the 
debarment provisions of Sec.  656.31(f)(1) (Sec.  656.31(e)(1) in the 
NPRM) failed to set a materiality standard and, hence, left employers 
and attorneys open to consequences that were inconsistent with the 
individual's intent and disproportionate to the violation's impact or 
importance. With respect to the various grounds for debarment, 
generally, commenters stated concern that the rule would impose a 
severe penalty for relatively minor and likely inadvertent offenses.
    After reviewing the comments, we have modified the proposed rule to 
add in this Final Rule an intent requirement (``willfully''). The Final 
Rule revises the provisions on failure to comply with the terms of the 
form, failure to comply with the audit process, and failure to comply 
with Certifying Officer-ordered supervised recruitment by adding a 
requirement that, for there to be a basis for debarment, there must be 
a pattern or practice of misconduct. As elsewhere in the Final Rule, 
the determination of when debarment is appropriate is made by the 
Administrator, Office of Foreign Labor Certification, a nomenclature 
change from the proposed rule, which named the Chief of the former 
Division.
    Improper or prohibited--One commenter maintained the term 
``improper'' is impermissibly vague in the portion of Sec.  
656.31(f)(1) (Sec.  656.31(e)(1) of the NPRM) that provides for 
debarment from the program based upon any action that was improper or 
prohibited at the time the action occurred. The term improper is a 
broad term and does not necessarily imply illegality or an action that 
was in violation of the permanent labor certification program 
regulations. Accordingly, the Department has removed the term from 
Sec.  656.31(f)(1).
    Time limits to pursue debarment--A commenter maintained most 
punitive laws include a statute of limitations,

[[Page 27928]]

beyond which violations cannot be prosecuted or pursued. Further, 
according to this commenter, statutes of limitations are promulgated 
because evidence and recollections fade with time. Conceivably, DOL 
could pursue debarment 20 years after an application is filed. In this 
connection, the commenter noted the H-1B program imposes a one-year 
time limit to lodge a complaint.
    The Department has concluded it would be appropriate to include a 
provision limiting the time in which to initiate debarment actions 
against employers, attorneys or agents. We considered requiring 
initiation of an investigation any time within the five years the 
employer is required to retain copies of applications for permanent 
employment certification filed with the Department and all supporting 
documentation from the date of filing the labor certification 
application (see Sec.  656.10(f) at 69 FR 77390 (Dec. 27, 2004)), or 
within a reasonable time thereafter. Since investigations can be time 
consuming, we have provided in Sec.  656.31(f)(1) of this Final Rule 
that debarment actions must be formally initiated within six years of 
the original filing date of the labor certification application on 
which the debarment action is based. For purposes of a pattern or 
practice, the statute of limitations will start to run with the last or 
most recent application that demonstrates or constitutes the pattern.
    Mandatory and permanent debarment--One commenter proposed that 
debarment be mandatory rather than permissive. After carefully 
considering this option, the Department has concluded it should retain 
discretion in the administration of the debarment provision. Debarment 
is a serious remedial measure not to be undertaken lightly. Discretion 
is also necessary to administer the debarment provision in the manner 
stated above and in the preamble to the proposed rule at 71 FR 7660 
(Feb. 13, 2006). As a result, we conclude the debarment provision in 
the Final Rule should remain discretionary rather than mandatory.
    The same commenter proposed that repeat offenders should be 
permanently debarred from the program following a second offense. The 
Department has concluded that we should gain operational experience 
with the debarment provision in this Final Rule before considering a 
provision to make debarment permanent following a second or later 
offense. Further, the Department is of the opinion that notice and 
comment rulemaking should be undertaken before promulgating a 
regulation allowing for permanent debarment.
    Requested changes to debarment proceedings--More than one commenter 
maintained debarment proceedings should include the right to 
specifically articulated charges; the right to request a hearing before 
an Administrative Law Judge (ALJ); the ability to present and confront 
witnesses; a transcript; and a stay of debarment upon timely appeal.
    With respect to the request for clearly articulated charges, Sec.  
656.31(f)(2), as redesignated in this Final Rule, has been amended to 
provide that a notice of debarment must include a detailed explanation 
of how the employer, attorney, and/or agent has participated in or 
facilitated one or more of the bases for debarment listed in paragraphs 
(f)(1)(i) through (f)(1)(v) of Sec.  656.31.
    With respect to the right to request a hearing before an ALJ, this 
Final Rule provides, at Sec.  656.26(a)(1), for the right to a review 
by the BALCA upon filing a written request with the Administrator, 
Office of Foreign Labor Certification, within 30 days of the date of 
the debarment. Section 656.27(e) authorizes the BALCA to hold hearings 
governed by the Rules of Practice and Procedure for Administrative 
Hearings before the Office of Administrative Law Judges, found at 29 
CFR part 18, encompassing both the right to present evidence and 
confront witnesses. While historically the ALJs have held very few 
hearings in permanent labor certification cases, we assume the BALCA 
will order hearings in appropriate cases.
    With respect to the ability to present and confront witnesses, the 
procedures outlined in 29 CFR part 18, which govern the Office of 
Administrative Law Judges and apply to the BALCA proceedings, establish 
the right to examine and cross-examine witnesses. 29 CFR 18.34. With 
respect to the right to a transcript, the BALCA procedures already 
provide for a hearing transcript. With respect to the right of a stay 
of debarment upon a timely appeal, the regulation at Sec.  656.26(a) of 
this Final Rule has been amended to provide that debarment is stayed 
upon receipt of the request for review.
5. Debarment of Attorneys and Agents
    Many commenters maintained the Department lacks the statutory 
authority to debar attorneys or agents. They argued, for example, that 
INA section 212(a)(5) relates solely to the admissibility of an alien 
coming to work in the United States and does not grant authority to 
legislate a system of penalties against an employer or its attorney or 
agent. Further, commenters suggested that, because the Congress did not 
explicitly establish debarment authority for the permanent labor 
certification program as it did in the H-1B and H-2A programs, the 
Department has no authority to create debarment mechanisms by this 
rule.
    The Department has considered the comments and has decided to 
retain the proposed remedial measure of debarment for employers, 
attorneys and agents in the Final Rule. There is extensive case law 
establishing that Federal agencies have the authority to determine who 
can practice and participate in administrative proceedings before them. 
The general authority of an agency to prescribe its own rules of 
procedure is sufficient authority for an agency to determine who may 
practice and participate in administrative proceedings before it, even 
in the absence of an express statutory provision authorizing that 
agency to prescribe the qualifications of those individuals or 
entities. Koden v. United States Department of Justice, 546 F.2d 228, 
232-233 (7th Cir. 1977) (citing Goldsmith v. United States Board of Tax 
Appeals, 270 U.S. 117 (1926)). See also Schwebel v. Orrick, 153 F. 
Supp. 701, 704 (D.D.C. 1957) (``The Securities and Exchange Commission 
has implied authority under its general statutory power to make rules 
and regulations necessary for the execution of its functions[,] to 
establish qualifications for the attorneys practicing before it and to 
take disciplinary action against attorneys found guilty of unethical or 
improper professional conduct''). In addition, an agency with the power 
to determine who may practice before it also has the authority to debar 
or discipline such individuals for unprofessional conduct. See Koden, 
564 F. 2d at 233. Further, as the Department has the authority to 
prescribe regulations for the performance of its business (as is the 
case with all executive departments under 5 U.S.C. 301), it likewise 
has the authority to determine who may practice or participate in 
administrative proceedings before it and may debar or discipline those 
individuals engaging in unprofessional conduct. The Department has 
exercised such authority in the past in prescribing the qualifications, 
and procedures for denying the appearance, of attorneys and other 
representatives before the Department's Office of Administrative Law 
Judges under 29 CFR 18.34(g). See also Smiley v. Director, Office of 
Workers' Compensation Programs, 984 F.2d 278, 283 (9th Cir. 1993).

[[Page 27929]]

6. Debarment of Employers
    At the time of the NPRM on the PERM program, some commenters 
recommended enhancing program integrity by establishing suspension and 
debarment procedures for employers that engage in fraudulent labor 
certification activities, prohibited transactions, or otherwise abuse 
the permanent certification process. In the NPRM to this rulemaking, 
the Department proposed establishing debarment procedures as an 
important part of efforts to avoid fraud, enhance and protect program 
integrity, and protect U.S. workers.
    Many comments on the NPRM expressed support for the Department's 
effort to debar from the permanent alien labor certification program 
employers and others who defraud or abuse the system. However, similar 
to comments received on the debarment of attorneys and agents, some 
commenters questioned the Department's authority to debar employers.
    The Department has carefully considered the comments on the 
proposal to debar employers and has determined that the availability of 
suspension of case processing and debarment mechanisms for employers, 
attorneys and agents is necessary to maintain program integrity. 
Therefore, these provisions are included in this Final Rule. The 
suspension and debarment of entities from participating in a Government 
program is an inherent part of an agency's responsibility to maintain 
the integrity of that program. As the Second Circuit found in Janik 
Paving & Construction, Inc. v. Brock, 828 F.2d 84 (2d Cir. 1987), the 
Department possesses an inherent authority to refuse to provide a 
benefit or lift a restriction for an employer that has acted contrary 
to the welfare of U.S. workers. In assessing DOL's authority to debar 
violators, the court found that ``[t]he Secretary may * * * make such 
rules and regulations allowing reasonable variations, tolerances, and 
exemptions to and from any or all provisions * * * as [s]he may find 
necessary and proper in the public interest to prevent injustice or 
undue hardship or to avoid serious impairment of the conduct of 
Government business.'' Id. at 89. In that case, the implied authority 
to debar existed even though the statute in question ``specifically 
provided civil and criminal sanctions for violations of overtime work 
requirements but failed to mention debarment.'' Id. The court held that 
debarment may be necessary to ``effective enforcement of a statute.''
    In order to encourage compliance, the regulatory scheme for PERM 
relies on attestations, audits and, through this Final Rule, the 
remedial measures of suspension and debarment proceedings to assure 
compliance. Use of debarment as a mechanism to encourage compliance has 
been endorsed in the INA for a number of foreign labor certification 
and attestation programs, e.g., the H-1A, H-1B, H-1C, H-2A and D visa 
programs. INA sections 212(m)(2)(E)(iv) and (v), 212(n)(2)(C), 
218(b)(2), and 258(c)(4)(B).
    In those programs, the Congress has chosen to delineate and 
establish limits on the manner in which debarment is imposed. 
Consequently, the H-1A, H-1B, and H-1C programs, under section 
212(m)(2)(E) and (n)(2)(D) of the INA, impose specific penalties on 
employers who willfully make a misrepresentation of a material fact in 
an application. See Immigration Act of 1990, Public Law 101-649, 104 
Stat. 104-4978 (1990); Immigration Nursing Relief Act of 1989, Public 
Law 101-238, 103 Stat. 2099 (1989); Nursing Relief for Disadvantaged 
Areas Act of 1999, Public Law 106-95, 113 Stat. 1312 (1999); and 
Nursing Relief for Disadvantaged Areas Reauthorization Act of 2005, 
Public Law 109-423, 120 Stat. 2900 (2006); see also INA section 258 
(regarding penalties in the program for nonimmigrant maritime 
crewmembers performing longshore work). In each of these programs, 
Congress took for granted the Department's authority to debar, but 
acted to limit or expand that inherent authority to enforce compliance 
in the employment-based immigration programs under the Department's 
jurisdiction. In the case of the H-2A program, the Congress elevated 
existing practice to express statutory status. Immigration Reform and 
Control Act of 1986, Public Law 99-603, 100 Stat. 3359 (1986).
    Beyond DOL's inherent authority to ensure compliance with the 
permanent alien labor certification program, there is an implied grant 
of statutory authority in section 122(b) of the Immigration Act of 
1990, which requires the Secretary to accept reports from the public on 
violations of the terms and conditions of a permanent alien labor 
certification.\4\ By specifically directing DOL to accept such reports, 
the Congress indicated its intent that DOL take action based on that 
information to address reported problems.
---------------------------------------------------------------------------

    \4\ The Secretary of Labor shall provide, in the labor 
certification process under section 212(a)(5)(A) of [the Act] that--
    (2) any person may submit documentary evidence bearing on the 
application for certification (such as information on available 
workers, information on wages and working conditions, and 
information on the employer's failure to meet terms and conditions 
with respect to the employment of alien workers and co-workers). 
[Pub. L. 101-619, sec. 122(b), Nov. 29, 1990, 104 Stat. 4995.]
---------------------------------------------------------------------------

    Ensuring the integrity of a statutory program enacted to protect 
U.S. workers is an important part of the Department's mission. The 
Department was established, ``to foster, promote, and develop the 
welfare of the wage earners of the United States, to improve their 
working conditions, and to advance their opportunities for profitable 
employment [Act of Feb. 14, 1903, Pub. L. 62-426, sec. 1, 37 Stat. 736] 
* * *.'' See also Janik Paving & Construction, Inc. v. Brock, supra.
    In December 2004, DOL changed, by regulation, the operation of the 
permanent labor certification program. Under the current regulation at 
20 CFR part 656, employers may attest to compliance with requirements 
to recruit U.S. workers rather than engaging in all cases in 
supervised, post-filing recruitment. Essential to maintaining the 
integrity of the new, streamlined process is a need to audit 
compliance, already included in the regulations, and a remedial measure 
for continued and serious non-compliance, which is included in this 
Final Rule. A system of attestation and audit, relying heavily on the 
veracity of employer submissions, requires a system for ``effective 
enforcement,'' as described in the Janik Paving holding, supra.
    For the above reasons, the remedial measure of debarment, modified 
as discussed above, is retained in this Final Rule as it applies to 
employers.
7. Provision of False or Inaccurate Information
    Consistent with complaints about the other terms for debarment, 
many commenters expressed concern the rule would impose a severe 
penalty for providing false information that was, all things 
considered, minor, immaterial, or not meaningful. Numerous commenters 
submitted identical comments listing specific circumstances they 
believed could lead to unjustified debarment and unfair punishment of 
attorneys, including: (1) Typographical errors in the application 
regarding the alien's date of birth; (2) an inaccuracy in the foreign 
national's job history due to someone's faulty memory; (3) employer's 
relationship to the alien; or (4) an inadvertent mistake in the number 
of workers or the Federal Employer Identification Number (FEIN). Some 
commenters opined that attorneys should be allowed to rely on 
information provided by clients unless there is a clear indication of 
fraud, and that ``no conduct of any attorney in any

[[Page 27930]]

setting is punishable without the elements of materiality and fraud.''
    Some commenters raised due process concerns. One commenter believed 
that existing mechanisms, e.g., denial of an application or imposition 
of supervised recruitment (but in future filings), were more viable 
options than what the commenter interpreted as indefinite suspension.
    The Department has concluded that Sec.  656.31(f)(1)(ii) (Sec.  
656.31(e)(1)(ii) in the NPRM) should be modified to address the 
commenters' concerns. Accordingly, the term ``willful'' has been added 
to this section so this Final Rule now applies to ``the willful 
provision or willful assistance in the provision of false or inaccurate 
information in applying for permanent labor certification.'' The 
Department wants to make clear it views debarment as an extraordinary 
remedy and does not intend to invoke it except under the most serious 
of circumstances.
    Authority to prohibit false or inaccurate information on an 
Application for Permanent Employment Certification--Commenters further 
argued the Department lacks the authority to regulate the information 
provided on an Application for Permanent Employment Certification. One 
commenter insisted the Department lacked the authority to prohibit an 
employer from providing false information on an application. As stated 
above, the authority given to the Department under the INA to approve 
applications carries with it the authority to regulate the program, 
debar abusers, and prohibit false or inaccurate information.
8. Failure To Comply With the Terms of the Labor Certification 
Application
    Proposed Sec.  656.31(f)(1)(iii) (Sec.  656.31(e)(1)(iii) in the 
NPRM) provided that failure to comply with the terms of the ETA 9089 or 
ETA 750 will be a factor in determining whether to issue a notice of 
debarment. Some commenters argued that such a rule would make the 
attorney the guarantor of the accuracy of the Application for Permanent 
Employment Certification. The Department disagrees. Section 656.3(f)(1) 
provides that a notice of debarment from the permanent labor 
certification program may be provided to an employer, attorney, agent, 
or any combination thereof. As stated in the preamble to the proposed 
rule the Department acknowledges that not all debarment triggers should 
be treated equally and will, therefore, take steps to ensure that any 
debarment is reasonable and proportionate to the improper activity.
    Further, the attorney does not have to sign the application unless 
he or she is the ``preparer'' in Section M of the application. 
Presumably, the attorney will take reasonably prudent steps to apprise 
him or herself of the facts before signing the application. However, to 
allay any fears the regulated community may have concerning the 
Department's possible use of the debarment provision, the Department 
has added the requirement that there must be a pattern or practice with 
respect to failure to comply with the terms of the labor certification 
application (either Form ETA 9089 or Form ETA 750). A similar 
requirement for a pattern or practice has been added to Sec.  
656.31(f)(1)(iv), failure to comply in the audit process, and to Sec.  
656.31(f)(1)(v), failure to comply with the Certifying Officer-ordered 
supervised recruitment process.
    Commenters asserted the provision discussing the failure to comply 
with the terms of the Form ETA 9089 or Form ETA 750 is vague or needs 
further clarification. We disagree. The terms and areas the Department 
is interested in are best represented in the certification sections of 
the two application forms, specifically, Section N, Employer 
Certifications, on the Form ETA 9089, and item 23, Employer 
Certifications, on the Form ETA 750. More detailed information on the 
employer certifications listed on the Form ETA 9089 in Section N of the 
application can be found in Sec.  656.10(c) of the current regulation 
and in the preamble thereto at 69 FR 77389 (Dec. 27, 2004). Detailed 
information on the employer certifications listed in item 23, Form ETA 
750, can be found in the former labor certification regulations at 
Sec.  656.20 (2004), ``General filing instructions'' and in Technical 
Assistance Guide No. 656 Labor Certifications. These resources provide 
ample guidance to the information sought in these sections and no 
further clarification is required.
9. Failure To Comply in the Audit or Supervised Recruitment Process
    Some commenters sought clarification of the provisions at Sec.  
656.31(f)(1)(iv) and (v) (Sec.  656.31(e)(1)(iv) and (v) in the NPRM) 
that failure to comply with the audit and supervised recruitment 
processes may be a factor in issuing a debarment. Section 
656.31(f)(1)(iv) and (v) will not normally apply to applications 
submitted under the former permanent labor certification regulations 
(20 CFR part 656 (2004)), because audit and supervised recruitment are 
not procedures currently in place under the backlog program. The 
Department has determined that these debarment provisions are 
appropriate to apply to conduct under the streamlined PERM processes 
because that system depends on ensuring employers furnish the required 
documentation within the required timeframes, as required by Sec. Sec.  
656.20 and 656.21 (69 FR 77396 (Dec. 27, 2004)). Further, a repeated 
failure to comply with core program requirements signals not only 
disregard for the process, but an intentional abuse of valuable, 
limited administrative resources, a practice the Department cannot 
tolerate.
    Some commenters provided scenarios in which an employer might fail 
to comply with audit or supervised recruitment requirements because the 
employer no longer wishes to go forward with the application, for 
example: (1) The employer has terminated the alien and, therefore, does 
not wish to respond to the audit request; (2) after an employer is 
requested to engage in supervised recruitment, its human resources 
office decides to terminate the application process; or (3) the 
employer decides to terminate the process after an audit when the 
employee resigns.
    These comments do not warrant removal from this Final Rule of the 
(f)(1)(iv) and (f)(1)(v) bases for debarment. We recognize that there 
are legitimate reasons for terminating an application during the audit 
or supervised recruitment processes and do not intend that these 
reasons should provide a basis for debarment.\5\ There are, however, 
cases in which the persistent failure to cooperate in the audit or 
supervised recruitment processes is evidence of an intent to avoid the 
discovery of serious violations of the regulations. Thus, the fact 
patterns these commenters cite must be considered individually as they 
arise. The existence of legitimate reasons to discontinue an 
application does not

[[Page 27931]]

moot the need for these debarment provisions.
---------------------------------------------------------------------------

    \5\ The Department reminds users of the labor certification 
program of the importance of the audit process to maintaining the 
integrity of PERM. As the Department stated in the 2004 preamble to 
the Final Permanent Labor Certification Regulation, we will 
``minimize'' the impact of non-meritorious applications by adjusting 
the audit mechanism in the new system as needed. We have the 
authority under the regulations to increase the number of random 
audits or change the criteria for targeted audits. As we gain 
program experience, we will adjust the audit mechanism as necessary 
to maintain program integrity. We note that under Sec.  656.21(a), 
the Certifying Officer has the authority to order supervised 
recruitment ``when he or she determines it to be appropriate.'' 69 
FR 77329 (Dec. 27, 2004). It should also be noted that Sec.  
656.10(f) requires employers to maintain copies of applications and 
supporting documentation for up to five years from the date of the 
submission of the application.
---------------------------------------------------------------------------

F. Other Objections and Comments

    Investigation of past substitution cases--Another commenter 
suggested that DOL investigate all past substitution cases with the 
help of USCIS. DOL does not have primary responsibility for 
investigation of past substitutions that were made after certification. 
The Department has participated in investigations and criminal 
prosecutions in appropriate cases involving substitution, and we will 
continue to work with DHS, DOL OIG, and DOJ when there are indications 
of possible fraud.
    Adequacy of current fraud safeguards--According to one commenter, 
the PERM system's vulnerability to fraud provides insufficient 
justification for DOL's proposals as articulated in the proposed rule. 
A certain amount of fraud should be tolerated, the commenter insisted, 
citing Medicare, credit card systems, and the entire tax system as 
processes in which some level of fraud is simply accepted by society. 
This commenter invited DOL to ignore the PERM system's vulnerability to 
fraud as the price to be paid for offering what the commenter 
characterized as a ``benefit'' to all. Having acknowledged fraud 
exists, the commenter next pointed to the design of the PERM system 
itself as containing built-in fraud protection mechanisms. As examples, 
the commenter cited built-in safeguards to detect fraud prior to filing 
such as: Initial establishment of the PERM account; verification of 
employer's existence; establishment of PINs; and limiting changes to 
accounts and sub-accounts. Finally, the commenter viewed Federal 
prosecutions as significant in preventing fraud or abuse.
    The Department declines the commenter's suggestion to simply 
acquiesce in a certain amount of fraud by those seeking certification. 
No regulatory scheme can eliminate all possibilities of fraud, but, as 
a matter of good government, the Department must make every reasonable 
effort to eliminate fraud. DOL takes its role and its statutory 
authority under the INA quite seriously and will continue to look for 
ways to eliminate fraud and the enticements to fraud in the permanent 
labor certification system. This Final Rule's elimination of 
substitution and of indefinite certification validity bolster fraud 
protection and reduce incentives and opportunities to commit fraud. The 
need to protect the system from fraud and eliminate vulnerabilities is 
clearly within DOL's authority and furthers the INA's statutory 
purpose.
    While fraud cases arising under the new PERM system were not 
described in the NPRM, this should not be taken as proof that fraud is 
not occurring under the system. The system is new and has not had the 
full opportunity for investigation and prosecution as has occurred 
under the previous regulation. In fact, the Department is aware of and 
has referred cases of possible fraud for investigation under the new 
PERM system. Further, we disagree that the issue of fraud in the 
permanent labor certification program lies solely in the Backlog 
Processing Centers or that the fraud detection examples provided by the 
Department indicate we are asserting that fraud cannot or will not 
occur under the new re-engineered PERM program. We disagree that not 
providing anecdotal evidence of fraud under the new PERM program is 
proof that no fraud is being conducted by some employers, agents or 
attorneys.
    PERM introduced many important safeguards that will help deter and 
detect fraud. However, these protections are insufficient to eliminate 
the incidence and incentives for fraud in the permanent labor 
certification program. The existence of some anti-fraud measures does 
not preclude the agency from initiating and establishing additional 
fraud detection and avoidance mechanisms, particularly when considering 
the value of such mechanisms against their relatively small costs. Our 
Federal partner agencies have demonstrated through investigations and 
prosecutions that the level of fraud today is far more advanced and 
sophisticated than it was 10 years ago and that it continues to evolve 
and become even more sophisticated. It is incumbent upon the Department 
to remain aware of these trends and to strengthen the program to 
withstand the changing nature of fraud being committed against it. 
Because the Department has direct experience with how fraudulent 
behavior within the permanent labor certification process is pervasive 
throughout the process and detrimental to the purpose and intent of the 
process, we can assess what systems and/or procedures are adequately 
detecting fraud and where improvements are needed.
    Many commenters stated that because we currently possess the 
authority to invalidate an application for labor certification up to 
five years after it has been certified, we already have sufficient 
safeguards in the permanent labor certification program. We 
respectfully disagree. The invalidation of an application is what 
happens to an application once the Department has detected fraud and 
found the employer, agent or attorney willfully engaged in such 
fraudulent behavior. It remedies a particular instance of fraud, but it 
does not, in and of itself, deter or prevent the increasing fraud 
occurring in the program.
    For the reasons stated throughout this preamble, the measures 
instituted by this Final Rule--eliminating substitution, limiting the 
validity period of a permanent labor certification, prohibiting sale of 
labor certifications, prohibiting employers from recouping recruitment 
costs and attorney fees from aliens, and prohibiting violators from 
using the permanent labor certification program--will deter and redress 
fraud and abuse in the permanent labor certification program. For the 
same reasons, the rule also clarifies the Department's authority to 
deny an Application for Permanent Employment Certification when we find 
an employer, agent or attorney has provided false information to us.

G. Comments Outside the Scope of the Rule

    The Department received a number of comments not directly related 
to the issues raised by the NPRM. These comments generally addressed 
the following topic areas:
     Lack of consistency between agencies, especially related 
to the need for labor certifications in light of USCIS policies 
limiting the availability of National Interest Waivers when the need 
for the individual stems from a labor shortage.
     Suggestions of other measures the Department should 
consider related to the permanent labor certification program, 
including conducting more investigations of suspected fraud, 
eliminating the authority of agents to represent employers or aliens in 
labor certification cases, fixing problems in the PERM software, and 
revising current requirements for advertising.
     Descriptions of personal experiences with the immigration 
process generally provided as examples of fraud and abuse.
     Comments concerning delays in the processing centers and, 
specifically, delays resulting from the audit process.
    We do not respond here to these issues individually, as they fall 
outside the scope of this rulemaking.

H. Other Amendments

    In addition to the specific revisions described above, the 
Department has made other minor, technical, and editorial changes to 
the regulatory text, as appropriate.

[[Page 27932]]

IV. Required Administrative Information

A. Regulatory Flexibility Act

    In crafting this Final Rule and reviewing public comments, the 
Department conferred with the Office of the Chief Counsel for Advocacy, 
Small Business Administration (SBA), as required by the Regulatory 
Flexibility Act (RFA), 5 U.S.C. 609(b). This impact analysis reflects 
those consultations and generally incorporates the Chief Counsel's 
comments. Based on the analysis detailed below, the Department submits 
that this Final Rule will not have a significant economic impact on a 
substantial number of small entities.
    In this rule, the Department takes measures to enhance program 
integrity and reduce the incentives and opportunities for fraud and 
abuse in the permanent employment of aliens in the United States. The 
rule's limitations on the acquisition and use of permanent labor 
certification applications and permanent labor certifications will have 
an economic effect on only those employers seeking DOL certification to 
hire foreign workers for permanent positions. The prohibition against 
substitution on the employer's permanent labor certification 
application and the validity period of 180 days on approved 
certifications each trigger a retest of the labor market (when original 
alien becomes unavailable a certification expires) to ensure that no 
U.S. workers are qualified and available to fill the job opportunity, 
carrying with it an economic cost. Employers' compliance with the 
procedures set forth in the Final Rule will not require completion of 
additional preprinted forms or the collection of information beyond 
that already required by Form ETA 9089, Application for Permanent 
Employment Certification.
    In Program Year (PY) 2005 (July 1, 2005--June 30, 2006), the 
Department received approximately 115,952 applications from employers 
seeking labor certification under the PERM program. Because the Final 
Rule would also impact permanent labor certification applications being 
processed and certifications issued through ETA's Backlog Processing 
Centers, the Department also included in its analysis 176,496 
backlogged applications in process as of September 7, 2006.\6\
---------------------------------------------------------------------------

    \6\ Reserved.
---------------------------------------------------------------------------

    To conduct its analysis, the Department looked to the major 
industries that PERM program data showed had applied for permanent 
labor certification in PY 2005, then applied a similar distribution 
(same industries and general percentages) to applications currently 
being processed through the Backlog Processing Centers.
    Although some, but not all, employers will file multiple 
applications with the Department in a given year, the Department's 
analysis treated each application as a separate economic impact on the 
employer and, consequently, the estimated impacts of the Final Rule may 
be overstated. Based on anecdotal evidence, and in the absence of 
precise historical data to accurately track substitution requests, the 
analysis also assumed that 10 percent of all employer applications will 
request substitution of the alien on the permanent labor certification 
application prior to implementation of this Final Rule, even though the 
historical practice of alien substitution by employers participating in 
the Department's permanent labor certification process is far less. The 
analysis does not attempt to quantify lost productivity costs employers 
could potentially incur after the loss of an alien worker for whom a 
permanent labor certification application has been filed and for whom 
substitution is no longer permitted. In the Department's experience, 
such costs are believed to be negligible, since the overwhelming 
majority of applications filed are for nonimmigrants already working in 
the United States and in the position that is the subject of the 
application.
    Under the Small Business Administration Act, a small business is 
one that is ``independently owned and operated and which is not 
dominant in its field of operation.'' The definition of small business 
varies from industry to industry to the extent necessary to properly 
reflect industry size differences.
    The Department conducted its size standard analysis based on 13 CFR 
part 121, which describes the SBA's size standards for businesses in 
various industries. To group employers by size, the Department relied 
on information submitted by each employer on the permanent labor 
certification application, which provides data on the total number of 
employees in the area of intended employment for each application. 
Because the Department does not collect information with respect to the 
annual receipts of employers, it used the average employment level of 
firms in each industry that predominates in the permanent labor 
certification program as the size standard for small businesses in each 
of those industries.
    To estimate the cost of the Final Rule on small businesses, the 
Department calculated each employer would likely pay in the range of 
$300 to $1,500 to meet the advertising and recruitment requirements for 
a job opportunity, and take one hour to prepare the recruitment report 
required for each application. The cost range for advertising and 
recruitment is taken from a recent (September 2006) sample of 
newspapers in various urban and rural U.S. cities, and reflects 
approximate costs for placing two 10-line advertisements in those 
newspapers. The cost to prepare the recruitment report is based on the 
median hourly wage rate for a Human Resources Manager ($36.52), as 
published by the U.S. Department of Labor's Occupational Information 
Network, O*Net OnLine, and increased by a factor of 1.42 to account for 
employee benefits and other compensation.\7\
---------------------------------------------------------------------------

    \7\ The O*Net OnLine summary information on Human Resources 
Manager positions may be found at http://online.onetcenter.org/link/summary/11-3040.00
.

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    The Department determined the following industries predominate in 
the permanent labor certification program: (1) Professional, 
Scientific, and Technical Services; (2) Manufacturing; (3) 
Accommodation and Food Services; (4) Healthcare and Social Assistance; 
(5) Educational Services; and (6) Construction. The Department has 
reviewed the data from each of these industries as described below to 
determine there is no significant impact on small businesses.
    The U.S. Census Bureau's 2002 Economic Census reported that 
approximately 602,578 employer establishments were operating year-round 
in the Professional, Scientific, and Technical Services Industry, and 
96.7 percent of those employed less than 50 employees. In PY 2005, 
13,286 PERM applications were filed with the Department by employers 
who indicated they employed less than 50 workers in the area of 
intended employment for positions in this industry. We estimate 
approximately 20,223 of the backlogged applications currently in 
process were submitted by similarly sized employers in this industry 
sector. Assuming employers will attempt to substitute the alien on 10 
percent of applications filed with the Department, we estimate the 
annual number of employer applications in this industry that may be 
impacted by the Final Rule is 3,351 at a cost range of $1,346,597 to 
$5,200,161.
    The U.S. Census Bureau's 2002 Economic Census reported that

[[Page 27933]]

approximately 350,828 employer establishments were operating in the 
Manufacturing Industry, and 98.9 percent of those employed less than 
500 employees. In PY 2005, 9,342 PERM applications were filed with the 
Department by employers who indicated they employed less than 500 
workers in the area of intended employment for positions in this 
industry. We estimate approximately 14,220 of the backlogged 
applications currently in process were submitted by similarly sized 
employers in this industry sector. Assuming employers will attempt to 
substitute the alien on 10 percent of applications filed with the 
Department, we estimate the annual number of employer applications in 
this industry that may be impacted by the Final Rule is 2,356 at a cost 
range of $946,855 to $3,656,473.
    The U.S. Census Bureau's 2002 Economic Census reported that 
approximately 456,856 employer establishments were operating year-round 
in the Accommodation and Food Services Industry, and 90.8 percent of 
those employed less than 50 employees. In PY 2005, 7,478 PERM 
applications were filed with the Department by employers who indicated 
they employed less than 50 workers in the area of intended employment 
for positions in this industry. We estimate approximately 11,383 of the 
backlogged applications currently in process were submitted by 
similarly sized employers in this industry sector. Assuming employers 
will attempt to substitute the alien on 10 percent of applications 
filed with the Department, we estimate the annual number of employer 
applications in this industry that may be impacted by the Final Rule is 
1,886 at a cost range of $757,930 to $2,926,901.
    The U.S. Census Bureau's 2002 Economic Census reported that 
approximately 619,517 employer establishments were operating year-round 
in the Healthcare and Social Assistance Industry, and 93 percent of 
those employed less than 50 employees. In PY 2005, 4,216 PERM 
applications were filed with the Department by employers who indicated 
they employed less than 50 workers in the area of intended employment 
for positions in this industry. We estimate approximately 6,417 of the 
backlogged applications currently in process were submitted by 
similarly sized employers in this industry sector. Assuming employers 
will attempt to substitute the alien on 10 percent of applications 
filed with the Department, we estimate the annual number of employer 
applications in this industry that may be impacted by the Final Rule is 
1,063 at a cost range of $427,311 to $1,650,149.
    The U.S. Census Bureau's 2002 Economic Census reported that 
approximately 38,293 employer establishments were operating year-round 
in the Educational Services Industry, and 98.9 percent of those 
employed less than 100 employees. In PY 2005, 1,336 PERM applications 
were filed with the Department by employers who indicated they employed 
less than 100 workers in the area of intended employment for positions 
in this industry. We estimate approximately 2,034 of the backlogged 
applications currently in process were submitted by similarly sized 
employers in this industry sector. Assuming employers will attempt to 
substitute the alien on 10 percent of applications filed with the 
Department, we estimate the annual number of employer applications in 
this industry that may be impacted by the Final Rule is 337 at a cost 
range of $135,410 to $522,912.
    The U.S. Census Bureau's 2002 Economic Census reported that 
approximately 710,307 employer establishments were operating in the 
Construction Industry, and 99.9 percent of those employed less than 500 
employees. In PY 2005 PERM, 5,579 PERM applications were filed with the 
Department by employers who indicated they employed less than 500 
workers in the area of intended employment for positions in this 
industry. We estimate approximately 8,492 of the backlogged 
applications currently in process were submitted by similarly sized 
employers in this industry sector. Assuming employers will attempt to 
substitute the alien on 10 percent of applications filed with the 
Department, we estimate the annual number of employer applications in 
this industry that may be impacted by the Final Rule is 1,407 at a cost 
range of $565,457 to $2,183,629.
    Several commenters maintained the rule would have a significant 
impact on a substantial number of small entities. One commenter 
challenged the analysis used by the Department to support its statement 
that the rule's impact on small business will be immaterial. The 
commenter maintained that although less than one percent of all small 
businesses would be affected, the appropriate universe to consider 
would consist only of those small businesses that wish to hire a 
foreign worker using the labor certification process. According to the 
commenter, the rule would not affect those businesses that do not 
submit applications. The commenter also suggested other measures of 
materiality, including: (1) Comparing the number of small businesses 
that have applied under the PERM and prior programs to the total number 
of businesses that have applied under those programs; and (2) comparing 
the number of labor certification applications filed by small 
businesses to the number filed by all businesses.
    Several commenters focused on the impact on small businesses of the 
prohibitions on substitution and reimbursement as a subset of the costs 
incurred by small businesses in successfully obtaining labor 
certifications. One commenter described the steps employers take when 
submitting labor certification applications, including verifying the 
job skills and cultural fit of the worker, conducting labor market 
tests, and determining future needs based on demand. Another commenter 
described the requirement to advertise positions in print, along with 
other recruiting activities. One commenter estimated the cost for each 
application was approximately $10,000, based on informal conversations 
with others. The same commenter said the costs for applications were at 
least $1,000 each. Commenters claimed the costs to small businesses 
were substantial.
    As described above, the Department's analysis focused only on those 
small businesses that filed or are likely to file applications for 
permanent labor certification, and accounts for costs of advertising 
and related recruitment activities. As stated in the section of the 
preamble addressing substitution, these are not costs unanticipated by 
the statute. Also, the Form ETA 9089 may be filed electronically and 
does not require a filing fee. The Department's analysis does not 
estimate reimbursement amounts, as the Department has always assumed an 
employer is not entitled to reimbursement; as explained in the section 
governing payments, above, the costs of labor certification are 
generally the employer's, and this rule simply codifies that 
responsibility. Our analysis leads us to conclude this rule's economic 
impact will not be significant.

B. Unfunded Mandates Reform Act of 1995

    This Final Rule will not result in the expenditure by state, local, 
and tribal governments, in the aggregate, or by the private sector, of 
$100 million or more in any one year, and it will not significantly or 
uniquely affect small governments. Therefore, no action is necessary 
under the provisions of the Unfunded Mandates Reform Act of 1995.

[[Page 27934]]

    One commenter stated this rule would amount to an unfunded mandate 
because it would be difficult to enforce and would require ETA to 
employ a large police force to monitor compliance. The Department 
disagrees with this comment. We do not anticipate significant 
additional costs to State, local, or tribal governments as a result of 
this rule. Although we do not speak here to any budgetary implications 
of the rule, additional costs, if any, to ETA as a result of this 
regulation are strictly Federal and attendant to the Department's 
responsibility in administering the permanent labor certification 
program. The Unfunded Mandates Reform Act does not cover costs to 
Federal agencies.

C. Executive Order 12866

    This Final Rule has been drafted and reviewed in accordance with 
Executive Order 12866, section 1(b), Principles of Regulation. The 
Department has determined, based on its benefit-cost analysis \8\ of 
the key provisions of the regulation, that the rule is not an 
``economically significant'' regulatory action within the meaning of 
section 3(f)(1) of the Executive Order. This rule will not have an 
annual effect on the economy of $100 million or more, nor will it 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities. We estimate the Final Rule's quantified benefits to be 
$64.3 million per year and the quantified costs to be $39.8 million per 
year. The Department made every effort, where feasible, to quantify and 
monetize the benefits and costs of this Final Rule. Where we could not 
quantify them--for example, due to data limitations--we described 
benefits and costs qualitatively. In such cases, the Department has 
provided a comprehensive qualitative discussion of the impacts of the 
rule. Finally, the Department has concluded, after consideration of 
both the quantitative and qualitative impacts of the rulemaking, that 
the benefits of the rule justify the costs.
---------------------------------------------------------------------------

    \8\ The Department's analysis followed the guidelines provided 
by the Office of Management and Budget (OMB) in Circular A-4. This 
circular constitutes OMB's guidance to Federal agencies governing 
regulatory analysis pursuant to Executive Order 12866 and other 
statutes and authorities. It is available online at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf
.

---------------------------------------------------------------------------

    Overall, the analysis estimated the benefits and costs associated 
with the Final Rule compared to the baseline, that is, the permanent 
labor certification application process before implementation of the 
rule. For a proper evaluation of the benefits and costs of the rule and 
its alternatives, we explain how the actions the rule requires of 
workers, employers, government agencies, and others are linked to the 
expected benefits. We also identify expected undesirable side effects 
of the Final Rule and the alternatives considered.
    Following OMB Circular A-4, this analysis focuses primarily on 
benefits and costs that accrue to citizens and permanent residents of 
the United States; it does not factor in benefits and costs to aliens 
who, for example, may be named on labor certification applications but 
are not yet U.S. citizens or lawful permanent residents. As explained 
in greater detail below, to the extent this Final Rule's economic costs 
or benefits are affected by the existence of foreign workers who are 
already here in the United States and part of the economy, the analysis 
considers those costs or benefits to be transfers between U.S. and 
foreign workers and not measurably impacting the rule's net economic 
impact.
    In most cases, this benefit-cost analysis covers 10 years to ensure 
it captures all major benefits and costs with respect to key entities 
and programmatic activities. For purposes of this analysis, the 10-year 
period starts in the next fiscal year on October 1, 2007. The analysis 
does not include permanent labor certification applications filed under 
the regulation in effect prior to March 28, 2005 and pending at the 
Department's Backlog Processing Centers. As stated above, we expect to 
eliminate the backlog by September 30, 2007. In the unlikely even that 
the Department does not completely eliminate the backlog by September 
30, 2007, the costs of the rulemaking may be slightly underestimated.
    With respect to immigrant worker petitions currently pending and 
open to substitution at the Department of Homeland Security, the 
analysis assumes a one-time impact (rather than recurring impact over 
10 years) until those applications are adjudicated. As this preamble 
states earlier in response to commenter concerns about application of 
the rule to pending applications, program users have had sufficient 
notice of the Department's intent to eliminate the practice of 
substitution; therefore, we believe that employers have had the 
opportunity to act on any substitution requests they know to be 
required but remain outstanding and not yet submitted to DOL or DHS,\9\ 
thus minimizing or eliminating impact of the prohibition on those 
employers for purposes of those applications.\10\ Nonetheless, in 
acknowledgment of the multi-agency process required for employment-
based immigration, the analysis makes a good faith attempt to quantify 
the most salient (potential) costs and benefits to employers with 
substitutable petitions currently pending at DHS, regardless of when 
filed. For purposes of a cost estimate, this analysis assumes that any 
employer who may find itself in need of substitution after the 
prohibition is in place could, in order to fill the vacancy, incur 
certain additional costs not required if substitution were still an 
option.
---------------------------------------------------------------------------

    \9\ This Final Rule's prohibition on substitution does not cover 
substitution requests submitted by the rule's effective date. 
Separately, the rule establishes a 180-day validity period for labor 
certifications not filed with DHS. Although we anticipate there are 
employers who--prior to the effective date of the rule--may either 
request substitutions they already know to be required or seek to 
file old but unused labor certifications in support of I-140 
petitions with DHS, this analysis does not quantify the number of 
employers or labor certifications in these categories. There is 
simply no information from which to draw conclusions, and any such 
estimate would be at best speculative.
    \10\ This analysis assumes one substitution over the life of a 
labor certification application.
---------------------------------------------------------------------------

    Because up-front, one-time costs associated with reading and 
understanding the Final Rule would not result in significant costs to 
employers or government agencies, we did not include them in our 
analysis. In addition, we assumed that annual costs would be the same 
each year. Following OMB guidance, we used discount rates of seven 
percent and three percent.
    The Department separately analyzed the benefits and costs of the 
major provisions of the Final Rule. The Department's analysis 
(elimination of substitution, establishment of a validity period, etc.) 
and response to public comments are set forth below. The size of the 
net benefits, the absolute difference between the projected benefits 
and costs, indicates whether one policy is more efficient than another. 
We estimated that total 10-year discounted quantified and monetized 
benefits range from $445.0 to $540.4 million and the total 10-year 
discounted quantified and monetized cost ranges from $279.5 to $339.4 
million for a net present value of the benefits of $165.5 to $201.0 
million.
1. Employer Costs and Burden Generally
    Some commenters maintained the proposed rule is a ``significant'' 
regulatory action within the meaning of Executive Order 12866 for 
several reasons, including its overall cost to

[[Page 27935]]

employers and its potential impact on the U.S. economy. These 
commenters based their concerns on the process they say employers 
generally undertake in successfully applying for a certification and 
their estimate of costs incurred by employers in pursuing those 
applications. One commenter pointed out the certification application 
is only one of several steps in hiring a foreign worker. In addition, 
according to the commenter, the employer must verify the job skills and 
cultural fit of the worker, conduct a labor market test, and determine 
its hiring and training needs based on demand. Another commenter made 
similar points, noting that it engages in required print advertising 
and other recruiting activities at a cost of more than $200,000 
annually. It also reviews resumes, interviews candidates, and engages 
legal counsel to assist in preparing and reviewing materials required 
for the application. Although none of the commenters provided detailed 
figures for each of their activities, at least one commenter estimated, 
based largely on feedback it states it received from other companies, 
that the cost for each application was approximately $10,000.
    Several commenters made broad observations related to the general 
burdens that the proposed rule would impose. One commenter stated the 
proposed rule is burdensome because the labor certification process 
itself has numerous requirements and is difficult to understand. Two 
other commenters argued the proposed rule is likely to curb business 
growth, inhibit job creation, and encourage employers to move jobs and 
operations offshore. Another commenter stated its concern that the rule 
would punish nonprofit research institutions due to the costs of 
compliance. One commenter suggested the rule could result in a 
reduction of foreign workers, which in itself would have an impact on 
the economy because foreign workers themselves create demand in the 
economy for housing, food and other essentials. Finally, one commenter 
protested that the rule will impose significant additional costs on the 
many employers who are honest in their acquisition and use of 
certifications, based on the misdeeds of a small number of employers 
who have abused the process.
    The Department agrees with the commenters that this rule is a 
significant regulatory action under EO 12866, and has been submitted to 
OMB for review. While the commenters express general concern over 
possible harm to employers, however, they failed to articulate how the 
rule itself will adversely affect the economy in a material way within 
the meaning of Executive Order 12866. Moreover, the commenters made 
little effort to explain how costs associated with the rule could 
result in an annual effect on the economy of $100 million or more. 
Instead, the commenters took issue with the individual, activity-based 
costs and economic impact of the labor certification process itself.
    The Department readily acknowledges that employers incur various 
costs associated with the decision to hire alien workers. The labor 
certification process, by its very nature, imposes costs to employers 
to establish, to the Secretary of Labor's satisfaction, the 
unavailability of and no adverse impact on U.S. workers. Since the 
costs are standard to the labor certification process, we do not 
consider these costs as incremental to the rulemaking.
    Further, as detailed in each of the sections below, the 
Department's analysis reveals the Final Rule's quantified and monetized 
benefits outweigh costs, and will impose no significant economic impact 
or material adverse effect within the meaning of Section 3(f)(1) of 
Executive Order 12866.
2. Ban on Alien Substitution
    Before this Final Rule takes effect, employers may substitute a 
different alien on a permanent labor certification application if the 
original alien named on the certification application is no longer 
available. Under the Final Rule, employers may not substitute the alien 
named on the application. Separately, the rule prohibits employers from 
amending any information on the application once it is submitted to the 
Department. If an alien is no longer available for the job described on 
the application, an employer must conduct a new labor market test, and 
if this test indicates no qualified U.S. workers are available and the 
only qualified worker is an alien, then the employer must submit a new 
permanent labor certification application.
    We estimate the 10-year discounted quantified and monetized 
benefits associated with this provision of the Final Rule will be 
between $177.4 and $215.5 million, and total quantified and monetized 
costs will be between $147.0 and $178.6 million. Thus, the quantified 
benefits exceed the quantified costs, and the net present value over a 
10-year time horizon will range from $30.4 to $36.9 million.

Benefits

    The ban on alien substitution has several important benefits to 
society: improved program integrity, increased employment opportunities 
for U.S. workers, cost-savings to employers in the form of reduced 
staff time and incidental costs, cost savings to State governments in 
the form of reduced unemployment insurance benefits, and cost savings 
to the Federal Government in the form of reduced staff time resulting 
from a reduction in processing substitution requests.
    The current practice of allowing substitution of alien 
beneficiaries provides a strong incentive for the filing of fraudulent 
labor certification applications. If substitution is permitted, 
permanent labor certification applications or resulting certifications 
can be marketed to aliens who are willing to pay a considerable sum of 
money to be substituted for the named aliens on the applications or 
certifications. The substitution ban increases program integrity by 
reducing the incentives or opportunities for fraud through the lawful 
permanent resident process. Due to a lack of adequate data, however, we 
were not able to quantify or monetize this important benefit.
    Banning substitution will deter unscrupulous employers, attorneys, 
or agents from filing permanent labor certification applications simply 
to sell them later for profit, and reduce the number of fraudulent 
applications received by the Department. We estimate the cost savings 
achieved from recovery of processing resources by multiplying the 
number of fraudulent substitutions (assume a subset of the total number 
of substitution requests received) by the average number of hours spent 
by our staff on each fraudulent substitution, by the average 
compensation of our staff reviewing fraudulent substitutions. We 
estimate the annual cost saving to the Department at $2.8 million per 
year.\11\ This analysis captures savings specifically linked to 
applications we estimate involve fraudulent substitutions, rather than 
all fraudulent applications (that is, applications employing fraud, 
regardless of type).
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    \11\ As described above, the Department estimated the annual 
number of substitutions to be approximately 11,595 and estimated 
that 10 percent of these substitutions are fraudulent. Average DOL 
staff time per fraudulent substitution is estimated at 40 hours and 
their average hourly salary (staff with pay grade GS 14, step 5) is 
$42.24, which was increased by 1.42 to account for employee 
benefits.
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    An important purpose of the substitution ban is to ensure that if 
an alien is no longer available, the employer will conduct a new labor 
market test to determine whether a suitable U.S. worker is available. 
Since labor market dynamics can change in a matter of months, it is 
possible that

[[Page 27936]]

when the alien on a permanent labor certification is no longer 
available, and the employer conducts new recruiting efforts, qualified 
U.S. workers will be identified. Some U.S. workers hired would have 
otherwise remained unemployed.
    Without the ban on substitution and required labor market test, the 
employer may not be aware that U.S. workers became available since 
their original test of the labor market, and may have otherwise hired 
an alien.\12\ Therefore, the second labor market test required by the 
Final Rule should result in increased employment opportunities for U.S. 
workers. We estimate the monetary value of this benefit by examining 
the compensation earned by U.S. workers that would not have otherwise 
been hired. To estimate this benefit, we accounted for the number of 
U.S. workers that would be favored by requiring employers to conduct 
new labor market tests and the compensation of these workers, which 
includes both their salaries and benefits, and reflects the decrease in 
time that those workers would have stayed unemployed. We estimate this 
benefit to be $21.3 million per year.\13\
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    \12\ For purposes of this analysis, the Department assumed that 
U.S. workers favored by the new labor market tests were unemployed. 
However, a benefit to U.S. workers could still exist even if these 
workers were employed elsewhere: their departure from their old jobs 
would open up new employment opportunities for other U.S. workers 
and potentially result in higher wages being earned.
    \13\ The Department estimated that of the 115,952 PERM 
applications filed between July 1, 2005 and June 30, 2006, 10 
percent requested a substitution. This is also the Department's 
estimate of percentage of substitution requests in cases filed under 
the preceding regulations. This analysis estimates 15 percent of 
labor market tests favor U.S. workers. The average annual wage on 
permanent labor certifications applications in the PERM database is 
$69,000 per year. The average wage was increased by 1.42 to account 
for employee benefits (source: Bureau of Labor Statistics). DOL 
assumed that workers would have been unemployed for an additional 
1.5 months. There may be some portion of these jobs filled by U.S. 
workers already employed. For these employees the range of benefits 
may, as a result of their being employed when taking the new 
opportunity, be less than the full salary and benefits accounted for 
in this range found in this analysis. This analysis does not 
quantify that lesser amount.
---------------------------------------------------------------------------

    The analysis assumes the U.S. workers hired who were previously 
unemployed will no longer be required to seek unemployment insurance 
benefits. Therefore, other things being constant, as an added benefit 
we estimate the states will experience a reduction in unemployment 
insurance expenditures as a consequence of U.S. workers being hired 
after labor market tests are conducted. The Department, however, was 
not able to quantify this important benefit for lack of adequate data.
    Further, because the employer would have otherwise hired an alien 
if it had not conducted the labor market test, the employer will 
experience cost savings by not continuing with the permanent labor 
certification application process. We estimate this cost savings by 
calculating the monetary value of the decrease in employer staff time 
for preparing, filing, and tracking labor certification applications; 
preparing and maintaining the recruitment report and submitting the 
recruitment report (to comply with an audit, where requested). We 
estimate this cost savings by multiplying the staff time required to 
conduct such activities by the staff compensation, by the number of 
U.S. workers hired as a result of labor market tests. It is important 
to note that this cost savings to employers partially offsets the costs 
of compliance to employers discussed below. The cost of compliance to 
employers outweighs this partial cost-savings. We also account for the 
incidental costs (such as delivery, copying, and telephone charges) 
incurred by employers. We estimate the annual cost savings to employers 
to be $1.2 million.\14\
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    \14\ The Department estimated that employers spend 10 staff 
hours on average preparing, filing, and tracking the labor 
certifications. As stated in the preamble to the PERM Final Rule, it 
takes on average one (1) hour for an employer to prepare a 
recruitment report for each application it files. We estimated that 
10 percent of these applications are audited, which will require an 
additional hour for the employer to submit the report. We assumed 
that Human Resources Managers (or their equivalent) conduct this 
activity for the employer and that their median hourly wage is 
$36.52, which we increased by 1.42 to account for employee benefits 
(source: Bureau of Labor Statistics). The Department estimated that 
employers spend $100 in incidental costs per application.
---------------------------------------------------------------------------

    In addition, we anticipate other cost savings or benefits 
associated with the ban on substitution will have a ripple effect 
through the publicly administered immigration system. We believe cost 
savings could be realized in the following areas: reduction in the 
Department of Labor's Office of Inspector General (OIG) staff time 
required to review or investigate potentially fraudulent substitutions; 
reduced DHS staff time to review I-140 immigrant petitions; reduced DHS 
staff time to review I-485 applications; a reduction in DOS staff time 
resulting from a need to conduct fewer interviews with aliens seeking 
permanent residence; and less DOJ staff time spent on investigation and 
prosecution of fraudulent substitutions. We believe that deterring and 
preventing substitution-related fraud will have an important and 
visible impact on other Federal agencies involved in the immigration 
system. However, due to a lack of adequate data, we were not able to 
quantify or monetize these benefits to society.

Costs

    The ban on substitution does impose several costs to society: 
additional job advertising and recruitment by employers, increased 
employer staff time for filing labor certification applications, and 
increased staff time in State Workforce Agencies (SWAs) and the 
Department, all described in greater detail below. We estimate the 10-
year discounted cost to society to be between $147.0 and $178.6 
million.
    If the employer's second labor market test indicates that no 
qualified U.S. workers are available, then the employer must submit a 
new permanent labor certification application with the name of the new 
alien. However, to fill the position, employers who otherwise might 
have substituted must test the market for U.S. workers and incur 
recruitment costs, independent of whether they eventually file a 
permanent labor certification application. To the extent an employer 
finds a qualified U.S. worker to fill the position, it is inappropriate 
to attribute those costs to the labor certification process, as in 
those cases the need for labor certification has been removed.
    The main cost to employers associated with the substitution ban is 
the increase in employer staff time to prepare, file, and track labor 
certification applications. We estimate this cost by multiplying the 
number of substitutions leading to labor market tests not favoring U.S. 
workers by the number of employer staff hours to prepare, file, and 
track the labor certifications, by the compensation of the employer 
staff undertaking these activities.
    Another cost to employers of the substitution ban results from the 
additional recruiting efforts, in particular job advertising, as well 
as the increased employer staff time to arrange for and track 
recruiting efforts and for receiving, compiling, interviewing, 
analyzing, and reporting the results of the recruitment.\15\ The 
Department

[[Page 27937]]

included in its cost estimate the time spent to comply in excess of the 
time the employer would normally spend in recruiting efforts. We 
estimate the recruiting costs by examining what recruiting efforts were 
reported by employers filing PERM applications and by surveying local 
newspapers, websites, and SWAs to determine the costs associated with 
these activities.\16\ We estimate the costs for filing applications and 
preparing recruitment reports by multiplying the staff time required to 
conduct such activities by the staff's compensation by the annual 
number of additional labor certification applications.\17\ We estimated 
the total annual cost to employers to process and track labor 
certification applications and conduct additional recruitment efforts 
to be $19.8 million per year.\18\
---------------------------------------------------------------------------

    \15\ It is possible some employers would not have conducted any 
recruiting activities to locate a second applicant if substitution 
were allowed (e.g., if a qualified alien was already working for the 
employer under a temporary H1B visa). If an employer would normally 
hire another alien that is already employed by the employer, then 
most of the recruiting activities required by PERM would be 
additional cost. If the employer would normally conduct an extensive 
recruiting effort to find a new qualified employee, few of the PERM 
required recruiting activities would constitute an additional cost. 
For the purposes of this analysis, DOL assumed that on average, an 
employer would place an ad in a Sunday paper and conduct other 
recruiting efforts, such as placing a notice on the organization's 
website or attending a job fair.
    \16\ The Department estimated that the cost of an advertisement 
in a Sunday paper is $750. DOL also estimated it would take an 
employer 0.5 hours to place the advertisement with the Sunday paper 
and 0.5 hours to place a job order with the SWA. In addition, this 
analysis assumes an employer would spend 10 hours to arrange for and 
track recruiting efforts and an additional 10 hours for receiving, 
compiling, interviewing, analyzing, and reporting the results of the 
recruitment.
    \17\ According to the preamble to the PERM Final Rule, it takes 
on average one (1) hour for an employer to prepare a recruitment 
report for each application it files. DOL estimated that 10 percent 
of these applications are audited, which will require an additional 
hour for the employer to submit the report. DOL assumed that Human 
Resources Managers (or their equivalent) conduct this activity for 
the employer.
    \18\ As mentioned above, the Department estimated that employers 
spend 10 staff hours on average preparing, filing, and tracking the 
labor certifications. DOL assumed Human Resources Managers (or their 
equivalent) conduct this work for the employer and that the median 
hourly wage for Human Resource Managers is $36.52, which DOL 
increased by 1.42 to account for employee benefits. This analysis 
assumes 85 percent of the required labor market tests favor aliens, 
and that employers request substitutions on 10 percent of the 
115,952 applications submitted per year, resulting in approximately 
9,856 additional permanent labor certification applications to be 
filed with DOL each year.
---------------------------------------------------------------------------

    SWAs also experience an additional cost. The substitution ban may 
increase the number of applications filed by employers, which requires 
employers to place a job order with the SWA serving the area of 
intended employment for a period of 30 days. Employers must also obtain 
a prevailing wage determination from the SWA. SWAs will incur some 
additional costs associated with increased SWA staff time to process 
job orders and provide employers with prevailing wage determinations. 
We estimate this cost by multiplying the SWA staff time to process job 
orders and determine the prevailing wage by the compensation of the 
staff, by the annual number of substitution requests. We estimate the 
annual costs to SWAs to be $0.5 million per year.\19\
---------------------------------------------------------------------------

    \19\ The Department estimated SWA staff spend one (1) hour on 
average to process job orders and determine the prevailing wage. We 
also estimated the hourly rate for SWA staff to be $34.94 per hour, 
which was increased by 1.42 to account for employee benefits 
(source: Bureau of Labor Statistics).
---------------------------------------------------------------------------

    The primary cost government-wide is the increased staff time to 
review additional labor certification applications, immigrant 
petitions, etc., that may be submitted when a legitimate change in the 
alien beneficiary is necessary. If employers must resubmit labor 
certification applications when the original alien becomes unavailable, 
then Department of Labor staff will spend that much more time reviewing 
applications. We estimate this cost to the Department by multiplying 
the time spent reviewing each application by the compensation of our 
analysts, by the increased number of applications.\20\
---------------------------------------------------------------------------

    \20\ The Department estimated that 70 percent of applications 
are ``clean'' and do not raise any audit flags. ``Clean'' 
applications require 0.25 hours of DOL staff time. We assumed that 
the remaining applications raise audit flags and must be reviewed 
manually, requiring four (4) hours of DOL staff time. We estimated 
that the median hourly wage for DOL reviewers is $30.06 (GS 12, step 
5, which was increased by 1.42 to account for employee benefits 
(source: Bureau of Labor Statistics). As explained above, DOL 
assumed that approximately 9,856 additional permanent labor 
certification applications will be filed with DOL each year.
---------------------------------------------------------------------------

    Another related cost to the Federal Government is the increased 
Departmental staff time to audit an increased number of recruitment 
reports. We estimate this cost by multiplying the time spent auditing 
each recruitment report by the average compensation of one of our 
analysts, by the increased number of recruitment reports that will be 
audited.\21\ We estimated the total annual Departmental costs to be 
$0.7 million per year.
---------------------------------------------------------------------------

    \21\ The Department assumed auditors spend two (2) hours to 
audit recruitment reports. We assumed the median hourly wage for DOL 
auditors is $30.06 (GS 12, step 5; source: DOL), which DOL increased 
by 1.42 to account for employee benefits (source: Bureau of Labor 
Statistics). As explained above, DOL assumed that approximately 
9,856 additional permanent labor certification applications will be 
filed with DOL each year.
---------------------------------------------------------------------------

    In addition, the Department considered potential costs to employers 
associated with a later priority date and a longer wait for an alien 
who would otherwise be the beneficiary of a substitution. However, this 
analysis does not quantify such costs. As stated previously, to the 
extent such costs are quantifiable, they are potentially negligible 
since most substituted jobs are already held by the alien to be 
substituted. To the extent they stem from a longer wait, or backlogs at 
other Federal agencies, the number of factors bearing on such costs 
(variables determining time in respective queues, mitigating factors 
such as options for interim sources of labor, etc.), and the relative 
impact of each factor, are simply too speculative for the Department to 
be able to accurately measure.

Impact of Prohibition Based on Availability of Alien

    As stated above, the analysis assumes 10% of employers may require 
substitution at the labor certification stage (11,595 applications). 
The analysis assumes all of those applications will require a second 
market test, 15% (1,739 applications) of which will favor U.S. workers. 
As stated, in that 15% of cases in which an employer finds a qualified 
U.S. worker, recruitment costs related to the labor certification 
process should not be attributed to this rulemaking. In the remaining 
9,856 cases, the analysis already includes the costs of the second 
labor market test and other costs of the labor certification process, 
including average filing and application management expenditures 
(recruitment, staff time, etc.) for each employer.
    As a refinement on this estimate, it is possible to make some broad 
assumptions about impact on different categories of employers holding 
those remaining 9,856 applications. We may assume, broadly and based on 
our programmatic experience, that approximately 80% of employers (7,885 
applications) have replacements at the ready (at their own place of 
business or another U.S. establishment), and the remaining 20% (1,971 
applications, or 1.7% of total applications processed in the system) 
must reach outside the country when the original alien becomes 
unavailable.\22\
---------------------------------------------------------------------------

    \22\ The Department's longstanding programmatic experience, both 
under the previous regulation and the more current PERM rule, is 
that a significant percentage of applications for permanent labor 
certification name aliens already here and participating in another 
visa program. Recent program data indicate approximately 80% name 
aliens on H-1B visas.
---------------------------------------------------------------------------

    As a general proposition, an employer who now has the option to 
substitute but would normally have another alien at the ready (thereby 
incurring no need to advertise) would incur additional recruitment 
costs after the substitution prohibition to meet the requirement for a 
second labor market test. An employer who can now substitute but must 
generally look outside the country to fill vacancies may not 
necessarily incur additional costs specifically for

[[Page 27938]]

recruitment as a result of the prohibition (assuming even with 
substitution, there would be similar costs associated with foreign 
recruiters and locating another worker abroad). For both groups of 
employers--those with ready candidates and without--the analysis 
assumes expenses associated with beginning the process anew, and builds 
in costs in addition to recruitment. Accordingly, as described in the 
main costs discussion above, the analysis already accounts for an 
average cost across employers for labor certification expenses in the 
absence of substitution (e.g., preparation, filing and tracking of a 
second labor certification). To the extent that potentially there is 
greater incremental impact at the labor certification stage to 
employers who, in the event they must substitute, must seek workers 
outside the country--over and above the diverse costs already included 
and explained above--there is insufficient data to quantify it. 
Additional impact to these employers may be captured in the discussion 
below, covering substitutable petitions pending at DHS.

Application of the Prohibition to Pending Applications

    As explained above, this analysis considers the additional, one-
time impact of this rulemaking on employers with substitutable 
immigrant worker petitions currently pending at DHS. As DHS is a 
separate Federal agency, and as employer decisionmaking, unique case 
circumstances, and agency processing dynamics at the I-140 stage are 
not within either the Department of Labor's expertise or, even more 
importantly, its influence, this analysis can make only the broadest of 
assumptions. The Department cannot estimate with precision this rule's 
benefits or costs to those employers or to DHS program activities. 
However, these data limitations notwithstanding, we have included in 
this analysis an estimate of the potential impact on employers. Noting 
that the rule does not impact labor certifications already filed with 
DHS, the prohibition on substitution will impact DHS processing at 
least to some extent going forward.
    The extensive benefits of the substitution prohibition described 
above apply equally to those labor certification applications currently 
in the immigrant petition backlog at DHS, and are also deemed part of 
this one-time impact. In addition to other benefits described above, 
DHS's workload would benefit from a reduction, as some of those 
abandoned immigrant petitions would not be replaced with foreign 
workers but with U.S. workers. Potential costs specifically to 
employers with petitions pending with DHS are described in greater 
detail below. These benefits and costs are in addition to the overall 
regulatory impact estimates provided above.
    As of April 2007, a total of approximately 70,000 immigrant 
petitions were pending at USCIS in immigrant preferences categories 
that were identified by DHS as dependent upon a labor certification. 
The Department assumed the same 10 percent substitution rate for labor 
certification applications now attached to a pending immigrant petition 
at DHS that would be prohibited from a future substitution. The 
analysis accordingly assumes all of the 7,000 applications identified 
will require a second test of the labor market. As above, the 
Department has assumed that 15% of these applications (1,050 
applications) will favor U.S. workers, and thus recruitment costs are 
not attributable. The costs of the labor certification process leading 
to labor market tests not favoring U.S. workers, including average 
filing and application management expenditures (staff time as indicated 
by staff compensation, costs of additional recruitment, etc.) for each 
employer, are then attributed to the remaining 5,950 applications for a 
total of $10.62 million. The Department is mindful that amount 
represents a one-time expense for a discrete group of applications and 
is, moreover, not discounted by the likelihood that some percentage of 
these applications that would otherwise be substituted would be too far 
into the adjudicatory process at DHS to be the subject of a future 
substitution.\23\
---------------------------------------------------------------------------

    \23\ For example, no discounting has been applied to remove 
labor certification applications from the calculation that are part 
of a filing which includes an adjustment application and for which a 
visa is immediately available, which would greatly reduce the 
chances that a substitution to benefit another alien would follow.
---------------------------------------------------------------------------

Transfer

    To the extent the ban on substitution will have an economic impact 
on foreign labor--that impact could be a carve-out from the overall 
economic impact of the rule as measured in this analysis, and not an 
additive. The foreign worker who is substituted has by definition 
become unavailable for the position for reasons unrelated to this 
rulemaking, and therefore does not incur either a cost or benefit in 
this analysis. The vacancy created results in both costs and benefits 
for the employer, U.S. workers, and foreign workers. Costs are 
associated with recruitment; we assume the employer will take steps 
necessary to fill the vacancy, whether with a foreign or U.S. worker. 
Benefits result from long-term stability and productivity gains to the 
employer from filling the vacancy, and pay and satisfaction to a new 
worker from a permanent position. The potential benefit to the 
employer--and the economy--from filling the vacancy would not change 
significantly whether the new worker is a U.S. or foreign worker; 
assuming a qualified individual fills the slot, the worker is meeting 
the same legitimate business need, and the employer incurs similar 
costs for comparable fringe benefits and compensation. The analysis 
already discusses the potential impact and assumptions associated with 
filling the vacancy with a U.S. worker. If, alternatively, the vacancy 
is filled with a second foreign worker--and to the extent foreign 
workers physically in the country and working are deemed part of the 
U.S. economy--the potential benefit to U.S. workers would be decreased 
by that number of slots and transferred to foreign workers who now 
enter the stream for permanent residency. So although total economic 
benefits do not change, their relative allocation does transfer between 
foreign and domestic workers, depending on who is awarded the permanent 
position. And in fact, non-material benefits to foreign workers may 
even be higher than to U.S. workers, were the analysis to factor in the 
positive impact that comes with a permanent residency-bound immigration 
track.

Issues Raised by Public Comment

    Several commenters argued the rule's prohibition of substitution of 
alien beneficiaries will create significant economic impact. One 
commenter, presuming direct employer costs per application of $10,000, 
stated the impact would be at least $1 billion if employers could no 
longer substitute beneficiaries. Another commenter focused on the 
effect it believed the substitution prohibition could have on the 
recruitment of workers. Noting that backlogs have reached 4.5 to five 
years at times, the commenter claimed the application process, which he 
characterized as lengthy, makes it imperative that employers be 
permitted to use certifications that are ``abandoned.'' One commenter 
stated the substitution prohibition would increase the likelihood that 
employers would take jobs offshore because they would be unable to 
recruit and obtain certification for foreign workers in a timely 
manner. The same commenter also suggested that a few plant closings or 
other business disruption could

[[Page 27939]]

easily result in an economic impact in excess of $100 million.
    One commenter focused on the costs and expenses of abandoning and 
reapplying for a labor certification due solely to the unavailability 
of a foreign worker. Noting the costs of advertising, market surveys, 
attorneys and recruitment, the commenter also pointed out the loss in 
productivity from delayed approval of applications, all of which it 
said results in thousands of dollars in employer expenses. The 
commenter argued that substitution is and should remain ``perfectly 
legitimate'' because it ``mitigates the employer's investment risk in 
an employment-based immigration visa process that still takes (and will 
likely continue to take) many years to complete.'' In addition to 
claiming the economic impact was significant, the commenter asserted 
the rule's substitution prohibition was an attempt to eliminate an 
unknown, but likely insignificant, quantum of fraud. Finally, the 
commenter stated that the impact on high technology industry employers 
would be substantial because such employers must recruit foreign 
nationals, often from U.S. universities, given the limited supply of 
U.S. citizens available for technical positions.
    The commenters have failed to explain how the elimination of the 
practice of substitution itself will result in material adverse impact, 
let alone economic impact exceeding $100 million. While some commenters 
estimated the costs of obtaining a new certification at nearly $10,000, 
the Department finds no support for that claim, and has estimated the 
costs as much lower as noted above.
    As stated elsewhere, the INA's treatment of employment-based 
immigration is designed to protect the wages and working conditions of 
U.S. workers. The Department meets the requirements of the statute 
through the labor certification process. As the administrator of that 
process, the Department has an obvious interest in and responsibility 
to identify, address and eliminate fraud, which is what the Final Rule 
will accomplish. The Department's experience, as articulated and 
discussed herein, resulted in the PERM process, which increased fraud 
protection. The Department's experience also shows the practice of 
substitution leaves the process susceptible to fraud.
    As discussed extensively throughout this Final Rule, the Department 
is concerned that various immigration practices, including the 
substitution of alien beneficiaries and the indefinite validity of 
permanent labor certifications, were subject to a significant degree of 
fraud and abuse. The purpose of this Final Rule is to impose clear 
limitations on the acquisition and use of permanent labor 
certifications in order to reduce incentives and opportunities for 
fraud and abuse, and enhance the integrity of the permanent labor 
certification program to the benefit of the U.S. workforce.
    The ban on substituting alien beneficiaries reduces the incentives 
and opportunities for fraud in important ways. First, absent this 
regulatory action, employers possess incomplete information about the 
current availability of qualified U.S. workers in the labor market. 
Because labor markets are inherently dynamic, even well informed 
employers may not keep abreast of changes in worker availability after 
their initial recruitment for a job opportunity. In addition, 
information may not always be accurate or widely available if it is 
costly to produce, analyze, or disseminate. Banning substitution 
``remedies'' the problem of imperfect information, consistent with the 
statutory intent to protect U.S. workers, by requiring employers to go 
back to the labor market a second time when the original alien becomes 
unavailable. This measure improves employer decision-making with 
respect to filling critical job openings, and improves the probability 
that a qualified U.S. worker will be selected for the job.
    Second, the ban on alien substitution significantly reduces the 
incidence of ``overconsumption,'' where unscrupulous employers, 
attorneys, or agents submit large numbers of applications for 
processing and, once certified, sell the certification to a different 
alien at prices that grossly exceed marginal costs. This 
overconsumption is driven by the exchangeability of the alien name on 
the certification, which in turn increases the document's 
transferability. In the absence of this Final Rule, a certification 
that was granted to be used to benefit or name one alien and no one 
other than the parties originally named for purposes of filing with DHS 
(in economic terms, a ``rivalrous and excludable good''), can be used 
by another alien simply by exchanging the name (in economic terms, a 
``rivalrous and non-excludable good'').
    These individuals or entities are not equating marginal social 
costs with marginal benefits, but rather marginal private costs with 
marginal benefits; hence, they overconsume from the permanent labor 
certification program. In other words, unscrupulous employers or 
attorneys have no incentive to consider the marginal social costs of 
filing the next fraudulent labor certification applications as long as 
the marginal private benefits (i.e., revenue from selling the labor 
certifications to a different alien) continue to exceed the marginal 
private costs (i.e., costs to process and track the labor 
certification) of the transaction.
    By eliminating alien substitution, this rule seeks to restore to 
certifications their rivalrous and excludable qualities, in that they 
may no longer be transferred, sold, bartered, or purchased; the 
employer, job opportunity, and alien beneficiary on the application are 
exclusive and cannot be transferred to a different alien beneficiary. 
By requiring appropriate, timely market tests; promoting better 
information on market conditions and worker availability; and restoring 
the exclusivity and integrity of labor certifications, we believe this 
regulatory action will more effectively align the marginal social costs 
of processing permanent labor certifications with the marginal 
benefits.
3. Validity Period
    Permanent labor certifications have thus far been valid 
indefinitely, and employers have been free to submit a permanent labor 
certification to DHS at any time. At least one commenter argued that a 
45-day proposed validity period such as that proposed in the NPRM would 
result in a significant impact. The Department disagrees with this 
conclusion. However, in response to other comments and our own 
analysis, we have lengthened the validity period to 180 days. Under 
this Final Rule, all permanent labor certifications will expire after 
180 calendar days of certification unless filed in support of an I-140 
immigrant petition with DHS.
    The 180-day period in which a permanent labor certification can be 
filed in connection with the I-140 petition to the DHS effectively 
limits the time in which certifications may be marketed. The ban on 
substitution and the establishment of a finite validity period, when 
taken together, effectively reduce the likelihood of validating stale 
recruitment while simultaneously eliminating ``rent-seeking'' behavior 
on the part of unscrupulous employers, attorneys, and agents in selling 
these certifications to uninformed alien beneficiaries. We estimate the 
cost impact of a 180-day validity period will be insignificant because 
sufficient time is provided to put the certification to use, since it 
is granted to the employer under the presumption that there is a 
critical need for the foreign worker and no qualified U.S. workers are 
available.

[[Page 27940]]

    This analysis does not quantify the marginal value of eliminating 
indefinite validity of labor certifications--that is, the value of 
establishing a limited validity period over and above the value gained 
from prohibiting substitution. The commoditization of labor 
certifications is a function of the availability of substitution and 
the absence of a finite expiration date. As this Final Rule eliminates 
both root causes, the analysis assumes most if not all quantifiable 
benefits are captured by the analysis above with respect to 
substitution.
    The analysis does measure two major benefits associated with a 
defined validity period. First, a validity period ensures labor market 
information is current, the prevailing wage recorded on the permanent 
labor certification is current and accurate, and the bona fide job 
opportunity exists as it appeared on the original application. When a 
certification becomes invalid, an employer must conduct new recruiting 
efforts that may indicate qualified U.S. workers are available and open 
that job opportunity for their consideration. Second, a validity period 
will slow the ``black market'' in approved labor certifications.
    As discussed in the benefit-cost analysis below, enforcing a 
validity period will increase costs for employers that do not file with 
DHS prior to the end of the validity period. In these cases, the 
employer must conduct a new labor market test and submit a new 
permanent labor certification application to the Department. The 
Department's costs will also increase, since it will review additional 
applications that are submitted because the original certification 
expired.
    The Department considered two periods of validity, 45 days and 180 
days. Both alternatives are discussed further below.

3(A). Validity Period of 180 Days

    We estimate that the 10-year discounted quantified benefits 
associated with this provision of the Final Rule will be between $74.8 
and $90.9 million, and total quantified costs will be between $132.4 
and $160.8 million. Thus, the net present value over a 10-year time 
horizon will range from -$57.6 to -$70 million. Due to a lack of 
adequate data, we were not able to quantify or monetize some important 
benefits of this provision of the Final Rule.

Benefits

    The 180-day validity period has several important benefits to 
society: Increased employment opportunities for U.S. workers, improved 
program integrity, and cost savings to the Federal Government resulting 
from positions filled with U.S. workers.
    An important purpose of the 180-day validity is to ensure that the 
certified job opportunity still exists as described on the initial 
application. If an employer files with DHS 180 days or more after the 
certification was approved by the Department, the passage of time may 
have impacted worker availability for purposes of the job opportunity 
that is the subject of the certification. This provision requires 
employers to conduct new labor market tests and submit a new 
application to the Department once validity expires.
    As with the benefits discussed under the substitution section, 
above, the Department estimates that without the 180-day validity 
period and required labor market test, the employer may not be aware 
that U.S. workers are available, and may have otherwise hired an 
alien.\24\ Therefore, the second labor market test required by the 
Final Rule may favor and result in increased employment opportunities 
for U.S. workers. As under the substitution section above, we estimated 
the monetary value of this benefit by examining the compensation earned 
by U.S. workers that would not have otherwise been hired. To estimate 
this benefit, we accounted for the number of U.S. workers that would be 
favored by requiring employers to conduct new labor market tests and 
the compensation of these workers, which includes both their salaries 
and benefits, and reflects the decrease in time that the U.S. workers 
favored by the 180-day validity period stay unemployed. We estimate 
this benefit to be $10.7 million per year.\25\
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    \24\ For purposes of this analysis, the Department assumed that 
U.S. workers favored by the new labor market tests were unemployed. 
However, a benefit to U.S. workers could still exist even if these 
workers were employed elsewhere; their departure from their old jobs 
would open up new employment opportunities for other U.S. workers 
and a move to a new job may imply a higher wage for the U.S. worker.
    \25\ The Department assumed that of the 115,952 PERM 
applications filed between July 1, 2005 and June 30, 2006, five (5) 
percent would expire prior to filing with DHS within 180 days. As 
before, we assumed 15 percent of the labor market tests favor U.S. 
workers. The average annual wage on permanent labor certifications 
applications in the PERM database is $69,000. The average wage was 
increased by 1.42 to account for employee benefits (source: Bureau 
of Labor Statistics). We assumed workers would have been unemployed 
for an additional 1.5 months.
---------------------------------------------------------------------------

    The 180-day validity period decreases the opportunity for fraud 
through the lawful permanent resident process. The current indefinite 
validity of approved permanent labor certifications has contributed, 
along with substitution, to the growth of a secondary market in 
approved labor certifications. A 180-validity period promotes more 
security in the labor market test conducted, adding significant 
protections for U.S. workers in the strength of the tests regarding 
availability and adverse effects of the test on wages and working 
conditions of the affected U.S. worker population. Having a defined 
validity period in combination with the elimination of substitution 
does not lessen fraud as much as it enhances the validity of the labor 
market test that was done. Due to a lack of adequate data, however, we 
were not able to quantify or monetize this important benefit.
    Enforcing a 180-day validity period will result in a small decrease 
in the number of applications dependent on a successful labor market 
test that are submitted to DHS and DOS. An employer that does not 
submit the permanent labor certification to DHS within 180 days will 
need to conduct a new labor market test and, if the test favors an 
alien, the employer must file a new application with the Department. If 
the test favors a U.S. worker, then the employer will not submit an 
application to the Department. Employers will submit fewer applications 
to DHS and DOS because after the original certifications expire, some 
of the new labor market tests will favor U.S. workers or may not be 
further pursued. In these cases, cost savings results from the reduced 
DHS staff time to review I-140 immigrant petitions and I-485 
applications to adjust to permanent resident status. In addition, DOS 
will have fewer interviews to conduct with aliens seeking a lawful 
immigrant visa to obtain permanent residence. Because of data 
limitations, we are not able to provide a quantitative or monetary 
value of these benefits.\26\
---------------------------------------------------------------------------

    \26\ The 180-day validity period will help deter unscrupulous 
employers, attorneys, or agents filing permanent labor certification 
applications with DOL because there will be fewer opportunities to 
profit off of fraudulent applications. In addition, Department of 
Justice staff time can be expected to be reduced from avoided 
investigation and prosecution of fraudulent applications for 
positions filled by U.S. workers.
---------------------------------------------------------------------------

Costs

    The 180-day validity period imposes several costs to society: 
Additional job advertising and recruiting from employers, increased 
employer staff time for filing labor certification applications, and 
increased staff time at the Department. In addition, a 180-day validity 
period requires employers to conduct labor market tests that will favor 
U.S. workers in some cases, which

[[Page 27941]]

results in a small reduction in revenue to DHS from I-140 petitions and 
I-485 applications and to DOS from immigrant visa applications. We 
estimate the 10-year discounted costs to society to range between 
$132.4 and $160.8 million.
    As described above, approved permanent labor certifications will 
expire if employers do not file the labor certification in support of 
an immigrant petition with DHS within 180 calendar days of the date the 
Department grants certification. If the certification expires, the 
employer must conduct a new labor market test if it chooses to pursue 
the foreign labor option. If the test favors a U.S. worker, then the 
employer will hire a U.S. worker. If the labor market test indicates 
that no qualified U.S. workers are available, then the employer must 
resubmit a permanent labor certification application.
    A significant cost to employers of the 180-day validity period is 
the increase in employer staff time to prepare, file, and track labor 
certification applications. We estimate this cost by multiplying the 
number of expired certifications leading to labor market tests not 
favoring U.S. workers by the number of employer staff hours to prepare, 
file, and track the labor certifications, by the compensation of the 
employer staff undertaking these activities.\27\
---------------------------------------------------------------------------

    \27\ As mentioned above, the Department estimated that employers 
spend 10 staff hours on average preparing, filing, and tracking the 
labor certifications. We assumed that Human Resource Managers (or 
their equivalent) conduct this activity for the employer and that 
their media hourly wage is $36.52, which was increased by 1.42 to 
account for employee benefits (source: Bureau of Labor Statistics). 
We assumed that five (5) percent of all certifications will expire 
and that 85 percent of the required labor market tests favor aliens, 
resulting in an additional 4,928 permanent labor certification 
applications to be filed with DOL.
---------------------------------------------------------------------------

    Another significant cost to employers of the 180-day validity 
period is the additional recruitment efforts, in particular job 
advertising, as well as the increased employer staff time to arrange 
for and track recruitment efforts and for receiving, compiling, 
interviewing, analyzing, and reporting the results of the recruitment. 
We estimate the costs for preparing recruitment reports by multiplying 
the staff time required to conduct such activities by the staff's 
compensation, by the annual number of additional labor certification 
applications.\28\ We estimated the total annual costs to employers for 
processing labor certifications and additional recruitment efforts to 
be $18.5 million per year.
---------------------------------------------------------------------------

    \28\ The Department estimated the cost of a Sunday paper 
advertisement is $750. We also estimated it would take an employer 
0.5 hours to place the advertisement with the Sunday paper and 0.5 
hours to place a job order with the SWA, and 1.5 hours to conduct 
additional recruiting, as required by PERM. In addition, DOL 
estimated that the employer would spend 25 hours to arrange for and 
track recruiting efforts and for receiving, compiling, interviewing, 
analyzing, and reporting the results of the recruitment. According 
to the preamble to the PERM Final Rule, it takes an average of one 
(1) hour for an employer to prepare a recruitment report for each 
application it files. For purposes of this analysis, we estimated 
that 10 percent of these applications are audited, which will 
require an additional hour for the employer to submit the report. We 
assumed that Human Resources Managers (or their equivalent) conduct 
this work for the employer and that their median hourly wage is 
$36.52, which was increased by 1.42 to account for benefits (source: 
Bureau of Labor Statistics). This analysis assumes five (5) percent 
of all certifications will expire and that 85 percent of the 
required labor market tests favor aliens, resulting in an additional 
4,928 permanent labor certification applications to be filed with 
DOL.
---------------------------------------------------------------------------

    A small cost to the Federal Government resulting from the 180-day 
validity period is the increased time for Departmental staff time to 
review the relatively small number of applications that are resubmitted 
if the original certification expired and subsequent labor market tests 
favor an alien. If employers resubmit applications, then our staff must 
spend additional time reviewing an increased number of applications. We 
estimated this cost by multiplying the time spent reviewing each 
application by the compensation of a foreign labor certification 
analyst, by the increased number of applications.\29\ We also factored 
in the potential increase in our staff time to audit additional 
recruitment reports. We estimated this cost by multiplying the time 
spent auditing each recruitment report by the average compensation of a 
DOL auditor by the increased number of recruitment reports that will be 
audited.\30\ We estimated the total annual costs to the Federal 
government to be $0.3 million per year.
---------------------------------------------------------------------------

    \29\ The Department estimated that 70 percent of applications 
are ``clean'' and do not raise any audit flags. ``Clean'' 
applications require 0.25 hours of our staff time. We assumed that 
the remaining applications raise audit flags and must be reviewed 
manually, requiring 4 hours of our staff time. We estimated that the 
median hourly wage for our staff analysts is $30.06 (GS 12, step 5, 
which was escalated by 1.42 to account for employee benefits 
(source: Bureau of Labor Statistics). As explained above, we 
estimated that approximately 4,928 additional permanent labor 
certification applications will be filed with the Department each 
year as a result of this provision.
    \30\ The Department assumed auditors spend two (2) hours to 
audit recruitment reports. We assumed the median hourly wage for DOL 
auditors is $30.06 (GS 12, step 5), which was increased by 1.42 to 
account for employee benefits (source: Bureau of Labor Statistics). 
As explained above, we assumed approximately 4,928 additional 
permanent labor certification applications will be filed with DOL 
each year as a result of this provision.
---------------------------------------------------------------------------

    Finally, DHS and DOS will experience small decreases in revenue 
from application fees. Since employers must conduct a labor market test 
after a certification expires and since some of the labor market tests 
will favor U.S. workers, there will be a slight decrease in the number 
of Forms I-140 and I-485 that would have been submitted to DHS and 
immigrant visa applications that would have been submitted to DOS. 
Because these forms have application fees, DHS and DOS will experience 
a small decrease in revenue.\31\ Due to a lack of adequate data, we 
could not quantify or monetize these costs.
---------------------------------------------------------------------------

    \31\ At time of publication, the DHS form I-140 immigrant 
petition filing fee is $195 and the immigrant visa application 
processing fee charged by DOS is $335 per person.
---------------------------------------------------------------------------

3(B). Validity Period of 45 Days

    In the proposed rule, the Department proposed a validity period of 
45 calendar days. In response to public comments regarding the 
hardships associated with a 45-day validity period, we increased the 
validity period to 180 calendar days. The most important benefit of the 
validity period is increased employment opportunities for U.S. workers, 
and the primary cost is to employers that must conduct new labor market 
tests and file new applications with the Department if approved 
certifications are not filed with DHS within the validity period and 
the labor market test favors an alien.
    In the section below, the Department analyzed the major benefits 
and costs. We assumed that twice as many certifications would expire 
before reaching DHS with a 45-day validity period as compared to a 180-
day validity period. We estimated the 10-year discounted benefits 
associated with a 45-day validity period to be between $149.6 and 
$181.7 million, and the total costs to be between $264.9 and $321.7 
million. Thus, the net present value over a 10-year time horizon will 
range from -$115.2 to -$140.0 million.

Benefits

    We estimate the monetary value of this benefit by examining the 
compensation earned by U.S. workers that would not have otherwise been 
hired. To estimate this benefit, we account for the number of U.S. 
workers that would be favored by requiring employers to conduct new 
labor market tests and the compensation of these workers, which 
includes both their salaries and benefits and reflects the decrease in 
time that those workers stay unemployed. We estimate this benefit to be 
$21.3 million per year.\32\
---------------------------------------------------------------------------

    \32\ The Department estimated of the 115,952 PERM applications 
filed between July 1, 2005 and June 30, 2006, 10 percent would 
expire prior to filing with DHS. In addition, we estimated 15 
percent of labor market tests favor U.S. workers. The average annual 
wage on permanent labor certifications applications in the PERM 
database is $69,000, which was increased by 1.42 to account for 
employee benefits (source: Bureau of Labor Statistics). We assumed 
workers would have been unemployed for an additional 1.5 months.

---------------------------------------------------------------------------

[[Page 27942]]

Costs

    The Department assumed that twice as many applications would expire 
under a 45-day validity period as compared to the 180-day validity 
period. The Department estimated the costs for a 45-day validity period 
by assuming the cost per application would be the same but the number 
of applications submitted by employers would double. We estimate the 
annual cost to employers to be $37 million per year. This cost includes 
additional job advertising, and employer staff time to arrange for and 
track recruiting efforts, prepare and file certification applications, 
and prepare and maintain recruitment reports.
    The 45-day validity period imposes a cost to the Department 
resulting from the need for increased foreign labor certification staff 
time to review additional applications resulting from expired 
applications. We estimated this cost to be $0.7 million per year. Also, 
if employers rush to file the I-140 to satisfy a 45-day rule, this will 
slow processing at DHS and increase the number of requests for 
additional evidence issued by that agency. However, due to a lack of 
adequate data, we were unable to quantify or monetize this cost.
4. Prohibition on the Sale, Barter, or Purchase of Applications for 
Permanent Labor Certification and of Approved Permanent Labor 
Certifications, and on Related Payments
    The Department is prohibiting improper commerce and certain 
payments related to permanent labor certification applications and 
certifications. We estimate that the 10-year discounted benefits 
associated with this provision of the Final Rule will be between $16.9 
and $20.5 million. Due to a lack of adequate data, we were unable to 
specifically quantify the costs to this provision of the Final Rule.

Benefits

    The prohibition on the sale, barter, or purchase of applications or 
certifications has several important benefits to society: Improved 
program integrity, a small cost savings to employers in the form of 
increased staff time to clear up their names when they are unknowingly 
used for fraudulent applications, and cost savings to the Federal 
Government in the form of reduced staff time resulting from the 
reduction in fraudulent applications. We estimate the cost savings to 
be $2.4 million per year.
    On the ``black market,'' employers or agents agree to broker 
applications for permanent labor certification on behalf of aliens in 
exchange for payment. Such payments are not compatible with the 
purposes of the permanent labor certification program and may indicate 
a lack of a bona fide job opportunity that is and has been truly open 
to U.S. workers. The Department is instituting this ban because 
allowing the sale of a government benefit to continue is simply bad 
government. Due to a lack of adequate data, we were not able to 
quantify or monetize the benefits to society of increased program 
integrity as a result of this provision of the Final Rule.
    The Department of Justice, DHS and DOL OIG spend a significant 
amount of time and resources to investigate fraudulent applications. 
Some of these applications are submitted by unscrupulous attorneys or 
agents filing on behalf of an alien, although the business named on the 
application did not provide authorization and may not even have been 
aware that its name was being used. When the Federal Government 
determines the application is fraudulent, the employer is often placed 
in an uncomfortable, precarious position and required to explain to the 
Department that it did not authorize the use of its name in the 
application.
    We estimate this cost savings by calculating the monetary value of 
the increase in employer staff time to discuss the findings and write 
an explanation to the Department. We estimate this cost savings by 
multiplying the staff time required to conduct such activities by the 
staff compensation, by the number of fraudulent applications submitted 
to the Department. We estimate the annual cost savings to employers to 
be $2.4 million per year.\33\
---------------------------------------------------------------------------

    \33\ The Department estimated that 10 percent of applications 
are fraudulent and that half of these fraudulent applications 
involve businesses whose names are used without authorization. We 
also estimated that a Human Resources Manager or their equivalent 
staff spends on average eight (8) hours to discuss the findings and 
write a letter to DOL. This analysis assumes Human Resources 
Managers (or their equivalent) conduct this work for the employer 
and that their median hourly wage is $36.52, which we increased by 
1.42 to account for employee benefits (source: Bureau of Labor 
Statistics).
---------------------------------------------------------------------------

    Enforcing a prohibition on the sale, barter, or purchase of 
applications of permanent labor certifications or approved permanent 
labor certifications will deter unscrupulous attorneys, employers, and 
agents from submitting fraudulent applications. Thus, all else being 
equal, the prohibition will result in fewer applications that are 
submitted to the Department, DHS, and DOS. Cost savings result from 
reduced OIG staff time to review and audit permanent labor 
certification applications and reduced DHS staff time to review I-140 
and I-485 applications. In addition, DOS will have fewer interviews to 
conduct with aliens seeking permanent residence. Finally, DOJ staff 
time can be expected to be reduced from avoided investigation and 
prosecution of fraudulent applications (for example, under existing 
racketeering laws). Because of data limitations, we were not able to 
quantify or monetize this important benefit.

Costs

    The prohibition of the sale, barter, or purchase of permanent labor 
applications and certifications imposes several costs to the Federal 
Government in terms of increased DOJ staff time to prosecute 
unscrupulous agents, attorneys, or employers that submit fraudulent 
applications, and a small reduction in revenue to DHS from I-140 
petitions and I-485 applications and to DOS from immigrant visa 
applications. Due to a lack of adequate data, we were unable to 
quantify the costs to this provision of the Final Rule.
    The main cost to the Federal Government is the increased DOJ staff 
time to investigate and prosecute unscrupulous agents, attorneys, or 
employers suspected of violating this prohibition. In addition, DHS and 
DOS will experience small decreases in revenue from application fees. 
Since unscrupulous agents, employers, and attorneys will no longer 
submit fraudulent applications to the Department, there will be a 
slight decrease in the number of I-140 petitions and I-485 applications 
that would have been submitted to DHS and an immigrant visa application 
that would have been submitted to DOS. Because both these forms have 
application fees, DHS and DOS will experience small decreases in 
revenue.\34\
---------------------------------------------------------------------------

    \34\ The DHS form I-140 application fee is $195 per application 
and the immigrant visa application processing fee is $335 per 
person. The Department did not monetize the total estimated 
reduction in revenue to DHS and DOS due to data limitations. In 
addition, the costs may be offset by the cost savings, since staff 
at DHS and DOS will spend less time processing applications.

---------------------------------------------------------------------------

[[Page 27943]]

Issues Raised by Public Comment

    At least two commenters stated that a large financial impact would 
result from the proposed rule's prohibition on payment or reimbursement 
of the employer's attorneys' fees or other employer costs. One of those 
commenting reported that it ``heard [f]rom several large companies and 
universities'' that the application process may cost as much as $15,000 
to $20,000, including attorneys' fees, although it conceded that the 
numbers were informal and not based on systematic research.
    The Department has considered comments from several sources 
regarding the prohibition on payment or reimbursement by alien workers 
of the employer's expenses. We believe there are compelling reasons to 
maintain in substantial part the prohibitions proposed in the NPRM, 
including the prohibition against employers seeking reimbursement of 
employers' attorneys' fees. The Department has detailed these reasons 
above. We reiterate, in addition, that assistance of counsel is at the 
employer's option, and not a requirement of the program.
    The ban on sale, barter, purchase and certain payments related to 
permanent labor certifications is also justified for its social 
purpose, which is to prevent labor certifications from becoming a 
commodity that can be sold by unscrupulous employers, attorneys, and 
agents to aliens seeking a ``green card.'' The public disclosure that 
permanent labor certifications cannot be sold, bartered, or purchased 
reduces information asymmetry in the sense that alien beneficiaries are 
now informed that they should no longer be purchasing these 
certifications under any circumstances.
5. Debarment
    The Department may suspend processing of any permanent labor 
certification application if an employer, attorney, or agent connected 
to that application is involved in either possible fraud or willful 
misrepresentation or is named in a criminal indictment or information 
related to the permanent labor certification program. The Department 
has instituted a public debarment mechanism to effectively deter 
individuals or entities from engaging in fraudulent permanent labor 
certification activities or prohibited transactions, and provide 
employers who seek assistance from attorneys or agents with better 
information about which individuals or entities have committed fraud or 
abuse. In addition, this regulatory action will increase government 
efficiency in processing legitimate permanent labor certification 
applications as debarred employers, attorneys, or agents are prevented 
from participating in the program for a specified period of time (i.e., 
up to three years).
    We estimate that the 10-year discounted benefits associated with 
this provision of the Final Rule ranges from $175.9 to $213.6 million. 
Due to a lack of adequate data, we were unable to quantify the costs to 
this provision of the Final Rule.

Benefits

    The debarment provision has several important benefits to society, 
including improved program integrity and cost savings to the Federal 
Government in the form of reduced staff time resulting from the 
reduction in fraudulent applications.
    We are implementing this provision to promote the program's 
integrity and to assist the Department in obtaining compliance with 
existing program requirements and this rulemaking. Given the breadth 
and increased sophistication of the immigration fraud that has been 
identified in the recent past, the Department added this provision to 
attain the necessary flexibility to respond to potential improprieties 
in labor certification filings.
    Debarring unscrupulous employers, attorneys, or agents who 
willfully or repeatedly violate program requirements will prevent such 
conduct in the future. To the extent that these provisions deter, 
prevent, or forestall inaccurate, inappropriate, or fraudulent 
applications, debarment will reduce the number of applications received 
by the Department, all other factors being constant. We estimate this 
cost savings by multiplying the number of fraudulent applications 
submitted by the average number of hours spent by foreign labor 
certification staff on each fraudulent application, by the average 
compensation of staff reviewing fraudulent applications. We estimate 
the annual cost savings to the Federal Government associated with 
debarment to be $25 million per year.\35\
---------------------------------------------------------------------------

    \35\ The benefits estimated by the section of this analysis 
covering the elimination of substitution assume only the fraud 
associated with substitution and thereby eliminated by prohibiting 
the practice. The benefits estimated by this section--covering the 
institution of debarment--considers the benefits of eliminating non-
substitution fraud as well as the benefits from the substitution 
analysis. The Department estimated that 10 percent of applications 
are fraudulent and would not be filed because the employer or 
attorney/agent would be debarred from filing applications. We 
estimated the cost savings by multiplying the number of fraudulent 
applications that were not fraudulent substitutions by the average 
review time per fraudulent application (40 hours). This estimate 
does not include cost savings from the decrease in fraudulent 
substitutions to avoid double counting the cost savings that are 
already accounted for in the first provision of this rule, the ban 
on substitution. The average compensation of DOL staff reviewing the 
fraudulent applications (staff with pay grade GS 14, step 5) is 
$42.24, which was increased by 1.42 to account for employee 
benefits.
---------------------------------------------------------------------------

    In addition, the Department anticipates that there will be other 
cost savings associated with the debarment provision but, because of 
data limitations, no quantitative or monetary values could be provided. 
One portion of cost savings results from reduced DHS staff time to 
review I-140 petitions and I-485 applications. In addition, DOS will 
have fewer interviews to conduct with aliens seeking lawful residence.

Costs

    The debarment provision imposes a small cost to the Federal 
Government in the form of reduced revenue to DHS and DOS related to 
fewer I-140 petitions and I-485 applications and immigrant visa 
applications. We were unable to monetize these costs because of 
inadequate data.
    The cost to the Department associated with debarment can be 
expected to be low, since we have experience creating and implementing 
electronic tracking systems to prevent debarred individuals from filing 
applications with the Department. For example, the Department's H-1B 
Labor Condition Application (LCA) System already includes a 
``debarment'' table that is automatically updated with the names of 
debarred individuals. LCAs filed by individuals on the list are 
electronically flagged, and there is minimal staff time associated with 
this process. Although the Department does not possess data to estimate 
this cost, we do not believe that enforcing the debarment provisions in 
this rule will require a significant amount of resources.
    Finally, DHS and DOS will experience small decreases in revenue 
from application fees. Debarred individuals will not be able to submit 
applications to the Department, and thus will be unable to proceed to 
the next steps of the process in DHS and DOS. Because these forms have 
application fees, DHS and DOS will experience a small decrease in 
revenue.\36\ The Department does not have sufficient data to estimate 
this cost.
---------------------------------------------------------------------------

    \36\ The DHS Form I-140 immigrant petition filing fee is $195, 
and the Form I-485 filing fee is $395. The immigrant visa 
application processing fee charged by DOS is $335 per person.

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[[Page 27944]]

D. Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by section 804 of the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). 
The standards for determining whether a rule is a major rule as defined 
by section 804 of SBREFA are similar to those used to determine whether 
a rule is an ``economically significant rule under Executive Order 
12866.'' Because we certified that this is not a major rule under 
Executive Order 12866, we also certify it is not a major rule under 
SBREFA. The rule will not result in an annual effect on the economy of 
$100 million or more; a major increase in costs or prices; or 
significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
companies to compete with foreign-based companies in domestic and 
export markets.
    One commenter took the position that the rule would constitute a 
``major rule'' within the meaning of SBREFA. The commenter assumed that 
employers must spend approximately $10,000 for each new application 
that must be submitted in light of the substitution prohibition. Based 
on that analysis, and noting that as many 100,000 applications are 
filed each year, the commenter argues that the impact could amount to 
$1 billion.
    While we are aware of and sensitive to the costs employers incur as 
part of the labor certification process, our regulatory analysis, as 
detailed above, indicates the rule will not have a significant economic 
effect. Separately, as pointed out earlier in this preamble, the costs 
borne by employers are not unanticipated by the statute. Therefore, 
under SBREFA, the rule is not ``major.''

E. Executive Order 13132

    This Final Rule will not have a substantial direct effect on the 
states, on the relationship between the Federal Government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, we have determined this rule does not have sufficient 
federalism implications to warrant the preparation of a summary impact 
statement. The Department received no comments that addressed Executive 
Order 13132.

F. Executive Order 12988

    This regulation meets the applicable standards set forth in 
sections 3(a) and 3(b)(2) of Executive Order 12988. The Department 
received no comments regarding this Executive Order.

G. Paperwork Reduction Act

    The collection of information under part 656 is currently approved 
under OMB control number 1205-0015. This Final Rule does not include a 
substantive or material modification of that collection of information, 
because it will not add to or change paperwork requirements for 
employers applying for permanent labor certification. The only 
consequence of this amendment eliminating the current practice allowing 
substitution of alien beneficiaries on applications and approved 
permanent labor certifications is to require those relatively few 
employers that could have availed themselves of the substitution 
practice to file new applications on behalf of alien beneficiaries. The 
Department does not anticipate any paperwork burden resulting from the 
creation of a 180-day validity period for approved certifications, the 
prohibition on sale, purchase, and barter of applications and labor 
certifications and on related payments, the ban on changes to 
applications filed under the new streamlined permanent labor 
certification procedures, nor the additional enforcement mechanisms in 
this Final Rule. The Department anticipates an insignificant increase 
in volume of permanent labor certification applications filed as a 
result of either employers withdrawing and then filing a corrected 
application or employers allowing a certification to expire and then 
filing a new application. In either situation, employers could avoid 
the need to file additional applications by proofreading and complying 
with regulatory requirements. The Department did not receive comments 
related to this section.

H. Assessment of Federal Regulations and Policies on Families

    This Final Rule does not affect family well-being. The Department 
did not receive any comments related to this section.

I. Administrative Procedure Act (APA)

    The Department has made this regulation available for notice and 
comment and, consequently, has complied with the relevant provisions of 
the Administrative Procedure Act.

J. Catalog of Federal Domestic Assistance Number

    This program is listed in the Catalog of Federal Domestic 
Assistance at Number 17.203, ``Certification for Immigrant Workers.''

List of Subjects in 20 CFR Part 656

    Administrative practice and procedure, Aliens, Employment, 
Employment and training, Enforcement, Fraud, Health professions, 
Immigration, Labor, Passports and visas, Penalties, Reporting and 
recordkeeping requirements, Unemployment, Wages, Working conditions.


0
Accordingly, for the reasons stated in the preamble, part 656 of 
Chapter V, Title 20, Code of Federal Regulations, is amended as 
follows:

PART 656--LABOR CERTIFICATION PROCESS FOR PERMANENT EMPLOYMENT OF 
ALIENS IN THE UNITED STATES

0
1. The authority citation for part 656 is revised to read as follows:

    Authority: 8 U.S.C. 1182(a)(5)(A), 1189(p)(1); section 122, Pub. 
L. 101-649, 109 Stat. 4978; and Title IV, Pub. L. 105-277, 112 Stat. 
2681.


0
2. Amend Sec.  656.3 to add the following definitions:


Sec.  656.3  Definitions, for purposes of this part, of terms used in 
this part.

* * * * *
    Barter, for purposes of an Application for Permanent Employment 
Certification (Form ETA 9089) or an Application for Alien Labor 
Certification (Form ETA 750), means the transfer of ownership of a 
labor certification application or certification from one person to 
another by voluntary act or agreement in exchange for a commodity, 
service, property or other valuable consideration.
* * * * *
    Purchase, for purposes of an Application for Permanent Employment 
Certification (Form ETA 9089) or an Application for Alien Labor 
Certification (Form ETA 750), means the transfer of ownership of a 
labor certification application or certification from one person to 
another by voluntary act and agreement, based on a valuable 
consideration.
    Sale, for purposes of an Application for Permanent Employment 
Certification (Form ETA 9089) or an Application for Alien Labor 
Certification (Form ETA 750), means an agreement between two parties, 
called, respectively, the seller (or vendor) and the buyer (or 
purchaser) by which the seller, in consideration of the payment or 
promise of payment of a certain price in money terms, transfers 
ownership of a labor certification application or certification to the 
buyer.
* * * * *


0
3. Add Sec.  656.11 to read as follows:

[[Page 27945]]

Sec.  656.11  Substitutions and modifications to applications.

    (a) Substitution or change to the identity of an alien beneficiary 
on any application for permanent labor certification, whether filed 
under this part or 20 CFR part 656 in effect prior to March 28, 2005, 
and on any resulting certification, is prohibited for any request to 
substitute submitted after July 16, 2007.
    (b) Requests for modifications to an application will not be 
accepted for applications submitted after July 16, 2007.


0
4. Add Sec.  656.12 to read as follows:


Sec.  656.12  Improper commerce and payment.

    The following provision applies to applications filed under both 
this part and 20 CFR part 656 in effect prior to March 28, 2005, and to 
any certification resulting from those applications:
    (a) Applications for permanent labor certification and approved 
labor certifications are not articles of commerce. They shall not be 
offered for sale, barter or purchase by individuals or entities. Any 
evidence that an application for permanent labor certification or an 
approved labor certification has been sold, bartered, or purchased 
shall be grounds for investigation under this part and may be grounds 
for denial under Sec.  656.24, revocation under Sec.  656.32, debarment 
under Sec.  656.31(f), or any combination thereof.
    (b) An employer must not seek or receive payment of any kind for 
any activity related to obtaining permanent labor certification, 
including payment of the employer's attorneys' fees, whether as an 
incentive or inducement to filing, or as a reimbursement for costs 
incurred in preparing or filing a permanent labor certification 
application, except when work to be performed by the alien in 
connection with the job opportunity would benefit or accrue to the 
person or entity making the payment, based on that person's or entity's 
established business relationship with the employer. An alien may pay 
his or her own costs in connection with a labor certification, 
including attorneys' fees for representation of the alien, except that 
where the same attorney represents both the alien and the employer, 
such costs shall be borne by the employer. For purposes of this 
paragraph (b), payment includes, but is not limited to, monetary 
payments; wage concessions, including deductions from wages, salary, or 
benefits; kickbacks, bribes, or tributes; in kind payments; and free 
labor.
    (c) Evidence that an employer has sought or received payment from 
any source in connection with an application for permanent labor 
certification or an approved labor certification, except for a third 
party to whose benefit work to be performed in connection with the job 
opportunity would accrue, based on that person's or entity's 
established business relationship with the employer, shall be grounds 
for investigation under this part or any appropriate Government 
agency's procedures, and may be grounds for denial under Sec.  656.32, 
revocation under Sec.  656.32, debarment under Sec.  656.31(f), or any 
combination thereof.

0
5. Amend Sec.  656.24 by revising paragraph (g) to read as follows:


Sec.  656.24  Labor certification determinations.

* * * * *
    (g)(1) The employer may request reconsideration within 30 days from 
the date of issuance of the denial.
    (2) For applications submitted after July 16, 2007, a request for 
reconsideration may include only:
    (i) Documentation that the Department actually received from the 
employer in response to a request from the Certifying Officer to the 
employer; or
    (ii) Documentation that the employer did not have an opportunity to 
present previously to the Certifying Officer, but that existed at the 
time the Application for Permanent Labor Certification was filed, and 
was maintained by the employer to support the application for permanent 
labor certification in compliance with the requirements of Sec.  
656.10(f).
    (3) Paragraphs (g)(1) and (2) of this section notwithstanding, the 
Certifying Officer will not grant any request for reconsideration where 
the deficiency that caused denial resulted from the applicant's 
disregard of a system prompt or other direct instruction.
    (4) The Certifying Officer may, in his or her discretion, 
reconsider the determination or treat it as a request for review under 
Sec.  656.26(a).

0
6. Amend Sec.  656.26 by revising paragraph (a) and adding a new 
paragraph (c), to read as follows:


Sec.  656.26  Board of Alien Labor Certification Appeals review of 
denials of labor certification.

    (a) Request for review. (1) If a labor certification is denied, if 
a labor certification is revoked pursuant to Sec.  656.32, or if a 
debarment is issued under Sec.  656.31(f), a request for review of the 
denial, revocation, or debarment may be made to the Board of Alien 
Labor Certification Appeals by the employer or debarred person or 
entity by making a request for such an administrative review in 
accordance with the procedures provided in paragraph (a) of this 
section. In the case of a finding of debarment, receipt by the 
Department of a request for review, if made in accordance with this 
section, shall stay the debarment until such time as the review has 
been completed and a decision rendered thereon.
    (2) A request for review of a denial or revocation:
    (i) Must be sent within 30 days of the date of the determination to 
the Certifying Officer who denied the application or revoked the 
certification;
    (ii) Must clearly identify the particular labor certification 
determination for which review is sought;
    (iii) Must set forth the particular grounds for the request; and
    (iv) Must include a copy of the Final Determination.
    (3) A request for review of debarment:
    (i) Must be sent to the Administrator, Office of Foreign Labor 
Certification, within 30 days of the date of the debarment 
determination;
    (ii) Must clearly identify the particular debarment determination 
for which review is sought;
    (iii) Must set forth the particular grounds for the request; and
    (iv) Must include a copy of the Notice of Debarment.
    (4)(i) With respect to a denial of the request for review, 
statements, briefs, and other submissions of the parties and amicus 
curiae must contain only legal argument and only such evidence that was 
within the record upon which the denial of labor certification was 
based.
    (ii) With respect to a revocation or a debarment determination, the 
BALCA proceeding may be de novo.
* * * * *
    (c) Debarment Appeal File. Upon the receipt of a request for review 
of debarment, the Administrator, Office of Foreign Labor Certification, 
immediately must assemble an indexed Appeal File:
    (1) The Appeal File must be in chronological order, must have the 
index on top followed by the most recent document, and must have 
consecutively numbered pages. The Appeal File must contain the request 
for review, the complete application file(s), and copies of all written 
materials, such as pertinent parts and pages of surveys and/or reports 
or documents received from any court, DHS, or the Department of State, 
upon which the debarment was based.

[[Page 27946]]

    (2) The Administrator, Office of Foreign Labor Certification, must 
send the Appeal File to the Board of Alien Labor Certification Appeals, 
Office of Administrative Law Judges, 800 K St., NW., Suite 400-N, 
Washington, DC 20001-8002.
    (3) The Administrator, Office of Foreign Labor Certification, must 
send a copy of the Appeal File to the debarred person or entity. The 
debarred person or entity may furnish or suggest directly to the Board 
of Alien Labor Certification Appeals the addition of any documentation 
that is not in the Appeal File. The debarred person or entity must 
submit such documentation in writing, and must send a copy to the 
Associate Solicitor for Employment and Training Legal Services, Office 
of the Solicitor, U.S. Department of Labor, 200 Constitution Ave., NW., 
Washington, DC 20210.

0
7. Amend Sec.  656.30 by: revising paragraphs (a), (b), and (c); and 
adding a new paragraph (e)(3), to read as follows:


Sec.  656.30  Validity of and invalidation of labor certifications.

    (a) Priority Date. (1) The filing date for a Schedule A occupation 
or sheepherders is the date the application was dated by the 
Immigration Officer.
    (2) The filing date, established under Sec.  656.17(c), of an 
approved labor certification may be used as a priority date by the 
Department of Homeland Security and the Department of State, as 
appropriate.
    (b) Expiration of labor certifications. For certifications 
resulting from applications filed under this part and 20 CFR part 656 
in effect prior to March 28, 2005, the following applies:
    (1) An approved permanent labor certification granted on or after 
July 16, 2007 expires if not filed in support of a Form I-140 petition 
with the Department of Homeland Security within 180 calendar days of 
the date the Department of Labor granted the certification.
    (2) An approved permanent labor certification granted before July 
16, 2007 expires if not filed in support of a Form I-140 petition with 
the Department of Homeland Security within 180 calendar days of July 
16, 2007.
    (c) Scope of validity. For certifications resulting from 
applications filed under this part or 20 CFR part 656 in effect prior 
to March 28, 2005, the following applies:
    (1) A permanent labor certification for a Schedule A occupation or 
sheepherders is valid only for the occupation set forth on the 
Application for Alien Employment Certification (Form ETA 750) or the 
Application for Permanent Employment Certification (Form ETA 9089) and 
only for the alien named on the original application, unless a 
substitution was approved prior to July 16, 2007. The certification is 
valid throughout the United States unless the certification contains a 
geographic limitation.
    (2) A permanent labor certification involving a specific job offer 
is valid only for the particular job opportunity, the alien named on 
the original application (unless a substitution was approved prior to 
July 16, 2007), and the area of intended employment stated on the 
Application for Alien Employment Certification (Form ETA 750) or the 
Application for Permanent Employment Certification (Form ETA 9089).
* * * * *
    (e)* * *
    (3) A duplicate labor certification shall be issued by the 
Certifying Officer with the same filing and expiration dates, as 
described in paragraphs (a) and (b) of this section, as the original 
approved labor certification.

0
8. Revise Sec.  656.31 to read as follows:


Sec.  656.31  Labor certification applications involving fraud, willful 
misrepresentation, or violations of this part.

    The following provisions apply to applications filed under both 
this part and 20 CFR part 656 in effect prior to March 28, 2005, and to 
any certifications resulting from those applications.
    (a) Denial. A Certifying Officer may deny any application for 
permanent labor certification if the officer finds the application 
contains false statements, is fraudulent, or was otherwise submitted in 
violation of the Department's permanent labor certification 
regulations.
    (b) Possible fraud or willful misrepresentation. (1) If the 
Department learns an employer, attorney, or agent is involved in 
possible fraud or willful misrepresentation in connection with the 
permanent labor certification program, the Department will refer the 
matter to the Department of Justice, Department of Homeland Security, 
or other government entity, as appropriate, for investigation, and send 
a copy of the referral to the Department of Labor's Office of Inspector 
General (OIG). In these cases, or if the Department learns an employer, 
attorney, or agent is under investigation by the Department of Justice, 
Department of Homeland Security, or other government entity for 
possible fraud or willful misrepresentation in connection with the 
permanent labor certification program, the Department may suspend 
processing of any permanent labor certification application involving 
such employer, attorney, or agent until completion of any investigation 
and/or judicial proceedings. Unless the investigatory agency, in 
writing, requests the Department to do otherwise, the Department shall 
provide written notification to the employer of the suspension in 
processing.
    (2) A suspension pursuant to paragraph (b)(1) of this section may 
last initially for up to 180 days. No later than 180 days after the 
suspension began, if no criminal indictment or information has been 
issued, or judicial proceedings have not been concluded, the National 
Certifying Officer may resume processing some or all of the 
applications, or may extend the suspension in processing until 
completion of any investigation and/or judicial proceedings.
    (c) Criminal indictment or information. If the Department learns 
that an employer, attorney, or agent is named in a criminal indictment 
or information in connection with the permanent labor certification 
program, the processing of applications related to that employer, 
attorney, or agent may be suspended until the judicial process is 
completed. Unless the investigatory or prosecutorial agency, in 
writing, requests the Department to do otherwise, the Department shall 
provide written notification to the employer of the suspension in 
processing.
    (d) No finding of fraud or willful misrepresentation. If an 
employer, attorney, or agent is acquitted of fraud or willful 
misrepresentation charges, or if such criminal charges are withdrawn or 
otherwise fail to result in a finding of fraud or willful 
misrepresentation, the Certifying Officer shall decide each pending 
permanent labor certification application related to that employer, 
attorney, or agent on the merits of the application.
    (e) Finding of fraud or willful misrepresentation. If an employer, 
attorney, or agent is found to have committed fraud or willful 
misrepresentation involving the permanent labor certification program, 
whether by a court, the Department of State or DHS, as referenced in 
Sec.  656.30(d), or through other proceedings:
    (1) Any suspension of processing of pending applications related to 
that employer, attorney, or agent will terminate.
    (2) The Certifying Officer will decide each such application on its 
merits, and may deny any such application as provided in Sec.  656.24 
and in paragraph (a) of this section.

[[Page 27947]]

    (3) In the case of a pending application involving an attorney or 
agent found to have committed fraud or willful misrepresentation, DOL 
will notify the employer associated with that application of the 
finding and require the employer to notify DOL in writing, within 30 
days of the notification, whether the employer will withdraw the 
application, designate a new attorney or agent, or continue the 
application without representation. Failure of the employer to respond 
within 30 days of the notification will result in a denial. If the 
employer elects to continue representation by the attorney or agent, 
DOL will suspend processing of affected applications while debarment 
proceedings are conducted under paragraph (f) of this section.
    (f) Debarment. (1) No later than six years after the date of filing 
of the labor certification application that is the basis for the 
finding, or, if such basis requires a pattern or practice as provided 
in paragraphs (f)(1)(iii), (iv), and (v) of this section, no later than 
six years after the date of filing of the last labor certification 
application which constitutes a part of the pattern or practice, the 
Administrator, Office of Foreign Labor Certification, may issue to an 
employer, attorney, agent, or any combination thereof a Notice of 
Debarment from the permanent labor certification program for a 
reasonable period of no more than three years, based upon any action 
that was prohibited at the time the action occurred, upon determining 
the employer, attorney, or agent has participated in or facilitated one 
or more of the following:
    (i) The sale, barter, or purchase of permanent labor applications 
or certifications, or any other action prohibited under Sec.  656.12;
    (ii) The willful provision or willful assistance in the provision 
of false or inaccurate information in applying for permanent labor 
certification;
    (iii) A pattern or practice of a failure to comply with the terms 
of the Form ETA 9089 or Form ETA 750;
    (iv) A pattern or practice of failure to comply in the audit 
process pursuant to Sec.  656.20;
    (v) A pattern or practice of failure to comply in the supervised 
recruitment process pursuant to Sec.  656.21; or
    (vi) Conduct resulting in a determination by a court, DHS or the 
Department of State of fraud or willful misrepresentation involving a 
permanent labor certification application, as referenced in Sec.  
656.31(e).
    (2) The Notice of Debarment shall be in writing; shall state the 
reason for the debarment finding, including a detailed explanation of 
how the employer, attorney or agent has participated in or facilitated 
one or more of the actions listed in paragraphs (f)(1)(i) through (v) 
of this section; shall state the start date and term of the debarment; 
and shall identify appeal opportunities under Sec.  656.26. The 
debarment shall take effect on the start date identified in the Notice 
of Deba
rment unless a request for review is filed within the time permitted by Sec. 656.26. DOL will notify DHS and the Department of State regarding any Notice of Debarment. (g) False Statements. To knowingly and willfully furnish any false information in the preparation of the Application for Permanent Employment Certification (Form ETA 9089) or the Application for Alien Employment Certification (Form ETA 750) and any supporting documentation, or to aid, abet, or counsel another to do so is a Federal offense, punishable by fine or imprisonment up to five years, or both under 18 U.S.C. 2 and 1001. Other penalties apply as well to fraud or misuse of ETA immigration documents and to perjury with respect to such documents under 18 U.S.C. 1546 and 1621. Signed in Washington, DC, this 1st day of May, 2007. Emily Stover DeRocco, Assistant Secretary, Employment and Training Administration. [FR Doc. E7-9250 Filed 5-16-07; 8:45 am] BILLING CODE 4510-FP-P



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