Employers are having to scale back their operations due to the hit they have taken from COVID-19. Unfortunately, this slowdown has placed employers in the difficult position of having to shrink their workforces and/or reduce workhours. Decision making has been made all the more difficult by the fact that employees in H-1B, H-1B1, or E-3 status present unique compliance concerns, since the terms and conditions of their employment are dictated by the Labor Condition Application (LCA) corresponding to them. Careful attention should be made to LCA wage issues, as a misstep could lead to back wage liability, fines, and debarment from some immigration programs.
The LCA is an application filed by an employer with the U.S. Department of Labor (DOL) to authorize the work of an H-1B, H-1B1, or E-3 worker. The LCA must be filed with DOL prior to requesting the United States Immigration and Citizenship Services (USCIS) permission to hire these categories of employees.
In filing an LCA, employers agree to four general attestations. The most relevant of these attestations in the context of a layoff, termination, furlough, reduction of hours, etc., is the requirement that the employer pay the “required wage rate.” The required wage rate must be paid at all times while the LCA is “active.” Failure to pay the required wage rate during the term of the LCA, unless due to a voluntary leave by the employee, may subject the employer to back wage, fine, and debarment liability. If an employer’s ability to pay the required wage rate during the term of an LCA is diminished, there are generally three options at the disposal of an employer.
Termination/Layoff with option of rehiring
The first option is to perform a “bona fide” termination. A bona fide termination occurs when three conditions are met. Firstly, an employer must expressly terminate their relationship with the foreign worker. Secondly, the employer must notify USCIS of the termination. Lastly, the employer must offer to pay for the worker’s reasonable costs of transportation to their home abroad, and pay those costs unless the workers stays in the U.S. If all three conditions are met, a bona fide termination is said to have occurred, which cuts off the employer’s wage liability prospectively.
Rehiring of a terminated employee by filing a new H-1B petition is possible, though the employer incurs the additional expense of the new petition. After termination, H-1B, H-1B1, and E-3 employees are afforded a one-time 60-day grace period. However, if the employee’s I-94 expires before the 60-day grace period, then the grace period lasts only until the I-94 expiry date. So, for example, if an employee is terminated on April 1, 2020, the employer would have until May 31, 2020 to rehire that individual, unless their I-94 is set to expire on April 15, 2020, then the earlier date would control. If the employee is still within their grace period, the employee is eligible to be rehired, provided the employer files a new petition with USCIS.
From an immigration standpoint, the advantage of a termination is that it provides an unambiguous means of stopping LCA wage liability during a furlough or layoff. This option, however, leaves much to be desired. Beside offboarding costs and risks, including being requested to pay the costs of return transportation if the employee opts to leave the United States, terminating an LCA subject employee means losing an employee who is likely very valuable. As mentioned previously, the employer will have to file another H petition in order to re-hire the individual. In addition, terminated employees are required to find alternate employment or file for a change of status within sixty days of being terminated. Beyond the immigration consequences, those who do not find employment may be unable to live in the United States without a paycheck, and so be forced to return to their home country. In a time where many countries are not even accepting their own citizens (e.g. India), this might result in a growing number of overstays.
If the employer performs a bona fide termination and later files a new petition for the employee to resume employment, the employee would be allowed to return to work under the doctrine of H-1B portability. Portability allows the H-1B nonimmigrant to begin work upon filing of the petition for new employment. In this scenario, however, the employer does not have to let the nonimmigrant return to work upon filing; instead, the obligation to put the employee back on the payroll is not triggered until after approval of the new petition. Therefore, employers worried about a more protracted downturn could file H-1B petitions for their terminated employees to have the ability to recall them, but they would not be obligated to recall them until several months later. And, of course, if the employer determines it would not be able to recall the H-1B employee, the employer could withdraw the pending petition and have no additional obligation to the employee.
Reduction of hours with an amended H-1B petition
If an employer cannot pay the required wage, an alternative to termination is to convert the employee to part-time status. In any case where the existing LCA contemplates the employee as working full-time (i.e. 35 hours per week) and salaried, the employee’s reduction of working hours below full-time will require the filing of an amended nonimmigrant visa petition.
The advantage of this option is that the employer can retain its employee and eventually revert them back to full-time status whenever business improves. There are some downsides, however, employers should consider. One is that the employee’s time will now have to be tracked, which might prove challenging logistically. It will also mean a decrease in productivity due to reduced hours. Furthermore, it might prove more costly overall to file an amended immigration petition to classify the employee as part-time, as a second amendment petition will have to be filed to revert the employee back to full-time status.
Furloughing or “benching” an employee generally does not absolve an employer from paying the LCA wage rate during times of non-productiveness.
The law states that if furloughing or benching becomes necessary due to a period of non-productivity caused by the employer, the employer is liable for any LCA wages during that period. There is little to no guidance from DOL as to whether a shortage of work brought on by a transcendent economic force, such as COVID-19, constitutes a period of non-productivity “caused by the employer.” There are reasonable arguments for and against the proposition that the period of inactivity was caused by the employer. In the absence of guidance, however, it should be noted that benching is inherently risky and could subject the employer back wage liability, civil fines and debarment.
One thing that is clear, however, is that if benching comes at the request of the foreign national worker, the law seems to indicate that the employer will not be subject to back wage liability. Therefore, if, for example, an employee contracts COVID-19 and requests unpaid time off, or requests reduced work hours to care for a school-aged child or other family member, the employer would not be required to pay the required wage rate during the period in which the employee is not working (except as required by other law or the employer’s benefits program).
Dealing with LCA wage issues requires very careful attention. With many factors and unknowns to consider during these unprecedented times, it can be daunting and ill-advised to navigate options on your own.