Beware of H-1B Wage Law Violations: Company to be Debarred, Ordered to Pay Over $120,000 in Penalties and Back Pay for H-1B/LCA Violations

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

A recent case before the Office of Administrative Law Judges (ALJ) is a compelling reminder that violations of H-1B wage requirements can result in significant financial penalties and fines. Moreover, violations of H-1B program rules also can lead to program debarment and even criminal investigations. Noting that the “rules governing the employment of nonimmigrant workers in specialty occupations are specific and must be followed completely,” Thomas Gauza, District Director for the U.S. Department of Labor’s (DOL) Wage and Hour Division cautioned that the case demonstrates that the DOL “will not hesitate to bring legal action against employers that continue to short their employees and violate the law.”

H-1B Wage Requirements

In the case at hand, the employer, an Indianapolis-based healthcare recruiting and staffing company, violated several H-1B wage obligations. An investigation by the DOL’s Wage and Hour Division revealed that the employer had misrepresented facts on its H-1B nonimmigrant applications and failed to pay wages at the prevailing wage rate for productive work time or pre-assignment and post-assignment time, as required by law, entitling the affected employees to back wages. The company also failed to withhold applicable employment taxes, such as payments to Medicare, FICA, and federal and state income tax, and was required to pay such taxes, plus interest and penalties, to the appropriate taxing authorities.

H-1B visas are issued for “specialty occupations” and allow an employee to work temporarily for a U.S. employer in a qualifying position. Employers of H-1B workers must adhere to stringent wage requirements. The regulations require an employer to pay H-1B employees as much as it pays other employees with similar experience and qualifications (the “actual wage”) or the prevailing local wage level for the H-1B worker’s occupational classification, whichever is greater. Prior to submitting an H-1B petition to the U.S. Citizenship and Immigration Services (USCIS), the company must determine the prevailing wage rate for the occupational classification in the H-1B employee’s area of intended employment and file a Labor Condition Application (LCA) with the DOL. The LCA defines the employer's obligations to ensure that employing a foreign worker under the H-1B program will not adversely impact the wages or working conditions of similarly-situated U.S. workers. A civil money penalty of up to $5,000 per violation may be assessed for willful failure to pay the required wages.

H-1B employees must be paid the required wage listed on the original H-1B petition when they report for work, and these wages must continue even if they are not performing work and are in a nonproductive status based on factors such as lack of work. The practice of an employer placing an H-1B nonimmigrant in nonproductive status without pay is colloquially referred to as “benching.” If an employee is benched, the employer remains liable for all salary due and owing to the employee. By contrast, wages need not be paid if an H-1B employee is nonproductive due to non-work-related factors, such as the H-1B employee’s voluntary request for leave, or circumstances that render the H-1B worker unable to work, such as leave for family/medical reasons or temporary incapacity for health reasons. In his statement, Gauza emphasized that non-compliance with H-1B wage requirements “denies qualified workers an opportunity for meaningful employment in the American economy.”

Debarment, Back Pay Awarded, and Severe Penalties Assessed for Violations

Under the terms of the court order, the company has been ordered to pay $81,454 in civil money penalties and $39,946 in back wages to six employees for violations of the H-1B wage regulations. The company has also been debarred from participation in the H-1B program for a one-year period. In addition to paying the back wages and penalties, the employer has agreed to enhance its compliance procedures, including records review by the DOL for a two-year period, and to comply with the Immigration and Nationality Act going forward.

Note: This article was published in the June/July 2014 issue of the Immigration eAuthority.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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