United States Citizenship and Immigration Services (USCIS) has started to notify employers of whether their H-1B petitions were selected in USCIS’s fiscal year 2017 random selection process, or “lottery,” that took place in April of 2016. Approximately 85,000 H-1B workers selected in the quota will begin work in the United States on October 1, 2016, or shortly thereafter. The H-1B lottery selection provides employers with a useful reminder to reexamine the relevant regulatory obligations that attach with sponsorship of an H-1B employee. Of particular importance, federal immigration laws require that an employee in H-1B status receive at least the  prevailing wage certified by the U.S. Department of Labor (DOL) and established in the relevant approved H-1B petition, beginning when the worker “enters into employment” with the employer and throughout the employment relationship. Recent cases initiated by investigations conducted by the U.S. Department of Labor’s (DOL) Wage and Hour Division serve as reminders that employers that fail to comply with wage attestation requirements may be required to pay back wages to H-1B employees, in addition to significant fines, and, may be temporarily banned from the H-1B program.. Because violations can often be the result of careless mistakes rather than intentional noncompliance, reexamining company policies and recordkeeping can help companies avoid issues.

When Does the Obligation to Pay the Minimum Required Wage Begin?

H-1B workers must be paid the required wage from the time they enter into employment with their U.S. employers. When an employer-employee relationship has been established may not always be evident, however, and determining when it begins therefore requires special consideration on the part of employers.

An employee enters into employment with an employer when he or she is available for work or otherwise is under the control of the employer. Examples of when employees are considered to have entered into an employment relationship with an employer include when they are:

  • waiting for assignments;
  • reporting for orientation or training;
  • attending meetings with customers; or
  • studying for licensing examinations. 

It is important to note that even when employees have not started actively performing work duties, the requirement to pay the required wages may be triggered.

Employers Must Continue to Pay H-1B Employees’ Required Wages

Throughout the Employment Relationship

Employers are responsible for paying H-1B workers their required wages throughout the employment relationship, including when the employee is in nonproductive status (with limited exceptions). In determining whether an employer must pay an H-1B worker the required wage during nonproductive status, the following key questions should guide the analysis:  

  • Is the H-1B worker’s nonproductive status due to the worker’s voluntary absence from work?
    • If so, the employer is not required to pay the employee during this time.
  • Is the employee's nonproductive status the result of a decision of the employer?
    • If so, the employer­ is required to pay the employee during this time.  

Employers are not required to pay H-1B employees if the nonproductive period is due to conditions unrelated to the employment and is at the employee’s voluntary request and convenience. For example, employers are not required to pay H-1B workers who request periods of absence to care for sick relatives or to tour the United States.

However, an employer must continue to comply with the wage attestation requirements when an H-1B employee is not performing work as a result of a decision made by the employer. This practice, commonly referred to as “benching,” occurs when an employer fails to pay an H-1B employee the required wage rate during the worker’s nonproductive periods, which may arise during holidays, annual plant shutdowns, or in between work assignments. Employers may not bench their H-1B workers, and this rule applies even when a company is not required to pay its U.S. workers during their time in nonproductive status.

Employers can face substantial penalties for noncompliance with benching rules. Benched H-1B workers may pursue claims with the Wage and Hour Division of the DOL. A judgment against an employer for benching can have significant consequences, including liability for back wages and interest.

Employers placing H-1B employees with third-party end client sites should take particular precaution. Employers must pay H-1B employees between client projects, even when the employees are not actively working. Recently, a DOL administrative law judge found that an H-1B employee of an information technology staffing company had been improperly benched when he was not paid until he was assigned to a project. The judge ordered the employer to pay $23,000 in back wages and fees. At issue was whether the employer had entered into an employment relationship with the employee. In that case, the company had filed an H-1B petition to change employers and the employee had lawfully begun work as a result of the portability provisions that permit an H-1B worker to transfer employment after a nonfrivolous petition has been filed on his or her behalf. The company maintained that the employment relationship had not formed during the time in question because the H-1B change of employer petition filed by the company was still pending (and ultimately was never approved). The judge rejected this argument, finding that the employee had entered into employment with the employer when he made himself available to work. The evidence of their employment relationship included an offer letter and communications indicating that the employee had been marketing himself to end clients listing the company as his employer.

This decision serves as a reminder for employers hiring H-1B employees from other companies and relying on portability provisions. These employers should carefully consider when the DOL may define the start of the employer-employee relationship.

When Does an Employer's Obligation to Pay an H-1B Employee End?

An employer’s obligation to pay an H-1B employee ends only when there has been a bona fide termination of the employment relationship. To properly discharge an H-1B employee, employers should fulfill the following steps:

  1. Notify the H-1B worker of the termination of the employment relationship.
  2. Withdraw the relevant Labor Condition Application (LCA).
  3. Send a letter notifying USCIS of the withdrawal of the employee’s H-1B petition.
  4. Offer to pay the H-1B employee the reasonable costs of return transportation to his or her last place of foreign residence. Preferably, this offer will be documented in writing with a clear and reasonable deadline for the worker’s acceptance.

Failure to follow these steps may result in an employer’s obligation to pay the former H-1B employee’s wages through the end date of the approved H-1B petition.

Next Steps

In the event that a benching claim is filed against an employer, the DOL will analyze the employee’s public access file to determine whether documentation supports the employer’s wage attestation. For this reason, employers should maintain organized and updated public access files on each H-1B employee. Among other documents, the file should include:

  • a copy of the approved LCA;
  • an actual wage memorandum outlining the company’s method of computing the actual wage for the occupation;
  • documentation used by the employer to arrive at the prevailing wage for the H-1B occupation; and
  • a summary of benefits offered to U.S. workers in the same classification as the H-1B employee.

Employers should maintain public access files for one year beyond the end of the period of employment specified in the LCA or until one year after the date on which the LCA was withdrawn with the DOL, whichever occurs first.

Employers should also keep careful records in employees’ personnel files of any nonproductive time granted at the employee’s request.

As employers onboard H-1B cap-approved employees, continue to transfer H-1B workers, and discharge others, employers should closely evaluate their own best practices and risk-reducing strategies to minimize and avoid noncompliant actions and exposure.