Introduction
Worsening consequences of refusal to post LCAs
LCA posting requirement
Government audits and site visits
Complaints by insiders and whistleblowers
Liability for constructive knowledge and disregard of unlawful practices
Comment
This update focuses on the joint liability held by H-1B employers and end clients when the client refuses to allow a contracting company to post labour condition attestations (LCAs) at the work location, as required by the regulations. Identified sources of risk of LCA non-compliance include:
- detection, enforcement actions and prosecution attendant to federal agency site visits and audits;
- complaints by aggrieved parties;
- complaints by employee whistleblowers;
- special risks and liabilities to federal contractors;
- civil liability to lawsuit by business counterparties - for example, reckless disregard, negligence and constructive knowledge that might arise from being aware that the LCA requirement has not been met, but still allowing an H-1B worker to be assigned at a client or third-party location; and
- general criminal law liabilities and prosecutions for visa fraud, conspiracy and aiding and abetting a scheme to employ H-1B workers unlawfully at sites in violation of the Immigration and Nationality Act.
In an environment of increasingly aggressive enforcement of employer violations of immigration laws, it is only a matter of time before an end client is prosecuted or sued over its participation in these types of violation. Excessive risk taking and failure to take steps to protect their own and other US workers have resulted in companies closing.
Additionally, this update examines the link that federal agencies might use to connect the action or inaction (crimes of omission and commission) of an end client with the direct liability of H-1B wilful violators that rise to the level of a criminal conspiracy. With federal agencies becoming increasingly restrictive of the outsourcing business model and creative in prosecution theories, general counsel and company executives must develop awareness of their potential liability when either the H-1B employer or its end-user client refuses to post LCAs.
For example, if a US worker complains or files a lawsuit against an end client or a contractor following collusion with other parties to avoid LCA requirements, the joint criminal and civil liabilities can be enormous, particularly if there has been fraud and economic damage to the government. There is a huge incentive to report such corporate misbehaviour, as whistleblowers can be awarded large reporting fees under the False Claims Act.
Worsening consequences of refusal to post LCAs
US employers that fail to post LCAs at all work sites (including third-party sites) where H-1B workers are assigned face a daunting variety of administrative penalties, civil fines, civil actions and potential criminal conviction. Violations of the arcane rules governing LCAs have become the primary focus of federal prosecutions of H-1B employers. The federal manpower being put into LCA compliance efforts rivals I-9 criminal prosecutions for illegal employment of aliens.
The two sets of laws overlap so that wilful schemes to violate LCA rules may entail prosecution under the harsher criminal penalties associated with employment of undocumented aliens, immigration fraud and conspiracy prosecution. The risk of LCA liability has thus spread to US companies that do not themselves directly employ H-1B workers, extending to third-party client companies that contract with outsourcing firms to place non-immigrant workers at client sites. Collusion to violate LCA requirements or reckless disregard of violations creates a large joint compliance liability.
Nonetheless, some third-party client companies continue to treat the on-site employment of H-1B contractors in a cavalier manner. Some even refuse to post LCAs, perhaps in the belief that they may offend US workers or cause other problems. These employers may believe that they enjoy immunity from immigration law for their practices toward contractors and alien worker subcontractors, but they are mistaken.
It is illegal for a company to contract a person for labour if he or she is known to be unauthorised for work in the United States. Similarly, it is illegal to employ contractors and their non-immigrant employees in ways that violate US immigration laws.
Using an increasingly aggressive reading of the law, US attorneys now prosecute companies that knowingly violate the status of H-1B contract employees by failing to post LCAs or assigning them to sites that are not included in LCAs. Third-party client companies that knowingly and repeatedly violate laws requiring posting - causing H-1B workers on site to violate their status by unauthorised employment - may be deemed to have themselves employed unauthorised aliens in violation of I-9 laws and may be prosecuted as if they had directly hired the aliens (8 CFR Section 274a(5)).
If this is part of a pattern or practice of violations, the company and its executives may not claim the good-faith exception and may be liable for large fines and even prison sentences (8 CFR Section 274a(3) and (6)(c)). If this is done in concert with the H-1B petitioner, both companies share civil and criminal liability, including the prospect of whistleblower suits by employees and affected counter parties, Racketeer Influenced and Corrupt Organisations actions and penalties under other federal laws, such as Sarbanes-Oxley. If the company is a federal contractor, it can also face judgments assessed under the False Claims Act. At the top of the risk ladder, a variety of federal fraud and conspiracy charges await the employer that acts with "reckless and wanton disregard for the legal consequences of permitting a third party to provide or introduce an illegal alien into the employer's work force" (8 CFR Section 274a(1)(g)).
Non-compliance risks and joint liability
Enforcement of immigration laws in the United States has fundamentally changed in recent years. Previously, the primary purpose of US immigration was to facilitate the international hiring needs of US companies and US-based multinationals. Today, the primary mission of federal agencies that administer business immigration in the United States is law enforcement and national security. Compliance and fraud detection and enforcement activities are rapidly expanding and are aggressively applied by several overlapping agencies. Companies that misjudge their compliance risks are now investigated by federal taskforces with the risk of being criminally prosecuted, hit with multimillion dollar fines and shut down.
A company that wishes to maintain its international recruitment programme and business reputation must now have expert immigration compliance counsel and tight controls that extend to third-party job sites. The first job of a competent immigration law firm is to reduce the risks and exposures of its clients. Risks that were once widely assumed to gain benefits are now unacceptable. The true cost of excessive risk taking and shoddy compliance practices is now too great - as has been recently demonstrated - as an entire company can be shut down for taking risky business decisions with non-immigrant workers and LCAs.
In October 2010 a New Jersey software consulting firm pleaded guilty to felony wire fraud for off-site employee assignment practices involving violation of LCA rules that were once widely practised and tolerated (for further details please see "Software firm debarred and hit with large fines for H-1B posting notice"). The firm's lawyer argued unsuccessfully in federal court that the company's practices were not prohibited under existing H-1B regulations published in the Federal Register. In that argument, the lawyer was correct, but the Federal District Court nonetheless ruled with the prosecution that the practices amounted to fraud.
In February 2011 a California university with more than 1,600 students (most of them Indian nationals) was shut down and its executives faced a range of fraud and conspiracy charges after federal investigators determined that it had been operating in violation of US Citizenship and Immigration Services (USCIS) rules for foreign student admissions to US colleges and universities.(1)
There are four federal agencies with jurisdiction over immigration: USCIS, Immigration and Customs Enforcement (ICE), the Department of State and the Department of Labour. All have their own fraud detection units and their own interpretation of the law. Additionally, US Customs and Border Protection has developed its own set of rules used to interrogate business travellers detained at airports. There is a danger that a company's non-compliance, or that of its contractors and third-party end clients or employees, will be detected in this way and that prosecution will result.
In recent years the government's position on immigration policy and enforcement issues has frequently changed without formal notice to the public. Spontaneous and unannounced changes in US immigration rules have widespread impact. In January 2010 USCIS suddenly issued strict new H-1B rules - the Neufeld memo - which differed in fundamental ways from existing published federal regulations. Three days later a posse of Customs and Border Protection officers descended on business passengers on a flight arriving from India. A number of Indian passengers working in the IT industry were detained for interrogation about off-site assignments and had their visas revoked. Some were placed in expedited removal proceedings and put aboard return flights. These individuals will have extraordinary difficulty ever returning to the United States. The companies that they work for will be scrutinised and, in some cases, will have great difficulties obtaining visas and other immigration benefits.
Increasing scrutiny and need for best practices
The USCIS has increasingly discouraged the multi-tier staffing model and agency actions have reached the point where there is real economic harm to some companies. Employers with non-immigrant workers must establish and maintain compliance and audit preparation programmes.
First, the employer must self-audit all compliance files - including I-9 and LCA public access documents - that may become the focus of scrutiny. Second, the company and its clients that host H-1B workers must scrupulously observe all rules related to LCAs to avoid the risk of enforcement activity and severe penalties. The Department of Labour has communicated that it intends eventually to audit all LCA users, so it is imperative that the contents of all LCA compliance files are complete, accurate and up to date. The Seventh Circuit has held that there is no statute of limitations on how far into the past the Department of Labour can investigate LCA violations and impose back wage assessments.(2)
Furthermore, employers should maintain an inspection file that includes the I-129 petition and supporting documents for every H-1B and L-1 worker. USCIS has created its own investigations branch, the Fraud Detection and National Security (FDNS) branch, which now operates within service centres and has performed thousands of employer site visits.
FDNS inspectors do not merely visit the petitioning company - their primary mission is to track down every outside location where non-immigrants work, with particular attention to client-site locations. The auditors usually arrive in pairs, asking questions and requesting to see documents, noting where posting notices and related documents are located and displayed. An H-1B employer or its client that has non-immigrant workers who are supposed to be working on site but are absent will be further investigated.
Firms that fail to file new LCAs, post LCAs or keep related files should expect a follow-up visit by the ICE or Department of Labour investigators bearing subpoenas, as well as other federal law enforcement agencies. FDNS auditors also visit client sites to check the activities of H-1B and other non-immigrant and immigrant workers assigned there, noting any violations observed, including failure to display posting notices. The unit also operates out of service centres. Petitions received are run through the powerful FDNS data system, which cross-checks applications against a list of articulable fraud indicators and interlinked federal databases, picking and profiling suspect petitions for further field investigation.
Companies suspected of so-called 'pattern and practice' violations are targeted for full criminal investigations by multi-agency task forces. The company may not even know that it is being investigated until its work sites are raided. These investigative teams employ another highly sophisticated computerised tool, ICEPIC, that can detect the actual workplaces and residences of non-immigrant workers by examining tax, motor vehicle, consumer credit and other online records and databases shared within the Department of Homeland Security.
Things will not get easier for companies that employ foreign workers or for their clients who employ them on site. As the chairman of the Senate Immigration Committee stated in August 2010, it is the intention of Congress to pass even more stringent measures to restrict the cost advantage enjoyed by outsourcing staffing firms that employ H-1B workers.
The Obama administration has made clear that the highest priority of the ICE, in addition to detecting national security threats and document fraud, is applying penalties for the employment of illegal aliens and the illegal employment of authorised workers. On a single day in 2009 it issued more than 650 notices to inspect I-9 files, more than were issued throughout 2008.
Title 20 (Sections 655.731 to 655.734) of the Code of Federal Regulations lays out four sets of LCA attestations; the first LCA requirement sets down that H-1B employers determine the actual and prevailing wage and keep documentation in a public access file, as well as displaying LCAs at all worksites.
Important exceptions apply to the posting requirement for short-term assignments and peripatetic (roving) workers. Whether obtaining a new certified LCA and filing an amended petition is required for off-site employment depends on the period of time for which the worker will be assigned off site.
Short-term placements
The general rule for short-term placement is as follows:
"An H-1B in the US under an LCA may be sent to a new worksite [for up to 10 days] which is not covered by an LCA in the occupation but only up to a maximum of 30 days each year and up to 60 days each year if the H-1B spends substantial time at a permanent worksite, if s/he continues to maintain an office or work station at the permanent worksite and if her US residence or place of abode is located in the area of the permanent worksite." (20 CFR Section 655.735)
The above subsection must be further understood in the context of the regulatory definition of 'place of employment' and the nature of the occupation as described at Section 655.715 of the code:
"(1) (ii) Particular worker's job functions: The nature and duration of an H1B non-immigrant's job functions may necessitate frequent changes of location with little time spent at any one location. For such a worker, a location would not be considered a place of employment or worksite if the following three requirements are all met:
(A) The nature and duration of the H1B worker's job functions mandates his/her short-time presence at the location. For this purpose, either:
(1) The H1B non-immigrant's job must be peripatetic in nature, in that the normal duties of the worker's occupation (rather than the nature of the employer's business) requires frequent travel (local or non-local) from location to location; or
(2) The H1B worker's duties must require that he/she spend most work time at one location but occasionally travel for short periods to work at other locations;
(B) The H1B worker's presence at the locations to which he/she travels from the home worksite is on a casual, short-term basis, which can be recurring but not excessive (ie, not exceeding five consecutive workdays for any one visit by a peripatetic worker, or 10 consecutive workdays for any one visit by a worker who spends most work time at one location and travels occasionally to other locations); and
(C) The H1B non-immigrant is not at the location as a strikebreaker (ie, the H1B non-immigrant is not performing work in an occupation in which workers are on strike or lockout).
(2) Examples of non-worksite locations based on worker's job functions: A computer engineer sent out to customer locations to troubleshoot complaints regarding software malfunctions; a sales representative making calls on prospective customers or established customers within a home office sales territory; a manager monitoring the performance of out-stationed employees; an auditor providing advice or conducting reviews at customer facilities; a physical therapist providing services to patients in their homes within an area of employment; an individual making a court appearance; an individual lunching with a customer representative at a restaurant; or an individual conducting research at a library."
Subsection 655.735(c) imposes further conditions on such short-term assignments, as follows:
"(1) The employer shall not place, assign, lease, or otherwise contract out any H-1B non-immigrant(s) to any worksite where there is a strike or lockout in the course of a labour dispute in the same occupational classification(s) as that of the H-1B non-immigrant(s).
(2) For every day the H-1B non-immigrant(s) is placed or assigned outside the area(s) of employment listed on the approved LCA(s) for such worker(s), the employer shall:
(i) Continue to pay such worker(s) the required wage (based on the prevailing wage at such worker's(s') permanent worksite, or the employer's actual wage, whichever is higher);
(ii) Pay such worker(s) the actual cost of lodging (for both workdays and non-workdays); and
(iii) Pay such worker(s) the actual cost of travel, meals and incidental or miscellaneous expenses (for both workdays and non-workdays)."
Peripatetic employees
The regulations at Section 655.715(1) and (2) of the code define a new type of H-1B employee whose work is 'peripatetic' in nature - that is, the normal duties of the occupation require frequent travel. Peripatetic workers may travel constantly, but may not spend more than five days in one place. For such peripatetic workers, a new location is not considered a new worksite and therefore does not require a new LCA. Similarly, H-1B workers that travel occasionally on a casual, short-term basis (not exceeding 10 days) to a new location are not considered to have a new worksite with new LCA requirements.
While the employer in such cases is not required to take one of the abovenamed steps to maintain compliance, the employer is required to pay travel expenses for each day in which the H-1B employee is travelling (both weekdays and weekends).
Additional considerations
The short-term placement rules permit an H-1B worker to travel for up to 30 or 60 days each year to another place of employment. However, the employer may not use the short-term placement rules in any area of employment for which the employer has a certified LCA for the occupational classification.
If the employer has such a certified LCA with an open slot, then the employer must use that slot and add a copy of that LCA to the employee's public access file. If the employer has a certified LCA, but has no open slots, then the employer must file a new LCA.
The regulations specifically prohibit employers from continuously rotating H-1B employees to short-term placements in a manner that would defeat the stated purpose of these rules to give employers flexibility and enough time to file a new LCA. The filing of a new LCA may still require the filing of an amended H petition, due to material change in employment.
Government audits and site visits
Random site visits and enforcement
USCIS now carries out routine, random site visits to workplaces and administrative offices of employers with H-1B and L workers. This is part of a major programme of compliance enforcement in parallel with the ICE and inspectors from the Department of Labour.
As part of this administrative site visit and verification programme, USCIS has hired a number of private investigation firms to conduct 'surprise audit visits'. Typically, these inspectors ask a battery of questions of non-immigrant workers, administrative personnel and supervisors. Significant compliance issues that arise may result in follow-up field investigation by either Immigration and Customs Enforcement or Department of Labour officers.
The principal purpose of these visits is to determine that H-1B non-immigrants are actually working and being paid as specified, in accordance with the terms of Form I-129 petitions filed. USCIS contractors may also request inspection of payroll records and documents for H-1B employees. Companies must keep files as part of the I-9, E-Verify and LCA compliance processes and are now recommended to create separate H-1B or L-1 petition files for USCIS Fraud Detection and National Security (FNDS) inspection purposes.
Legally, USCIS does not have statutory jurisdiction over direct enforcement of wage and hour provisions related to LCA compliance and it lacks authority to impose civil or criminal fines for violations of the terms and conditions of the H-1B petitions. USCIS employees and contractors have no statutory law enforcement authority and may not enter workplaces without permission. However, USCIS shares information gained from its visits with the ICE, which is able to pursue a full criminal investigation into suspected fraud or immigration violations, including LCA violations. The data collected by the FDNS data system may also be shared with other federal agencies, including the Department of State and the Department of Labour.
Civil penalties and fines for LCA violations may be imposed by the Department of Labour; it may further disbar employers from the LCA programme if they are found to be 'wilful violators', effectively banning that company from the H-1B programme for up to three years. USCIS may also revoke the approval of H-1B or L-1 petitions if the employer or employee is found to have violated the terms or conditions of the petition or if statements in the petition are found to be inaccurate. The Department of State routinely reviews FDNS data system records and may also return approved petitions to USCIS for revocation on the same grounds.
The formal mechanism for joint investigations is the Document & Benefits Fraud Task Forces which, since 2006, has been the mechanism by which USCIS and the ICE combine investigative resources with traditional partner agencies, including the Department of State, the Bureau of Diplomatic Security, the Department of Labour, the Office of Labour Racketeering and Fraud Investigations and US attorneys' offices around the country.
Companies that use the H-1B and L-1 programmes, particularly heavy users, H-1B dependent firms and companies that fit the FDNS data system 'articulable fraud' criteria, should expect site visits and must prepare appropriately. The company's compliance officer must work with qualified immigration counsel to establish a plan of action to manage the risks associated with unannounced document audits and work site inspections and interviews. The company and counsel should audit relevant records for completeness and accuracy, if this has not been done recently. Procedures must be established along with contingency planning and training of potentially affected managers and supervisors. The company's HR department must be brought into the planning process and made aware of the possibility of unannounced audits and possible questioning of managers and staff at all locations where non-immigrant workers may be deployed.
All H-1B inspection files should be organised and kept separately from I-9 and LCA files. Companies may choose to keep these records readily accessible or at their attorney's office. The advantage of the former approach is that in the event of a site visit, the requested file may be quickly and easily retrieved for convenient inspection. If H-1B files are not routinely kept at the particular work site, the investigator is likely to ask for a follow-up meeting to review the petition documents. The inspector may be directed to counsel, who should be alerted immediately on the appearance of the auditors.
H-1B inspection files should contain the required documents for the H-1B petition. This material somewhat overlaps with the contents of a typical LCA public inspection file - expert advice should be sought with respect to the documents that should be produced and the level of accommodation and access given on the appearance of FDNS inspectors, usually contractors without warrants or subpoenas.
It is too soon to announce the demise of the dual-tier transnational model of production for multinationals operating in the United States. However, the contours of a post-H-1B and post-L visa regime are emerging, with a definite decline in domestic operations of companies that employ non-US workers in Tier One positions along with accompanying layoffs of highly skilled domestic workers.
This may lead to a lasting change in the way that these companies operate, as these key international personnel allow companies to integrate their development operations smoothly across borders and different business cultures.
Audits by a US government agency
Whether a company will be audited or visited by a federal agency if it employs H-1B workers at its site depends on a number of potential risk factors. These include:
- the size of the company;
- the length of time that the company has operated in the United States;
- the number of H-1B and other non-immigrant workers employed by the company;
- the type of work that the company carries out;
- specific risk characteristics, such as outsourcing to client sites; and
- any past history of compliance issues or violations.
At some point, the company is likely to be visited by inspectors from one of several federal agencies that have jurisdiction over subject-matter areas - including I-9 compliance, H-1B petitions and related LCAs - for each of which the company must now allocate separate files. In November 2009 the ICE announced that it would be carrying out an additional 1,000 I-9 inspections(3) in addition to the 526 that it had announced earlier. Meanwhile, USCIS intends to increase its H-1B site audits to 25,000, a five fold increase in inspections by its FDNS division.(4) The Department of Labour has been conducting LCA file inspections for years and reportedly desires eventually to audit all LCA filers.
Inspectors may notify a company in advance that they will be conducting a site visit, but often H-1B auditors just show up without prior notice. The inspectors may visit the head office where records are kept or visit employee work sites. In either case, on-site managers, reception staff and employees must be trained in advance to deal with them. Firms that do not already have procedures in place should urgently complete a compliance self-audit, particularly if they have H-1B workers assigned at client sites.
As a general rule, employers should cooperate with US government auditors and allow them onto business premises. However, the degree of cooperation and access shown will depend on which agency they are representing and whether they hold warrants or administrative subpoenas - or just come bearing business cards. There are three agencies and three basic inspection types:
- I-9 inspections are generally conducted by the ICE, which may come bearing warrants;
- LCA file inspections fall under the jurisdiction of the Department of Labour, which may issue administrative subpoenas to inspect some specific types of document, but otherwise cannot conduct searches or involuntary questioning of individuals;
- H-1B audits are carried out by the FDNS, but this is not a law enforcement agency and it does not have the power to issue subpoenas, demand production of documents or engage in involuntary questioning.
Companies should separate their LCA public access files from H-1B inspection files. The Department of Labour auditor will issue an administrative letter demanding to look at the employer's LCA public inspection files. Several categories of documentation that must be included - complete, accurate and up-to-date - or the company can be fined or worse. By contrast, the FDNS auditors do not have law enforcement powers and cannot even compel employers or H-1B workers to allow them onto the premises or provide them with documents. Nonetheless, they should be received in a courteous and professional manner.
While USCIS does not have legal jurisdiction over wage and hour provisions related to LCA compliance, it does and will inform the Department of Labour, along with the ICE and other law enforcement agencies, of any observed violations. Access, documents and interviews must therefore be carefully controlled. Decisions such as the production of specific documents made available to auditors, who may be interviewed by FDNS and any other matters related to the H-1B petition are protocols that must be developed in advance with a lawyer, rather than improvised.
Complaints by aggrieved parties
Investigations of alleged LCA violations often commence pursuant to complaints received by 'aggrieved parties', often associated with organised labour or vigilante groups that believe that companies using H-1B have displaced US workers or are operating to keep down US wages in certain industries.
The regulations lay out the procedures and limitations on investigations of complaints received by the Department of Labour Wage and Hour Division, which has formal jurisdiction over LCA compliance actions. The division is not supposed to act as an aggrieved party to initiate its own investigations, but may investigate when it comes across evidence of violations in the course of other matters, as well as pursuing leads received from other federal agencies. Investigations should commence within a year of the date on which the violation occurred. Section 655.806 of the regulations states that:
"(a) Any aggrieved party, as defined in Sec. 655.715, may file a complaint alleging a violation described in Sec. 655.805(a). The procedures for filing a complaint by an aggrieved party and its processing by the Administrator are set forth in this section. The procedures for filing and processing information alleging violations from persons or organisations that are not aggrieved parties are set forth in Sec. 655.807. With regard to complaints filed by any aggrieved person or organisation:
(1) No particular form of complaint is required, except that the complaint shall be written or, if oral, shall be reduced to writing by the Wage and Hour Division official who receives the complaint.
(2) The complaint shall set forth sufficient facts for the Administrator to determine whether there is reasonable cause to believe that a violation as described in Sec. 655.805 has been committed, and therefore that an investigation is warranted. This determination shall be made within 10 days of the date that the complaint is received by a Wage and Hour Division official. If the Administrator determines that the complaint fails to present reasonable cause for an investigation, the Administrator shall so notify the complainant, who may submit a new complaint, with such additional information as may be necessary. No hearing or appeal pursuant to this subpart shall be available where the Administrator determines that an investigation on a complaint is not warranted.
(3) If the Administrator determines that an investigation on a complaint is warranted, the complaint shall be accepted for filing; an investigation shall be conducted and a determination issued within 30 calendar days of the date of filing. The time for the investigation may be increased with the consent of the employer and the complainant, or if, for reasons outside of the control of the Administrator, the Administrator needs additional time to obtain information needed from the employer or other sources to determine whether a violation has occurred. No hearing or appeal pursuant to this subpart shall be available regarding the Administrator's determination that an investigation on a complaint is warranted."
Complaints by insiders and whistleblowers
Awards for failure to pay the LCA wage may add up to substantial amounts, in some cases exceeding $1 million. In part, this is due to the way that administrative law judges and the Department of Labour administrative review board calculate the start and end date when full LCA wages must be paid to the H-1B worker. The employer may believe that it received productive labour from the beneficiary for a much shorter period, but will nonetheless be required to pay for the full period of LCA validity if paperwork requirements are not executed fully and according to proper procedures, as determined by Department of Labour legislation. The precise interpretation of rules governing H-1B employer-employee relationships are otherwise unstated - it is therefore important that the decisions of the judges and the review board are analysed and understood.
An employee who believes that he or she has been underpaid, faced discrimination or been retaliated against in violation of employer activities of the sort described in the above section may file a complaint with the Department of Labour Wage and Hour Division. Complaints of an employer's violation of an LCA provision must be filed by an 'aggrieved party' under the Immigration and Nationality Act within 12 months; however, various administrative law judges and the administrative review board have interpreted the tolling date to be a later date that encompasses "all other similar violations involving the same LCA", not the date that a particular employee was first aggrieved. Furthermore, it has been held that the date of complaints may not determine tolling dates in cases where the department initiated enforcement.(5)
In other cases, the Department of Labour Administrative Review Board has held that the end date for the requirement to pay wages is the date that the employee was properly terminated and that the obligation to pay remains in effect until there is a proper termination or the LCA expires.(6)
Furthermore, the immigration status of the beneficiary is not a relevant consideration for a continuing obligation to pay the LCA wage. Even if the employer knows that the H-1B worker has violated status or the terms of an employment contract, he or she must still be paid full LCA wages until formally terminated. In Administrator, Wage & Hour Division v Synergy Systems, Inc,(7) the Administrative Review Board also found:
" [I]n a pre-hearing ruling denying Synergy's request to inquire into the immigration status, the ALJ relied on case-law arising under the Fair Labour Standards Act holding that an employee's immigration status is not relevant in a case in which unpaid wages are being sought for work already performed. This ruling is consistent with the Board's holding in Administrator v. Ken Tech., Inc, ARB No. 03-140, ALJ No. 2003-LCA-00015, slip op. at 5 (ARB Sep. 30, 2004) (whether employee was undocumented is not at issue in an H-1B case)."
Several Department of Labour agencies, including the Wage and Hour Division, the Employee Benefits Security Administration, the Mine Safety and Health Administration and the Occupational Safety and Health Administration Whistleblower Programme enforce the anti-retaliation provisions of numerous related statutes and executive orders. Information concerning many of these additional anti-retaliation protections is available in the Department of Labour Compliance Guide.(8)
Basic provisions/requirements of whistleblower statutes
Generally, the employee protection programmes listed above enforce laws that prohibit employers from discharging or otherwise discriminating against an employee because he or she engaged in certain activities protected by law. The protected activities typically include:
- initiating a proceeding under, or for the enforcement of, any of these statutes or causing such a proceeding to be initiated;
- testifying in any such proceeding;
- assisting or participating in such proceedings or in other action to carry out the purposes of these statutes; or
- complaining about a violation.
Many of the statutes specifically protect an employee's internal complaints to his or her employer. The Department of Labour's regulations state that employees who express concerns internally to their employers are protected under all of the whistleblower statutes administered by the department.
Liability for constructive knowledge and disregard of unlawful practices
As the Peri Software case has shown, US employers of non-immigrant workers may be liable for administrative penalties and criminal prosecution for the fraudulent misuse or mis-assignment of H-1B workers in violation of LCA compliance regulations. In addition, third parties may be similarly liable if it is shown that they:
- acted in concert with such a fraud;
- had constructive knowledge of the unlawful employment of aliens at their workplaces; or
- otherwise acted in reckless disregard of I-9 and LCA requirements as part of a pattern and practice of unlawful activities involving H-1B workers.
The laws and regulations that together would make up the theory of the case in a joint prosecution of an H-1B labour contractor and its client for violation of LCA requirements are outlined below.
Unlawful employment
Section 274a (8 USC Section 1324a) of the Immigration and Nationality Act states that it is unlawful to employ unauthorised aliens:
"(1) In general: It is unlawful for a person or other entity:
(A) to hire, or to recruit or refer for a fee, for employment in the United States an alien knowing the alien is an unauthorized alien (as defined in subsection (h)(3)) with respect to such employment…
(2) Continuing employment: It is unlawful for a person or other entity, after hiring an alien for employment in accordance with paragraph (1), to continue to employ the alien in the United States knowing the alien is (or has become) an unauthorized alien with respect to such employment…
(h) (3) Definition of unauthorized alien:
As used in this section, the term 'unauthorized alien' means, with respect to the employment of an alien at a particular time, that the alien is not at that time either (A) an alien lawfully admitted for permanent residence, or (B) authorized to be so employed by this Act or by the Attorney General."
Constructive knowledge of unlawful employment of an alien
The subject of liability for constructive knowledge and reckless disregard for unlawful employment most often arises in the context of I-9 compliance, where the terms are imbedded in the act and the Code of Federal Regulations. It is a civil and criminal violation for a US employer to "hire, or to recruit or refer for a fee, for employment in the United States an alien knowing the alien is an unauthorized alien" under Section 274a(1)(a) of the act.
An employer is deemed to have 'constructive knowledge' that an employee is an illegal unauthorised worker if a reasonable person would infer it from the facts (8 CFR Section 274a(1)(l)). Constructive knowledge constituting a violation of federal law has been found where:
- the I-9 employment eligibility form has not been properly completed, including supporting documentation;
- the employer has learned from other individuals, media reports or other source of information available to the employer that the alien is unauthorised to work; or
- the employer acts with "reckless and wanton disregard for the legal consequences of permitting a third party to provide or introduce an illegal alien into the employer's work force" (8 CFR Section 274a(1)(g)).
Knowledge cannot be inferred solely on the basis of an individual's accent or foreign appearance. Additionally, "actual specific knowledge" is not required. For example, constructive knowledge may be evident when a contractor is hired despite being known to have a practice of hiring unauthorised workers - a company that contracts with it for services without having performed due diligence may be held to have constructive knowledge. In cases such as this, constructive knowledge can simply be widely held public knowledge that would become evident through reasonable due diligence. In a Ninth Circuit decision, a newspaper article stating that ballrooms depend on an illegal alien workforce of dance hostesses was held by the courts to be a reasonable ground for suspicion that unlawful conduct had occurred.(9)
Reckless disregard for the illegal actions of another party may involve a company in the same violation. Thus, contractors may involve the contracting company in immigration violations and vice versa; for example, an H-1B subcontractor may be liable for the actions of a third-party client, such as a refusal by the client's contractor to post LCAs on its premises, which would have the effect of violating the terms of the LCA and of the lawful non-immigrant status of H-1B workers that the subcontractor continues to assign there. Knowing that H-1B workers may not be assigned to client sites where there has been no LCA posting, the third-party client would also become part of the same cause of action under doctrines of civil liability and tort law. Under the law of conspiracy, the third-party client would assume criminal liability for the violation that it forced on the H-1B contractor.
Section 274a(5) on the use of labour through contract states that:
"Any person or entity who uses a contract, subcontract, or exchange entered into, renegotiated, or extended after November 6, 1986... to obtain the labour or services of an alien in the United States knowing that the alien is an unauthorised alien with respect to performing such labour or services, shall be considered to have hired the alien for employment in the United States in violation of section 274A(a)(1)(A) of the Act." (74 FR 55739, October 28 2009)
Unlawful employment of non-immigrants otherwise authorised for US employment
Sections 274a(1)(g) and 274a(5) raise the possibility that a third-party contractor with non-immigrant workers performing services on site might be held liable for its own actions if it knowingly violates their lawful status - such as its own refusal to post LCAs - and may be liable for employing them unlawfully. This is in addition to the more obvious liability that will occur should the same third-party contractor conspire with an H-1B subcontractor to violate the terms of LCA compliance, such as allowing H-1B workers not included in the LCA to carry out services on its premises.
This is contingent on whether a third-party client contractor can ever be held liable under Section 274a(1) for unlawful employment of a non-immigrant with a work authorisation that is apparently valid, such as an I-797 approval notice for H-1B employment with a labour contractor. Many US companies operate under the assumption that they have immunity for the immigration status and violations of contractors. This would usually be the case, except in certain circumstances - namely, where the firm has constructive knowledge of unlawful status and 'pattern and practice' violations of I-9 and LCA rules. Such firms may therefore be prosecuted for immigration crimes, as well as fraud, conspiracy and other serious criminal charges.
Section 274a(3) allows a defence for good-faith compliance with the I-9 requirements for employment of aliens. However, knowledge of wrongdoing of counter parties may create civil and criminal liabilities, as above. A company cannot claim immunity or good-faith compliance when it:
- acts with constructive knowledge of its involvement with a contractor with serious compliance problems;
- tolerates reckless disregard for immigration violations; or
- knowingly acts to further the violation of the Immigration and Nationality Act or federal regulations by a contractor.
In such circumstances, it makes itself vulnerable to fraud and conspiracy charges.
Liability will also occur if a US third-party client is the actual employer and knowingly employs H-1B workers illegally. A business is usually exempt under Section 274a(1) from the requirement to determine the employment eligibility of independent contractors and workers employed by contractors and subcontractors, and would be immune from the consequences of their unlawful employment. However, that immunity is not absolute. If a business knows that the employment of alien workers or subcontractors is unauthorised, or that the work is being performed in violation of the terms of their non-immigrant status, the business receiving their services or labour may be deemed to be the employer or co-employer and thus be held liable for violation of Section 274a(1) and other immigration law.
As a result there have been many ICE actions against US companies that claimed to be employing aliens as independent contractors, but were found by the agency and administrative law judges to be liable as the employer of unauthorised workers.
In order to avoid potential liability, it has become the practice of some firms to demand to see the I-9 files of contract workers employed on their premises. Normally, production of a copy of an apparently valid employment authorisation document or other document evidencing work authorisation in the United States and an executed I-9 provides immunity from charges of unlawful employment. However, that presumption does not consider fraudulent document use:
"(3) Defence: A person or entity that establishes that it has complied in good faith with the requirements of subsection (b) with respect to the hiring, recruiting, or referral for employment of an alien in the United States has established an affirmative defence that the person or entity has not violated paragraph (1)(A) with respect to such hiring, recruiting, or referral...
(b) Employment Verification System: The requirements referred to in paragraphs (1)(B) and (3) of subsection (a) are, in the case of a person or other entity hiring, recruiting, or referring an individual for employment in the United States, the requirements specified in the following three paragraphs:
(1) Attestation after examination of documentation:
(A) In general: The person or entity must attest, under penalty of perjury and on a form designated or established by the Attorney General by regulation, that it has verified that the individual is not an unauthorised alien by examining: (i) a document described in subparagraph (B), or (ii) a document described in subparagraph (C) and a document described in subparagraph (D). Such attestation may be manifested by either a hand-written or an electronic signature.
(2) (a) A person or entity has complied with the requirement of this paragraph with respect to examination of a document if the document reasonably appears on its face to be genuine. If an individual provides a document or combination of documents that reasonably appears on its face to be genuine and that is sufficient to meet the requirements of the first sentence of this paragraph, nothing in this paragraph shall be construed as requiring the person or entity to solicit the production of any other document or as requiring the individual to produce such another document. [...]
(E) (4) Authority to prohibit use of certain documents: If the Attorney General finds, by regulation, that any document described in subparagraph (B), (C), or (D) as establishing employment authorisation or identity does not reliably establish such authorisation or identity or is being used fraudulently to an unacceptable degree, the Attorney General may prohibit or place conditions on its use for purposes of this subsection."
Subsection (E)(4) applies narrowly to categories of document that may be found by regulation to be insecure or prone to misuse for I-9 purposes. Nonetheless, more generally, fraud violates the lawful status of the alien and nullifies the ability of the employer to employ the alien lawfully, particularly if the employer and a third-party employer have active or constructive knowledge of the fraud.
Fraudulent misuse of the H-1B alien's services by the employer and the third-party employer in violation of the alien's status would necessarily void the good-faith exception for both companies. Furthermore, good-faith compliance with I-9 requirements cannot be found if the employer has engaged in a pattern and practice of similar violations:
"(6) (5) Good faith compliance:
(A) In general: Except as provided in subparagraphs (B) and (C), a person or entity is considered to have complied with a requirement of this subsection notwithstanding a technical or procedural failure to meet such requirement if there was a good faith attempt to comply with the requirement.
(B) Exception if failure to correct after notice. Subparagraph (A) shall not apply if:
(i) the Service (or another enforcement agency) has explained to the person or entity the basis for the failure;
(ii) the person or entity has been provided a period of not less than 10 business days (beginning after the date of the explanation) within which to correct the failure; and
(iii) the person or entity has not corrected the failure voluntarily within such period.
(C) Exception for pattern or practice violators: Subparagraph (A) shall not apply to a person or entity that has or is engaging in a pattern or practice of violations of subsection (a)(1)(A) or (a)(2)."
Additional penalties for 'pattern or practice' violations of LCA requirements
If an H-1B employer and a third-party client collude in a scheme to assign an H-1B to worksites in violation of the LCA posting requirements, they are jointly in violation of both civil and criminal provisions of Section 274a (8 USC Section 1324a):
"(f) Criminal Penalties and Injunctions for Pattern or Practice Violations:
(1) Criminal penalty: Any person or entity which engages in a pattern or practice of violations of subsection (a)(1)(A) or (a)(2) shall be fined not more than $3,000 for each unauthorised alien with respect to whom such a violation occurs, imprisoned for not more than six months for the entire pattern or practice, or both, notwithstanding the provisions of any other Federal law relating to fine levels.
(2) Enjoining of pattern or practice violations: Whenever the Attorney General has reasonable cause to believe that a person or entity is engaged in a pattern or practice of employment, recruitment, or referral in violation of paragraph (1)(A) or (2) of subsection (a), the Attorney General may bring a civil action in the appropriate district court of the United States requesting such relief, including a permanent or temporary injunction, restraining order, or other order against the person or entity, as the Attorney General deems necessary."
Compliance with immigration laws by independent contractors and subcontractors poses a special problem for companies that use non-immigrant workers at client sites. This is largely due to the broad definition of the term 'employee' adopted by the ICE, as applied to both the unauthorised employment of aliens and in determining whether a foreign worker qualifies as an H-1B and L-1 non-immigrant. The ICE can deem contract workers to be direct employees in two circumstances:
- by indications of an employer/employee relationship, extremely broadly defined by the amount of common law control that management exercises over these workers; or
- by the company having actual or constructive knowledge of the independent contractor's workforce being illegal.
Systematic abuses by third parties, such as failure to post LCAs, can violate non-immigrant status and make both parties criminally liable.
For further information on this topic please contact Rami D Fakhoury at Fakhoury Law Group PC by telephone (+1 248 643 4900), fax (+1 248 643 4907) or email ([email protected]).
Endnotes
(1) Tri-Valley University, February 25 2011, http://abcnews.go.com/US/immigration-officials-tri-valley-university-sham-selling-student/story?id=12974636.
(2) Alden Management Services, Inc v Chao, 532 F3d 578, 7th Circuit, June 25 2008 (07-2838).
(3) "ICE Assistant Secretary John Morton announces 1000 new workplace audits to hold employers accountable for their hiring practice", November 19 2009, www.ice.gov/pi/nr/0911/091119washingtondc2.htm.
(4) Patrick Thibodeau, Computerworld, "Feds Plan 25,000 on-site inspections", November 17 2009, www.computerworld.com/s/article/9141047/Feds_plan_25_000_on_site_H_1B_inspections?taxonomyId=19.
(5) For example, Administrator, Wage & Hour Division v Synergy Systems, Inc, 04-076 (ARB June 30 2006), AILA Doc 06071071.
(6) Gupta v Jain Software Consulting, Inc, 05-088 (ARB March 30 2007), AILA Doc 08080661.
(7) ARB June 30 2006, AILA Doc 06071071.
(8) www.dol.gov/compliance/guide/whistle.htm.
(9) Seven Star Inc v US, 933 F2d 791, 9th Circuit, 1991, http://ftp.resource.org/courts.gov/c/F2/933/933.F2d.791.90-55596.html.