On October 26, 2016, an administrative law judge (“ALJ”) for the U.S. Department of Labor (“DOL”) found that an H-1B employer, located in Massachusetts, properly enforced a repayment agreement by deducting all expenses related to the H-1B process from an H-1B employee’s final paycheck. See Administrator v. Woodmen of the World Life Insurance Society, Case No. 2016-LCA-00018 (2016). The H-1B employee in this case entered into an employee repayment agreement (“ERA”) for all expenses related to the employer’s H-1B submission. The DOL’s regulations preclude employers from deducting these expenses from an employee’s wages and argued that this ERA was unenforceable.
The ALJ disagreed. The ALJ noted that the entire sum due for H-1B expenses under the ERA was paid out of the employee’s unused vacation pay and thus did not adversely affect his wages. In this regard, the ALJ noted that the employer’s vacation policy was a “benefit” normally paid out of the employee’s final paycheck upon resignation. In addition, the ALJ noted that other debts due by employees, such as tuition reimbursements, also were deducted from the last paycheck for all employees, not just H-1B employees. Under these circumstances, the ALJ rejected the DOL’s argument that the ERA violated the DOL’s regulation precluding the deduction of H-1B expenses from wages.
Employers interested in requiring H-1B employees to execute ERAs should pay careful attention to the facts of the Woodmen decision. If the employer plans to deduct these costs from a final paycheck, it must be certain that this is permissible under state law. The employer also must make sure that the repayment process satisfies the DOL’s regulation and does not result in a deduction from the employee’s wages.