On August 19, 2011, the U.S. District Court for the Eastern District of Tennessee issued its decision in Kutty v. U.S. Department of Labor, No. 3:05-CV-510 (E.D. Tenn. Aug. 19, 2011). In Kutty, the federal court upheld a DOL determination that Dr. Kutty had committed multiple violations of the "no benching" and anti-discrimination provisions of the immigration laws, and affirmed an award of over $1.1 million for back pay and civil penalties for the violations.

Dr. Kutty is a medical doctor who had five clinics in rural Tennessee. The DOL alleged that he sponsored 17 FN physicians on H-1B nonimmigrant visas to staff and operate these clinics. When he encountered financial difficulties, however, Dr. Kutty unilaterally reduced the salaries of some of those H-1B physicians. When the physicians hired counsel to contest Dr. Kutty's actions, Dr. Kutty stopped paying them. As a result, they filed a complaint with the DOL, alleging, among other things, that he had violated the no-benching and antidiscrimination provisions of the immigration laws applicable to H-1B employees.

The complaint was adjudicated by an administrative law judge ("ALJ") with the DOL. The ALJ found that Dr. Kutty had violated the immigration laws by willfully refusing to pay the physicians the wages required by their H-1B petitions and by retaliating against them when they complained. The ALJ assessed back wages of over $1 million and a civil penalty of $108,800. After the DOL's Administrative Review Board affirmed the ALJ's decision, Dr. Kutty sued in federal court to overturn the decision as being arbitrary and capricious. The district court, however, affirmed the ALJ's decision in all respects, concluding that Dr. Kutty had willfully violated the no-benching and anti-discrimination provisions of the immigration laws by refusing to pay the physicians the wage required by their H-1B petitions and then retaliating against them when they sought to contest his actions.

On June 30, 2011, another ALJ with the DOL decided Limanseto v. Ganze & Company, OALJ Case No. 2011-LCA-00005 (June 30, 2011). In Limanseto, an H-1B employee complained that he had not received the salary promised by the employer in its H-1B petition on his behalf. The employer countered that it was not liable because Limanseto had been discharged and he had received all compensation required up to that date. The ALJ found that while the employer had terminated the employment relationship under state law, it had failed to effectuate a "bona fide" termination of his H-1B status and, thus, was liable for all wages due under the Labor Condition Application ("LCA") filed to support the H-1B petition.

The concept of a "bona fide" termination in the H-1B area is not new but, as this case illustrates, is easily forgotten by H-1B employers. When securing H-1B status for a prospective employee, an employer must file an LCA in which it, among other things, represents that it will pay the employee the prevailing wage or actual wage for the position, whichever is higher, and that it will continue to pay this wage for the duration of the H-1B status. Under the administrative law regarding H-1B nonimmigrants, the DOL has developed a concept called a "bona fide" termination to ascertain when an employee's H-1B status actually ends. According to a series of cases, an employer effectuates a "bona fide" termination by: (1) notifying the employee of the termination as required by contract or state law, (2) providing notice of the termination to the USCIS, and (3) paying the H-1B employee's reasonable transportation costs home as required by both the LCA and H-1B petition. Under the DOL's "bona fide" termination rule, an employer remains liable for the LCA wages until it completes all three steps.

In the Limanseto case, the employer's failure to effectuate a "bona fide" termination of the employee's H-1B status meant that the employer was liable for $156,425, the wages due under the LCA from the time the employee was terminated until his H-1B status ended. The ALJ refused to allow the employer to mitigate this damage award by showing income that Limanseto earned after the employer terminated him. According to the ALJ, the concept of mitigation did not apply because this was a statutory proceeding, not an action at law for damages. For purposes of the H-1B program, Limanseto remained an H-1B employee until the "bona fide" termination so that the concept of mitigation was inapplicable. At the same time, the ALJ assessed the employer an additional $1,500 to reimburse Limanseto for the legal fee that he paid to secure the H-1B approval. Also according to the ALJ, an employer that files an H-1B petition must pay all associated legal and filing fees. By forcing Limanseto to pay this fee, the employer violated the DOL rules, and he was entitled to reimbursement. Finally, the ALJ awarded Limanseto both pre- and post-judgment interest.

Finally, the DOL reports that it is devoting additional resources to the scrutiny of wage levels used by employers in the LCAs filed for sponsored H-1B employees. The agency is concerned that H-1B employers may be using wage levels below those actually applicable to the sponsored position and, thus, undercutting the wages of U.S. workers. The DOL has indicated that it will refuse to certify any LCA, or will seek revocation of a certified LCA, wherever it discovers that the employer used a wage level below that applicable to the sponsored position.

The Kutty and Limanseto decisions, coupled with the DOL warnings on prevailing wage levels for H-1B nonimmigrants, serve as timely reminders to H-1B employers of the additional obligations they incur from H-1B sponsorship. The minimum salary that must be paid to the H-1B employee is defined by the complexity, educational level, and experience required for the sponsored position, and the employer's wage obligation in the LCA remains, and cannot be reduced unilaterally (i.e., "benched") without amending the LCA and the H-1B petition. At the same time, the immigration laws protect FNs, and employers must avoid any retaliation against those who assert their rights to these protections. Finally, an employer could face a substantial and unanticipated liability if it does not properly terminate H-1B employees or requires them to pay legal and filing fees that the law imposes on the employer.