In a recent H1-B dispute, Administrator, Wage and Hour Division v. Itek Consulting, Inc., 2008- LCA-00046 (May 6, 2009), an Administrative Law Judge (ALJ) found an employer owed an H1-B employee back wages for time spent in nonproductive status and for failing to pay the required wage for the time the employee worked prior to a bona fide termination.
Under the Immigration and Nationality Act (INA) and its regulations, an employer is required to pay an H1-B employee the wages set forth in the Labor Condition Agreement (LCA) beginning at the time the employee “enters into employment.” An employee enters into employment when he first makes himself available for work, coming under the control of the employer. “Benching” an H1-B immigrant, that is, placing him in nonproductive status without pay, is an INA violation; an employer must compensate an H1-B employee for time spent in nonproductive status due to a decision by the employer. However, an employer need not compensate an H1-B employee for time spent in nonproductive status because of conditions unrelated to employment, an inability to work, or a bona fide termination.
In Itek Consulting, when an H1-B employee initially informed his employer that he was available, his employer indicated that he must obtain a Social Security number prior to working. Four months passed before the employer assigned work to the H1-B employee, well after he had received his Social Security number. The ALJ found that the lack of a Social Security number, like the lack of a license or permit, is an employment-related reason for the employee’s nonproductive status. Therefore, the employee was entitled to back wages for his four months in nonproductive status. In reaching his decision, the ALJ emphasized that neither the Social Security Administration nor the Internal Revenue Service (IRS) requires that an H1-B employee present a Social Security number at the time he begins working. Rather, the employee must merely show that he has applied for a Social Security number.
Additionally, the ALJ concluded that the employer owed further back wages for failing to pay the employee the required H1-B wage. Under the pertinent regulations, the required H1-B wage is the higher of the actual wage for the specific employment or the prevailing wage for the occupation in the employee’s geographic area. Moreover, evidence of “cash wages paid” for purposes of the required H1-B wage consists only of payments shown in the employer’s payroll records or payments reported to the IRS. Because the employer in Itek Consulting reported on the employee’s W-2 form an amount lower than the required wage, the ALJ ordered the employer to pay the employee additional back wages. Although the employee’s paychecks showed an amount approximating the required wage, the ALJ concluded that, under the regulations, the paychecks did not serve as evidence of the cash wages paid to the H1-B employee.
Finally, the ALJ found that the employer owed back wages up to the point at which it effected a “bona fide termination” of the employee. To effect a “bona fide termination,” an employer must not only provide the employee notice of his termination but also notify the Department of Homeland Security (DHS) and, in some cases, provide the employee with payment for transportation home. Therefore, the employer in Itek Consulting owed the employee back wages up to the point at which it notified DHS of the employer’s termination. The ALJ refused to consider the employer’s defense that it had withheld the employee’s wages to offset losses caused by the employee, concluding that such a defense was outside the Department of Labor’s jurisdiction.