The recent economic downturn has caused companies across the country to downsize and restructure their workforces, including H-1B workers. Employers of H-1B nonimmigrants often are unaware that they have specific obligations when ending the employment relationship with H-1B employees. This Management Alert summarizes employers’ obligations when terminating an H-1B worker.

Background

H-1B employers must comply with certain requirements concerning the terms and conditions of employment, including a wage obligation. Every H-1B petition filed includes a Labor Condition Application (“LCA”) certified by the U.S. Department of Labor (“DOL”). By filing an LCA, the employer attests that it will pay the H-1B employee the higher of the actual wage paid by the employer to similarly situated employees and the prevailing wage for that occupation within the geographic area of intended employment – known as the required wage.

Employers must pay the required wage for the duration of the approved H-1B petition or until there is a bona fide termination of the H-1B worker’s employment. DOL has authority to enforce the H-1B wage obligations and may impose penalties on employers who fail to comply with this requirement (see below discussion of potential penalties for LCA violations). Thus, it is critical that H-1B employers wishing to terminate an H-1B worker effect a “bona fide termination” to stop the clock on the employer’s obligation to pay wages.

In case law, DOL has taken the position that a bona fide termination requires the following: 1) notification to the H-1B worker of the termination; 2) notification to USCIS of the termination; and 3) provision of return transportation home.

Ensure There is a Clear Termination of the H-1B Worker

Terminated employees should be provided clear, written notification of the termination, including the effective date.

Notify USCIS of the Termination

Immigration and Nationality Act regulations require employers of H-1B workers to notify U.S. Citizenship and Immigration Services (USCIS) immediately of any changes in the terms and conditions of employment that may affect eligibility for H-1B classification – including terminations of employment. Such notification typically includes a simple letter to USCIS referencing the petition file number, stating that the H-1B is no longer employed with the employer, and including a copy of the Form I-797 approval notice.

Address the Return Transportation Obligation

USCIS and DOL regulations provide that an employer is liable for the reasonable costs of return transportation if an employee is terminated involuntarily before the conclusion of the authorized period of admission in H-1B status. This applies even if the employer is not the first to employ the worker in H-1B status. This requirement does not apply to dependent family members of the H-1B worker, however. Historically, USCIS has refrained from becoming involved in disputes involving the return transportation obligation, taking the position that the return transportation obligation is a matter of private contract between the H-1B employer and employee. DOL, however, has looked at the return transportation obligation as one factor in determining whether there has been a bona fide termination of employment of the H-1B worker. In the past, employers have made a written offer of return transportation (typically an offer to purchase a one-way nonrefundable ticket to the home country). In such situations, employers have not actually purchased tickets unless the H-1B worker has accepted the offer. Recently, DOL officials have commented informally that the mere offer of return transportation would not be sufficient to effect a bona fide termination for this purpose.

Employer Considerations

  • Review materials provided to terminated employees to confirm that there is a clear, written record of the H-1B employee’s termination date.
  • Notify USCIS of the termination of the H-1B employee and withdraw the underlying LCA (if the H-1B worker was employed pursuant to an individual LCA).
  • Determine the strategy for satisfaction of the return transportation obligation. Potential options range from providing a pre-purchased ticket that must be picked up by the terminated employee within a specific period of time, such as 10 days, to providing an unrestricted ticket to the home country, which could result in a windfall to a worker who does not plan to return to his or her home country.

Related Considerations

  • In the event of a DOL audit, potential penalties for LCA violations (including failing to properly terminate an H-1B worker) could include fines of $1,000 to $35,000 per violation, one to three year debarment (prohibiting an employer from obtaining future visas for the restricted time period), and/or an order to pay back wages.
  • Even if an H-1B employee is not terminated, but is merely furloughed or faces a reduction in pay, employers should contact the Seyfarth attorney with whom they usually work to assess the impact of such a decision of the employer’s wage obligation under the LCA.
  • Employers should note that there is no grace period of H-1B status for an H-1B worker once he or she is no longer employed by the petitioning employer. Depending upon the circumstances, employers may wish to consider whether to provide a period of advance notice of the termination and to advise the employee to seek the advice of an immigration attorney in order to minimize the impact of the termination on the H-1B worker.