Consulting Company Assessed H1B Back Wages and Penalties
Posted Jul 15, 2005
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The U.S. Department of Labor's (DOL) Administrative Review Board (ARB) assessed over $250,000 in back wages and a $40,000 civil fine against a computer consulting company, on June 30, 2005, that had unlawfully benched H1B foreign national employees. The ARB awarded substantial back wages to both the employer's current and former employees, even though the employer attempted to argue that the employees had been laid off or otherwise terminated. It is important for employers and employees to understand that there are legal consequences that will likely follow if there is a breach of obligations under immigration law. It is important to follow steps to avoid these adverse consequences.
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Employer Liable for Failure to Inform USCIS of Terminations
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The common thread for all of the employees who were granted back wages was that the consulting company had never notified the U.S. Citizenship and Immigration Services (USCIS) (or its predecessor, the Legacy INS), that it terminated the employment of any of the employees. The company asserted that the USCIS has the authority to determine when termination has occurred. The ARB disagreed with the employer, since it asserted that the DOL's wage and hour division has the authority to decide what wages are due to an employee.
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Employer Liable While Employees Await Work and Report to Headquarters
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The company argued that some employees were never authorized to enter the U.S. H1B visas were granted to these employees, however, because the company had filed H1B petitions and sent assertions to the consulates that the employees were needed. The employees worked in-house for the company and/or visited or called the headquarters routinely to inquire about work. They were not paid while working at the company's headquarters. Neither were they paid when they were not working, but awaiting projects. The ARB agreed with prior findings that these employees were also entitled to back wages.
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Intermittent Work is Not Tantamount to Termination
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Some employees worked on projects intermittently. These employees were not paid during the periods when they were not working on projects. The employer claimed that these periods were leave-without-pay or should be considered as terminations. The ARB rejected the employer's arguments, holding that the employer is responsible for paying for involuntary leaves of absence until there is a proper termination of employment.
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Testimony Does Not Necessarily Correlate to Back Wages Due
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The ARB indicated that the DOL's Wage and Hour Division Administrator had proven a pattern and practice of failure to pay back wages through persons who testified against the employer. Therefore, the ARB found that persons who did not testify, but fell under the same pattern, were also entitled to back wages.
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The ARB even found that persons who testified that they were not due back wages were actually entitled to back wages. The ARB indicated that these persons were still working for the employer, so it was possible that their testimony was affected by their interest in keeping their jobs. In addition, their fact patterns were similar to other persons who were obtaining back wages. Therefore, the ARB found that granting back wages to these H1B employees was also appropriate.
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Salary Advances Not Considered Wages
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In some cases, the employer had given employees "salary advances." The ARB found that these amounts were not wages because they were not given to the employees free and clear and they were not reported as employee earnings to the Internal Revenue Service (IRS). Therefore, these amounts were not deducted from the back wages owed.
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Employment Agreements Not Binding if Employers Violate Law
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The employees paid a security deposit before beginning work with the employer. In order to get the security deposit back, employees were required to sign a form indicating that they were not owed any back wages by the employer. The ARB found that these agreements were not binding. The ARB also found that these agreements were further evidence of the company's willful violation of the Labor Condition Application (LCA) wage attestations. The company had attested in the LCAs that it would pay the greater of the established prevailing wage or the employer's actual wage, normal for the position.
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Conclusion
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If an employer is facing financial difficulties and has H1B employees, as in this case, then the lack of money to pay H1B employees is not a sufficient reason for failing to pay the required salary / prevailing wage. If an employer cannot pay its employees, then the employer must terminate the employees and notify the USCIS to prudently evidence that the employer-employee relationship in fact has been terminated. Otherwise, should the DOL's wage and hour division investigate, as it did in this case, it is possible that back wages and civil fines will be due, adding to the employer's financial and business troubles.