USCIS Contractor Owes Over $1.5 Million in Back Wages
Posted Oct 02, 2009
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The U.S. Department of Labor (DOL)'s Employment Standards Administration (ESA) issued a September 30, 2009 press release announcing the assessment of over $1.5 million in back wages against a U.S. Citizenship and Immigration Services (USCIS) contractor. The 272 contract employees at issue worked at the Vermont Service Center (VSC.) The contractor, SI International SEIT, Inc. (SI International) agreed to pay a total of $1,559,978 in back wages, following an investigation by the ESA's Wage & Hour Division (WHD). The Murthy Law Firm was not involved in any aspect of this case. We report this public information to alert employers to the importance of ensuring you and your company are prepared for government scrutiny of  employment records and practices, in the event of an investigation. This case demonstrates how pervasive employment and wage violations of all types have become, and that all employers have to be aware of the laws that govern employees and employment practices.
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It is important to note that these were contracted employees, and the noncompliance was on the part of the direct employer, which subcontracted employees to the USCIS. There are no claims of wrongdoing by the VSC or the USCIS.
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Role of the DOL Wage & Hour Division
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As regular MurthyDotCom and MurthyBulletin readers will recall from our August 21, 2009 NewsBrief, H1B Back-Wage Assessment for Employee Sent Abroad, WHD is responsible for investigating claims of underpayment or nonpayment of wages owed to U.S. workers (including H1B and other nonimmigrant workers). WHD's authority to investigate back-wage claims extends to companies that employ workers under federal service contracts subject to the McNamara-O'Hara Service Contract Act, as was the case with this investigation.
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Misclassification Leads to Underpayment
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The WHD's investigation found that SI International had classified many of its employees incorrectly, which resulted in failure to pay the proper prevailing wages, as required by the McNamara-O'Hara Act. The McNamara-O'Hara Act uses prevailing wage considerations and requirements similar to the requirements familiar in the immigration law context. The McNamara-O'Hara Act requires that contractors and subcontractors performing work under federal service contracts pay their employees no less than the wage rates and fringe benefits found for that classification of work in that general location. The problem here stems from misclassification of the workers, so that the wage rates paid were lower than what was appropriate for the actual job performed. The DOL press release cited above quotes Secretary of Labor Hilda L. Solis as stating, "I am pleased that these workers finally will be properly compensated for the work they performed for SI International."
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Wage Level Challenge - Current Investigation Trend
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This WHD investigation into the misclassification of workers is not unique. The Murthy Law Firm has noted that WHD has, with increasing frequency, challenged classifications of H1B workers, particularly in the IT and computer / software consulting industries. Typically, this involves situations in which employers classify the workers in the lowest of the four levels, as level 1, with an entry-level wage. Similar problems can occur even for level 2 classifications, if the workers should have been classified at level 3 or 4, and paid appropriately. WHD is now investigating these matters, and may review a variety of documentation to determine the true nature of the job. This review may include an employer's help-wanted advertisements, marketing materials, and other immigration filings that relate to the job requirements (such as labor certifications and I-140 petitions). The WHD may also look at an employer's contracts and purchase orders to see how the company describes employee skills and abilities. If this is not consistent with the wage level being paid, then there could be back wage issues for misclassification.
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Background on Wage Level Classification
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As discussed in our April 10, 2009 NewsBrief, H1B Compliance: Wage Level Issues, many H1B employers rely on wage data available online, rather than obtaining a prevailing wage determination in advance of filing their cases. When doing so, they must utilize the wage for the position in the applicable location, and at the correct wage level. Employees must be properly classified within the four classification levels, from entry level to senior level. Employers need to retain documentation to justify the basis of the classification, should it be required for defense in the event of an investigation.
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Risk to Business : Back Wages and Bad Press
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As the size of the repayment in the SI International investigation demonstrates, a finding that one's company misclassified workers can lead to substantial back-wage obligations. In addition to the immediate financial impact, these problems can result in bad publicity, suddenly sullying a reputation that may have been carefully constructed over time. The best way to protect against such a situation is to honestly assess your compliance with all applicable immigration and wage requirements. This assessment may best be performed by an outside party, who can audit employer documents and give an independent analysis regarding compliance. The Murthy Law Firm is available to perform such audits for companies upon request. See our section on Government Investigations.
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Conclusion
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The SI International agreement with the DOL emphasizes how important it is for employers to meet all wage and other obligations under the law. In this environment of heightened DOL investigations, employers need to take a hard look at their past and current practices. They cannot afford to ignore red flags when lower level wage classifications are used with regularity. We will continue to monitor DOL investigations and related decisions to update MurthyDotCom and MurthyBulletin readers.