DOL Finds Employer Liable for H1B LCA Violations
Posted Jul 14, 2006
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Employers must comply with the H1B Labor Condition Application (LCA) and the payment of the prevailing wage to employees. The importance of these requirements is illustrated for MurthyDotCom and MurthyBulletin readers in the case described. This case also suggests a few simple steps for an employer to avoid being considered in violation of the law. The U.S. Department of Labor (DOL)'s Administrative Review Board (ARB) issued a decision on June 30, 2006 that the DOL may investigate an H1B LCA violation even if an employee does not file a complaint. In Administrator, Wage & Hour Division, Employment Standards Administration, U.S. Department of Labor v. Synergy Systems, Inc., the ARB found that, where a particular beneficiary (Beneficiary A) files a wage complaint with the DOL, the DOL can choose to investigate whether another beneficiary (Beneficiary B) also has been denied wages. No wage complaint from Beneficiary B is required for the DOL to investigate and award back wages to Beneficiary B.
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Regulation Timelines Do Not Preclude Enforcement
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The ARB also found that the DOL could take its investigations and case beyond the timelines in the relevant regulation. Since the regulation does not state penalties for failure to act within the timelines, the ARB determined that the timelines were not meant to limit the DOL's jurisdiction to act on wage claim violations. Further, the employing company in this case could not substantiate its claim that the DOL's delays prejudiced their defense in any way. The ARB therefore permitted the DOL to proceed with its findings.
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Determining Any Back Wages
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The Administrative Law Judge (ALJ) determined in the initial case that none of the witnesses presented credible testimony. The ALJ had reached this conclusion having relied upon documentary evidence, including payroll records, earnings statements, employee status reports, the LCA and H1B petitions, medical insurance records, employee interview statements, and a written request for leave from Beneficiary B. The ALJ determined that none of the records supported that a legitimate request for leave had been worked out between the company and either Beneficiary A or Beneficiary B. Both A and B, accordingly, were due back wages for all periods of nonproductive status (commonly referred to as being on the "bench"). The ARB upheld these findings on appeal.
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The ARB agreed with the ALJ's finding that wages were due to both Beneficiary A and Beneficiary B, until such time as the U.S. Citizenship and Immigration Services (USCIS) was notified that the employees were no longer working for the company. Surprisingly, this was also the finding in the case where the beneficiary had signed a termination agreement a month prior to the time when the USCIS was notified of the termination.
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Advance Loans Cannot Be Deducted from Pay
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The ARB found that the ALJ erred in determining that advance loans given to the employees could be deducted from the wages due to these two employees. Instead, the ARB determined that the company needed to repay the amount of the loan withheld from subsequent checks to the employees. The advance loans could not be counted as pay because they were not recorded in the employer's payroll as earnings for the employee, were not free and clear when due, and were not reported to the Internal Revenue Service (IRS) as the employee's earnings.
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Willful Violation of Employer Rightfully Prompts Penalties
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The ARB concurred with the DOL's assessment that a $5000 penalty was appropriate in this case. This finding was based, in part, on the fact that the company had created and retained written records in an attempt to falsely show that these two employees had taken leaves of absence during the time that they were actually benched. This willful violation caused the ARB to find that the DOL did not abuse its discretion in assessing the penalty. The company had also failed to provide these beneficiaries with copies of the H1B LCAs as of their respective dates of hire, but, though the violation was noted, there was no monetary penalty.
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Company Barred from Filing H1Bs for Two Years
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Since the ARB found that the company had willfully violated its H1B LCA requirements, the ARB instructed the DOL to notify the USCIS that there should be a two-year bar against the company, thereby preventing them from filing H1B petitions. Once the two-year bar is over, the company will have to report itself as a willful violator on future LCAs and H1B petitions.
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Conclusion
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It is critical for employers to understand the H1B LCA requirements and execute them properly. If an employee will be benched because there is no work, the employee must be paid the required prevailing wage indicated on the H1B LCA and the H1B petition. Otherwise, the employee must depart the U.S. or the employer must terminate the H1B employee. The employer should properly document such termination and err on the side of caution in notifying the USCIS to avoid continued monetary penalties. If an employee legitimately needs unpaid leave for family emergencies or otherwise, as allowed under the Family Medical Leave Act, then this fact must be accurately documented.
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Employers must be cautious in recording unpaid leave, since that exception to the LCA requirements has been abused by employers seeking to bench employees without pay. If an employer has any questions regarding the H1B LCA requirements, the employer should speak to an immigration attorney knowledgeable on this matter. This case also helps H1B employees who feel that they have been harmed by the willful actions of an H1B employer who violates the law.