LC Substitution Regulation Restricts Payment for LCs Posted Mar 09, 2007 ©MurthyDotCom At the Murthy Law Firm, we have been following the proposed U.S. Department of Labor (DOL) regulation that addresses and prohibits labor substitution. Our most recent article on the topic is Labor Substitutions: Still Possible in February 2007, available on MurthyDotCom. The regulation is a general anti-fraud regulation, however, with provisions that extend beyond substitution. One important element of the proposed regulation involves a prohibition against payment by the employee of certain fees and costs related to the filing of a labor certification (LC). Included in the list of prohibited fees are legal fees and advertising costs. Costs related to the filing of a ”green card” are often shared between the employer and beneficiary. Therefore, employers who allocate green card costs to employees may wish file their cases before there are any changes in the regulations. ©MurthyDotCom Background on the LC Regulation ©MurthyDotCom These provisions, and our opinion that the regulation is too broad in this regard, were reported in our February 17, 2006 MurthyBulletin article, DOL Proposes Elimination of LC Substitutions and Other Changes, also available on MurthyDotCom. Currently, the proposed regulation is being considered by the Office of Management and Budget (OMB), and the possible effective date is not known at this time. The OMB has 90 days to review a regulation and, after the review, the regulation could be approved, rejected, or returned to the DOL for further revisions. The regulation would have to be published in the Federal Register prior to becoming effective. While there has been much focus on the elimination of labor substitutions and the 45-day validity period for the filing of I-140s after LC approval, there has been less attention on the proposal regarding payments made in connection with labor certifications. These provisions could have a major impact on employers and employees. ©MurthyDotCom Ban on Improper Commerce of LCs ©MurthyDotCom The proposed regulation seeks to eliminate "improper commerce" in labor certifications. This includes the sale, barter, or purchase of labor certifications and is aimed at the black market. In exchange for payment, some employers and agents have brokered labor certifications or agreements to file them. There appears to be no justifiable argument against this section of the regulation. An LC or the employer's promise to file an LC should not be an item of commerce. This practice invites fraud and is contrary to the purpose of the labor certification. ©MurthyDotCom All LC Costs to be Borne Exclusively by U.S. Employers ©MurthyDotCom The proposed regulation moves beyond the sale of labor certifications, however, into other types of payments. According to the text of the proposed regulation, as originally published, “An employer shall not seek or receive payment of any kind for any activity related to obtaining a permanent labor certification. Payment or reimbursement of the employer’s attorney’s fees or other employer costs related to preparing and filing a permanent labor certification applicant and obtaining permanent labor certification is prohibited.” ©MurthyDotCom Broadly defined by the DOL, the prohibited payments include monetary payments, wage and employment concessions, and goods and services. Additionally, recruitment costs were specifically listed as an expense that would be restricted to employers in the DOL’s explanation of the regulation. ©MurthyDotCom If approved, the regulation would apply to both PERM and pending LC cases filed before March 28, 2005. Since laws and regulations generally cannot be retroactive, however, it should apply only as of its effective date. ©MurthyDotCom Parties Must File PERM Cases Promptly ©MurthyDotCom Since the proposed regulation is not yet in effect, its terms do not apply at this time. Thus, this may be a good time to move forward with cases for which employers are not intending to pay all costs. There are many reasons for employers to share the cost with their employees, and there are many who hope the DOL will reconsider its position. A green card benefits both employer and beneficiary in a case. The allocation of the costs is a matter of reasonable business discretion. The costs covered for employees and the benefits offered vary from employer to employer. This is not a matter of fraud, however, unlike cases where an approved labor certification is sold to the highest bidder. ©MurthyDotCom Arguments such as these, and others, were put forth in the comments to the proposed regulation. Because there is no way to know if the DOL will heed what many consider to be business reality, however, it is best to be proactive. In this situation, this means either filing cases now or budgeting and planning for coverage of all expenses related to the filing of PERM cases in the future. ©MurthyDotCom Conclusion ©MurthyDotCom The recruitment and paperwork involved in the filing of a labor certification, even when assisted by an attorney, represents costs in terms of funds as well as time for any employer. These employers are making an additional investment that is not needed when a U.S. worker is hired for a position. At a minimum, the foreign national in such a case should be allowed to pay those costs that do not exist when employing a U.S. worker, that is, everything but the recruitment costs. An employer does not have any incentive to file a labor certification simply because the foreign national is picking up all or part of the cost. It is much easier and quicker to hire a U.S. worker, in most cases. An employer processing a labor certification is not motivated to do so simply because the attorney's fees or recruitment costs are covered. Parties will need to file promptly to avoid this issue, but it will be something for employers and employees to reckon with in the long run. Copyright © 2006, MURTHY LAW FIRM. All Rights Reserved
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