New Year Reminders for Employers – H1B Salary Issues: Part 2 of 211 Jan 2011
Part 1 (07.Jan.2011) of this New Year reminder to employers focused on the H1B-related issues of labor condition applications (LCAs) and employee terminations. In part 2, H1B salary matters are explained.
Many employers typically perform annual salary reviews. If an employee’s performance has been good (and the economy has not wreaked havoc with business revenue), employee wages may increase. This is routine, and normally does not require any changes related to the H1B petition. However, if the salary increase results in an employee earning well above the offered wage listed in the H1B petition and labor condition application (LCA) currently in place for the worker, the employer should examine whether the employee is still working in the position and performing the job duties described in the H1B petition.
If the individual is now working in a higher position than stated in the H1B petition and LCA, it may be necessary to obtain a new certified LCA and amend the H1B petition. This, of course, should be done at the time when any material changes occur. However, in some companies job changes occur over time, in a somewhat informal manner. Not all employers have ridged job categories and promotional levels. Thus, significant job changes may occur over time for those who are capable of additional responsibilities. If this has happened with an H1B worker, salary may be a key indicator of that fact.
It is necessary to reflect such changes in the actual wage statements prepared in connection with new LCAs. Under the law, H1B workers must be paid the higher of the prevailing wage or the actual wage. The actual wage is the wage paid to other employees of the company who hold the same position. A memorandum regarding the actual wage, which is generally a range dependant upon various factors, must be included in the public access file. If there has been an overall adjustment to the employer’s pay system or scale, the employer must retain documentation that explains the change and establishes that, even after the change, the H1B workers are receiving the greater of the (now increased) actual or prevailing wage.
It is necessary to properly identify wage levels. If an individual initially was working in a level I (entry level) position, but has advanced over time to a level II or above, this should be reflected in the H1B and LCA filings. Accordingly, it is important to accurately identify the wage levels and document and retain proof of the minimum job requirements used in preparing the LCA and H1B petition. The risk of an incorrect wage level can be found in our news article, H1B Compliance: Wage Level Issues (10.Apr.2009).
Required Wages on W2s Should Match LCA and H1B
Employers should look at their H1B employees’ expected year-end gross wages to see if there is a discrepancy between the wages actually paid and wages listed in the LCAs and H1B petitions. While the DOL does not consider a W-2 to be conclusive proof of payment of the required wages, checking the year-end gross wages of each H1B employee is a good start.
If it appears that an H1B employee has not been paid the required wages, the employer should consider consulting with an experienced immigration attorney. The reasons for the wage deficiency can be reviewed to determine whether there is a potential violation and back-wage obligation, or whether the employer has a valid claim to an exception. If there is an applicable exception, the file and human resources records should be well-documented, in case of DOL investigation.
There can be many valid reasons that the W2 wage does not match the LCA wage. The simplest situation is found during the H1B employee’s first year of employment in the United States. Very few H1B employees start employment precisely on January 1st. Thus, the W-2 for that year would not reflect the full annual salary. There can be normal issues tied to pay cycles, as wages are almost always behind by at least a week or two, due to payroll timing. Employers should verify, however, that their payroll systems are compliant with both federal and state laws. For example, not all states allow for monthly payroll; many require at least bi-monthly. If there is a wage deficiency due to pay cycles, the employer needs to be confident that their system for the timing of pay days complies with applicable laws.
More on Salary Discrepancies from H1B LCA Wage Obligations
Additional complexities arise with respect to start dates, vacations, delays in payment, and benching. For example, some employers delay the initiation of wage payments to H1B workers until they begin work on a particular project. This can result in violations, depending upon timing. There are set regulations regarding when an employee’s pay must start. These are discussed in our news article, When Must an Employer Start Paying an H1B Worker? (17.Apr.2009), available on MurthyDotCom. Payment start dates are frequently delayed until a worker has obtained a Social Security number. This is a legally incorrect practice that can result in the DOL making back-wage findings, and the employer owing several weeks or even months of salary to the involved H1B employee/s. More on this is available in, Absence of SSN No Excuse for H1B Wage Obligations (22.May.2009).
The New Year is a good time to tie up any loose ends, and make sure that one’s company procedures and paperwork are in order. This is simply good personal and business practice, and can help lead to a year free of avoidable problems. We at the Murthy Law Firm will continue to provide helpful suggestions to U.S. employers of H1B workers.
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