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Summary of Department of
Labor’s
12/20/00 Interim Final H1B Regulation
Adapted from American
Immigration Lawyers Association Summary
Provisions Applicable to H1B
Dependent Employers
See Separate Summary for Provisions of General
Applicability
Note: This
regulation is extensive, complex and highly detailed. This summary
touches on only some of the issues raised by the regulation—there
are many other items that are not covered here. In any event,
this summary cannot substitute for the attorney’s own review
and analysis of the regulation. It is strictly an attempt to
highlight a handful of the changes initiated by the regulation.
DEFINING H1B DEPENDENT
EMPLOYERS
When is an employer considered
H1B dependent under ACWIA? Under ACWIA,
an employer is H1B dependent if it has in the U.S.:
- 25 or fewer full-time equivalent ("FTE")
employees and more than 7 H1B employees;
- between 26 and 50 FTE employees and
more than 12 H1B employees; or
- at least 51 FTE employees and a number
of H1B employees equal to at least 15% of the employer’s
FTE employees. In counting the number of FTE employees for
this purpose, H1B employees are included. Back
to top.
What is the formula
for determining whether a particular employer is H1B dependent?
The DOL views the formula as requiring a comparison of two
dissimilar numbers: an actual head count of H1B employees, without
regard to full or part-time status, and a computation of the
employer’s FTE employees. If the ratio of H1B employees to the
total workforce is "obvious and can easily be compared
to the definition of ‘H1B dependency’," the employer’s
status as dependent or non-dependent need not be calculated.
If the employer’s dependency status is "borderline"—i.e.,
not readily apparent—the employer may use a "snap shot
test" to determine if calculation of the status is necessary.
Employers of 51 or more persons would divide the number of H1B
employees by the number of full-time employees. (It would not
be necessary to perform the FTE calculation for part-time workers
described below.) If this "snap shot" results in a
ratio of less than 15%, the employer is not dependent and no
further calculations are necessary. If the "snap shot"
gives a result of 15% or more, and the employer believes it
is actually non-dependent, then it must calculate the FTEs of
its part-time workforce as described below. Smaller employers
(50 or fewer full and part time employees) may compare a head
count of their workforces to the definition of H1B employer
for this "snap shot" test. Back to top.
What is a full-time equivalent
employee? Under the IFR, an FTE employee
is either one who actually works full time, i.e., at least 40
hours per week, unless the employer can show that a lesser number
of hours are considered full-time in its regular course of business.
Under the DOL regulation, full-time can never be less than 35
hours per week. The IFR offers two options for calculating how
many part-time employees equal an FTE:
- count each part-time worker as ½ of an FTE
for the calculation, thus requiring no records of actual hours
worked and no complex calculations; or
- total the hours worked by all part-time workers
in the pay period and divide that total by the employer’s
standard hours for full-time employment (at least 35 hours
per week), based on the last payroll or, where records of
hours of work are not maintained, a reasonable approximation
of the hours worked, such as a standard work schedule. Back
to top.
Who is counted as an
employee in calculating dependency? Bona fide independent
contractors and consultants are not counted as employees. The
DOL will accept an employer’s designation of who are "employees,"
provided they are consistently treated as employees for all
purposes, including FICA and FLSA. The count of employees should
be based on the most recent records of the employer before filing
the LCA. Back to top.
Who is the employer?
The Interim Final Rule (IFR) provides that entities considered
a "single employer" under the Internal Revenue Code
Sections 414(b), (c), (m), or (o) must combine their employees
for determining their dependency calculation. In general, those
sections include:
- controlled groups of corporations:
this includes a parent-subsidiary controlled group, a brother-sister-controlled
group, or a combined group;
- trades or businesses under common control:
this may include sole proprietorships, partnerships, estates,
trusts, and corporations; or,
- affiliated service groups: this includes
service organizations (health care organizations, law firms,
accounting firms) and other organizations that regularly perform
services for the first organization and either are shareholders
or partners in the first organization or the interest in the
second organization is held by highly-paid employees of the
first organization.
At present, the Treasury Department has no regulations
governing employee-leasing situations and thus such situations
are not covered in this regulation. If, however, the Treasury
Department issues regulations on the subject in the future,
members of employee leasing groups might be treated as a single
employer. This "single employer" definition is only
to be used in dependency calculation, and not in any other element
of H1B LCA filing or enforcement. Back to top.
When must the calculation
of H1B dependency be made? Employers must determine
their dependency status each time an LCA (existing or new) is
used to support an H1B petition (for new employment or an extension
of employment). The LCA filed in support of that petition must
accurately state the employer’s dependent or non-dependent status.
Stating that DOL "disagrees" with the argument that
invalidating existing, valid LCAs for H1B dependent employers
is retroactive rule-making, the IFR requires that employers
wishing to file petitions for new H1B employees or to extend
the status of existing H1B employees must determine their dependency
status. If they are H1B dependent, they must file a new LCA
indicating that status to support those petitions, and may not
use existing, certified LCAs, even if they are still valid and
have open "slots" on them. Those LCAs are still valid
for existing H1B employees, and the employer need not comply
with the new attestation requirements for those employees, until
they wish to file for extensions of status for those employees.
An employer undergoing a corporate reorganization must also
recheck its dependency status before filing new LCAs for future
petitions (see the summary of provisions of general applicability
for the regulations regarding the need for documentation in
a corporate restructuring situation). Back to top.
What records of the dependency
determination must be kept? The IFR
does not require any documentation of the employer’s determination
if its "snap shot" makes its dependency status readily
apparent, either dependent or non-dependent. However, if the
employer’s snapshot is over 15% and it makes a further calculation
that it is non-dependent, the employer must retain a copy of
the full computation. If an employer’s status changes from dependent
to non-dependent, the employer must keep a copy of the full
calculation used to make this determination. If an employer
uses the IRS "single employer" test to determine dependency,
it must keep records of which entities are included in the definition
of single employer as well as the computation performed (either
the snapshot or full calculation). Also, if any employees are
included in the calculation that are not on the employer’s normal
payroll, the employer must have documentation to substantiate
that the workers are indeed employees. None of this documentation
must be kept in the public access file, but must be made available
to DOL in an investigation. Back to top.
What indication of the employer’s
status is included on the LCA? The
new LCA form will have three options for the employer to check:
- the employer is non-dependent;
- the employer is dependent but the only H1Bs
to be sponsored under this LCA are "exempt" H1Bs
(see below); or
- the employer is dependent, the employees
are non-exempt, and the employer will comply with the additional
attestations. According to the regulation, the LCA cannot
be used for new H1B nonimmigrants or extensions of H1B status
if an employer’s dependency status changes from that indicated
on the form (either to dependent or non-dependent). Likewise,
if the LCA indicates it will be used only for exempt H1B nonimmigrants,
it may not be used to support petitions for non-exempt H1Bs.
Dependent employers must file separate LCAs for exempt and
nonexempt H1Bs even in the same occupation. Back to top.
WILLFUL VIOLATORS
What constitutes
a "Willful violator" for purposes of the additional
attestations and random investigations authorized under ACWIA?
Under the regulation, any employer who is found to have
committed a willful failure to meet a condition of the LCA
or a misrepresentation of a material fact on the LCA, is required
to make additional attestations for H1B dependent employers
and be subject to random DOL investigations during the five
year period following the date of the final determination
of such violation (on or after October 21, 1998) either in
a DOL proceeding (relating to LCA compliance) or in a Department
of Justice proceeding (relating to failing to offer employment
to U.S. workers under the recruitment attestation). The section
of the preamble discussing the random audits states that the
date of the "finding" of willful violation or misrepresentation
occurs when the administrative review process is completed,
as described in Section 655.855(b) of the regulations (which
would be the date on which the final administrative appeal
is exhausted and a finding is issued). Back to top.
EXEMPT H1B NONIMMIGRANTS
What are "Exempt H1B
Nonimmigrants" generally? Under
the statute, "exempt H1B nonimmigrants" (for whom
an H1B dependent employer is not obliged to meet the additional
attestation elements) are those holding a master’s or higher
degree or its equivalent in a specialty related to the intended
employment, or who earn wages (including cash bonuses and
similar compensation) at an annual rate of at least $60,000.
Back to top.
Who will make the determination
whether a nonimmigrant is "exempt"?
The IFR states DOL’s "understanding" that INS will
examine the exempt status of any nonimmigrant whose petition
is supported by an LCA that indicates it is to be used only
for exempt nonimmigrants. This examination will be based on
the wage level indicated for the individual on the LCA and
the petition, or, if this wage level is not adequate to support
an exempt status, whether the individual’s educational level
qualifies for exempt status. If the INS’ initial determination
is that the individual is not exempt, then INS will, according
to the preamble to the DOL regulation, issue a Request for
Evidence seeking a new LCA or documentation of the individual’s
exempt status. DOL will, in an investigation, determine whether
an individual actually received the required wage rate. If
the wage rate is not adequate, then DOL will examine the educational
level of the individual (including whether the field of study
is relevant). However, under the terms of the IFR, the DOL
will treat as conclusive INS’ determinations of exempt status
based on educational attainments, unless the INS determination
was based on false information. Back to top.
What documentation
of the "exempt" status must be kept?
DOL will not require that individual petitions be kept
in the public access file, but the employer must keep them
in case of a DOL investigation. However, the public access
file must include a list of the names of H1B employees whose
petitions are supported by any LCA indicating that it will
be used only for exempt nonimmigrants, unless the employer
does not employ any non-exempt H1B employees, in which
case a simple statement to that effect must be included in
the public access file. Back to top.
How is the $60,000 annual
rate determined? The regulation
indicates that the "cash in hand, free and clear"
standard applicable to satisfaction of the prevailing and
actual wage requirement also applies to the question of whether
the full $60,000 annual rate was actually paid. Under the
regulation, part-time workers may not meet this requirement
unless they actually receive $60,000 for their part-time work
(i.e., the $60,000 cannot be prorated for part-time
employees). Employees who have worked less than a full year
will retain their exempt status if they received at least
the pro rata share of the $60,000 annual requirement for the
period. Back to top.
How is the "equivalent"
of a degree determined? DOL rejects
the use of work experience equivalency for this standard,
and instead requires the individual to have the actual degree
or its foreign equivalent. With regard to determining equivalence
of foreign degrees, the IFR requires that the degree be from
an institution recognized or accredited by the law of the
country, and specifies that where an employer attests that
an H1B nonimmigrant is exempt based on education, rather than
wages, the employer must provide, at the request of either
INS or DOL, copies of the degree and transcripts of courses
taken and grades earned. DOL also is proposing (for
comment, but not as part of the IFR) to include the guidelines
published by the American Association of Collegiate Registrars
and Admissions Officers (AACRAO) regarding equivalency of
foreign degrees as part of the Final Rule for use in determining
whether a foreign degree is equivalent to a U.S. master’s
degree. As an alternative, DOL proposes that employers would
be able to present evidence from a credential evaluation service
if there were no foreign degree listed as equivalent or where
a degree was awarded in the past and circumstances have changed.
The DOL regulation does not address how INS might evaluate
degree equivalency for these purposes. Back to top.
What is "a specialty
related to the intended employment"? The IFR
adopts a standard that in order to be considered "relevant"
the degree must be "generally accepted in the industry
or occupation as an appropriate or necessary skill or credential."
In order to determine whether a credential meets this standard,
the DOL, in the preamble, indicates its intention to use the
Occupational Outlook Handbook and O*NET as guides.
The preamble also suggests that DOL may examine other evidence
of industry standards in an investigation. DOL also seeks
comment on whether or not to specifically cite the OOH
and O*NET as primary sources for determining whether a degree
is in a specialty related to the occupation in the Final Rule
and proposes that where neither of the two primary sources
recognizes the credential, then the employer may submit a
report from a credentialing organization that the degree is
recognized in the industry as an appropriate and necessary
skill. Back to top.
DISPLACEMENT ATTESTATION
Which employees are
protected from displacement? The statute provides
that "employees of the employer" and "employees
of the other employer" in contractor situations ("secondary
displacement") are protected from displacement by H1B nonimmigrants.
The IFR uses a "common law" test to determine whether
an individual is an "employee" of either the principal
employer or the other employer. However, the IFR does not include
a detailed list of factors that determine common law employment,
as was proposed in the NPRM. The preamble reiterates that the
common law test requires an assessment of all of the factors
of the employment, but also states that the right to control
the means and manner of work will be a key determinant, with
no single factor controlling. The preamble does not suggest
any particular test, but does state that an employer’s designation
of a worker’s status for tax purposes is not controlling as
to the matter of that worker’s status for purposes of the H1B
program. The preamble also emphasizes that the common law test
is not only for use in the displacement context, but for any
area in the H1B program in which the question of an employment
relationship may arise. However, the IFR does state that the
employer of any H1B nonimmigrant is, by definition, the petitioning
entity. Back to top.
The employee must also be in an "essentially
equivalent job" to that held by the H1B nonimmigrant. The
IFR indicates that the comparison will be one-to-one where appropriate
between the displaced worker and the H1B nonimmigrant, but may
be broader "where appropriate," such as in cases where
a department is eliminated and then the function staffed with
H1B nonimmigrants. The comparison will be based on the job responsibilities,
focusing on the core elements of and competencies for the job,
the qualifications and experience of the workers in question,
which must be substantially equivalent (the IFR indicates that
10 years of experience would be "substantially equivalent"
to 15 years of experience and that degrees from any accredited
university would be "substantially equivalent" regardless
of the stature of the institution). The comparison also must
be for positions that are in the same area of employment, i.e.
the area within normal commuting distance of the worksite. Back
to top.
What circumstances does the
"secondary displacement" prohibition cover?
The secondary displacement prohibition controls when an H1B
employer places the nonimmigrant at a worksite operated or owned
by another employer where there are "indicia of employment"
between the H1B professional and the other employer. DOL notes
that such "indicia" do not have to meet the definition
of "employed by the employer" (based on the common
law test), but the IFR includes a list of relevant indicia to
include:
- The other employer has the right to control
when, where and how the nonimmigrant performs the job (the
presence of this indicator would suggest that the relationship
"approaches" the relationship that triggers the
secondary displacement provision);
- The other employer provides tools, materials
and equipment;
- The work is performed on the premises of
the other employer (this alone would not trigger the secondary
displacement provision);
- There is a continuing relationship between
the nonimmigrant and the other employer;
- The other employer has the right to assign
additional projects to the nonimmigrant;
- The other employer sets the hours of work
and the duration of the job;
- The work performed by the nonimmigrant is
part of the regular business of the other employer;
- The other employer is itself in business;
and
- The other employer can discharge the nonimmigrant
from providing services. Back to top.
What is considered
an impermissible layoff vs. a permissible termination for determining
"displacement"? The IFR clarifies that
an employer may terminate an employee for inadequate performance,
violation of workplace rules, or other cause related to the
worker’s performance or behavior on the job. The worker may
also voluntarily depart or retire (although DOL will assess
whether "constructive discharge" may have taken place
in this circumstance). In cases where the U.S. worker is discharged
because of the expiration of a grant or contract, where such
expiration essentially ends the need or funding for the job,
DOL will not consider it to be a lay off, but will examine closely
to determine whether or not the employer usually moves employees
to a new contract or project when such expirations occur. The
preamble states that in situations where an employer normally
lays off U.S. workers when alternative work is not available
and then rehires them when it is, DOL will expect the employer
to first contact the laid off U.S. worker before hiring an H1B
nonimmigrant. An employer may also offer a U.S. worker who loses
employment an alternative job offer that is a "similar
employment opportunity" at equivalent or higher compensation.
The alternative offer does not need to be in the same area of
employment, but in a case where the job location is different,
DOL will assess cost of living differentials and payment of
moving expenses in determining whether the offer is at "equivalent
or higher compensation." The comparison of the job opportunities
will also include comparison of compensation and benefits, levels
of authority, discretion and responsibility, opportunity for
advancement and tenure and work scheduling. Back to top.
What inquiry/documentation
is needed for a secondary placement situation?
The placing employer is required to exercise "due diligence"
in enquiring of the other employer as to displacement of U.S.
workers during the relevant period (90 days before and after
placement of the H1B nonimmigrant at the worksite). The LCA
and the IFR make clear that making this inquiry will not protect
a placing employer from sanctions if the secondary employer
does, in fact, displace a U.S. worker within the relevant period.
However, unless the employer knew or had reason to know of the
displacement, the employer would be subject only to monetary
penalties, and not to debarment. The other employer has no liability
in such situations. The IFR suggests that the placing employer
may accomplish this inquiry in several ways, including securing
written assurance from the other employer regarding displacements,
preparing a written memorandum of an oral statement of the other
employer, or including a secondary displacement clause in the
contract with the other employer. The IFR also states that the
employer may be required, in the exercise of due diligence,
to make further inquiries when it has other information which
indicates that U.S. workers might have been or will be displaced
(examples include where the employer is taking over a function
of the other employer that was formerly conducted by its own
employees, or following news reports of layoffs by the other
employer) if the information is available before the placement
of the H1B nonimmigrant. Back to top.
What documentation
is required to support the direct displacement attestation?
The employer is required to retain (not create) all records
that it makes or receives concerning the circumstances under
which each U.S. worker in the same locality and occupation as
the H1B nonimmigrant left the employer’s employ during the relevant
period (90 days before and after the petition filing) and any
such U.S. worker was terminated by the employer’s action. The
documentation should contain the following: name, last-known
mailing address, occupational title and job description, any
documentation concerning the employee’s experience and qualifications
and principal assignments. All documentation prepared by the
employer relating to the departure of such employees, including
any offers of alternative employment, notification of termination
and any responses thereto, must be retained as well. These records
are not required to be in the public access file, just available
to DOL upon request. Back to top.
RECRUITMENT ATTESTATION
What are the standards for
recruitment? The employer is required
to engage in "good faith recruitment" using "industry-wide
standards." The IFR states that the employer is not required
to utilize any particular number or type of recruitment, but
must use strategies that have been successfully used by other
employers in the industry to recruit U.S. workers. An employer
may not use the "least common denominator" of methods
that are unsuccessful at recruiting U.S. workers, even if such
methods are common. An employer must, at a minimum, recruit
both internally and externally and use both active and passive
methods. Examples of active methods include attending job fairs,
using college placement services or headhunters, and internal
employee training. Examples of passive methods include print
or Internet advertisement and internal job postings. The language
of the regulation appears to require that at least some recruiting
must target former employees. Back
to top.
The employer has the burden of proving, in an
enforcement action, that its recruitment met "industry-wide
standards," such as trade organization surveys, studies
by consultative groups or reports/statements from trade organizations.
Staffing firms must meet the standards of the industry in which
they are placing employees, i.e. health care staffing
firms must meet the standards of the health care industry, and
technology-staffing firms must meet the standards of the information
technology industry generally. The preamble also makes clear
that an employer may advertise for multiple similar positions,
and such recruitment may be acceptable if it accords with "relevant
industry standards" applicable to that employer. The preamble
also cautions employers that disproportionate use of certain
recruitment methods, such as college campus recruiting, may
have the unintended consequence of discriminating against older
workers. Back to top.
The employer’s recruitment must also be in "good faith."
DOL determines that this means that U.S. workers must be given
an equal and fair opportunity to obtain the position. An employer
must not skew the recruitment process against U.S. workers or
in favor of H1B nonimmigrants. Specifically, the IFR states
that an employer may not give preference to its current nonimmigrant
workers who do not yet have H1B status (such as students on
practical training). DOL also states that it would look with
disfavor upon any practice that screens the applications of
H1B nonimmigrants or prospective H1B nonimmigrants differently
than U.S. workers.
The preamble notes that DOL has rejected its
presumption that successful recruitment of U.S. workers would
necessarily meet its good faith recruitment standard, since
the perception that a negative presumption would attach to unsuccessful
recruitment was evidenced from the comments. However, the preamble
also notes that in its enforcement, DOL will look closely at
the recruitment efforts of employers who have not been successful
in hiring U.S. workers. Employers may not apply otherwise-legitimate
selection criteria in a way that skews the recruitment process
in favor of H1B nonimmigrants, nor may they apply their screening
criteria in a discriminatory manner. Such violations would evidence
the employer has failed to recruit in "good faith."
Back to top.
What are the standards
for selection? The employer must offer the job to
any equally or better qualified U.S. worker who applies. The
employer may use any "legitimate selection criteria relevant
to the job that are normal and customary to the type of job.
While the Department of Justice has jurisdiction over claims
from U.S. workers who allege they were not offered the job but
were equally or better qualified, DOL asserts its authority
to determine whether or not legitimate selection criteria were
used. The IFR indicates that each criterion must meet three
standards:
- legitimate, meaning legally cognizable and
not violating any applicable laws;
- relevant to the job, meaning having a nexus
to the job and its duties and responsibilities; and,
- normal and customary to the type of job,
meaning necessary and appropriate based on the practice or
expectations of the industry, rather than the preferences
of the particular employer. The preamble indicates that DOL
will look to the Occupational Outlook Handbook and
O*NET as guidelines for what constitute acceptable criteria
that are normal and customary for the job, and that those
resources will be used as a tool in DOL enforcement. However,
DOL acknowledges that these sources would not be definitive.
DOL also cautions against recruitment practices and selection
criteria that have the effect of discriminating against U.S.
workers generally or against groups of workers, such as older
workers and minorities. Back to top.
What documentation is the
employer required to maintain with regard to its recruitment?
The employer must make and maintain documentation of the recruiting
methods used, including the places and dates of any advertisements,
postings or other methods used, the content of the advertisements
or postings, and the compensation terms, if such are not included
in the advertisements or postings. The documentation may be
in any form, including a summary memorandum to the file. The
employer must keep any documentation it has received or prepared
concerning the treatment of applicants for the position, such
as copies of applications and related documents, test papers,
rating forms, records of interviews, and records of job offers
and responses. The preamble emphasizes that DOL is not requiring
that the employer create any documents relating to the treatment
of applicants, but it must keep any documents it does create
or receive. A summary of the recruitment methods used and periods
for recruitment must be in the public access file. All other
documentation must be made available to DOL upon investigation
and request. Back to top.
KEY DATES
Key
dates. Unless
otherwise noted, the provisions of
this regulation are effective January
19, 2000. Comments are due February
20, 2001, except for comments on a
new proposed form for collecting information
to determine if a violation has been
committed. Comments on that form are
due January 19, 2001.
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