This is the second of a two-part article discussing authorized deductions for H-1B specialty occupation workers. Part 1 addressed the rules for “authorized deductions” on H-1B workers’ wages relating to the prevailing wage determination. Part 2 is a case study of a July 2009 Administrative Appeals Office decision regarding H-1B authorized deductions.
Case Study: Administrative Appeals Office (AAO) Decision on H-1B Autorized Deductions:
In 2009, the AAO issued a decision of denial revoking a previously approved H-1B visa on the basis that the deductions by the employer were not authorized. The H-1B petitioner in that case was a Filipino newspaper/entertainment promoter that employed the H-1B beneficiary as a public relations specialist and journalist. The issue was whether the beneficiary was being paid the prevailing wage taking into account the deductions which the employer believed were authorized. Failure to pay the prevailing wage violates the H-1B terms and conditions of employment and will have the effect leaving the beneficiary without valid H-1B status. Thus, care must be taken to strictly abide by the authorized deductions procedures indicated in Part 1.
On appeal, counsel for the petitioner explained that the beneficiary received free housing for ten months in 2003 and 2004, valued at $9,500.00 for each year. Counsel explains that as part of the beneficiary’s wages in 2003 and 2004, the petitioner paid rent on behalf of the beneficiary. The beneficiary occupied only the master bedroom of a two bedroom whch was viewed as compensation in the amount of $9,500.00 for each year. Counsel further explained that “starting in November 2004, beneficiary began paylng his own housing.” Thus, counsel for the petitioner contended that the beneficiary’s salary, plus the residential expenses, which is $9,500.00 per year, was above the prevailing wage, and thus the petitioner did not violate the H-1B requirements.
General Rule: Deductions MUST be for the benefit of the employee
The AAO determined that housing and food allowances may be permissible deductions if tthey meet the benefit of the employee standard. The H-1B employee’s housing must be principally for the benefit of the employee. According to the regulations, the employee’s housing may not principally benefit the employer, such as requiring the employee to be “on-call.” As a journalist, the petitioner may require that the beneficiary be “on-call” at all times to report on any news-breaking stories. The petitioner did not provide sufficient documentation to establish that the housing provided to the beneficiary meets the benefit of the employee standard. Thus, the deduction was not a permissible deduction of the beneficiary’s wages.
Housing and Food Allowances Generally:
Housing and food allowances are examples of deductions that usually are principally for the benefit of the employee unless the employee is traveling on the employer’s business. The rules also permit deduction of the cost of transportation from and to the alien’s home country at the beginning and end of the assignment, unless the employer is liable for the cost of return transportation because it has terminated the H-1B worker. Translation and visa application fees associated with the case may also be lawfully deducted (such expenses are not considered the employer’s business expense). The value of “in-kind” benefits, such as the value of a car, apartment, parking space, may also be lawfully deducted, provided each criteria is satisfied.
Impermissible Deductions on H-1B Worker’s Wages
Matters that are considered impermissible deduction for the employer’s “business expenses” include the following: (1) the cost of tools and equipment; (2) travel expenses to and from off-premises assignments; (3) living expenses when the employee is traveling on the employer’s business; and (4) attorney fees and other costs associated with the preparation and filing of the LCA and H-1B petition (not including translation and visa application fees). Matters that do not meet each of the five criteria listed above are considered unauthorized deductions.
The Law Firm of Shihab & Associates, Co., LPA
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