This two-part article discusses authorized deductions for H-1B specialty occupation workers. Part 1 addresses 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.
Prevailing Wage for H-1B Specialty Occupation Workers:
An employer must pay an H-1B specialty occupation worker the prevailing wage or the actual wage paid to other similarly situated employees. The Immigration and Nationality Act (INA) requires that the foreign worker will not adversely affect the wages and working conditions of U.S. workers employed in similar positions. Per the DOL regulations, H-1B employees must be paid the prevailing wage rate for the occupational classification in the area of employment or the actual wage paid to similarly employed workers.
H-1B Worker Paid Below the Prevailing Wage: Authorized Deductions?
According to Federal Regulations for the H-1B classification, wage rate means the remuneration (exclusive of fringe benefits) to be paid, stated in terms of per hour, day, months or year. In addition, the required wage rate must be paid to the H-1B employee, cash in hand, free and clear, when due, except that authorized deductions may reduce the cash wage below the level of the required wage.
Question: What are “Authorized Deductions” under H-1B?
According to the regulations, “Authorized deductions,” for H-1B purposes means a deduction from wages in complete compliance with one of the enumerated criteria below. These deductions allow an employer to pay an H-1B worker below the prevailing wageso long as each deduction is primarily for the benefit of the employee.
These deductions are considered “authorized” for H-1B purposes:
- Deduction which is required by law (e.g., income tax; FICA); or
- Deduction which is authorized by a collective bargaining agreement, or is reasonable and customary in the occupation and or area of employment (e.g., union dues; contribution to premium for health insurance policy covering all employees; savings or retirement fund contribution for plan(s) in compliance with the Employee Retirement Income Security Act), except that the deduction may not recoup a business expense(s) of the employer (including attorney fees and other costs connected to the performance of H-1B program functions which are required to be performed by the employer, e.g., preparation and filing of LCA and H-1B petition); the deduction must have been revealed to the worker prior to the commencement of employment and, if the deduction was a condition of employment, had been clearly identified as such; and the deduction must be made against wages of U.S. workers as well as H-1B nonirnrnigrants (where there are U.S. workers);
- Deduction must be made in accordance with voluntary, written authorization by the employee (an employee’s mere acceptance of a job which carries a deduction as a condition of employment does not constitute voluntary authorization, even if such condition were stated in writing);
- Deduction must be for a matter principally for the benefit of the employee (housing and food allowances would be considered to meet this “benefit of employee” standard, unless the employee is in travel status, or unless the circumstances indicate that the arrangements for the employee’s housing or food are principally for the convenience or benefit of the employer (e.g., employee living at worksite in “on call” status);
- Deduction must not be a recoupment of the employer’s business expense (e.g., tools and equipment; transportation costs where such transportation is an incident of, and necessary to, the employment; living expenses when the employee is traveling on the employer’s business; attorney fees and other costs connected to the performance of H-1B program functions which are required to be performed by the employer (e.g., preparation and filing of LCA and H-1B petition)).
- Deduction must be an amount that does not exceed the limits set for garnishment of wages in the Consumer Credit Protection Act, and the regulations of the Secretary pursuant to that Act, under which garnishment(s) may not exceed 25 percent of an employee’s disposable earnings for a workweek.
Any deduction that does not meet the above enumerated criterion will not be considered “authorized” and cannot be deducted from the H-1B beneficiary’s wages to meet the prevailing wage requirement. The next article addresses a case study of these requirements in a real life example.
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