H-1B Visa Audit Update: New Standard Almost Meant Huge Wage Liability for H-1B Employers

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In a February blog article, we covered the case of an H-1B employee who had “absconded.” Specifically, she made herself patently unavailable for work by fleeing the area and being unresponsive to attempts to assign work to her. In normal circumstances, there are easy solutions to this kind of problem. But with the Department of Labor’s (DOL) support, the former employee was able to construct a somewhat persuasive case that the employer owed her a great deal of money. Luckily, however, the judge disagreed. He instead agreed with the employer–represented by Attorney Gus Shihab. To explain the case, the situation that led to the government’s coming to side with the employee must first be presented.

To hire an H-1B worker, an employer must demonstrate (through a Labor Condition Application) that the foreign worker’s presence displaces no American workers. The goal is to limit the incentive one has in hiring H-1B workers to their skills and qualifications. Nonetheless, some groups are blaming H-1B workers for certain economic woes. Perhaps because of this, the government appears to be attempting to make the hiring of H-1B workers less and less attractive.

One consequence of Labor Condition Application requirements is that hiring H-1B workers comes with a high standard for avoiding wage payment liability. In order to be released from this liability, an employer must effectuate a “bona fide” termination (which is more complicated than a normal termination) or show that the employee was unavailable for work (or in “nonproductive status”) due to “factors unrelated the employment.” If neither of these are done for any period of time (and the employee has not resigned or forfeited H-1B status), an employer is obligated to pay the employee as if he or she had been regularly working (even if this is not the case). This pay must be at least the prevailing wage of people with the H-1B worker’s same occupation in his or her area.

The preceding is increasingly relevant because being competitive in the tech world requires ever specialized skills–but doesn’t always need them for long periods of time. This has led to the rise of technology consulting companies. Many of these skills are insufficient in the U.S. workforce and must be supplemented with foreign workers if demand for them is to be met. This has caused those consulting companies to look for these skills in other countries, with the H-1B program as their preferred avenue. However, these facts have created a difficulty (in addition to the short supply of H-1B visas).

This difficulty became manifest in a recent case: Gupta vs. Compunnel. It has always been the case that the burden of proof to show that an H-1B employee has entered nonproductive status due “to conditions unrelated to the employment” has fallen on the employer. This isn’t a big problem for H-1B employers, in part because of how much worse the program would be for them if the only way to avoid wage liability was through bona fide termination. Given the short supply of H-1B visas, applications only remain open for one week each year, and so many are received that a random selection process is used. Aside from the comparatively small group that is able to file uncapped, much less than half of the H-1B petitions received by USCIS are chosen. Those not selected must reapply the following year or seek alternatives.

Somewhat exacerbating the situation, it was found in Gupta that an employer’s showing that an employee’s nonproductive status is due to outside conditions is alone insufficient for escaping wage liability (without termination). Escaping it in this way now also requires that the employer show that there was work available for the H-1B employee to complete upon returning to productive status. Otherwise, it is reasoned, how can an employer prove that the employee’s nonproductive status was due to nothing more than a lack of work to accomplish? The application of this new standard to consulting companies with H-1B workers was at the heart of the aforementioned difficulty. Guidance, or at least some clarification was badly needed.

This is why the case mentioned in the first paragraph is so important. With DOL support, a former H-1B and consulting company employee tried to use Gupta to show that her former employer owed her nearly $50,000. This represented about a year’s salary–for a year that she had skipped town and was patently unresponsive–but not yet terminated. She had never been put on a consulting assignment, so DOL believed that the precedent created in Gupta prevented the employer from proving that the employee had been nonproductive “due to conditions unrelated to the employment.” Thankfully, this argument didn’t fly with the judge. (The specific details in the case and its full conclusion are covered in a separate article.)