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Employer Stands to Lose More Than a Million Dollars due to Confusion Over who Should be in the Drive

A recent decision, Kutty v. United States Department of Labor, from the Sixth Circuit of the United States Court of Appeals, reinforces a basic principle of immigration law with respect to H-1B visas for professional workers, which is that it is the U.S. employer (and not the foreign employee) who is responsible for the H-1B process, compliance with H-1B regulations, and fees related to the process.

Like so many other employers, an owner of medical clinics who hired workers in H-1B status, Dr. Kutty did not understand employer obligations under the H-1B process. As a consequence, the Department of Labor (“DOL”) found that the medical clinics were in violation of the H-1B regulations. The DOL assessed liability of over $1 million in back wages and over $100,000 in civil penalties.

Employer’s Obligations During the H-1B Process are Complex

We often get questions about how employers should begin the H-1B process. Most of the questions are about the amount of fees and which forms to sign. The H-1B process, however, is much more than just writing a check and filling out a form for approval. The DOL has promulgated regulations requiring the employer to drive process, not the employee. The employer makes all H-1B-related decisions, promises to the government to comply with H-1B regulations, hires the attorney, and pays the government filing fees and the attorney’s fees.

For each H-1B employee, the employer must comply with certain obligations, to name a few: --Establish the correct job classification and the prevailing wage for the proposed employment either through filing with DOL or by using alternative means allowed by DOL regulation; --File a Labor Condition Application (“LCA”) outlining conditions of employment and making promises to the government under penalty of perjury not to be in violation of the LCA requirements; --Post an LCA filing notice at the H-1B employee’s work location; --Maintain the LCA public access file; and --Maintain compliance throughout H-1B employee’s authorized term of employment.

Some employers do not realize the extent of the promises they are making when signing the LCA. The employer makes promises to the government that include: paying a prevailing wage (or the actual wage, whichever is higher), employing the worker at the specific location for a specific amount of hours per week, providing notice of the LCA to the foreign worker and the rest of the workforce, and other promises. Additionally, during the process, the employer must maintain a public access file containing a signed copy of the certified LCA, copy of posted notice, and other appropriate information available for inspection by the DOL.

If the employer is not willing to continue with employment as promised on the LCA, the employer must file a new LCA, amend the H-1B petition, or withdraw it. Failure to do so exposes the employer to very serious liability. What Consequences do Employer’s Face for H-1B Non-Compliance?

So what happens if the employer does not understand what the H-1B regulations require and is found in violation? --Civil Penalties

If the employer disregards any of the legal requirements during the H-1B process, there are many remedies available for the government. In civil cases, such as the Kutty case, the DOL can ask for back wages (with interest) for the employee who was not paid the exact amount listed on the LCA in a timely manner or if the employer shifted the cost of filing or attorney’s fees to the worker. DOL may also assess civil penalties/fines for “willful” disregard for the regulations. “We didn’t know about the H-1B regulations” is not a defense. Additionally, any civil penalties assessed against an employer are usually accompanied with a bar on allowing that company/individual to petition for H-1B visas for several years.

The employer in this case, Dr. Kutty, apparently did not realize the complexity of H-1B regulations when he was engaged in the H-1B process, nor did he seek advice of counsel who would be concerned with H-1B compliance. Dr. Kutty appeared to be completely unprepared when DOL came to inspect his files at one of his business locations. Dr Kutty was found in violation of almost all H-1B regulation “sins” and was ordered to pay over 1 million dollars. The court found that the employer was liable for back wages for all of his unpaid employees (with interest), civil penalties to the government, and he was barred from employing aliens for two years. Ultimately, Dr. Kutty himself was found personally liable on all of the fines assessed. The result in this case seems extreme, but in reality could’ve been much worse. --Criminal Penalties

If an employer’s actions during the H-1B process warrant it, an employer may be held criminally liable in addition to civil penalties. Usually in these cases employers are not informed on the complexity of the H-1B process and they do not seek advice from counsel on how to comply with the DOL and USCIS requirements throughout all the steps. Some actions such as “benching,” which is not providing consistent, steady work for the employee throughout the period of authorized employment, resulting in underpayment, may result in a criminal indictment. The biggest risk to employers here is actually signing the LCA without fully understanding what it entails. For example, employers who change wage, hour, and/or work location of the H-1B employees without first seeking permission from DOL or USCIS are at risk of the government treating this as criminal fraud, not just a civil violation. See an example here. Employer’s Immigration Attorney’s Role is To Advise Employer Regarding H-1B Compliance

It is typical for new H-1B employers to be surprised when we discuss the complexity of the H-1B process. Many employers do not realize the basics of the process or the reasoning behind the complex H-1B regulations. An employer's responsibilities relating to H-1B visas stretch from the hiring the employee to terminating the employment of the H-1B visa holder, and the failure to abide by the regulations can result in the employer being subject to a fine or imprisonment.

The employer’s immigration attorney’s role is not only to analyze facts and prepare the employer’s H-1B petition, but more importantly, to advise the H-1B employer regarding H-1B compliance so that the business is aware of, and is protected from, H-1B-related risks. Since the employer is responsible for compliance, the immigration attorney is always the employer’s attorney, not the employee’s. The regulations reinforce this notion by considering legal fees in conjunction with the H-1B process as “business expenses” which are not to be charged to the employee. What Does This Mean for H-1B Employers?

It is paramount for employers to understand that the process is driven by the employer, not the employee. Employers, who are considering whether or not they should engage in the H-1B visa process, should consider whether they are ready to commit to learning about the process, choose competent counsel to represent them, and make sure that they are H-1B compliant. If, upon consideration, the employer is not ready to commit the time and financial resources needed for an H-1B process compliant with the H-1B regulations, then the employer should not engage in sponsoring H-1B employees.

Danielle Atchison, Business Immigration Attorney MDIVANI CORPORATE IMMIGRATION LAW FIRM 7007 College Blvd., # 460, Overland Park, KS 66211 USA Phone :: 913.317.6200 Email ::

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