Unfortunately, the new regulations are both dense and voluminous (comprising over 150 pages within the Federal Register) and so are not readily condensed into a thin summary.  Accordingly, please take the time to carefully review selected highlights of these new regulations:

Are you an “H-1B dependent” employer?

• The DOL regulations create a “snap shot” test to determine if an employee is H-1B dependent.  Please note that employers hiring less than 8 H-1B employees cannot be deemed H-1B dependent.  Under this “snap shot” test, employers are defined as H-1B dependent if:
  • they have 25 or fewer full-time equivalent (“FTE”) employees, of whom 8 or more are (part-time or full time) H-1B employees
  • they have between 26 and 50 full-time employees, of whom 13 or more are (part-time or full time) H-1B employees, or
  • they have 51 or more full-time employees, of whom 15% or more are (part-time or full time) H-1B employees.
• If the above formula does not lead to a clear result, or if employers feel the “snap shot” test improperly leads to the employer being defined as H-1B dependent, the employer may instead adopt a DOL-devised formula.  Under this formula, “full-time equivalent” (“FTE”) employees, are defined as:
  • actual individuals who work at least 35 hours per week, or
  • virtual full-time employees, created through
    • combining two part-time employees as one, or, alternatively,
    • adopting a formula whereby the employer totals the hours worked by all part-time employees within the pay period, divide that total by the employer's standard number of hours full-time employment period (typically, 40 hours per week), based upon either the last payroll or a standard work schedule.
• Bona fide independent contractors and consultants are not to be counted as FTEs.
• In making the H-1B dependency calculation, a group of corporations will be treated as a "single employer" where the group is comprised of:
  • a parent-subsidiary controlled group, brother-sister controlled group, or a combined group,
  • trades or businesses under common control
  • affiliated service groups (such as law firms or accounting firms), where the principals of these organizations own sufficient ownership in the H-1B petitioning company
• The H-1B dependency calculation must be made each time a new or existing LCA is used to support a new H-1B petition, whether for new H-1B employment or extension of previously-approved H-1B employment.
• No documentation of the H-1B dependency determination need be kept by the employer unless the “snap shot” test reveals the employer to be dependent, and only the alternate test demonstrates the employer is not H-1B dependent.
• If the employer is deemed to be H-1B dependent, it must so indicate on all LCA filings unless the only H-1Bs to be sponsored on the LCA are “exempt”.
• Any H-1B employer who is found to have either failed to comply with its own LCA attestations, or alternatively, made a material misrepresentation on an LCA, will be treated as H-1B dependent, and subject to random DOL audits, for a five-year period following the date of final determination of LCA violation/misrepresentation.

“H-1B dependent” employers face new attestation requirements on recruitment

• Effective January 19, 2001, US employers that are defined as “dependent” upon H-1B employees (that is, whose workforce contains a certain ratio of H-1B employees to other employees, as discussed above) must engage in “good faith recruitment” using “industry wide standards.”
  • Such recruitment must take place both internally and externally, using both active methods (e.g., college placement, headhunters, job fair attendance) and passive methods (e.g., print or internet advertisements).
  • Such recruitment efforts must be in good faith, meaning that nonimmigrant job candidates may not be given preferential treatment during the recruitment process.
  • DOL has indicated in the preamble to its regulations that it will scrutinize H-1B dependent employers who are unable to demonstrate success in finding US workers.
  • In the course of such recruitment, the H-1B dependent employer must offer its open positions to any US workers who apply for the job with equal or better qualifications.
• Employers defined as H-1B dependent must create and maintain documentation of their recruitment efforts. 
  • Recruitment documentation may consist of actual copies of the recruitment materials used, or a summary memorandum of those efforts.
  • Recruitment documentation must include documentation it received or created during the candidate selection process, including resumes, interview sheets, ratings forms, records of interviews, etc.  A summary memorandum documenting the recruitment methods used must be maintained in the employer’s “public access” LCA file.

Non-Displacement attestations for H-1B dependent employers

• H-1B dependent employers must attest on each LCA that the H-1B employee being sponsored will not displace any similarly-situated US worker from equivalent jobs in the same geographic area of employment.
• Similarly, H-1B dependent employers must attest that their H-1B employees will not displace US workers at other worksites.  For example, an H-1B dependent software consulting company may not use H-1B workers to work under contract with another company, where such a placement would, in turn, displace US workers at the contracting company.  This is referred to as “secondary displacement”.
• The prohibition against “secondary displacement” does not apply unless there are “indicia of employment” which indicate that the H-1B employee is engaging in a “quasi-employment” relationship with the “secondary employer”.  Such indicia include, but are not limited to, the following:
  • the contracting/secondary employer controls how, when and where the H-1B employee performs the contracted services,
  • the contracting/secondary employer provides the relevant materials or equipment for the H-1B employee,
  • the work is performed on the contracting/secondary employer’s premises,
  • a continuing relationship develops between the H-1B employee and the contracting/secondary employer, and/or
  • the H-1B employee is providing services that comprise the regular business for the company (e.g.,. a software engineer developing software for a software company).
• While contracting/secondary employers may be allowed some leeway to terminate its US workforce (e.g., termination for cause), layoffs may be closely scrutinized.
• H-1B dependent employers (and not the contracting, secondary employers) are expected to exercise due diligence in determining from the contracting entity whether and how the placement of H-1B workers might impact US workers at the contracting company’s worksite.

Exemptions from new LCA obligations for H-1B dependent employers

• Even where an employer is deemed as H-1B dependent through application of either formula described above, the new attestation requirements need not apply where the H-1B employee to be sponsored is deemed “exempt”.
• An H-1B worker will be exempt from the heightened LCA attestation requirements for “dependent” employers where:
  • The H-1B worker holds a master’s degree or higher in the field of specialty related to the proposed H-1B employment, or
  • They will earn annual wages (including bonuses and related compensation) of at least $60,000.
• By “master’s degree”, the DOL means an actual master’s degree, without regard to so-called “experience equivalencies”.
• While the employer need not keep evidence of an H-1B employee’s “exempt” status in its public access LCA files, the employer must keep such evidence available for DOL’s review, should such evidence be requested.

New LCA forms and LCA filing procedures

• A revised version of the Labor Condition Application (ETA Form 9035) will be made available.
• This new form contains new attestations on a cover page to the LCA form (ETA Form 9035CP).
• The new attestations, where required, must be included with all posting notices.  We recommend that the cover page (ETA 750CP) be retained in the public access file for each LCA. The attestations on the cover page must be provided to the H-1B employee if he or she requests a copy. A copy of the LCA must be provided to the H-1B employee.
• From January 19, 2001 through at least February 5, 2001, all LCAs must be sent via US Mail.  There will be no “faxback system”, which will likely drastically slow down LCA processing times.
• After February 5, 2001, the new faxback system should be running, and be able to accomodate the new LCA form. 

No need to file new LCAs after corporate reorganizations

• No new LCA need be filed with the DOL due to a corporate reorganization, even where the corporate reorganization results in a new corporate identity, or even a new IRS Employment Identification Number (“EIN”).
• Instead, the newly-created corporate entity is required to assume the obligations of the prior LCA by amending its public access files.

New rules for when and how LCAs must be filed for mobile employees

• “Place of employment” has been re-defined to allow H-1B employees to move from location to location – even outside the geographic area of the LCA-designated worksite – as long as the H-1B employee’s duties require frequent trips to many different locales.
• However, such trips must be extremely short in duration (e.g., no more than 5 consecutive business days for employees who frequently travel, and no more than 10 consecutive business days for employees who only occasionally travel.)
• For H-1B employees who move to a different worksite within the same geographic area of the LCA-designated worksite, new LCA posting notices must be displayed on or before the date the H-1B employee reports to that worksite.
• For H-1B employees who move to a different worksite within a geographic area outside the LCA-designated worksite, the H-1B employer must either file a new LCA or follow new “short-term placement” rules.
  • Under “short-term placement” rules, qualifying employers may temporarily place an H-1B employee at a worksite outside the LCA’s designated geographic area for a total of 30 workdays in any given year.
  • Under these same rules, qualifying employers may temporarily place an H-1B employee at a worksite outside the LCA’s designated geographic area for a total of 60 workdays in any given year, as long as the employee maintains a permanent presence at the LCA-designated worksite, and as long as the employee actually continues to live within the geographic area of the LCA-designated worksite.
  • The “short-term placement” rules prohibit employers from making the H-1B employee’s initial assignment outside the LCA-designated worksite.
  • The “short-term placement” rules may not be used when H-1B employees are being sent to a geographic area where that employer has already filed a separate LCA for the relevant occupational classification.
  • Employers taking advantage of the “short-term placement” rules must continue to pay the required wage designated on the H-1B employee’s LCA, and must also pay the employee’s actual cost of travel, lodging, meals, and incidental expenses for all days (not just workdays) at the short-term worksite.

New rules regarding “benched” (“nonproductive”) employees

• The new DOL rules implement statutory requirements that H-1B employers continue to pay H-1B employees the full salary (and benefits) due to the employee under the LCA attestation, even where the employee is forced into a “nonproductive” status due to a lack of work assignments or other reasons the employer decides.
• These obligations are incurred once the H-1B enters into employment with the petitioning company, or within 30 days of the H-1B employee’s entry to the United States on the H-1B visa, or -- if the H-1B employee is already in country the time of H-1B petition approval – within 60 days of the H-1B employee’s eligibility to assume work with the H-1B employer.
• If an employee becomes nonproductive voluntarily (such as taking a period of time off for personal reasons, or medical leave), the LCA wage need not be paid. However, employers are reminded that payments of wages pursuant to other laws may be required. In addition, as discussed below, employers must extend to H-1B employees all benefits due to similarly employed US workers.
• A bona fide termination relieves the H-1B employer of these provisions, but the DOL regulations imply that a bona fide termination may require the H-1B employer to send notice to the INS that the employment relationship has been terminated, request a cancellation of the terminated employee’s H-1B petition, and fulfill the obligation to provide return airfare to worker. In any event, we recommend that employers document termination of employees in writing using termination letters or similar written memos.

New rules regarding benefit plans for H-1B employees

• H-1B employees must be offered benefits and eligibility for benefits on the same basis as U.S. workers. 
• Employers must now include in their LCA public access files a summary of their benefit plans, listing those benefits offered to both H-1B and U.S. workers.
• Multinational employers are not required to initiate U.S. benefits for workers that remain on the foreign office benefits and payroll for U.S. trips of 90 days or less.  However, employers may not avail themselves of this rule unless they maintain special documentation of the foreign benefits in their public access LCA files and individual employee files.

Limitations on H-1B fees & costs chargeable to the H-1B employee

• Employers may not charge their H-1B employees for the attorneys fees and other costs incurred in obtaining H-1B authorization for that employee, if such fees – when deducted from the employee’s wage – would bring the employee’s wage below the required prevailing wage.
• Employers may not charge penalties to H-1B employees for terminating their employment with the petitioning employer prior to the agreed-upon date.  Employers may charge previously agreed-upon liquidated damages (including attorneys’ fees) to the employee, but may not do so by deducting money from the H-1B employee’s outstanding paychecks.  In no event may an H-1B employer recoup the $1000 training fee paid to the INS with the H-1B petition.