As many of you may know, April 7 was the last day H-1B cap petitions were accepted for FY 2016. Although the flurry of H-1B filings is over, employers must now focus on ensuring compliance with H-1B regulations. Any employer filing H-1B petitions must prepare for the possibility of a Wage and Hour Division (WHD) investigation by the Department of Labor (DOL). Recently, the Obama administration has continued its aggressive enforcement policies by increasing WHD investigations to ensure that employers are complying with the various requirements under the H-1B visa program.  Findings of noncompliance with H-1B regulations may negatively affect not only the financial and reputational health of a corporation, but also the ability to file future petitions. In a recent investigation, the WHD determined that an employer in violation of H-1B regulations owed back wages totaling $983,039 to 122 H-1B employees, assessed civil monetary penalties at $405,175, and recommended a two-year debarment from the H-1B program. Wage and Hour Division v. Sirsai, Inc., ARB No. 12-102, ALJ No. 2011-LCA-00001 (ARB Jan. 28, 2015). Although the damages owed were ultimately modified, this case nevertheless demonstrates the potential detrimental costs to an employer who violates WHD regulations. Id.

Wage and Hour Division Investigations: Nuts and Bolts

Prior to filing an H-1B petition, employers must submit a Labor Condition Application (LCA) to the DOL that attests to material facts and labor condition statements regarding the proposed employment. The WHD is charged with ensuring that employers are in compliance with all attestations made on the LCA.

The WHD may initiate investigations if it receives a complaint from an aggrieved person or organization or if it receives credible information from a reliable source. In addition, the secretary of labor can initiate its own WHD investigation if in the past an employer has willfully failed in its LCA obligations or if there is reasonable cause to believe that the employer is not in compliance. However, most investigations are complaint driven.

WHD investigations generally require the employer to provide substantial documentation within a requested time frame, which may include H-1B petitions including LCAs, Public Access Files (PAFs), notices of termination, payroll records, etc. The WHD investigator has significant latitude to conduct the investigation, including the ability to expand the investigation in terms of scope and geographic location. The investigator may also involve other federal agencies, such as the IRS or ICE, at her discretion.  WHD investigations can be multi-year investigations and are highly burdensome to the employer in terms of documentation production and heightened scrutiny of its corporate policies and procedures.

If violations are found, the WHD may assess civil monetary penalties from $1,000 to $35,000 per violation. The WHD may also impose significant back wage awards; debar an employer from filing future H-1B petitions; or impose any other appropriate legal or equitable remedies the WHD deems appropriate. Employers may dispute investigatory findings through adjudication before an administrative law judge (ALJ).

Ensuring Compliance and Preparing for a WHD Investigation

Companies that sponsor H-1B workers can take action to improve compliance and protect their position in the event of a WHD investigation. A preventive system with pristine recording keeping is ideal for compliance with the H-1B regulations, as a failure to produce documentation in the event of a WHD investigation often serves as a basis for penalties.

It would behoove H-1B employers to ensure compliance with the following:

• Wages: The WHD will investigate whether the employer is paying wages to its H-1B workers that are at least equal to the actual wage paid by the employer to other workers with similar experience and qualifications for the job in question, or the prevailing wage for the occupation in the area of intended employment – whichever is greater.
• Public Access File: Properly maintaining an H-1B worker’s Public Access File (PAF), including the LCA for each worksite, is essential for avoiding WHD violations.
• Benching: LCA wage obligations prohibit “benching,” the practice of placing the H-1B worker in nonproductive status without pay. To avoid violations for benching, employers should ensure that H-1B workers are paid the wages stated on the LCA while employed by the H-1B employer in the U.S.
• Employee Termination: In the event of a termination of an H-1B worker, the employer must immediately notify USCIS as to the termination. An employer should also maintain records of the termination and how it was communicated to the employee. Finally, the employer should also document that it offered reasonable return transportation to the H-1B worker’s home country or country of last residence.
• Early Termination Repayment Agreements: Employers should examine any early termination repayment agreements signed by H-1B workers to ensure that they do not contain unenforceable penalty clauses.

These tips are certainly not exhaustive, but they are a solid start to ensure compliance with the various requirements under the H-1B visa program.