[Federal Register: December 20, 2000 (Volume 65, Number 245)]
[Rules and Regulations]
[Page 80109-80158]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20de00-20]
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Part III
Department of Labor
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Employment and Training Administration
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20 CFR Parts 655 and 656
Temporary Employment in the United States of Nonimmigrants under H-1B
Visas; Final Rule
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DEPARTMENT OF LABOR
Employment and Training Administration
20 CFR Parts 655 and 656
RIN 1215-AB09
Labor Condition Applications and Requirements for Employers Using
Nonimmigrants on H-1B Visas in Specialty Occupations and as Fashion
odels; Labor Certification Process for Permanent Employment of Aliens
in the United States
AGENCY: Employment and Training Administration, Labor, in concurrence
with the Wage and Hour Division, Employment Standards Administration,
Labor.
ACTION: Interim final rule; request for comments.
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SUMMARY: This document contains interim final regulations implementing
recent legislation and clarifying existing Departmental rules relating
to the temporary employment in the United States of nonimmigrants under
H-1B visas. On January 5, 1999, the Department published a notice of
proposed rulemaking (64 FR 628) seeking public comment on issues to be
addressed in regulations to implement changes made to the Immigration
and Nationality Act (INA) by the American Competitiveness and Workforce
Improvement Act of 1998 (ACWIA). In particular, the ACWIA requires H-
1B-dependent employers and willful violators to comply with certain
additional attestations regarding anti-displacement and recruitment
obligations. The Department also sought further comment on certain
proposals which were previously published for comment as a Proposed
Rule on October 31, 1995 (60 FR 55339), and on certain interpretations
of the statutes and its existing regulations which the Department
proposed to incorporate in the regulations.
DATES: Effective Dates: These regulations are effective January 19,
2001, with the exception of Secs. 655.731(a)(2) and 656.40, (c) and (d)
which are effective December 20, 2000.
Applicabililty Date: Sections 655.731(a)(2) and 656.40 apply
retroactively to any prevailing wage determinations thereunder which
were not final as of October 21, 1998. Sections 655.720 and 655.721 are
applicable to Labor Condition Applications filed on or after February
5, 2001.
Comment Date: Written comments on these regulations and issues
raised in the preamble may be submitted by February 20, 2001, with the
exception of any comments on Form WH-4, which must be submitted by
January 19, 2001.
ADDRESSES: Submit written comments concerning Part 655 to Deputy
Administrator, Wage and Hour Division, ATTN: Immigration Team, U.S.
Department of Labor, Room S-3502, 200 Constitution Avenue, N.W.,
Washington, D.C. 20210. Commenters who wish to receive notification of
receipt of comments are requested to include a self-addressed, stamped
post card. Comments may also be transmitted by facsimile ("FAX")
machine to (202) 693-1432. This is not a toll-free number.
Submit written comments concerning Part 656 to the Assistant
Secretary for Employment and Training, ATTN: Division of Foreign Labor
Certifications, U.S. Employment Service, Employment and Training
Administration, Department of Labor, Room C-4318, 200 Constitution
Avenue, NW., Washington, DC 20210. Commenters who wish to receive
notification of receipt of comments are requested to include a self-
addressed, stamped post card. Comments may also be transmitted by
facsimile ("FAX") machine to (202) 693-2769. This is not a toll-free
number.
FOR FURTHER INFORMATION CONTACT: Michael Ginley, Director, Office of
Enforcement Policy, Wage and Hour Division, Employment Standards
Administration, Department of Labor, Room S-3510, 200 Constitution
Avenue, NW., Washington, DC 20210. Telephone: (202) 693-0745 (this is
not a toll-free number).
James Norris, Chief, Division of Foreign Labor Certifications, U.S.
Employment Service, Employment and Training Administration, Department
of Labor, Room C-4318, 200 Constitution Avenue, NW., Washington, DC
20210. Telephone: (202) 693-3010 (this is not a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act
The H-1B nonimmigrant program is a voluntary program that allows
employers to temporarily import and employ nonimmigrants admitted under
H-1B visas to fill specialized jobs not filled by U.S. workers.
(Immigration and Nationality Act (INA), 8 U.S.C. 1101(a)(15)(H)(I)(b),
1182(n), 1184(c)). The statute, among other things, requires that an
employer pay an H-1B worker the higher of the actual wage or the
prevailing wage, to protect U.S. workers' wages and eliminate any
economic incentive or advantage in hiring temporary foreign workers.
Under the Immigration and Nationality Act (INA), as amended by the
Immigration Act of 1990 (Act), and as amended by the Miscellaneous and
Technical Immigration and Naturalization Amendments of 1991, an
employer seeking to employ an alien in a specialty occupation or as a
fashion model of distinguished merit and ability on an H-1B visa is
required to file a labor condition application with and receive
certification from DOL before the Immigration and Naturalization
Service (INS) may approve an H-1B petition. The labor condition
application process is administered by ETA; complaints and
investigations regarding labor condition applications are the
responsibility of ESA.
On January 5, 1999, the Department of Labor (DOL) published a
proposed rule which would implement statutory changes in the H-1B
program made to the INA by the American Competitiveness and Workforce
Improvement Act of 1998 (ACWIA) (Title IV, Pub. L. 105-277). The ACWIA,
as amended by the American Competitiveness in the Twenty-First Century
Act of 2000 (Pub. L. 106-313), among other things, temporarily (until
October 2003) increases the maximum number of H-1B visas permitted each
year; temporarily requires new non-displacement (layoff) and
recruitment attestations by "H-1B dependent" employers (as defined by
the ACWIA) and willfully violating employers; and requires employers to
offer the same fringe benefits to H-1B workers on the same basis as it
offers fringe benefits to U.S. workers. The public was invited to
comment on the proposed rule, including the information collection
requirements noted below. In addition, pursuant to the Paperwork
Reduction Act of 1990, DOL submitted a paperwork package to the Office
of Management and Budget (OMB), requesting review and approval of the
information collection requirements included in the proposed rule.
Since publication of the NPRM, additional amendments to the H-1B
provisions were enacted by the American Competitiveness in the Twenty-
first Century Act of 2000 (Pub. L. 106-313, 114 Stat. 1251, October 17,
2000), the Immigration and Nationality Act--Amendments (Pub. L. 106-
311, 114 Stat. 1247, October 17, 2000), and section 401 of the Visa
Waiver Permanent Program Act (Pub. L. 106-396, 114 Stat. 1637, October
30, 2000) (collectively, the October 2000 Amendments). Most pertinent
to these regulations were provisions that raised the ceiling on the
number of H-1B visas that may be issued and extended the
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period of effectiveness of the additional attestations applicable only
to H-1B-dependent employers and willful violators.
Comments were received from members of Congress, OMB, law firms,
information technology industry associations, other industry
associations, information technology firms, research firms, other
employers of H-1B workers, Federal agencies and individuals. Commenters
questioned DOL authority under the ACWIA and/or the Immigration and
Nationality Act to impose the paperwork requirements contained in the
proposed rule. Further, commenters questioned the DOL burden estimates
for these information collections, indicating that the estimates were
much too low. Many commenters contended DOL should only require the
production of records in an investigation context. One commenter
suggested for clarity that DOL provide a check list for H-1B employers
indicating which records must be kept, which records are required by
other statutes or regulations and where these records must be kept.
Many commenters have fundamental misunderstandings of the nature of
the reporting and disclosure requirements proposed in the NPRM. The
Department has made every effort in the NPRM and in the Interim Final
Rule to limit recordkeeping requirements to documents which are
necessary for the Department to ensure compliance, and to documents
which are already required by other statutes and regulations or would
ordinarily be kept by a prudent businessperson. As a general matter,
when reviewing the recordkeeping and disclosure obligations set forth
in the regulations, employers should be aware that the regulations
distinguish between a requirement to "preserve" or "retain" records
if they otherwise exist, and a requirement to "maintain" records
whether or not they already exist. A requirement that employers retain,
for example, "any" documentation on a particular subject requires
only that any such documents be retained if they otherwise exist, but
does not require creation of any documents. In addition, the Department
points out that where the regulations do not explicitly require public
access, the records may be kept in the employer's files in any manner
desired; they do not need to be segregated by labor condition
application (LCA) or establishment and do not need to be segregated
from the records of non-H-1B workers, provided they are promptly made
available to the Department upon request in the conduct of an
investigation. The Department considers it important to require that
such records be maintained, as in other enforcement programs, so that
in the event of an investigation, the Department is able to determine
compliance or, in the event of violations, to determine the nature and
extent of the violations. This can only be accomplished with adequate,
accurate records since it is only the employer who is in a position to
know and produce the most probative underlying facts. See Anderson v.
t. Clemens Pottery Co., 328 U.S. 680, 687 (1946).
In addition, in the regulations, the Department has limited the
documents that must be disclosed to the public to those which the
Department has concluded are necessary for a member of the public to be
able to determine the employer's obligations and the general contours
of how it will comply with its attestation obligations. The regulations
on public access files do not require that there be a separate public
access file for each LCA or for each worker. Thus, for example, an
employer might choose to keep a single public access file with one copy
of each of the required documents which are applicable to all LCAs
(such as the description of the employer's pay system), and separately
clip together those documents which are specific to each LCA.
Nothing in the ACWIA suggests that it intends to deny the
Department the usual authority to require recordkeeping as a means of
ensuring compliance with an employer's statutory obligations. To the
contrary, Section 212(n)(1) specifically requires employers to make the
LCA "and such accompanying documents as are necessary" available for
public examination. The Department believes that this provision clearly
permits the Department to determine what documents must be created or
retained by employers to support the LCA. In the absence of such
records, the Department is unable to ascertain whether an employer in
fact is in compliance or the extent of violations.
In an effort to fully educate the public regarding the H-1B program
and its requirements (including paperwork), DOL intends to prepare and
make available pamphlets, fact sheets and a small business compliance
guide. Further compliance assistance material will be made available on
the DOL website. See Section IV.B, below, for an extensive discussion
of this public outreach effort. The following is a brief discussion of
the paperwork requirements contained in the proposed rule, the public
comments on those requirements, the DOL response and the paperwork
requirements imposed by this interim final rule. A much more extensive
discussion of the issues, including the paperwork requirements, is
contained in Section IV of the preamble.
A. Labor Condition Application (Sec. 655.700)
The process of protecting U.S. workers begins with a requirement
that employers file a labor condition application (LCA) (Form ETA 9035)
with the Department. In this application the employer is required to
attest: (1) That it will pay H-1B aliens prevailing wages or actual
wages, whichever are greater--including, pursuant to the ACWIA, the
requirement to pay for certain nonproductive time and to provide
benefits on the same basis as they are provided to U.S. workers; (2)
that it will provide working conditions that will not adversely affect
the working conditions of U.S. workers similarly employed; (3) that
there is no strike or lockout at the place of employment; and (4) that
it has publicly notified the bargaining representative or, if there is
no bargaining representative, the employees, by posting at the place of
employment or by electronic notification--and will provide copies of
the LCA to each H-1B nonimmigrant employed under the LCA. In addition,
the employer must provide the information required in the application
about the number of aliens sought, occupational classification, wage
rate, the prevailing wage rate and the source of the wage rate, and
period of employment. Pursuant to the ACWIA, additional attestation
requirements become applicable to H-1B-dependent employers and willful
violators after promulgation of these regulations. This form, currently
approved by OMB under OMB No. 1205-0310, was revised in the NPRM to
identify H-1B dependent employers and provide for their attestation to
the new requirements. The ACWIA increased the number of H-1B
nonimmigrants from 65,000 to 115,000 in fiscal years 1999 and 2000 and
to 107,500 in fiscal year 2002. Besides the increase in LCAs filed for
these additional workers, by regulation H-1B-dependent employers are
required to file new LCAs if they wish to file petitions for new H-1B
nonimmigrants or to seek extensions of status for existing workers. The
Department estimated in the proposal that 249,500 LCAs are filed
annually by 50,000 H-1B employers (dependent and nondependent). The
only added LCA burden proposed in the NPRM was for H-1B-dependent
employers and willful violators to indicate on the LCA their status and
their agreement to the
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additional attestation requirements. (The time required for an
estimated 50 H-1B employers to make the mathematical calculation to
determine if they must make the additional attestations required of an
H-1B employer is separately set out in C. of this section, below.)
Since it was estimated that only 50 H-1B employers will find it
necessary to make this calculation, out of a total of 50,000 H-1B
employers, the estimate of time necessary to complete the form remained
at 1 hour. Total annual burden was estimated at 249,500 hours.
Since promulgation of the NPRM, the 2000 Amendments to the INA
further increase the ceiling on the number of H-1B visas that may be
issued annually for 2001, 2002 and 2003, to 195,000 annually, with an
additional unspecified number who may be admitted if they will be
employed by a school, a related non-profit entity, a State or local
government research organization, or a nonprofit research organization.
Commenters generally objected to the one hour estimate for
completing the LCA, pointing out that the revised LCA is four pages
long, whereas the current LCA is only one page for an estimated burden
of one and one-quarter hour per LCA.
OMB suggested asked whether the conditions in a, b and c in section
8 capture the requirements for H-1B dependent employers. They also
suggested amending the end of the sentence following the second box to
read "* * * unless the exemption requirement in the NOTE below is
met."
A commenter stated that DOL had failed to consider that many
employers will now be forced to file two LCAs where previously they
only filed one. Several of its member employers who previously filed an
LCA for multiple openings indicated that they may file separate LCAs
for each opening rather than take the risk that of INS making a
determination that one H-1B nonimmigrant is not exempt, thus
invalidating the entire LCA.
As discussed in Section IV.B.4 below, the ETA Form 9035 has been
amended to provide that every employer is required to indicate whether
it is or is not H-1B-dependent or a willful violator. Since all
employers are required to determine whether or not they are H-1B
dependent--although for most employers, as discussed below, their
status will be readily apparent and no actual computation will be
necessary--the additional box for non-dependent employers should
require no additional time. There is no other information required
which is not contained on the current form other than to check a box
indicating the agreement of H-1B-dependent employers and willful
violators to the additional attestation requirements. The longer form
is not due to the requirement to furnish additional information, but to
the new format required for the FAXback, which is designed to decrease
significantly the processing time. See Section IV.5, below. The
Department also notes that the 1\1/4\ hour estimate on the current ETA
Form 9035 includes the 15 minutes estimated to file a complaint with
the Wage and Hour Division
Upon review, the Department sees no reason to change its estimate
of an average of one hour per form, including both reading the
instructions and filling out the form (estimated to take no more than
one-half hour per form), as well as taking the actions that are
subsumed in filling out the form (obtain the prevailing wage and
providing notice). Based upon current data, and considering the
regulatory change deleting the necessity for filing a new LCA when an
employer's corporate identity changes (see B. of this section, below)
as well as the requirement that H-1B-dependent employers with current
LCAs file new LCAs if they wish to file new H-1B petitions or requests
for extension of status, DOL estimates that 637,000 LCAs will be
submitted annually by 63,500 H-1B employers (dependent and
nondependent). Total annual burden for the LCA is estimated to be
637,000 hours (637,000 LCAs x 1 hour).
B. Documentation of Corporate Identity (Sec. 655.760)
Currently, the regulatory requirement is that a new LCA must be
filed when an employer's corporate identity changes and a new Employer
Identification Number (EIN) is obtained. Under the proposed rule, an
employer who merely changes corporate identity through acquisition or
spin-off could merely document the change in the public file (including
an express acknowledgment of all LCA obligations on the part of the
successor entity), provided it satisfied the Internal Revenue Code
definition of a single employer. The proposed regulation was designed
to eliminate a burden on businesses to file a new LCA, while at the
same time ensuring that the public is aware of the changes and that the
employer will continue to follow its LCA obligations. It was estimated
in the proposal that 500 H-1B employers would be required to file the
subject documentation annually. It was estimated that the recording and
filing of each such document would take 15 minutes for a total annual
burden of 125 hours.
One commenter asked how DOL's rulemaking affected the INS
interpretation that any "material change in employment" necessitates
the filing of an amended petition. Another commenter asked what opinion
an employer is to follow when current DOL opinion is that any change to
an approved LCA requires an amendment to the H-1B petition and the view
of INS is that a change in company name or EIN does not require a new
LCA, just that the change be documented at the time of amendment or
extension. Another commenter stated that the burden for this
requirement is significantly higher than DOL estimated.
Upon reconsideration, DOL's Interim Final Rule provides that a new
LCA will not be required merely because a corporate reorganization
results in a change of corporate identity, regardless of whether there
is a change in the EIN and regardless of whether the IRS definition of
single employer is satisfied, provided that the successor entity, prior
to the continued employment of the H-1B nonimmigrant, agrees to assume
the predecessor entity's obligations and liabilities under the LCA. The
agreement to comply with the LCA for the future and to any liability of
the predecessor under the LCA must be documented with a memorandum in
the public access file.
With these changes, and based on the Department's experience, it is
now estimated that 1000 H-1B employers (an increase from the 500
employers estimated in the NPRM) will be required to file the
documentation annually and that the recording and filing of each such
document will take approximately 30 minutes for a total annual burden
of 500 hours. The Department also estimates that employers who file
this memorandum will file 10,000 fewer LCAs, for a net saving of 9,500
hours.
INS requirements for the filing of an amended petition are separate
from DOL requirements for the filing of LCAs.
C. Determination of H-1B Dependency (Sec. 655.736)
An H-1B employer must calculate the ratio between its H-1B workers
and the number of full-time equivalent employees (FTEs) to determine
whether it meets the statutory definition of an H-1B-dependent employer
(8 U.S.C. 1182 (n)(3)(A)). The NPRM provided that when it is a close
question, the determination would ordinarily be made by examination of
an employer's quarterly tax statement and last payroll (or last quarter
of payrolls if more
[[Page 80113]]
representative) or other evidence as to average hours worked by part-
time employees to aggregate their hours into FTEs, together with a
count of the number of workers under H-1B petitions. Documentation of
this determination would be required where non-dependent status is not
readily apparent and a mathematical determination must be made. A copy
of this determination would be placed in the public disclosure file. In
addition, if an employer changed from dependent to non-dependent
status, or vice-versa, a simple statement of the change in status would
be placed in the public disclosure file. The NPRM explained that
documentation of a determination of H-1B dependency where it is a close
question is necessary to determine employer compliance with H-1B
requirements, and to advise the public of an employer's status. It was
estimated in the proposal that approximately 50 H-1B employers would
need to make the determination with 25 employers who are found not to
be dependent employers would be required to document this determination
annually. The making and documentation of each such determination was
estimated to take approximately 15 minutes, and occur at least twice
annually for a total annual burden of 12.5 hours.
Several commenters expressed the view that the DOL burden estimate
for this requirement was severely underestimated. They remarked that
large employers who hire H-1B employees will have to create systems of
verification of H-1B dependency and that the determination will be
difficult where employees are located in multiple locations and
departments and the data needed to make the determination are
maintained in different databases. Some commenters questioned the
connection DOL made between the use of blanket LCAs and the likelihood
of H-1B dependency and how frequently the determination would need to
be made. Some also commented that it appeared that whenever the
determination is made, a copy of the calculation must be placed in the
public access file, making it a requirement for all H-1B employers, not
just those who are borderline H-1B dependent. OMB commented that the
15-minute burden for the dependency determination seemed low and asked
if the estimate just includes the assurance (how it is written) or does
it also include documentation of the assurance.
Having taken into consideration all of the comments pertaining to
the determination of dependency status, DOL has decided modification
these requirements is appropriate to achieve the purposes of the ACWIA
and avoid unnecessary burden on employers. First, the Interim Final
Rule provides that all employers must retain copies of the I-129
petitions or requests for extensions of status filed with INS. These
documents are critical to several provisions in the regulations,
including in particular the determination of dependency and the number
of hours that must be compensated if employees are "benched." The
Department believes that prudent businessmen would retain copies of
these documents in any event. (See also the discussion in D. of this
section, below.)
The Interim Final Rule also significantly reduces the burden to
employers in making the computations of dependency. The Rule will
permit employers to use a "snap shot" test to determine if dependency
status is readily apparent and requires a full computation only if the
number of H-1B workers exceeds 15 percent of the total number of full-
time workers of the employer. Furthermore, the Rule provides employers
an option of considering all part-time workers to be one-half FTE,
rather than make the full computation. If the full computation (where
required because the dependency status is not readily apparent)
indicates that the employer is not H-1B dependent, the employer must
retain a copy of this computation. Further, the employer must retain a
copy of the full computation in specified circumstances which the
Department believes will very rarely occur. The full computation must
be maintained if the employer changes status from dependent to non-
dependent. If the employer uses the Internal Revenue Code single
employer test to determine dependency, it must maintain records
documenting what entities are included in the single employer, as well
as the computation performed, showing the number of workers employed by
each entity who is included in the calculation. Finally, if the
employer includes workers who do not appear on the payroll, a record of
the computation must be kept. The Department has concluded that the
computations or summary of the computations need not be kept in the
public access file.
Although DOL has made several changes to simplify the determination
of dependency status and its documentation, upon reconsideration DOL
has increased its estimate of burden from 15 to 30 minutes, thus
increasing the annual burden for an estimated 25 employers who must
make and document such calculations twice annually from 12.5 to 25
hours. The Department also estimates that no more than 5 percent of
employers will be required to retain copies of H-1B petitions and
extensions who do not currently retain these documents, for an average
of 3 minutes per petition, and a total of 159 hours (3,175 employers
x 3 minutes 60). Total annual burden for this item is
estimated to be 184 hours.
D. List of Exempt H-1B Employees in Public Access File
(Sec. 655.737(a)(1))
The ACWIA provisions regarding non-displacement and recruitment of
U.S. workers do not apply where the LCA is used only for petitions for
exempt H-1B workers. The NPRM provided that where the INS determines a
worker is exempt, employers would be required to maintain a copy of
such documentation in the public access file. Determinations as to
whether or not H-1B workers meet the education requirements to be
classified as exempt H-1B nonimmigrants would be made initially by the
INS in the course of adjudicating the petitions filed on behalf of H-1B
nonimmigrants by dependent employers. In the event of an investigation,
it was anticipated that considerable weight would be given to the INS
determination that H-1B nonimmigrants were exempt, based on the
educational attainments of the workers, since INS has considerable
experience in evaluating the educational qualifications of aliens.
Retention of copies of such determinations would aid DOL in determining
compliance with the H-1B requirements and provide the public with
notice as well. It was estimated in the proposal that 28,125 such
documents would need to be filed annually. Each such filing would take
approximately one minute for an annual burden of approximately 468.8
hours.
One commenter indicated that the one minute to physically complete
the form may be correct but that the estimate ignores the analysis and
review required to determine if they are exempt. Another commenter
asked what documentation must be copied and maintained in the file,
i.e., would INS issue a separate determination or would Form I-797,
Notice of Approval of H-1B Petition suffice? They also believed it was
unclear how DOL estimated only 28,125 documents would be filed annually
when the number of H-1B petition approvals for the current fiscal year
is 115,000.
On further consideration, because of privacy considerations, DOL
has concluded that the H-1B petitions with the INS determinations of
workers' exempt status need not be included in the public access file.
However, DOL
[[Page 80114]]
believes the public should know which workers are not covered by the
new attestation elements so they can challenge a determination of
exempt status where they believe the basis for the exemption is
invalid. Therefore, under the interim final rule employers will be
required to include in their public access file a list of the H-1B
nonimmigrants supported by any LCA attesting that it will be used only
for exempt workers, or in the alternative, a statement that the
employer employs only exempt H-1B workers. DOL estimates that each list
or statement will take approximately 15 minutes and that 200 H-1B
employers will prepare one such list or statement annually for a total
burden of 50 hours.
E. Record of Assurance of Non-displacement of U.S. Workers at Second
Employer's Worksite (Sec. 655.738(e))
Section 212(n)(F)(ii) of the INA, 8 U.S.C. 1182(n)(F)(ii),
prohibits an H-1B-dependent employer from placing H-1B nonimmigrant
with another employer unless the dependent employer makes a bona fide
inquiry as to the secondary employer's intent regarding displacement of
U.S. workers by H-1B workers. The proposed regulation would require an
employer seeking to place an H-1B nonimmigrant with another employer to
secure and retain either a written assurance from the second employer,
a contemporaneous written record of the second employer's oral
statements regarding non-displacement, or a prohibition in the contract
between the H-1B employer and the second employer. Pursuant to the
ACWIA, an H-1B employer may be debarred for a secondary displacement
"only if the Secretary of Labor found that such placing employer * * *
knew or had reason to know of such displacement at the time of the
placement of the nonimmigrant with the other employer." Congress
clearly intended that the employer make a reasonable inquiry and give
due regard to available information. In order to assure that the
purposes of the statute are achieved, the Department developed a
regulatory provision to require that the H-1B employer make a
reasonable effort to inquire about potential secondary displacement and
to document those inquiries. It was estimated that approximately 150
employers would place H-1B nonimmigrants with secondary employers where
assurances are required. It was estimated that each such assurance will
take approximately 5 minutes and each such employer would obtain such
assurances 5 times annually for an annual burden of 62.5 hours.
Commenters stated that DOL grossly underestimated the amount of
time necessary to persuade and obtain from the secondary employer the
necessary assurances, create a verification form or revise a contract
and the annual frequency of the assurances. Further, some commenters
felt that DOL had failed to consider the additional burden on the
secondary employer to document their compliance with the assurance.
The paperwork burden estimate, properly, does not include the time
necessary to persuade a secondary employer to provide such an assurance
but does include the development of the verification form or contract
clause and its execution. DOL believes that once the form or contract
clause is created, this form or contract clause will be used uniformly
for subsequent assurances making the average burden per occurrence
minimal. There is no burden on the secondary employer to document its
compliance with the assurance, since it is solely the responsibility of
the primary H-1B employer to comply with the attestation that no U.S.
worker will be displaced by an H-1B worker. DOL estimates an average
burden of 10 minutes per attestation or statement, and that 150 H-1B
employers will document such assurance 5 times annually, for a total
annual burden of 125 hours.
F. Offers of Employment to Displaced U.S. Workers (Sec. 655.738(e))
The ACWIA prohibits H-1B dependent employers and willful violators
from hiring H-1B nonimmigrants if their doing so would displace similar
U.S. workers from an essentially equivalent job in the same area of
employment. The proposed regulations would require H-1B-dependent
employers to keep certain documentation with respect to each former
worker in the same locality and same occupation as any H-1B worker who
left its employ in the period from 90 days before to 90 days after an
employer's petition for an H-1B worker. For all such employees, the
Department proposed that covered H-1B employers maintain the last-known
mailing address, occupational title and job description, any
documentation concerning the employee's experience and qualifications,
and principal assignments. Further, the employer would be required to
keep all documents concerning the departure of such employees and the
terms of any offers of similar employment to such U.S. workers and
responses to those offers. These records are necessary for the
Department to determine whether the H-1B employer has displaced similar
U.S. workers with H-1B nonimmigrants. The Department stated that no
records need be created to comply with these requirements, since the
Equal Employment Opportunity Commission (EEOC) already requires under
its regulations that the records described above be maintained.
Commenters stated that they were unaware of the EEOC regulation
that required this documentation and requested that DOL recite rather
than just refer to the EEOC regulations.
As discussed in Section IV.F.8 below, commenters are generally
correct that the EEOC regulation cited in the NPRM, 29 CFR 1620.14,
does not establish a general requirement that employers create the
records encompassed by the Department's displacement proposal. Rather,
it requires an employer to preserve all personnel or employment records
which the employer "made or kept". Furthermore, EEOC requires the
preservation of the same or similar records under other statutes it
administers, such as the Age Discrimination in Employment Act (ADEA).
Under this Interim Final Regulation, DOL is not requiring employers to
create any documents other than basic payroll information, with one
noted exception. If the employer offers the U.S. worker another
employment opportunity, and does not otherwise do so in writing, by the
provisions of section 655.738(e)(1) of these regulations, the employer
must document and retain the offer and the response to such offer.
It is estimated that 10 H-1B employers will make such offers of
employment 5 times annually (50) and that 5 of those offers and
responses would not otherwise be committed to writing without this
paperwork requirement. Each such documentation is estimated to take 30
minutes for a total annual burden of 2.5 hours.
G. Documentation of U.S. Worker Recruitment (Sec. 655.739(i)
Pursuant to the ACWIA, H-1B-dependent employers are required to
make good faith efforts to recruit U.S. workers before hiring H-1B
workers. Under the proposed regulations, H-1B-dependent employers would
be required to retain documentation of the recruiting methods used,
including the places and dates of the advertisements and postings or
other recruitment method used, the content of the advertisements or
postings, and the compensation terms. Further, the employer would be
required to retain any documentation concerning consideration of
applications of U.S. workers, such as copies of applications
[[Page 80115]]
and related documents, rating forms, job offers, etc. The proposed rule
also would require the employer to place either documentation or a
simple list of the places and dates of the advertisements and postings
of other recruitment methods used. Comments were requested regarding
how employers should determine industry-wide standards and make this
determination available for public disclosure. The documentation noted
above is necessary for the Department of Labor to determine whether the
employer has made a good faith effort to recruit U.S. workers and for
the public to be aware of the recruiting methods used. It was estimated
that annually 200 H-1B dependent employers would need to document their
good faith efforts to recruit U.S. workers. The filing of such records
was estimated to take approximately twenty minutes per employer for an
annual burden of approximately 66.7 hours.
Commenters felt the burden for this item was underestimated, i.e.,
that DOL should recognize that employers file more than one LCA each
year and that DOL should recite rather than just refer to the EEOC
regulation requiring this documentation.
As noted in F. above and as discussed at some length in Section
IV.G.5 of the preamble, DOL believes that employers are required to
preserve the records required under current EEOC requirements. With the
exception of the list to be included in the public access file (and
here too employers have the option of putting the actual records in the
file), DOL is not requiring employers to create any documents, but
rather to preserve those documents which are created or received.
Further, DOL, upon further review, has determined that employers will
not be required to maintain evidence of industry practice for
recruitment. The only additional recordkeeping burden required by these
regulation is that the public disclosure file contain a summary of the
principal recruitment methods used and the time frames in which they
were used. This recordkeeping requirement may be satisfied by creating
a memorandum to the file or the filing of pertinent documents. It is
estimated that 200 H-1B employers will file such documents or
memorandum 5 times annually and that each recordkeeping will take 20
minutes, for an annual burden of approximately 333 hours.
H. Documentation of Fringe Benefits (Sec. 655.731(b))
Pursuant to the ACWIA, all employers of H-1B workers are required
to offer benefits to H-1B workers on the same basis and under the same
criteria as offered to similarly employed U.S. workers. The proposed
regulations would require employers to retain copies of all fringe
benefit plans and summary plan descriptions, including all rules
regarding eligibility and benefits, evidence of what benefits are
actually provided to individual workers and how costs are shared
between employers and employees. These records are necessary for the
Department to determine whether the H-1B nonimmigrants are offered the
same fringe benefits as similarly employed U.S. workers. Copies of most
fringe benefit programs are required to be maintained by Internal
Revenue Service and Pension and Welfare Benefits Administration
regulations; thus there would not ordinarily be an additional
recordkeeping burden from these requirements. The Department estimated
that 2,500 employers would spend approximately 15 minutes each
documenting unwritten plans, for an annual burden of 625 hours.
The Department in the proposed rule also inquired as to whether it
would be possible to require multinational employers to keep H-1B
workers on "home country" benefit plans in lieu of those provided to
U.S. workers and what records would need to be kept to demonstrate the
value of the "home-country" benefits and those provided to U. S.
workers.
A commenter said that DOL should recite, rather than just refer to
the PWBA and IRS regulations. Another commenter stated it was unclear
whether in fact these regulations governing retention of benefits
information meet the DOL requirements for the H-1B program, since the
DOL regulations require specific documentation of the comparative
benefits offered and received by H-1B employees and their U.S.
counterparts, including the need to determine the appropriate
comparison group and then require the maintenance of all the
information in the public inspection file for each H-1B worker. Another
comment stated that DOL has failed to consider the additional burden of
comparing fringe benefits offered by similar employers in the area
which DOL is proposing to require. Commenters questioned the need for
the documentation of fringe benefits to be placed in each public access
file, with others suggesting more flexibility in how the documentation
should be provided. One commenter suggested that employers be allowed
to select equivalent but different valued benefits as long as employers
can show that all similarly situated workers were offered the same
array of benefits.
It is believed that almost all employers of H-1B workers would,
absent the regulation, have already created an employee handbook or
have a summary description plan required by ERISA regulations which
would satisfy the H-1B regulatory requirement. The provision being
considered to require a comparison of fringe benefits offered by
similar employers in the area is not included in this interim final
rule. DOL is not requiring that detailed records of fringe benefits be
maintained in each public access file. These records may be kept in a
master file or in any other manner the employer desires. The public
access file need only contain a summary of the benefits offered to U.S.
workers in the same occupation as H-1B workers, including a statement
of how employees are differentiated, if at all. Ordinarily this would
be satisfied with the employee handbook or summary description
discussed above. Where an employer is providing home country benefits,
the employer need only place a notation to that effect in the public
access file.
There are an estimated 10 percent of H-1B employers, or 6,350 who
provide fringe benefits, such as bonuses, vacations and holidays, not
required by ERISA regulations to be documented. It is estimated to
document these plans would take 15 minutes per employer, for an annual
burden of 1,588 hours (6,350 x 15 minutes). It is further estimated
that 25 percent of H-1B employers (15,875) are multinational employers
and that a note to the file that these workers receive "home country"
benefits would take 5 minutes per employer for an annual burden of
1,323 hours. The total estimated burden for this item is 2,911 hours.
I. Wage Recordkeeping Requirements Applicable to Employers of H-1B
Nonimmigrants
The Department republished and asked for comment on several
provisions of the December 20, 1994 Final Rule (59 FR 65646) which were
published for notice and comment on October 31, 1995 (60 FR 55339).
Existing regulations require all H-1B employers to document their
actual wage system to be applied to the H-1B nonimmigrants and U.S.
workers. They are also required to keep payroll records for non-FLSA
exempt H-1B workers and other employees for the specific employment in
question. The proposed rule would decrease the burden on employers of
keeping hourly pay records for U.S. workers, requiring such records
only if either the worker is not
[[Page 80116]]
paid on a salary basis, or the actual wage is stated as an hourly wage.
For H-1B workers, such records must also be kept if the prevailing wage
is expressed as an hourly rate. The statute requires that the employer
pay H-1B nonimmigrants the higher of the actual or prevailing wage. The
Department explained that in order to determine if the employer is
paying the required wage, it must be able to ascertain the system an
employer uses to determine the wages of non-H-1B workers. The
Department also stated that it is essential to require the employer to
maintain payroll records for the employer's employees in the specific
employment in question at the place of employment to ensure that H-1B
nonimmigrants are being paid at least the actual wage being paid to
non-H-1B workers or the prevailing wage, whichever is higher. The
Department estimated that approximately 50,000 employers employ H-1B
nonimmigrants. The documentation would have to be done only one time
for each employer. Hourly pay records would have to be prepared with
respect to all affected employees each pay period. The Department
estimated that the public burden wold be approximately 1 hour per
employer per year to document the actual wage system for a total burden
to the regulated community of 50,000 hours in a year.
The payroll recordkeeping requirements are virtually the same as
those required by the Fair Labor Standards Act (FLSA) and any burden
required is subsumed in the OMB Approval No. 1215-0017 for those
regulations at 29 CFR Parts 516, except with respect to records of
hours worked for exempt employees. There would be no burden for U.S.
workers since as a practical matter, hours worked records would be
required for U.S. workers only if they are not exempt from FLSA, or if
they are exempt but paid on an hourly basis (certain computer
professionals), and therefore would keep hourly records in any event.
The Department estimates that 55,000 H-1B workers will be paid on a
salary basis. Hours worked records would be required for these workers
only if the prevailing wage is expressed as an hourly rate--estimated
to 17 percent of all cases. The Department estimated a burden of 2.5
hours per worker per year, for 9,350 workers and a total of 23,375
hours.
Several commenters stated that DOL had grossly underestimated the
burden of documenting the objective wage system. Some indicated that it
was ludicrous to estimate that the documentation is done only once,
since wage systems continually change, documentation will need be done,
at a minimum, each time a new LCA is prepared and employers do not hire
H-1B nonimmigrants only for one position in the organization. Thus, DOL
must calculate how many different job categories are filled by H-1B
nonimmigrants on average for each employer to estimate how many times
the burden of documenting the objective wage system occurs annually.
Further, the documentation must be sufficiently detailed to allow a
third party to determine the actual wage, making the burden higher than
estimated. Some commented that the proposed regulation requires the
actual wage be determined and documented anew for each H-B hire, along
with periodic adjustments to the actual wage system.
The Department has deleted the provisions suggesting that the
employer's wage system must be objective, as well as the statement that
it must be described in the public disclosure file with detail
sufficient for a third party to determine the actual wage rate for an
H-1B nonimmigrant. As stated above, the requirement that a description
of the actual wage system be included in the public access file is
already contained in the regulations at section 655.760(a)(3).
Therefore these regulations create no additional burden for this
requirement.
Some commenters stated that while DOL estimated that only 17
percent of the prevailing wages provided to employers by State
Employment Security Agencies (SESAs) are expressed as hourly rates,
their experience was that SESAs regularly provides employers and
attorneys with the prevailing wage stated as an hourly rate.
With respect to the concern expressed that SESA more frequently
issues hourly rates, the modification to section 655.731(a)(2) in the
interim final rule will provide that employer shall convert the
prevailing wage determination into the form which accurately reflects
the wages which it will pay.
The Department has also concluded that a revision of the regulation
is appropriate to remove the requirement that the employer keep hourly
wage records for its full-time H-1B employees paid on a salary basis.
The regulation continues to require employers to keep hours worked
records for employees who are not paid on a salary basis and for part-
time H-1B workers, regardless of how paid. The additional burden of
keeping records for salaried H-1B workers who are exempt from the FLSA
is estimated at 2.5 hours per worker for 10,500 workers (1.5 percent of
total H-1B workers), for a total annual burden of 26,250 hours.
J. Information Form Alleging H-1B Violations
The ACWIA requires DOL to develop a procedure so that a person,
other than an aggrieved party, can provide, in writing on a form
developed by DOL, information alleging H-1B program violations. The
Department proposes that a single form be used by any party alleging
violations, to the Wage and Hour Division of the U.S. Department of
Labor, whether a complainant or another source. The H-1B Nonimmigrant
Information Form, WH-4, is included in this Interim Final Rule for
public review and comment. It is estimated that 200 such responses will
be received annually and that each response will take approximately 20
minutes, for a total burden of 67 hours.
Total Annual Hours Burden for all Information Collections--667,423
Hours
Retention of Records: The current regulations provide at section
655.760 that copies of the LCAs and its documentation are to be kept
for a period of one year beyond the end of the period of employment
specified on the LCA or one year from the date the LCA was withdrawn,
except that if an enforcement action is commenced, these records must
be kept until the enforcement procedure is completed as set forth in
part 655, subpart I. The payroll records for the H-1B employees and
others employees in the same occupational classification must be
retained for a period of three years from the date(s) of the creation
of the record(s), except that if an enforcement proceeding is
commenced, all payroll records shall be retained until the enforcement
proceeding is completed. These record retention requirements have been
approved by OMB under OMB No. 1205-0310.
After consideration of comments raised in response to the NPRM, the
Department has clarified the record retention requirements to provide
that where there is no enforcement action, the employer shall retain
required records for a period of one year beyond the last date on which
any H-1B nonimmigrant is employed under the labor condition application
or, if no nonimmigrants were employed under the labor condition
application, one year from the date the labor condition application
expired or was withdrawn.
H-1B employers may be from a wide variety of industries. Salaries
for employers and/or their employees who perform the reporting and
[[Page 80117]]
recordkeeping functions required by this regulation may range from
several hundred dollars to several hundred thousand dollars where the
corporate executive office of a large company performs some or all of
these functions themselves. Absent specific wage data regarding such
employers and employees, respondent costs were estimated in the
proposed rule at $25 an hour. Total annual respondent hour costs for
all information collections were estimated to be $8,105,887.50 ($25.00
x 324,235.5 hours).
Some commenters questioned the $25 per hour estimate for respondent
costs, indicating that in order to comply with the information
requirements, H-1B employers must employ high-level compensation
professionals and human resource professionals. The Department
recognizes that some employers may employ highly-paid professionals to
advise them on how to comply with the H-1B program requirements.
However, it is believed that such a need will be short-lived and that
once a system is in place, compliance can be maintained without this
highly paid professional assistance. The $25 an hour respondent cost is
an average cost, which recognizes higher initial cost to effect
compliance, as well as the low cost of performing the clerical filing
functions. Further, as noted above, in addition to the guidance
provided in this regulation and its preamble, the Department intends to
provide non-technical guidance printed material and information in
electronic format which should greatly assist employers and employees
in understanding the H-1B program requirements. Total annual respondent
hour costs for all information collections are estimated at $16,685,575
($25.00 x 667,423).
The paperwork requirements discussed above will not become
effective until OMB has reviewed and approved these requirements and
assigned an OMB approval number.
II. Background
On November 29, 1990, the Immigration and Nationality Act was
amended by the Immigration Act of 1990 (IMMACT 90) (Pub. L. 101-649,
104 Stat. 4978) to create the "H-1B visa program" for the temporary
employment in the United States (U.S.) of nonimmigrants in "specialty
occupations" and as "fashion models of distinguished merit and
ability." The H-1B provisions of the INA were amended on December 12,
1991, by the Miscellaneous and Technical Immigration and Naturalization
Amendments of 1991 (MTINA) (Pub. L. 102-232, 105 Stat. 1733). Further
amendments were made to the H-1B provisions of the INA on October 21,
1998, by enactment of the American Competitiveness and Workforce
Improvement Act (ACWIA) (Title IV of Pub. L. 105-277, 112 Stat. 2681).
In addition, the H-1B provisions of the INA were amended in October,
2000 by enactment of the American Competitiveness in the Twenty-first
Century Act of 2000 (Pub. L. 106-313, 114 Stat. 1251, October 17,
2000), the Immigration and Nationality Act--Amendments (Pub. L. 106-
311, 114 Stat. 1247, October 17, 2000), and section 401 of the Visa
Waiver Permanent Program Act (Pub. L. 106-396, 114 Stat. 1637, October
30, 2000) (collectively, the October 2000 Amendments).
These cumulative amendments of the INA assigned certain
responsibility to the Department of Labor (Department or DOL) for
implementing several provisions of the Act relating to the temporary
employment of certain nonimmigrants. The H-1B provisions of the INA
govern the temporary entry of foreign "professionals" to work in
"specialty occupations" in the United States under H-1B visas. 8
U.S.C. 1101(a)(15)(H)(i)(b), 1182(n), and 1184(c). The H-1B category of
specialty occupations consists of occupations requiring the theoretical
and practical application of a body of highly specialized knowledge and
the attainment of a Bachelor's or higher degree in the specific
specialty as a minimum for entry into the occupation in the United
States. 8 U.S.C. 1184(i)(1). In addition, an H-1B nonimmigrant in a
specialty occupation must possess full State licensure to practice in
the occupation (if required), completion of the required degree, or
experience equivalent to the degree and recognition of expertise in the
specialty. 8 U.S.C. 1184(i)(2). The category of "fashion model"
requires that the nonimmigrant be of distinguished merit and ability. 8
U.S.C. 1101(a)(15)(H)(i)(b).
A. Changes Made by the ACWIA and the October 2000 Amendments
The ACWIA made numerous significant changes in the H-1B provisions.
One was the temporary increase in the maximum number of H-1B visas over
the three fiscal years following ACWIA's enactment: For fiscal years
1999 and 2000, the cap would be 115,000; for fiscal year 2001, the cap
would be 107,500; and for fiscal year 2002 (and thereafter), the cap
would return to the original 65,000. Another significant change was the
imposition of additional attestation requirements for certain employers
to provide better protections to U.S. workers. The additional
attestation requirements apply to "H-1B-dependent employers" and to
employers who have been found to have committed a willful failure or
misrepresentation with respect to the H-1B requirements (hereafter
referred to as "willful violators"). H-1B-dependent employers and
willful violators must attest that they: (1) Have not displaced and
will not displace a U.S. worker within the period beginning 90 days
before and ending 90 days after the filing of an H-1B petition; (2)
will not place an H-1B worker with another employer with indicia of an
employment relationship without making an inquiry to assure
displacement has not and will not take place within the period
beginning 90 days before and ending 90 days after the placement; and
(3) have taken good faith steps to recruit U.S. workers for the job for
which the H-1B workers are sought, and will offer the job to any
equally or better qualified U.S. worker. The recruitment provision does
not apply to an LCA for an H-1B worker who is "exceptional," an
"outstanding professor or researcher," or a "multinational manager
or executive" within the meaning of section 203(b)(1) of the INA. The
ACWIA specified that both the displacement and recruitment/hiring
protections become effective upon the date of the Department's final
regulation and apply only to LCAs filed before October 1, 2001. An H-
1B-dependent employer or willful violator filing an LCA which will be
used only for "exempt" H-1B workers is not required to comply with
the new attestation requirements for that LCA.
The ACWIA also instituted a filing fee of $500, to be collected by
INS, for initial petitions and first extensions filed on or after
December 1, 1998, and before October 1, 2001. Institutions of higher
education and related or affiliated nonprofit entities, nonprofit
research organizations, and Governmental research organizations are
exempt from the new fee. The fees are to be used for job training, low-
income scholarships, and program administration/enforcement.
The ACWIA included other generally applicable worker protections,
specifically: whistleblower protection, prohibitions against
reimbursement of the $500 filing fee and against penalizing an H-1B
worker who terminates employment prior to a date agreed with the
employer, and a requirement that the employer pay wages during
nonproductive time if such time is not due to reasons occasioned by the
worker. The ACWIA
[[Page 80118]]
also required employers to offer H-1B workers fringe benefits on the
same basis and in accordance with the same criteria as U.S. workers.
The ACWIA specified new civil money penalties ranging from $1,000
to $35,000 per violation, along with debarment. New investigative
procedures were created, authorizing the Department to conduct
"random" investigations of willful violators during the five-year
period after the finding of such violation, and establishing an
alternative investigation protocol based on information indicating
potential violations obtained from sources other than aggrieved
parties. Enforcement of the requirement that employers hire U.S.
workers if they are equally or better qualified than the H-1B workers
is carried out by the Attorney General through arbitration.
The ACWIA mandated a particular method of computation of the local
prevailing wage for purposes of the requirements of the H-1B program
and the permanent immigrant worker program with respect to employees of
institutions of higher education and related or affiliated nonprofit
entities, nonprofit research organizations, and Governmental research
organizations. Under the ACWIA provision, the prevailing wage level is
to take into account only employees at such institutions and
organizations.
The ACWIA became law on October 21, 1998. With one exception, its
provisions took effect at that time, and apply both to existing LCAs
and to LCAs filed in the future. Pursuant to section 412(d) of the
ACWIA and section 212(n)(1)(E)(ii) of the INA as amended by the ACWIA,
8 U.S.C. 1182(n)(1)(E)(ii), the special attestation provisions
regarding displacement and recruitment are applicable only to LCAs
filed by H-1B-dependent employers and willful violators on or after the
date this Interim Final Rule becomes effective and until October 21,
2001.
In addition, section 415(b) of the ACWIA provided that the
amendments to section 212(p) of the INA, 8 U.S.C. 1182(p)--relating to
computing the prevailing wage level for employees of an institution of
higher education or a related or affiliated nonprofit entity, for
employees of a nonprofit research organization or Governmental research
organization, or for professional athletes--apply to prevailing wage
computations for LCAs filed before October 21, 1998, "but only to the
extent that the computation is subject to an administrative or judicial
determination that is not final as of such date." Therefore, the
regulations in parts 655 and 656 to implement section 212(p) apply
retroactively to any prevailing wage determinations thereunder which
were not final as of October 21, 1998.
Two other ACWIA's provisions contained temporal qualifications,
relating to the Department's authority to conduct random investigations
and other source investigations (INA, sections 212(n)(2)(F),
212(n)(2)(G), respectively). The Act specified that the Department's
authority, pursuant to section 212(n)(2)(F) of the INA as amended by
the ACWIA, 8 U.S.C. 1182(n)(2)(F), to conduct random investigations of
employers who have committed a willful failure to meet a condition of
their LCAs or who have made a willful misrepresentation of material
fact applies only where such a finding has been made by the Secretary
on or after October 21, 1998. The Act also specified that the
Department's authority, pursuant to section 212(n)(2)(G), 8 U.S.C.
1182(n)(2)(G), to conduct investigations based on credible information
from a source other than an aggrieved person would "sunset," i.e.,
expire, on September 30, 2001.
The October 2000 Amendments made substantial increases in the
numbers of H-1B visas available for the employment of nonimmigrants:
195,000 each year for fiscal years 2001, 2002, and 2003 (with the
number thereafter to revert to the original 65,000 per fiscal year); an
unspecified additional number for fiscal year 1999 to cover
nonimmigrants issued visas above the authorized number for that year;
an unspecified additional number for fiscal year 2000 to cover
petitions filed before September 1, 2000; and an unlimited number for
nonimmigrants employed by institutions of higher education, by their
related or affiliated nonprofit entities, by nonprofit research
organizations, or by governmental research organizations (i.e., visas
for employees of such entities are not counted against the annual
limits). The Amendments extended the effective periods for two ACWIA
provisions: The additional attestation elements for H-1B-dependent
employers and willful violator employers were extended until October 1,
2003; the Department's authority to conduct investigations based on
sources other than aggrieved parties was extended through September 30,
2003. In addition, the Amendments created a "portability" option for
H-1B nonimmigrants, by authorizing their change of employers (from one
H-1B employer to another) "upon the filing by the prospective employer
of a new petition on behalf of such nonimmigrant" (i.e., eliminating
the need to await the INS adjudication of the petition). Further, the
Amendments authorized the extension of H-1B status for nonimmigrants in
cases of delayed INS adjudications of petitions for employment-based
immigration or applications for adjustment of status for permanent
residence; the extensions of H-1B status are to be made by the INS in
one-year increments. The Amendments doubled the ACWIA-created petition
fee (from $500 to $1,000) and extended the effective period of the fee
provision to October 1, 2003. The Amendments broadened the ACWIA's
exemption of certain employers from payment of the filing fee (to
include nonprofit entities engaging in established curriculum-related
clinical training of students registered at such institutions). In
addition, the Amendments made some changes in the ACWIA allocations of
fee monies for various training programs, increased the ACWIA
allocation of fee monies to the INS for processing of LCAs, and reduced
the ACWIA allocation of fee monies to the Department for processing and
enforcement of LCAs (i.e., reduced from 6 percent to 5 percent, to be
divided equally between processing and enforcement). Finally, the
Amendments directed that an amended H-1B petition was not required to
be filed by an employer that was involved in a corporate restructuring,
where the nonimmigrant's terms and conditions of employment remained
the same.
The Department notes that the ACWIA was the product of extensive
negotiations between the Administration and the House and the Senate.
See 144 Cong. Rec. H8584 (Sept. 24, 1998); 144. Cong. Rec. S10877
(Sept. 24, 1998). Earlier in the year both the House and the Senate had
issued very different bills to address the H-1B program (see S. Rep.
No. 105-186, 105th Cong., 2d Sess. (1998); H.R. Rep. No. 105-657, 105th
Cong., 2d Sess. (1998)). The resulting legislation was a compromise,
and there was no conference committee report or joint statement by the
negotiators that would provide clear legislative history as to its
intent. Although Senator Abraham and Congressman Lamar Smith, as well
as other individual Congressman, made remarks in the Congressional
Record, their views as to the meaning and effect of the legislation are
dramatically different.
The Department further notes that the October 2000 Amendments were
also the product of extensive negotiations, but that there is very
little legislative history concerning the limited
[[Page 80119]]
provisions that were actually enacted by Congress.
Keeping in mind the difficulty with construing legislation under
these circumstances, the Department has--in the Preamble of this
Interim Final Rule--cited to the legislative history of ACWIA in both
the House and the Senate, and to the extensive remarks of both Senator
Abraham and Congressman Smith.
B. Summary of Comments on the January 5, 1999 NPRM
To obtain public input to assist in the development of interim
final regulations, the Department published a Notice of Proposed
Rulemaking (NPRM) and invited public comment in the Federal Register on
January 5, 1999. The NPRM also stated that the Department was re-
publishing for notice and further comment certain provisions of the
Final Rule promulgated in December 1994. These provisions had been
proposed for comment on October 31, 1995, during the pendency of the
litigation in National Association of Manufacturers v. Reich, 1996 WL
420868 (D.D.C. 1996) (NAM), which resulted in an injunction against the
Department's enforcement of some of the provisions on Administrative
Procedure Act (APA) procedural grounds. In addition, the Department
sought comment on a number of interpretive issues arising under the
existing regulations, set forth in proposed Appendix B. The thirty-day
comment period set forth in the January 5, 1999 NPRM was extended until
February 19, 1999.
The Department has, in this Interim Final Rule, carefully
considered comments received in response to the October 31, 1995
Proposed Rule in conjunction with the comments received in response to
the January 5, 1999 NPRM. The 1995 Proposed Rule elicited comments from
13 commenters, including one from a trade association, one from an
association representing immigration attorneys, one from an association
representing firms which provide international personnel to American
businesses, five from information technology companies, one from an
accounting and auditing firm, two from universities and two from law
firms. The proposals which then elicited the greatest number of
comments concerned the actual wage system (Appendix A), workplace
notice, the 90-day short-term placement option for H-1B workers who
move to worksite(s) not covered by LCA(s), and the use of the
Government per diem schedule for travel expenses for those workers. All
but two of these commenters objected to the Department's proposal that
the actual wage be based on a system utilizing objective criteria.
Seven of the commenters objected to the Department's proposals on the
posting of notices at worksites not controlled by the employer, while
eight of the commenters objected to the Department's proposals with
regard to the 90-day option. Five of the commenters objected to the use
of the Government per diem schedule for reimbursement of travel
expenses under this option.
The Department received 92 comments in response to the January 5,
1999 NPRM, including comments which were received late but which were
included in the rulemaking record and fully considered. The commenters
included individuals, a union, employee associations, lawyers or law
firms, businesses, trade and business associations, educational and
research facilities and associations, U.S. Government agencies, and
embers of Congress (one comment from two Senators and one comment
signed by 23 Members of Congress (hereafter referred to as
"Congressional commenters")).
The proposals eliciting the greatest numbers of comments were those
regarding non-productive time (or "benching"), the information
required on the LCA regarding the employer's status as H-1B-dependent,
recruitment, displacement, and the posting of notices. Individual
commenters were critical of the H-1B program generally, describing it
as particularly detrimental to the job security of older Americans, and
sought more guidance from the Department with regard to procedures
which American workers may follow to prove displacement. These
commenters also urged the Department to strictly enforce the ACWIA "no
benching" provisions; include a requirement that all employers check
the H-1B dependency box on Form ETA 9035, with the imposition of heavy
fines for noncompliance; and require the physical posting of all
notices at the place of employment or worksite.
The union and employee association commenters generally endorsed
the Department's proposed regulations. Educational and research
facilities primarily addressed and supported the Department's proposals
regarding determination of prevailing wages for employees of those
institutions. These commenters also urged the Department and the INS to
be consistent in their application of the definitions contained in the
regulatory provisions.
Two associations, one representing the interests of immigration
lawyers and the other representing the interests of firms which provide
international personnel to American businesses, commented on virtually
every proposal made by the Department in the NPRM. Lawyers and law
firms particularly addressed the proposal that all fees and costs
connected with the filing of the LCA and H-1B petition, including
attorney and INS fees, are to be borne by the employer. The
Department's proposal addressing the timing of the H-1B dependency
determination also drew a strong response from commenters representing
business interests. Senator Abraham, one of the ACWIA's Congressional
sponsors, submitted his October 21, 1998 Congressional Record remarks
to be included in the rulemaking record. Senator Abraham, along with
Senator Bob Graham, further commented on a number of NPRM provisions
they believed to be inconsistent with Congressional intent. The
Department also received a letter signed by 23 Congressmen and
Senators, including Senators Abraham and Graham. These commenters
expressed concerns on a number of provisions, including proposed
paperwork requirements, the requirement that the actual wage be based
on an objective system, and the 90-day short-term placement option.
III. General Issues Applicable to the Rule
In the review of the comments and the development of this rule, the
Department realized that there are a number of general issues which
affect the entire rule. The following discussion addresses these
issues.
A. The Administrative Procedure Act
On January 5, 1999, the Department of Labor published a Notice of
Proposed Rulemaking (NPRM) in the Federal Register (64 FR 628). The
Department published the NPRM to obtain public comment and assistance
in the development of regulations to implement changes made to the INA
by the ACWIA, and to provide an additional opportunity for comment on
certain provisions which were previously published for comment as a
Proposed Rule in 1995 (60 FR 55339). In addition, the Department sought
comments on various interpretations of the existing regulations,
published as proposed Appendix B.
The Department's NPRM set forth specific regulatory language for
comment on some, but not all, of the issues arising from the provisions
of the ACWIA. For those issues with no specific regulatory language,
the Department identified concerns, and set out its proposed approach
to addressing
[[Page 80120]]
them or described alternative approaches. The Department sought comment
on all of these issues and proposals.
The Department was mindful of Congress' intent that the ACWIA
implementing regulations be promulgated in a "timely manner;" the
legislation allowed a public comment period of "not less than 30
days." Accordingly, the Department set a 30-day comment period, to
close on February 4, 1999. Upon petition by the American Council on
International Personnel (ACIP), the Department extended the comment
period another 15 days, until February 19, 1999. After consideration of
the comments received, the Department now issues this Interim Final
Rule and invites further comment on the regulatory provisions set forth
in Part IV.A through N of this preamble and the accompanying regulatory
text. After reviewing any comments received, the Department will issue
a Final Rule.
The Department received 13 comments on its regulatory process.
The comments focused primarily on the length of the comment period
and the NPRM's lack of regulatory text on various issues. Nine
commenters generally objected to the length of the comment period in
combination with the lack of regulatory text, variously contending that
the requirements of the Administrative Procedure Act (APA) were
violated in that the bulk of the proposals together with the lack of
regulatory text, definitions, and clear explanations prohibited
meaningful comment even within the extended period allowed. The
American Immigration Lawyers Association (AILA) recommended that the
Department withdraw the NPRM and issue an Advance Notice of Proposed
Rulemaking (ANPR). ACIP and Senators Abraham and Graham suggested that
the Department publish a proposed rule with request for comment prior
to implementing an interim final or final rule. ACIP also expressed
concern about the inclusion of the outstanding issues in the 1995 NPRM
in the proposed rule. In the alternative, ACIP and the American Council
on Education (ACE) requested the Department to defer enforcement of the
interim final rule during an employer education period of at least 60
days following its promulgation.
The Department has concluded that the delay inherent in the
publication of an ANPRM or a new NPRM with full regulatory text would
not be warranted. The new attestation requirements for H-1B-dependent
employers and willful violators created by the ACWIA do not take effect
until these regulations are promulgated and will terminate on October
1, 2003 (with the extended "sunset" date specified by the October
2000 Amendments). Congress specifically allowed a comment period of 30
days. The Department obliged commenters by extending this period an
additional 15 days. The analysis of the comments and the preparation of
this Interim Final Rule have been a complex and time-consuming process.
The Department is of the view that there should be no further delay of
key ACWIA provisions. The Department is now providing an additional
opportunity for comment on the provisions of the Interim Final Rule.
Also, the Department seeks comments on additional proposals presented
for the first time; these proposals are not included in the Interim
Final Rule but are presented for comment for possible inclusion in the
Final Rule.
The Department is of the view that the procedure followed on this
Rule is in full compliance with the notice and comment provisions of
the APA. The APA requires that an agency include in its notice of
proposed rulemaking "either the terms or substance of the proposed
rule or a description of the subjects and issues involved." 5 U.S.C.
553(b)(3); see Kooritzky v. Reich, 17 F.3d 1509, 1513 (D.C. Cir. 1994).
Furthermore, the agency must give "interested persons an opportunity
to participate in the rulemaking through submission of written data,
views, or arguments." 5 U.S.C. 553(c). Thus, under the plain language
of the APA, the absence of complete regulatory text in the NPRM does
not compromise the Department's compliance with the notice and comment
requirements of the APA.
The lengthy and detailed preamble to the NPRM, setting forth the
Department's proposals and concerns on each of the issues, struck a
balance between the need to promulgate regulations expeditiously
(created by the ACWIA provision that its new attestation requirements
would not take effect until regulations are issued and will terminate
on October 1, 2001 (now extended until October 1, 2003), as well as the
need to give regulatory guidance with regard to those ACWIA provisions
which took effect immediately), and the opportunity to provide
meaningful public comments. Certainly the public has a right to have a
sufficient description of the subjects and issues involved to offer
meaningful comment. The Department believes that it has fully
accommodated this need with its detailed discussion in the NPRM
preamble. Furthermore, in addition to describing the provisions it
proposed to promulgate where regulatory text was not included in the
NPRM, the Department discussed and sought comments on numerous
additional alternatives it was considering, in an attempt to ensure
that there would be no surprises to the public if, after a review of
the comments, it determined that an alternative was appropriate for the
Interim Final Rule. The NPRM preamble is sufficiently detailed to
"inform the reader, who is not an expert in the subject area, of the
basis and purpose for the * * * proposal[s]." Federal Register Act, 44
U.S.C. 1501-1511 and regulations thereunder, 1 CFR 1812(a).
The Department has carefully considered the request for a delay in
enforcement for 60 days after the effective date of the regulations.
The Department notes that the new law was extensively negotiated with
stakeholders for nearly a year before it was enacted, that stakeholders
have been aware of the Department's proposed approach to the issues for
more than a year, that a number of the provisions will be in effect for
only a limited period of time, and that several provisions that are the
subject of this rulemaking relate to applications of the law that have
been in effect for nearly a decade and have been addressed in prior
rulemaking. Furthermore, the Department plans to undertake extensive
education efforts, as discussed below. The Department has therefore
concluded that it is inappropriate to administratively declare a period
in which civil money penalties and debarment would not be imposed.
However, we would point out that in all cases the Department's
enforcement and the penalties imposed take into consideration the full
circumstances of any violations found, within the constraints of the
statutory requirements. See INA, section 212(n)(2)(C), 8 U.S.C.
1182(n)(2)(C), and Sec. 655.810 of this Rule. Furthermore, with regard
to the recordkeeping requirements in particular, as discussed in IV.M.5
below, the Department will issue CMP assessments for violations only
where it finds that the violation impedes the ability of the
Administrator to determine whether a violation of the H-1B requirements
has occurred, or the ability of members of the public to have
information needed to file a complaint or information regarding alleged
violations of the Act.
Finally, the Department notes that the changes to the method of
making prevailing wage determinations for academic institutions and
related nonprofit entities, nonprofit research organizations, and
Governmental research organizations, set forth at
[[Page 80121]]
Sec. Sec. 655.731(a)(2) and 656.40, are effective immediately and apply
retroactively to all LCAs filed on or after October 21, 1998, as well
as to all LCAs filed earlier to the extent that the prevailing wage
determination was subject to an administrative or judicial
determination that was not final as of October 21, 1998. Pursuant to 5
U.S.C. 553(d), the Department finds good cause to make these provisions
effective immediately in light of the statutory provisions at Section
415(b) of the ACWIA, expressly making the changes in the prevailing
wage determinations apply retroactively.
B. Dissemination of Information to the Public
A significant concern expressed by a large number of commenters is
the need to ensure that both U.S. and H-1B workers, as well as
employers, are well-informed about their rights and obligations under
the H-1B program in general, and the new provisions of the ACWIA in
particular. The Department appreciates the importance of such education
and intends to undertake active efforts to educate the public about the
H-1B program. Specifically, the Department intends to prepare and make
available pamphlets, fact sheets and a small business compliance guide
in both written and electronic formats. These resources will explain
the obligations of employers, the rights of H-1B and U.S. workers, and
the roles of the Department of Labor and the other government agencies
involved in the program (the INS, the Departments of Justice and
State). The resources will also reference materials available from
these agencies that bear on the employment of H-1B nonimmigrants. The
Department also plans to work with the INS and the State Department to
develop a pamphlet to be provided to visa applicants and posted
electronically that will explain rights and responsibilities under the
H-1B program.
The electronic compliance material will be available through the
Department's web page at https://www.dol.gov, which will provide
electronic links to other sources of information that bear on the
employment of nonimmigrants. From the home page, the material will be
accessible either by going to DOL Agencies: Employment Standards
Administration, Wage and Hour Division (WHD), then to Laws and
Regulations, and then to Compliance Assistance Information: Wage and
Hour Division, or by going directly to
https://www2.dol.gov/dol/esa/public/regs/compliance/whd/whdcomp.htm.
The Department also intends to add an "H-1B Advisor" to its
Internet "Employment Laws Assistance for Workers and Small
Businesses" (ELAWS) system (located at the bottom of the home page).
The H-1B ELAWS Advisor will be an interactive program that helps
employers, employees, and other interested parties determine their H-1B
rights and responsibilities, 24 hours-a-day, 7 days-a-week. The Advisor
imitates the interaction an individual may have with a DOL expert--it
asks questions, provides information, and directs the user to the
appropriate resolution based on the responses given.
This information may also be obtained from the Wage and Hour
Division's national and local offices. Mail requests should be
addressed to the Wage and Hour Division Immigration Team, Room S-3510,
200 Constitution Avenue, NW., Washington, DC 20210. Telephone requests
should be made of the Wage and Hour Division Immigration Team at (202)
693-0071.
The addresses and phone numbers for Wage-Hour's district offices
may be found on the Department's website at https://www.dol.gov/dol/esa/
public/contacts/whd/america2.htm, and in the Federal government section
of local telephone directories. Additionally, the Interim Final Rule
refers to three electronic resources: America's Job Bank, O*NET, and
the Occupational Outlook Handbook . The job bank may be accessed at
https://www.ajb.dni.us. The O*NET may be downloaded for free or ordered
through the Government Printing Office, which can be reached through
the Department's weblink at https://www.doleta.gov/programs/onet. The
Occupational Outlook Handbook, published by the Department/s Bureau of
Labor Statistics, may be found at https://stats.bls.gov/ocohome.htm.
Finally, the Department will continue its practice of making
available speakers for groups affected by the Department's
administration of the H-1B program. The Department will also furnish
information and copies of its resource materials to both employee and
industry organizations to facilitate distribution to their member
organizations.
IV. Discussion of Provisions of Interim Final Rule and Comments
Issues arising under the Proposed Rule, including the Department's
response to comments thereon are discussed below. For the convenience
of the public, the numbering in this part of the Preamble remains the
same as in the Proposed Rule unless otherwise indicated.
The Department notes that, in a few instances, it is requesting
comments in the Interim Final Rule on a regulation or an approach to a
regulation on which it has not previously sought comment. These
provisions are not included in the Interim Final Rule, but rather will
be considered when the Department promulgates the Final Rule after
review of any comments. These issues are highlighted in the preamble.
The Department also notes that the new regulatory text published
here generally includes all of the surrounding regulatory text in order
to provide context to the reader. However, the only provisions which
are open for comment are the issues discussed in the Preamble.
Further, the Department notes that the Interim Final Rule includes
changes in the regulations to implement the October 2000 Amendments.
These matters are discussed in the appropriate sections of the
Preamble, and comments on the provisions are invited.
The Department has been working with the INS to coordinate our
respective rulemaking efforts under the Act and to achieve consistency
in the implementation of the ACWIA provisions and the October 2000
Amendments.
A. What Constitutes an "Employer" for Purposes of the ACWIA
Provisions? (Sec. 655.736(b) and Sec. 655.730(e))
Section 212(n)(3)(C)(ii) of the INA as amended by the ACWIA directs
that "any group treated as a single employer under subsection (b),
(c), (m), or (o) of section 414 of the Internal Revenue Code of 1986
shall be treated as a single employer" for purposes of defining an
"H-1B--dependent employer." These provisions, found at 26 U.S.C.
414(b), (c), (m) and (o), concern the circumstances in which ostensibly
separate businesses are treated by the Internal Revenue Code (IRC) as a
single employer for purposes of pension and other deferred compensation
plans.
Section 414(b), (c), and (m) of the IRC, respectively, define
"controlled group of corporations," "partnerships, proprietorships,
etc., which are under common control," and "affiliated service
group." Section 414(o) provides that the Department of the Treasury
may issue regulations addressing other business arrangements, including
employee leasing, in which a group of employees are treated as employed
by the same employer. However, the Department of the Treasury has not
issued any regulations under this provision; therefore Section 414(o)
will not be taken into account in determining who is treated as a
single
[[Page 80122]]
employer for ACWIA purposes unless regulations are issued by the
Department of the Treasury during the period the H-1B-dependency
provisions of the ACWIA are effective.
Section 414(b) of the IRC provides that all employees within a
"controlled group of corporations" (within the meaning of section
1563(a) of the Code, determined without regard to sections 1563(a)(4)
and (e)(3)(C)) are treated as employed by a single employer. Under
section 1563(a) and the related Treasury regulations, a controlled
group of corporations is a parent-subsidiary-controlled group, a
brother-sister-controlled group, or a combined group. 26 U.S.C.
1563(a); 26 CFR 1.414(b)-1(a). A parent-subsidiary is, generally, one
or more chains of corporations connected through stock ownership with a
common parent corporation where at least 80 percent of the stock (by
voting rights or value) of each subsidiary corporation is owned by one
or more of the other corporations (either another subsidiary or the
parent corporation), and the common parent corporation owns at least 80
percent of the stock of at least one subsidiary. In general terms, a
brother-sister controlled group is a group of corporations in which
five or fewer persons (individuals, estates or trusts) own 80 percent
or more of the stock of the corporations and certain other ownership
criteria are satisfied. A combined group is a group of three or more
corporations, each of which is a member of a parent-subsidiary
controlled group or a brother-sister controlled group and one of which
is a common parent corporation of a parent-subsidiary controlled group
and is also included in a brother-sister controlled group.
Section 414(c) of the IRC and the related Treasury regulations
state that all employees of trades or businesses (whether or not
incorporated) that are under common control are treated as employed by
a single employer. 26 U.S.C. 414(c); 26 CFR 1.414(c)-2. Trades or
businesses include sole proprietorships, partnerships, estates, trusts
and corporations. Trades or businesses are under common control if they
are included in a parent-subsidiary group of trades or businesses, a
brother-sister group of trades or businesses, or a combined group of
trades or businesses. Generally, the standards for determining whether
trades or businesses are under common control are similar to the
standards that apply to controlled groups of corporations. However, for
these purposes, pursuant to 26 CFR 1.414(c)-2(b)(2), ownership of at
least an 80 percent interest in the profits or capital interest of a
partnership or the actuarial value of a trust or estate constitutes a
controlling interest in a trade or business.
Section 414(m) of the IRC provides that all employees of the
members of an "affiliated service group" are treated as employed by a
single employer. 26 U.S.C. 414(m). In general terms, an affiliated
service group is a group consisting of a service organization (the
"first organization"), such as a health care organization, a law firm
or an accounting firm, and one or more of the following: (a) A second
service organization that is a shareholder or partner in the first
organization and that regularly performs services for the first
organization (or is regularly associated with the first organization in
performing services for third persons), or (b) any other organization
if (i) a significant portion of the second organization's business is
the performance of services for the first organization (or an
organization described in clause (a) of this sentence or for both) of a
type historically performed in such service field by employees, and
(ii) ten percent or more of the interest in the second organization is
held by persons who are highly compensated employees of the first
organization (or an organization described in clause (a) of this
sentence). IRS has issued proposed regulations at 52 FR 32502 (Aug. 27,
1987), which may be consulted to ascertain IRS's interpretation of
these provisions.
In the event of an H-1B investigation involving the issue of what
entity or entities constitute a single employer for purposes of the
ACWIA dependency provisions, an employer will be required to provide
documentation necessary to enable the Department to apply these IRC
provisions. The Department emphasizes that if an employer wishes to use
the definitions in section 414(b), (c) or (m) of the IRC, it will be
the employer's burden to establish that it meets the requirements of
the IRC and the regulations thereunder.
In the NPRM, the Department stated that it was considering the
effect and implications of adopting this single definition of
"employer," as set forth in these IRC sections for all purposes under
this program, to the extent it may serve to accommodate business
activities and facilitate administration and enforcement of the H-1B
program. Specifically, the Department sought comment on the
consequences of a regulation which would provide that where an
"employer" files an LCA and thereafter undergoes some change of
structure (e.g., buy-out by a successor corporation; corporate
restructuring or "spin-off" of subsidiaries), the employer for LCA
purposes would be the entity which satisfies the IRC definition of a
single employer. The Department sought comment on whether and how it
may be able to modify its current position that a new LCA must be filed
when the employer's corporate identity changes and a new Employer
Identification Number (EIN) is obtained. Thus, the Department raised
the possibility an employer which changes its corporate identity
through acquisition or spin-off would be allowed to forego the filing
of new LCAs if it documented this change in its public access file,
provided that it satisfies the IRC definition of a single employer and
that the documentation includes an express acknowledgment of all LCA
obligations on the part of the "new" entity. The Department also
sought comments on whether another approach should be used to address
corporate restructuring.
The Department received 17 comments on its proposals with regard to
defining an employer for purposes of the H-1B program.
ACIP, AILA and the Information Technology Association of America
(ITAA) strongly opposed using the relatively broad IRC definition of
"single employer" for any purpose other than determining whether an
employer is H-1B-dependent as provided in the ACWIA. These
organizations generally asserted that there was no basis to infer that
Congress intended to expand this extraordinarily broad definition to
the entire H-1B law and that expanded use of this definition would not
facilitate corporate concerns in administering an employer's
obligations in the H-1B program.
AILA further asserted that the IRC "single employer" concept is
designed to prevent the avoidance of employee benefit requirements
through the use of separate organizations, employee leasing, or other
arrangements. Therefore, AILA observed, to prevent discrimination in
employee benefits in favor of highly compensated employees, the
"single employer" encompasses all entities that are related by
financial interest (ownership or transactional). In contrast, AILA
averred, the H-1B program seeks to protect U.S. workers and, to promote
this purpose, an "employer," at a minimum, should have an employment
relationship with respect to covered workers, as defined by the ability
to hire, fire, pay and other indications of control. Thus, AILA
concludes, to depart from the longstanding definition of "employer"
in the H-1B program, without explicit statutory authority, would be
improper.
Nine commenters (AILA, Cowan & Miller, ITAA, Rubin & Dornbaum, the
[[Page 80123]]
Small Business Survival Committee (SBSC), the U.S. Chamber of Commerce,
White Consolidated Industries, Network Appliance, and the Fred
Hutchinson Cancer Research Center (FHCRC)) stated their view that
extending the use of the definition of "single employer" would serve
no useful purpose in facilitating corporate restructuring and efficient
H-1B administration. In fact, they asserted, broader application would
have the opposite effect by requiring multi-entity corporations to
coordinate many functions among the various entities, including
benefits, wages, movement of H-1B employees among the entities, lay-
offs, and other purposes, every time an H-1B worker is hired, promoted,
or moved. The Chamber of Commerce, however, suggested that if a single
employer analysis is required outside the H-1B-dependent employer
context, the Department should adopt the four-factor test developed by
the National Labor Relations Board and approved by the Supreme Court in
single employer labor law cases, rather than the analyses required by
IRC Section 414.
ITAA sought clarification on the calculation of H-1B dependency
given the ACWIA's definition of "employer." For instance, ITAA noted,
a controlled group could consist of parent A and subsidiaries B, C and
D. If subsidiary B were to file an LCA, would the H-1B dependency
calculation be made using all employees of A, B, C, and D, or only the
employees of B? The Department believes that, under the IRC definition
of "controlled group," all of the employees of A, B, C, and D would
be included in the dependency calculation if any of the subsidiaries or
the parent company filed the LCA.
Many employers and their representatives supported the Department's
proposal to modify its current requirement for filing of a new LCA upon
a change in the EIN. AILA, ACIP, Intel Corporation (Intel), ITAA and
the Society for Human Resource Management (SHRM) urged a rule that a
new or amended LCA and H-1B petition not be required upon an
acquisition, merger, spin-off, transfer or other corporate
reorganization regardless of whether there is a change in the EIN. ACIP
further urged that no new or amended LCA and H-1B petition be required
whether or not the new entity meets the IRC definition of "single
employer." Essentially, these groups endorsed a position that they
stated is similar to the I-9 provisions of the INA, 8 CFR
274a.2(b)(1)(viii)(A)(6) & (7), whereby the new employer has the option
of assuming the immigration-related liabilities of the old employer
regardless of whether the employer assumes any other liabilities in the
transaction. Similarly, AILA suggested application of established
successor-in-interest rules. Two other commenters (Kirkpatrick &
Lockhart, Jose E. Latour and Associates (Latour)) also urged
consistency between INS and DOL rules.
ACIP elaborated on this issue, suggesting that continued corporate
compliance responsibility in the event of restructuring could be
accomplished via a simple memorandum placed in the public access file,
rather than a new LCA, except where there is a material change in the
worker's job duties or the worker is relocated to a site not covered by
an LCA, or the new entity hires a new H-1B worker. ACIP stated that an
employer should not be able to use positions on the previous entity's
LCA to hire a new H-1B nonimmigrant.
The AFL-CIO opposed the Department's proposed modification to the
current LCA filing requirements because, in its view, it could create
the substantial risk that employers, through acquisition or spin-off,
could in fact create an H-1B-dependent workforce and yet avoid the
concomitant recruitment and non-displacement obligations of H-1B-
dependent employers. The AFL-CIO pointed out that the governing IRS
regulations use the "common control" test to determine whether a
parent-subsidiary group of corporations or brother-sister trades or
business satisfy the Code's definition of single employer. The AFL-CIO
suggested that under the Department's proposal, a non-H-1B-dependent
corporation that has filed an LCA, but has yet to hire any H-1B workers
under that application, could create an H-1B-dependent subsidiary
corporation that meets the "common control" test, but avoid filing a
new LCA. The parent could then acquire the requested or remaining
number of H-1B workers on its outstanding LCA, and place them in the
subsidiary workforce without applying any of the new attestation
requirements for H-1B-dependent employers.
The Department believes that the AFL-CIO's legitimate concerns are
related to the statutory definition of "dependent employer" and not
to the proposal to eliminate the requirement to file a new LCA when an
employer, as defined by the ACWIA, undergoes a change in corporate
structure. Thus, given the scenario presented by the AFL-CIO, under the
ACWIA-imposed definition of "employer" the parent corporation and its
subsidiaries (if they meet the "common control test") are a "single
employer" whose entire, combined work force is assessed to determine
dependency. Under the IRC definition, the H-1B employees of the
"subsidiary" are considered part of the larger work force of the
"parent" corporation, which then may or may not be a dependent
employer required to comply with the ACWIA attestation requirements.
Based on a careful review of all the comments submitted on this
issue, the Department agrees that the use of the IRC definition of
"employer" should be limited to determining H-1B-dependent employer
status, as set forth in section 212(n)(3)(C)(ii). The IRC rules do not
appear useful to facilitate the resolution of issues involving changes
in corporate status.
However, as urged by the commenters, the Department has concluded
that it is appropriate to change its current requirement that a new LCA
(and, as a result, a new H-1B petition) be filed when corporate
identity changes result in a change in the employer's EIN number. In
the past, the Department has taken the position that a new LCA must be
filed to assure continued compliance responsibility by the "new"
employer--a corporate entity other than the one that filed the LCA in
the first place. The Department understands, however, that when a
corporate identity changes, it is common for the H-1B worker(s) to
continue to perform the same job duties in the same location for the
new, restructured entity, and for the new entity to assume the
obligations of the previous entity. In such circumstances, where the
obligations are assumed and there is no real change in the H-1B
worker's job and his/her "new" employer's responsibilities, filing a
new LCA and H-1B petition solely because of the change in corporate
structure would be an unnecessary and burdensome exercise for the
employer, the State Employment Service Agency (SESA) responsible for a
prevailing wage determination, the Department in reviewing the LCA, and
the INS in adjudicating the H-1B petition.
Further support for the Department's position is found in the
October 2000 Amendments, in which Congress specified:
An amended H-1B petition shall not be required where the
petitioning employer is involved in a corporate restructuring,
including but not limited to a merger, acquisition, or
consolidation, where a new corporate entity succeeds to the
interests and obligations of the original petitioning employer and
where the terms and conditions of employment remain the same but for
the identity of the petitioner.
Section 314(c)(10) of the INA, 8 U.S.C. 1184(c)(10), as enacted by
section 401 of
[[Page 80124]]
the Visa Waiver Permanent Program Act. While this new INA provision is
directed to the INA's processing and adjudication of petitions, we
consider it to be instructive as to Congress' intent that a
restructured "new" corporate employer be authorized to continue the
employment of existing H-1B nonimmigrants on the same terms and
conditions as the "original" employer.
Therefore, the Department's Interim Final Rule, at Sec. 655.730(e),
provides that a new LCA will not be required merely because a corporate
reorganization results in a change in corporate identity, regardless of
whether there is a change in the EIN, provided that the new employing
entity, prior to the continued employment of the H-1B nonimmigrant,
agrees to assume the predecessor entity's obligations and liabilities
under the LCA. The agreement to comply with the LCA for the future and
assumption of liability for any past violations must be documented with
a memorandum in the public access file, specifically identifying the
affected LCAs and the EIN of the new employing entity, and describing
the new employing entity's actual wage system (see IV.O.3, below). In
addition, the employer will be required to retain in its records a list
of the name and job title of each H-1B worker transferred to the new
employer. It should be noted that the employer's status as a new
employing entity which is not required to file a new LCA is not
determined by traditional principles of successorship (although we
anticipate that the new entity will commonly be a successor employer),
but rather by the new entity's agreement to undertake the obligations
and liabilities of the predecessor under the LCA. This position is
consistent with the assumption of liability under the INA, 8 CFR
274a.2(b)(1)(viii)(A)(6) and (7), whereby a new employer may either
assume liability for the old I-9 forms or prepare new ones, and
provides the employer with flexibility to deal with the circumstances
surrounding the particular corporate reorganization. These principles
apply whether the reorganization is as a result of an acquisition,
merger, sale of stock or assets ("spin-off"), or similar change in
corporate structure. The Department cautions that an employer which
undergoes a change in structure and EIN, but chooses not to insert the
required memorandum in the public access file, is required to file new
LCAs.
A new LCA (and H-1B petition) will be required if the H-1B worker
changes jobs or where the new entity/employer seeks to hire a new H-1B
worker or to extend an existing H-1B petition. Thus the "new"
employer may not utilize H-1B "slots" left over from the previous
entity's LCA for a worker hired after a reorganization or
restructuring. The Department also understands that where there is a
material change in duties (whether or not there is a change in
occupation), INS may require the filing of a new H-1B petition.
The Department emphasizes that a change in a corporation's H-1B-
dependency status as a result of a change in the corporate structure
would have no effect on the employer's obligations with respect to its
current H-1B workers. In other words, a corporation which was H-1B-
dependent, and as a result of a change in structure becomes non-
dependent, would be required to continue to comply with the secondary
displacement attestation unless it chooses to file a new LCA and H-1B
petition(s) for any H-1B worker(s) employed pursuant to the
"dependent" LCA. Similarly, a non-dependent corporation which becomes
dependent as a result of corporate restructuring would not be required
to comply with the H-1B-dependent employer obligations for H-1B workers
employed pursuant to a pre-existing LCA, provided the employer has
assumed the obligations and liabilities of that LCA. Furthermore, as
discussed, a new LCA (attesting to the newly acquired H-1B-dependent or
non-dependent status) would have to be filed for all future H-1B
petitions and extensions of status.
B. What Is an H-1B Dependent Employer or a Willful Violator?
(Sec. 655.736(a) and (f))
The ACWIA requires non-displacement and recruitment attestations by
"H-1B dependent employers" and by employers found, after the date of
ACWIA's enactment, to have committed a willful violation or a
misrepresentation of a material fact on an LCA during the five-year
period preceding the filing of an LCA.
The ACWIA definition of "H-1B-dependent employer" provides a
formula for comparing the number of H-1B nonimmigrants employed to the
total number of full-time equivalent employees (FTEs) in the employer's
workforce. The Act provides that an H-1B-dependent employer is one that
employs in the United States:
25 or fewer FTEs, and more than seven H-1B nonimmigrants;
or
At least 26 but not more than 50 FTEs, and more than 12 H-
1B nonimmigrants; or,
At least 51 FTEs, and H-1B nonimmigrants in a number that
is equal to at least 15 percent of the number of such FTEs.
Thus, the H-1B-dependency formula for all employers uses two
dissimilar numbers: the number of H-1B nonimmigrants employed (a "head
count" of all H-1B workers, both full-time and part-time) and the
number of FTEs (including both H-1B workers and other employees). For
larger employers (i.e., those with 51 or more FTEs), the computation is
made with the number of H-1B workers as the numerator and the number of
FTEs as the denominator; if the ratio is greater than 15 percent, then
the employer is H-1B-dependent.
The structure and application of this statutory definition was
addressed by one commenter (Tata Consultancy Services (TCS)), which
urged the Department to focus on the perceived purpose rather than the
language of the statutory test. TCS described itself as the largest and
oldest software consulting and development firm in Asia, employing some
12,000 workers hired and trained in India, and conducting business in
the U.S. through contracts to provide services both at client locations
and at TCS locations. TCS expressed concern that "the Act and the
Department's proposals literally include TCS as an H-1B dependent
employer, since the number of TCS employees on H-1B visas is more than
15 percent of TCS' employees in the United States." While
acknowledging that it is an H-1B-dependent employer under the literal
language of the statute (and thus subject to the additional attestation
obligations for such employers), TCS urged the Department to issue a
regulation which focused not on the express statutory provision but
rather on the intention of Congress to impose the new obligations on
"job shops." In TCS's view, its own operation should not be included
in the definition of H-1B-dependent employer because its operation does
not constitute a "job shop," which it defines as companies which
"seek only to make money from the temporary placement of foreign
personnel with respect to whom the job shoppers have no real employer/
employee relationship."
The Department has considered the TCS suggestion but has concluded
that the regulation must reflect the express language of the ACWIA
definition. There being no ambiguity in this provision, the Department
has no authority to promulgate a regulation defining a "job shop" and
substituting that definition for the mathematical computation
prescribed in the statutory definition of "H-1B-dependent employer."
The ACWIA specifies that "exempt H-1B nonimmigrants" are not to
be included in the employer's determination of its H-1B dependency
[[Page 80125]]
status during a certain period after enactment of the Act (i.e., six
months from the date of enactment (thus, until April 21, 1999), or
until the date of the Department's final rule on this provision is
issued (thus, the date of this Interim Final Rule)).
None of the comments on the H-1B-dependent employer issues
addressed the limited exclusion of "exempt" H-1B workers from the
determination of H-1B-dependency. The prescribed period for this
limited exclusion expires with the issuance of this Rule, and all
"exempt" H-1B workers are henceforth to be included in the employer's
determination of H-1B-dependency status. Therefore, the Department has
determined that it is not necessary or appropriate to include in this
section of the regulation any language concerning this now moot limited
exclusion for "exempt" H-1B workers.
As stated above, the new non-displacement provisions and
recruitment requirements contained in the ACWIA also apply to employers
found, after the date of ACWIA's enactment, to have committed a willful
violation or misrepresentation during the five-year period preceding
the filing of an LCA. Section 655.736(f) of the Rule provides that an
employer who is a "willful violator" is one who is found in either a
Department of Labor proceeding pursuant to these regulations, or a
Department of Justice proceeding pursuant to section 212(n)(5) of the
INA as amended by the ACWIA, 8 U.S.C. 1182(n)(5), to have committed
either a willful failure to comply with the requirements of Section
212(n) or a misrepresentation of material fact during the five-year
period preceding the filing of the LCA in question. Furthermore, the
final decision in the proceeding finding willful violation or a
misrepresentation must have been entered on or after the date of
enactment of the ACWIA. "Willful failure" is defined in accordance
with the existing regulations at Sec. 655.805(b).
The following discussion addresses the other matters raised in the
NPRM and in the comments, including the meaning of "FTE," the manner
and time of determining H-1B-dependency status, documentation of the
determination, and the designation(s) to be made on the LCA regarding
an employer's status as an H-1B-dependent employer or a willful
violator.
1. What Is a "Full-Time Equivalent Employee"? (Sec. 655.736(a)(2))
The ACWIA definition of "H-1B-dependent employer" includes the
term "full-time equivalent employees" (FTEs) as a critical part of
the calculation to determine an employer's H-1B-dependency status. The
term is not defined in the Act.
The NPRM explained that the Department considered various
interpretations of the term "full-time equivalent," some of which
would significantly increase an employer's paperwork burden. The NPRM
recognized that an employer's FTEs would include only its employees
(both H-1B nonimmigrants and U.S. workers) and would not include bona
fide consultants and independent contractors who do not meet the
employment relationship test under the common law. The NPRM also
recognized that the determination of the number of FTEs would need to
include consideration of both the employer's full-time employees and
its part-time employees (if any).
The Department pointed out that one possible approach to the FTE
determination--presumably the most burdensome approach, from the
employer's perspective--would be to maintain records of all hours of
work by all employees (both hourly-paid and salaried workers, both
full-time and part-time workers) during a certain period of time (e.g.,
a year, a work week), and to divide that total by a number of hours
constituting a full-time employee standard.
The Department proposed a less onerous approach, in which FTEs
could be determined in a two-step process. First, the number of
employees would be determined through the employer's quarterly tax
statement (or similar document) (assuming there is no issue as to
whether all employees are listed on the tax statement). Second, the
employer would count its full-time workers using some standard
threshold; each full-time worker would constitute one FTE. The
employer's standard for full-time employment would be accepted,
provided it was no less than 35 hours per week (or, where the employer
has no standard, 40 hours per week). Third, the employer would
aggregate its part-time employees into FTEs by identifying the workers'
average number of hours of work per week, then aggregating these
average weekly hours, and finally dividing that total by the employer's
standard for full-time employment. The aggregation of the average hours
of the part-time workers into FTEs would be made through an examination
of the last payroll (or the payrolls over the previous quarter if the
last payroll is not representative) or through other evidence as to
average hours worked by part-time employees (such as evidence of their
standard work schedule).
Thirteen commenters responded to the Department's proposal and
offered alternatives for determining FTEs.
Four commenters addressed issues concerning the identification of
"employees." Three commenters (ACIP, AILA, SHRM) expressed concern at
what they viewed as the NPRM's inappropriate inclusion of consultant
and contractor personnel in the determination of FTEs based on
"indicia of an employment relationship" with the employer. The
commenters asserted that this approach was inconsistent with the
statute, that the determination of FTEs should include only those
persons whom the employer considered to be its employees, and that the
application of an "indicia" test to all personnel including
consultants and contractors would be burdensome. ACIP stated that the
application of the test would be inconsistent with the NPRM proposal
that FTEs be calculated by examining the employer's quarterly tax
statements to determine the number of employees on the payroll; ACIP
noted that consultants and contractors would not appear on these tax
statements. The commenters suggested that the identification of
"employees" for purposes of the determination of FTEs should be a
simple head count of workers on the employer's payroll (i.e., persons
identified by the employer on these records as its employees).
On the related matter of the proposed sources of information as to
the number of employees--the employer's payrolls and tax statements--
the AFL-CIO recommended that the FTE determination use an average of
the number of employees shown on the employer's last three quarterly
tax returns, and not the last quarterly return and the last payroll
period, because this averaging process would prevent employers from
timing the filing of LCAs to coincide with a greater ratio of FTEs to
H-1B workers so as to avoid H-1B-dependency status.
It appears to the Department that some commenters' assertions
regarding "indicia of employment" are based on a misapprehension of
one aspect of the proposal. The NPRM did not propose that an "indicia
of employment" test would be applied in this context; the "indicia"
test was created in the ACWIA for purposes of the secondary
displacement prohibition. The NPRM stated that the common law test of
"employment relationship" would be used in identifying the persons to
be included as "employees" in the FTE computation, and that bona fide
consultants and independent contractors would be excluded from the
count. The Department is of the view
[[Page 80126]]
that it is not necessary for the employer to do a detailed analysis of
application of the common law test to every worker in order to identify
"employees" for purposes of FTE determinations. Instead, as indicated
in the NPRM and supported by the commenters, the employer's existing
identifications of workers as "employees" (as opposed to consultants
or contractor personnel) will ordinarily be sufficient for this purpose
and no additional analysis will be needed.
Thus, the Interim Final Rule, at Sec. 655.736(a)(2)(i), provides
that the determination of FTEs is to include those persons who are
consistently treated by the employer as "employees" for all purposes,
including payroll records and Internal Revenue Service statements. The
determination of FTEs is not to include those persons who are
consistently treated by the employer as consultants or independent
contractors for all such purposes, and for whom the employer fills out
IRS Form 1099, provided there is no issue as to whether this treatment
is bona fide. For any persons who are not consistently treated as
either employees or consultants/contractors, the facts and
circumstances must be examined in accordance with the common law test
for an employment relationship with the employer. The common law test
is the required standard for this analysis, since the Act does not
prescribe a standard and, as a matter of law, the common law test
applies. See, Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318
(1992); Community for Creative Non-Violence v. Reid, 490 U.S. 730
(1989). The Department notes that all H-1B workers are necessarily
employees within the meaning of the INA, and therefore must be included
in both the numerator and the denominator of the dependency
determination.
Similarly, the Department is of the view that it is not necessary
for an employer to compute an average number of "employees" based on
a series of quarterly tax statements. The Department agrees with the
AFL-CIO that it would be desirable to foreclose the possibility of
potential abuse of the program by employers who have significant
fluctuations in the numbers of "employees" and who might time their
LCA submissions based on tax statements with "employee" numbers
supporting non-H-1B-dependency status. However, the Department has
concluded that the imposition of an averaging/computation burden on all
employers would be an inappropriate means of foreclosing the
possibility of an unknown--but presumably very small--number of abusive
filings. The Department cautions that, where it appears that an
employer has manipulated its employment numbers to avoid dependency
just prior to filing LCAs or H-1B petitions, the Department will
examine the situation closely and utilize an employer's normal payroll.
Further, with regard to the use of quarterly tax statements, the
Interim Final Rule also clarifies that after determining which workers
are "employees," it will be necessary in determining FTEs to separate
those employees who are part-time, do a separate FTE determination for
those workers, and then add those FTEs to the number of full-time
workers to determine total FTEs.
One commenter (ITAA) objected to the Department's proposal to count
all H-1B nonimmigrants (both full-time and part-time) in the numerator
of the equation to calculate H-1B-dependency. ITAA suggested that, for
fairness and mathematical accuracy, the regulation should be written so
that part-time H-1B workers are counted in the numerator in the same
manner as part-time employees are counted in the denominator.
Similarly, AILA argued that whether the regulation uses a simple head
count or a calculation of FTE taking into consideration part-time
hours, there should be consistency in counting workers for both the
numerator and the denominator.
The Department has considered these suggestions, but has concluded
that they cannot be accepted because the statutory language requires
the difference in counting as described in the NPRM. The ACWIA
prescribes the computation of "full-time equivalent employees" for
the entire workforce, and explicitly requires that the number of FTEs
be compared to the number of "H-1B-nonimmigrants" (with no
distinctions as to full-time or part-time status).
Nine commenters addressed the matter of determining what
constitutes a full-time worker for purposes of computing the employer's
FTEs. Three commenters (AILA, Hammond & Associates (Hammond), and
Latour) recommended that "full-time" be determined by individual
employers consistent with their standards and business practices. Five
commenters (ACIP, Intel Corporation (Intel), Kirkpatrick & Lockhart
(Kirkpatrick), Rapidigm Immigration Services (Rapidigm), and American
Occupational Therapy Association (AOTA)) supported the NPRM proposal
that the employer should use its payroll and tax records to count the
number of workers it employs on a full-time basis, using some standard.
However, these comments differed with regard to the appropriate
benchmark for full-time hours (e.g., 35 hours per week, 32 hours or
more per week, 21 hours or more per week). Two commenters (AILA and
Hammond) asserted that employers may be able to document that full-time
work is a figure less than the 35 hours per week suggested in the NPRM.
Two commenters (AOTA and American Physical Therapy Association (APTA))
suggested that the Department set a numerical standard for part-time
employment and that all employees with hours above that standard be
considered full-time.
After fully considering the comments, the Department has concluded
that the NPRM proposed definition of full-time will be adopted since it
provides considerable flexibility for employers while incorporating a
reasonable and appropriate baseline standard. Thus, the Interim Final
Rule, at Sec. 655.736(a)(2)(iii)(A), provides that the employer may use
its own standard for full-time employment, which the Department will
accept provided that the standard is no less than 35 hours of work per
week. The Department believes that this is a reasonable approach, that
it is easily understood and applied, and that 35 hours as the minimum
for full-time employment is a well-established labor standard, utilized
by the Bureau of Labor Statistics for survey purposes. See, e.g., the
definitions of the terms utilized in U.S. Bureau of Labor Statistics,
Employment and Earnings. This standard is the equivalent of seven hours
of work per day, five days per week, with non-working time for lunch
each day. The Rule also provides that, where the employer has no
standard for full-time employment, the Department in an enforcement
action will use the standard of 40 hours of work per week (the Fair
Labor Standards Act standard).
Four commenters (ITAA, ACIP, AILA and SHRM) expressed concerns as
to the need for and the methodology of aggregating part-time workers
into FTEs for purposes of determining the employer's H-1B-dependency
status. ACIP and SHRM suggested that no such aggregation or
"conversion" should be required, and stated that the method proposed
by the Department was burdensome, complex and unworkable. ITAA stated
that the proposal would be burdensome because many part-time workers
are salaried with no records of hours of work. AILA considered the
proposed method to be burdensome, and offered its own proposed formula
for calculation of FTEs--each full-time worker, each FLSA-exempt
worker, and each part-time worker working more
[[Page 80127]]
than 20 hours per week would equal one FTE; part-time workers who work
fewer than 20 hours per week and are not FLSA-exempt would be
aggregated through an average of hours as proposed in the NPRM.
The Department recognizes that, for some employers, the aggregation
of part-time workers into FTEs may be somewhat burdensome. However, in
light of the clear statutory language, the Department is unable to
dispense with the concept of "full-time equivalent employees," which
is not a mere head-count of workers in the workforce (number of
employees) but instead is a calculation of the number of full-time
workers needed to perform the total work done by the total workforce
(number of "equivalents" of full-time workers). Congress explicitly
prescribed the use of the FTE concept at three points in the ACWIA, and
must be presumed to have used the concept with an understanding of its
established meaning. The concept of "full-time equivalent employees"
is well-known to Congress. For example, Congress considers FTEs each
year in the enactment of the appropriations of operating funds for the
Federal agencies, which submit their budget requests based on the
Office of Management and Budget definition of FTEs:
"* * * the total number of regular straight-time hours (i.e., not
including overtime or holiday hours) worked by employees divided by
the number of compensable hours applicable to each fiscal year.
Annual leave, sick leave, compensatory time off and other approved
leave categories are considered to be "hours worked" for purposes
of defining full-time equivalent employment that is reported in the
personnel summary."
Office of Management and Budget, Circular No. A-11 (1998), p. 31. As
stated in the NPRM, the Department considered but rejected the
comprehensive computation that would be required under the OMB
definition (i.e., totaling all hours worked by all workers, and
dividing by the normal standard of hours of work for a full-time
worker); this approach could be extremely burdensome to employers. But
the Department recognizes that some computation of FTEs--including a
computation regarding part-time workers--was mandated by the ACWIA and
must be reflected in the dependency computation.
In an effort to minimize the burden to employers, as suggested by
SHRM and other commenters, the Department has modified its proposed
method for the aggregation or conversion of part-time workers into
FTEs. The Interim Final Rule, at Sec. 655.736(a)(2)(iii)(B), provides
the employer a choice between two methods. First, the employer may
count each part-time worker (i.e., each employee working less than a
full-time schedule) as one-half of an FTE. This method requires no
records of hours of work and no complex calculations; the employer
simply counts the number of part-time workers and divides by two to
arrive at the number of FTEs represented by its part-time workers. In
the alternative, the employer may total the hours worked by all the
part-time workers in a work week and divide that total by the standard
hours for full-time employment (e.g., 40 hours). The Department notes
that the use of this alternative does not require the employer to have
hours-worked records for its part-time workers; rather, the employer
may use any reasonable method of approximating the average hours worked
by its part-time workers, such as their standard work schedule.
One commenter (AILA) suggested that the regulations enable
employers to avoid any complicated calculation whatsoever where it is
"readily apparent" that an employer is not H-1B dependent based on
the make-up of its work force. AILA stated that an employer should be
allowed a "safe harbor" when a quick, simple and straightforward
calculation shows non-dependency. It suggested a calculation: the
number of H-1B workers would be divided by the number of full-time
employees; if the result is less than 15 percent, no further or
detailed computation would be necessary, but if the result is greater
than 15 percent, the employer would calculate its FTEs to determine its
H-1B-dependency status. Rapidigm and ACIP agreed that a test should be
provided for "readily apparent" status.
The Department agrees with the suggestion that there should be a
simple method for determining whether the employer's status as either
H-1B-dependent or non-dependent is "readily apparent." The NPRM
stated the Department's belief that, for most employers, dependency
status would be "readily apparent" and, therefore, they would not
need to make a calculation of their FTEs in order to be able to attest
to their status. The Department, in Sec. 655.736(c)(1) and (2) of this
Interim Final Rule, is adopting a provision which requires no
computations by the employer with "readily apparent" status, and is
also adopting the AILA-recommended 15 percent "snap shot" test as the
means for an employer with borderline status to determine whether it
must engage in the full computation of the number of FTEs in its work
force in order to determine its H-1B-dependency status. The "snap
shot" test allows small employers (i.e., those with 50 or fewer
employees in the U.S.) to simply compare their work forces to the
definition for H-1B-dependent employer, counting all employees rather
than computing FTEs. If such an employer appears to be H-1B-dependent
based on the snap shot test, then the employer which believes itself to
be non-dependent should make a complete computation. The snap shot test
provides that large employers (i.e. those with 51 or more employees in
the U.S.) may make a quick appraisal of the proportion of H-1B
nonimmigrants in their work force. Where the number of H-1B workers
divided by the number of full-time employees is greater than 0.15, any
employer which has reason to believe it may not be H-1B-dependent (for
example, because of the number of part-time workers in its work force),
must calculate its FTEs. The employer whose "snap shot" clearly shows
it is not H-1B-dependent, as well as any employer which admits it is
dependent, may file its LCA(s) reflecting that status (as described in
the following discussion), without engaging in further computations. In
the event of an enforcement action, the employer may be required to
verify its "snap shot" results and its H-1B-dependency status through
available records (as discussed in IV.B.3 below).
2. When Must an Employer Determine H-1B Dependency? (Sec. 655.736(g))
The ACWIA definition of "H-1B-dependent employer" and the new LCA
attestation elements that are required of such an employer do not
clearly define the timing of the dependency determination. The
questions therefore arise: When must a new LCA be filed and what
obligations, if any, does an employer have if its dependency status
changes?
The Department, in the NPRM, expressed concern that if H-1B-
dependent employers are permitted to continue to use LCAs certified
before this Rule is effective, they could avoid any application of the
law's new attestation provisions (which are applicable only to LCAs
filed after the issuance of this Rule and before October 1, 2003 (the
"sunset" date as extended by the October 2000 Amendments). An LCA is
ordinarily valid for up to three years from its date of certification
by ETA and can provide for numerous H-1B nonimmigrants to be hired
during that period. Thus an employer could use a previously-certified
LCA to bridge the entire period during which the new LCA attestation
elements would be required. H-1B-dependent employers could, in effect,
disregard all of the new
[[Page 80128]]
worker protection provisions, with the potential effect of nullifying
these provisions.
The Department proposed that, by operation of the regulation, any
current LCA(s) would become invalid for an employer that is or becomes
H-1B-dependent, for purposes of any future H-1B petitions (including
extensions). The employer's previously certified LCA(s) would continue
to be valid, however, and the obligations under that LCA(s) would
continue with respect to any petitions filed before the effective date
of these regulations (i.e., pending petitions would not be affected).
Thus, the Department proposed that the regulation would require that
all H-1B-dependent employers with existing LCAs file new LCAs if they
wish to petition for any new H-1B nonimmigrants or seek extensions of
any existing H-1B visas on or after the effective date of the Rule.
Likewise, the Department proposed that the regulation would require all
non-dependent employers that experience a change of status (becoming H-
1B-dependent) to file new LCAs if they wish to petition for new H-1B
nonimmigrants or seek extension of existing H-1B visas after the date
they become H-1B-dependent. The proposal contemplated that non-H-1B-
dependent employers whose status remained unchanged would not be
required to file new LCAs.
The NPRM discussed the timing and frequency of employers'
determinations of their H-1B-dependency or non-dependency status. The
Department recognized that the make-up of an employer's workforce--and,
thus, its H-1B-dependency status--could change significantly over time.
The Department therefore suggested that an employer's status would need
to be redetermined at appropriate times, and reflected in the
employer's actions, in order for the new LCA obligations to be
appropriately implemented. The Department proposed that an employer
would be required to make a determination of its status not just prior
to or on the effective date of the regulation, but also when it files
any new LCA or H-1B petition (including extensions) after that date.
Thus a non-dependent employer (i.e., one which is not H-1B-dependent on
the effective date of the Interim Final Rule or at the time an LCA is
filed) would have a continuing obligation to ensure that, if it later
becomes dependent and wishes to file new H-1B petitions (or seek
extensions), it takes steps necessary to comply with the requirements
of the law and the regulation. The NPRM further stated that an employer
which is H-1B-dependent and files an LCA indicating that status, but
later becomes non-dependent, would not be required to comply with the
attestation elements applicable to dependent employers with respect to
any H-1B workers during any period in which it is not dependent.
The Department also described alternative approaches to the
proposed timing of dependency determinations, such as having the
dependency update determined on a set, regular basis (e.g., each
calendar quarter) or limiting the LCA's validity period to some period
shorter than the current three years (e.g., 90 or 180 days), with a new
dependency status determination made in connection with each new LCA.
The NPRM explained that the Department believed that, as a
practical matter, the continuing obligation of the non-dependent
employer to ensure that its dependency status has not changed would not
place an undue burden on employers. For most program users, their
status as non-dependent would be readily apparent and they would have
no obligations to perform the full computations or to file new LCAs.
(See discussion of "readily apparent" status in IV.B.1, above).
The statements by Senator Abraham and Congressman Smith in the
Congressional Record are silent regarding the effect of the ACWIA
provisions on existing LCAs. Both Senator Abraham and Congressman Smith
simply state, regarding the effective date, that the provisions are
effective on the date the Secretary issues final regulations to carry
them out. 144 Cong. Rec. S12752 (Oct. 21, 1998); 144 Cong. Rec. E2325
(Nov. 14, 1998).
Sixteen commenters responded to various aspects of these NRPM
proposals.
Eleven commenters addressed the Department's proposal to invalidate
the LCAs of H-1B-dependent employers for purposes of petitions for new
or extended visas. Four commenters (Senators Abraham and Graham, AILA,
ITAA, and Baton Rouge International, Inc. (BRI)) challenged the
Department's authority to invalidate LCAs already in effect. Senator
Abraham stated that Congress specified in ACWIA that the new
attestation requirements would apply only to LCAs filed on or after the
date of the Department's final regulations. Three of these commenters
(BRI, AILA and ITAA) also asserted that the proposed rule would be
invalid as retroactive rulemaking.
An attorney (Hammond) acknowledged the Department's reasons for its
proposal as legitimate and did not challenge the Department's authority
to invalidate existing LCAs; but questioned the proposal because of the
paperwork and processing burden on the Department and the INS. Hammond
recommended that, instead of invalidating the previously-certified LCA,
the Department and INS should require an affidavit, mirroring the
dependent employer attestations, on any new petitions filed using
"old" LCA forms. Hammond further recommended that the proposed
invalidation of existing LCAs be phased in over a six-month period.
Another attorney (Latour) acknowledged that while the proposal was
burdensome, there seemed to be no attractive alternative to requiring
H-1B-dependent employers with existing LCAs to file new LCAs for the
purpose of filing new H-1B nonimmigrant petitions. Another commenter
(Simmons, Ungar, Helbush, Steinburg & Bright (Simmons, Ungar)) also
recommended a phase-in period and suggested a three- to six-month
window for filing new LCAs; this commenter expressed concern that the
requirement of immediate new LCAs would lead to significant disruptions
in ongoing critical projects.
The Department has carefully considered the views of the commenters
who asserted that the proposed rule would be contrary to the meaning of
the statute or invalid as retroactive rulemaking, but disagrees with
their conclusions. To the contrary, the proposed rule is not
inconsistent with the language of the ACWIA. The Act makes the new
attestation elements apply to "an application filed on or after the
date final regulations are first promulgated to carry out this
[provision], and before October 1, 200[3]" (the "sunset" date having
been extended from 2001 until 2003 by the October 2000 Amendments). The
ACWIA is silent regarding the timing of the employer's determination of
its dependency status or the effect of the ACWIA on previously
certified LCAs, leaving a gap to be filled by these rules. See Chevron
v. Natural Resources Development Council, 467 U.S. 837, 842-43 (1984).
The proposed rule would require an employer to make that determination
when and if it seeks access to new H-1B workers or wishes to extend
their stay in the United States; if the employer then determines it is
H-1B-dependent, it would be required to file a new LCA. Under the ACWIA
language, such new LCAs would be subject to the new attestation
elements.
Given the significance of the new attestation requirements in the
ACWIA, we believe it is reasonable for the Department to avoid the
nullification of these requirements by issuing regulations which
require employers to make dependency determinations if they choose to
file new H-1B petitions
[[Page 80129]]
or apply to extend existing visas after the effective date of these
regulations. B-West Imports, Inc. v. U.S., 880 F. Supp. 853, 863 (Ct.
Int'l Trade 1995), aff'd, 75 F.3d 633 (Fed. Cir. 1996). In this
connection, the Department notes that it has reviewed LCAs filed since
the effective date of the ACWIA, and found that many employers filed
LCAs for numerous H-1B workers. A list of the 20 users in each region
which filed LCAs for the greatest number of aliens in the period
October 1, 1998 through May 31, 1999, showed the average number of
workers per LCA ranging from one worker per LCA to more than 500 per
LCA. Out of the top 20 users in Region I (Boston), for example, only
three employers averaged less than 10 workers per LCA, while eight
averaged 50 or more per LCA, of whom four averaged 100 or more. This
data supports the Department's view that--given the limited time these
recruitment and non-displacement obligations will be in effect and the
three-year validity period of the LCAs--this requirement is necessary
to effectuate the worker protection provisions applicable to H-1B-
dependent employers and willful violators.
It is also the Department's view that the regulation would not be
invalid as retroactive rulemaking. The rule does not create a new
obligation, impose a new duty or attach a new disability with respect
to transactions already taken. See, Landgraf v. USI Film Products, 511
U.S. 244, 269 (1994). The regulation does not change the standards or
consequences, or require adjustments or corrections, for completed
transactions. The H-1B visas under previously certified LCAs remain
valid and in effect, and the prevailing wage and other obligations
under that LCA continue to apply to those visas. New LCAs are required
only for H-1B-dependent employers and willful violators filing new H-1B
petitions or applications for extension of existing visas. See
Association of Accredited Cosmetology Schools v. Alexander, 979 F.2d
859, 865 (D.C. Cir. 1992). Nor does the rule impair vested rights. See
Landgraf v. USI Film Products, 511 U.S. at 269-71. Furthermore, the LCA
itself is only the first step by an employer in applying for H-1B
visas, and for workers in seeking to enter the United States. Even
after the LCA is certified, the employer has no vested right to hire H-
1B nonimmigrants; the nonimmigrant in turn has no vested right, once
the petition is granted, to obtain a visa or to enter the country.
Joseph v. Landon, 679 F.2d 113, 115 (7th Cir. 1982). See Pine Tree
edical Associates v. Secretary of Health and Human Services, 127 F.3d
118, 122 (1st Cir. 1997).
The Department wishes to emphasize that an LCA certified prior to
this Rule will continue in effect for the vast majority of program
users who are not H-1B-dependent. Furthermore, such LCAs will remain in
effect for H-1B-dependent employers and willful violators except that
they may not be used to support new H-1B petitions or applications for
extension of status. Thus, for example, the prevailing wage rate and
obligation under the "old" LCA would remain in effect even for H-1B-
dependent employers and willful violators with respect to any H-1B
workers supported by the "old" LCA. A new LCA (and new wage rate)
would be necessary only where an H-1B-dependent employer wants to
petition for new workers or request extensions for existing workers
(who would typically require a new LCA in any event).
The Department has also considered the suggestion by some
commenters that the requirement of new LCAs be phased in over some
period of weeks or months following the issuance of this rule. However,
the Department is confined by the ACWIA language prescribing that the
obligations are effective for LCAs that are filed on or after the date
this rule is promulgated. Further, the Department is aware that the new
attestation elements will be effective only with respect to LCAs that
are filed during a relatively short period (i.e., until October 1,
2003, the "sunset" date as extended by the October 2000 Amendments).
We have, therefore, concluded that it would be contrary to the language
and purposes of the legislation to provide an additional phase-in
period which would have the effect of restricting an already limited
period for the application of the new attestation elements. The
Department notes that employers have already had considerable time to
prepare for the ACWIA provisions since their enactment on October 21,
1998, and the publication of the NPRM on January 5, 1999.
The Department understands that INS plans to modify its petition
form to obtain information about a petitioner's H-1B-dependency status,
and in its adjudication of H-1B petitions, will review LCAs filed by
dependent employers to ensure that the LCA reflects the employer's
status as set forth on the petition. Thus, it is the Department's
expectation that if a dependent employer seeks to support an H-1B
petition with an LCA which does not identify itself as H-1B-dependent
and attest to the new attestation elements for dependent employers, INS
will advise the employer that it must obtain a new LCA.
Nine commenters addressed the Department's proposal concerning the
timing or frequency of the employer's determination of its H-1B
dependency status.
One commenter (AILA) supported the Department's proposal that the
dependency determination be made each time an LCA is used by the
employer in support of an H-1B petition. Four commenters (AFL-CIO,
AOTA, APTA, and AILA) supported requiring that employers determine
dependency when filing an LCA.
Five commenters (Intel, Computec International Resources
(Computec), ACIP, SemiConductor Industry Association (SIA), and ITAA)
objected to the Department's proposal requiring employers to make
dependency determinations when filing an LCA or H-1B petition; they
viewed the requirement as unrealistic and burdensome. SIA and ITAA
suggested annual dependency determinations. ACIP suggested that
determinations be made annually or at the time there is a large
increase in H-1B staff. Intel and Computec suggested that dependency be
determined on a quarterly basis, and Intel stated its view that an
employer's dependency will not change from one filing to another.
Having considered the varying views of the commenters, the
Department has concluded that the proposed approach is appropriate in
that it achieves the purposes of the Act while not imposing an
unreasonable burden. No employer will be required to make a
determination of its dependency status unless it wishes to file
petitions for new workers or to seek extension on the visas of existing
workers (i.e., the determination is required only when an employer
seeks access to H-1B workers, on either new visas or extended visas--
which typically require a new LCA in any event). The Department
believes that the vast majority of the employers using the H-1B program
are non-dependent and that for both dependent and non-dependent
employers, their status would be readily apparent (see discussion of
"snap shot" determination in IV.B.1, above). Further, the Department
anticipates that the status of most employers would be unlikely to
change, whether that status be dependent or non-dependent. At the same
time, however, the Department considers the new attestation provisions
to be important and believes the purposes of these provisions cannot be
satisfied if an employer is permitted to continue to use an LCA for
non-
[[Page 80130]]
dependent employers if its status changes.
Three commenters responded to the Department's alternative
suggestion that the validity period of an LCA might be shortened from
the current rule's maximum period of three years. The AFL-CIO
recommended that the LCA validity period be shortened to six months.
AOTA recommended a quarterly (three-month) filing requirement. BRI
opposed the reduction of the LCA validity period, asserting that
quarterly or semi-annual LCAs would overburden and backlog
administering agencies.
The Department considered the comments pertaining to the
possibility of reducing the validity period of the LCA. However, we see
no advantage that would outweigh the significant increase in the burden
on employers and government agencies due to the repeated submissions of
new LCAs upon the expiration of short-lived LCAs. Therefore, the
Interim Final Rule does not make any reduction of the LCA validity
period of three years.
After consideration of all these comments, the Interim Final Rule,
at Sec. 655.736(c) and (g), adopts the proposal that H-1B-dependent
employers be required to file a new LCA if they wish to file new H-1B
petitions, or extensions of status, after the effective date of the
regulations. In addition, if a non-dependent employer becomes dependent
after the effective date of the regulations and wishes to file new H-1B
petitions or extensions of status, it must file a new LCA attesting
that it is dependent and agreeing to the new attestation requirements
for H-1B-dependent employers. Thus an employer must consider and attest
to its dependency status each time it files a new LCA; similarly, as
discussed below, an employer seeking to file a new H-1B petition, or
seeking an extension of status, must use an LCA in support of the
petition that accurately attests as to its dependency status at the
time it files the petition. An H-1B employer that changes its status to
non-dependent but wishes to petition for additional H-1B nonimmigrants
or extensions of stay using an approved "dependent" LCA continues to
be bound by the dependent-employer attestation requirements unless it
files a new LCA attesting to its non-dependency.
3. What Kind of Records are Required Concerning the H-1B Dependency
Determination? (Sec. 655.736(d))
The Department, in the NPRM, discussed the issue of what records,
if any, the employer would be required to create and retain concerning
its dependency determination(s). The Department proposed that
documentation be created and retained only when an employer's non-
dependent status is not readily apparent. On the other hand, the
Department also proposed that if the employer's dependency status is
"readily apparent" (either dependent or not dependent), no records
would need to be made or retained. The Department sought comments on
whether there should be an explicit standard for when the employer's
status is "readily apparent." (See discussion of "snap shot"
determination in IV.B.1, above). Further, the Department proposed that
if the employer's dependency status changes, the employer should retain
records in the public access file reflecting the change and, if the
change of status is from dependent to non-dependent, the public access
file must show the underlying computation. Finally, the Department
requested comments on the feasibility and appropriateness of the
regulation specifying that no records are required if the dependency
determination could be made from publicly available records and, if so,
what public records are generally available for this purpose.
The Department received 13 comments on these proposals.
Kirkpatrick & Lockhart, Latour and AOTA supported the NPRM
proposals. The AFL-CIO, Rubin & Dornbaum, and White Consolidated
Industries suggested that all employers be required to document not
only their status but also the underlying mathematical computations.
AILA stated that the Department should not require recordkeeping of the
calculation by any employer, but especially it should not require non-
dependent employers to retain dependency documentation and keep it in
public access files. Intel and ACE agreed with the proposal that no
record needs to be kept where the employer's non-dependent status is
readily apparent. ITAA suggested that the regulation should prescribe a
bright line test to show when employers are required to create and
maintain records, and that no records at all should be required of
employers that concede that they are H-1B-dependent. ACIP suggested
that the Department should advise employers how long they are to keep
records and should allow employers five working days to produce their
dependency status records in the event of an investigation. Rapidigm
suggested that the records used to make the dependency determination
should be made accessible to the Department on a quarterly basis.
Computec suggested that an employer be required to keep dependency
records in only one location (apparently based on the misunderstanding
that public access files must be maintained in numerous locations).
Having taken into consideration all of the commenters' varied views
pertaining to the creation and retention of documentation regarding the
determination of dependency status, the Department has concluded that
modification of the proposal is appropriate to achieve the purposes of
the ACWIA while avoiding unnecessary burdens on employers. The
Department first notes that for the vast majority of employers using
the H-1B program, their dependency status (either non-dependent or H-
1B-dependent) will be obvious and stable and they, therefore, will have
no documentation burden; a small number of employers with
"borderline" status or changing status will be required to document
their determinations of status and/or their changes of status, but the
documentation burden will be minimal.
The Interim Final Rule requires that employers determine their
dependency status the first time after the Rule is in effect that they
file an LCA or an H-1B petition or extension under an existing LCA.
Employers may use the "snap shot" test to determine if their
dependency status is readily apparent, but must do the full computation
if the number of H-1B workers divided by the number of full-time
workers in their workforce is more than 0.15, and must retain a copy of
the full computation if they then conclude that they are not H-1B-
dependent. The regulations do not require that an employer do the
computation, but do require that the employer consider its status, each
time thereafter that an LCA or H-1B petition is filed; the employer
must attest as to its status on each LCA, and may not use a non-
dependent LCA to support new H-1B petitions or requests for extensions
if its status changes from non-dependent to dependent. Furthermore, we
understand that employers will be required to indicate their status on
each H-1B petition or extension filed with INS. Thus it is important
that employers remain cognizant of their dependency and do a recheck of
their dependency status if the make-up of their work force changes
sufficiently that their status might possibly change.
If an employer changes status from dependent to non-dependent, the
employer will be required to retain a copy of the full computation of
its status. The Interim Final Rule also requires a recheck of
dependency (whether the "snap shot" test or the full
[[Page 80131]]
computation) if there is a change in corporate status, as discussed in
IV.A, above. In addition, the Rule provides that if an employer
utilizes the IRC single-employer test to determine dependency, it must
maintain records documenting what entities are included in the single
employer, as well as the computation performed (whether the "snap
shot" or full computation), showing the number of workers employed by
each entity who are included in the numerator and denominator of the
equation. It is important that such employer retain copies of the
records necessary to support the computation or be able to provide such
records in the event of an investigation, since the records may not all
be under its control. Finally, if an employer includes workers in its
computation who do not appear as employees on its payroll, the employer
must keep a record of its computation (whether the "snap shot" or the
full computation) and be able to substantiate its determination that
the workers are its employees.
The Department has concluded that it is not necessary, however, to
include either the computations or a summary of the computations in the
public access file. The Department believes that the notation on the
LCAs as to dependency status constitutes the information necessary for
the public. In addition, the Interim Final Rule, at Sec. 655.736(d)(7),
requires the employer to include a notation in the public access file
listing any other entities which are considered to be part of a
"single employer" for purposes of the dependency determination.
Further, all employers are required to retain copies of H-1B petitions
and requests for extensions filed with INS and to make petitions and
payroll records available to the Department in the event of an
investigation.
The current regulation contains guidance that meets the concerns of
some commenters pertaining to location of public access files and the
length of time that records must be retained. Section 655.760(a)
directs the employer to make a public access file available in either
of two locations (its principal place of business in the U.S. or at the
worksite) and describes the required contents of the file. The
regulation does not mandate a separate file for each H-1B worker or for
each LCA. If the employer maintains one public access file for all of
its LCAs, documentation specific to an LCA should be attached to the
respective LCAs in the file; where documentation is common to all LCAs,
only one document need be retained in the file. The record retention
period is set forth in Sec. 655.760(c), which has been clarified to
require that records be retained for one year beyond the last date on
which any H-1B nonimmigrant is employed under the LCA or, if no
nonimmigrants were employed under the LCA, one year from the date the
LCA expired or was withdrawn. The regulation further requires that
payroll records be retained for a period of three years from the
date(s) of the creation of the record(s). If there is an enforcement
action, records shall be retained until the enforcement proceeding is
completed.
With respect to the suggestion that the regulations allow employers
five working days to produce records as to dependency status, the
Department believes that such a provision in the regulations is
unnecessary. Wage-Hour district offices commonly make appointments with
employers before an investigation commences, thereby allowing employers
time to produce necessary records. For employers who are required to
make and retain computations of their dependency status, the Department
would anticipate that the computations would be provided promptly to
Wage-Hour. Wage-Hour will allow employers reasonable time to gather
back-up documentation needed to support the computation, or for Wage-
Hour to make the computation if none has been made by the employer,
taking into consideration the fact that the statute provides that the
investigation is to be completed within 30 days.
4. What Information Will Be Required on the LCA Regarding an Employer's
Status as H-1B Dependent? (Sec. 655.736(e))
The Department proposed in the NPRM that the revised attestation
form (LCA), at a minimum, would require that every employer which is H-
1B-dependent at the time it files an LCA, affirmatively acknowledge its
status and obligations by checking a box on the LCA attesting to its
dependency and its compliance with the additional attestation
requirements concerning non-displacement and recruitment of U.S.
workers. With respect to an employer which is not H-1B-dependent at the
time it files an LCA, the NPRM set out three alternatives for the LCA
form:
1. The employer would expressly attest that it is not H-1B-
dependent and that if it later becomes dependent, it will comply with
the additional attestation requirements; or
2. The employer would not have to attest that it is not dependent,
but the LCA would clearly state--and by signing the form the employer
would agree--that the employer is required to comply with the
additional attestation requirements if it does become dependent; or
3. The employer would not have to attest that it is not dependent,
but the LCA would clearly state that it could not be used in support of
any H-1B petition filed after the employer became dependent.
The NPRM included a draft revision of the LCA form, which included
a "box" for the employer's acknowledgment of H-1B-dependent status
but no "box" regarding non-dependent status. The draft also included
a "box" for the employer to indicate that the LCA would be used only
for "exempt" H-1B workers, as well as a "box" for the employer's
acknowledgment of a finding of a willful violation or misrepresentation
of material fact.
Thirty-two commenters, including 20 members of the general public,
responded to the Department's proposals. The majority of commenters
endorsed the "check box" approach for the LCA and favored the use of
an LCA form which clearly reflects the employer's status and
obligations. For example, Intel stated that "[b]y checking a box, it
will clearly be evident whether an employer is dependent or non-
dependent." The majority of commenters (each of the 20 individuals,
the AFL-CIO, Kirkpatrick & Lockhart, Latour, the Institute of
Electrical and Electronics Engineers (IEEE), and the American
Engineering Association (AEA)) suggested that all employers be required
explicitly to attest to their status as dependent or non-dependent when
filing LCAs. Three commenters (APTA, ITAA, and Cooley Godward) endorsed
NPRM proposed alternative 2. BRI favored either option 1 or option 2.
ITAA suggested that non-dependent employers should not be required to
check any boxes, but should be given separate LCA forms. AILA suggested
that an employer intending to use the LCA only for "exempt" H-1B
workers should be allowed to check a single box indicating that
intention and not be required to take any action with regard to
determining H-1B-dependency or marking any boxes on the LCA as to
dependency status. Several other commenters supported the proposal that
the LCA should have a method by which the employer could explicitly
designate that the LCA will be used exclusively for exempt H-1B
workers. Two commenters (Intel) recommended that employers check one of
three boxes, but suggested different approaches than those offered in
the NPRM. Intel
[[Page 80132]]
suggested that employers be given three "boxes": (1) Non-dependent;
(2) Dependent filing for exempt workers; and (3) Dependent filing for
non-exempt workers. AILA suggested three different "boxes": (1) The
LCA is used only for exempt workers and no additional attestations are
made; (2) The employer is non-dependent and no additional attestations
are required; and (3) The employer is H-1B-dependent, the workers
sought are non-exempt, and the employer makes the additional
attestations. ACIP suggested that separate LCAs be developed: one for
non-dependent employers and dependent employers hiring exempt workers,
and another for dependent employers and willful violators. With regard
to the employer's history concerning finding(s) of willful violations
or misrepresentations of material fact, the IEEE urged that there be an
additional "box" by which the employer could attest to the absence of
such finding(s) (the draft form having only a "box" to show that
there was such a finding).
The Department has reviewed all of the comments and has determined
that the proposed regulation and LCA revision will be modified along
the lines recommended by Intel. In light of the strong views of the
majority of the commenters, the LCA will require that every employer
mark a "box" to explicitly designate its status as either H-1B
dependent or non-dependent. The LCA will also provide a "box" by
which an H-1B-dependent employer can designate that it will use the LCA
only for exempt workers. It is our understanding that if the latter
"box" is marked, the INS will examine each petition supported by the
LCA to determine whether the beneficiary is "exempt" (see discussion
in IV.C, below). After careful consideration, the Department has
concluded that it would not be appropriate or feasible to allow all
employers to mark only a "box" for exempt workers and then make no
further determinations or designations as to dependent status as
suggested by AILA and ITAA, because such an approach would impose an
unreasonable administrative burden on the INS in examining the exempt
status of workers employed by the vast majority of employers which are
non-dependent. The Department believes that the burden of determining
dependent status under the Interim Final Rule is minimal, especially
for the vast majority of employers whose status is readily apparent,
and that it is not unreasonable to require such employers to attest as
to their non-dependent status.
In the event that an employer's dependency status changes (either
to dependent or to non-dependent) after the LCA is filed and the LCA
therefore no longer accurately reflects that status, a new LCA
designating the new status would have to be filed if the employer wants
to seek access to H-1B workers through either new petitions or requests
for extensions (see discussion in IV.B.2, above). Similarly, an
employer which attests that it will use an LCA only for exempt workers
may not use the LCA for non-exempt workers. However, the LCA will
provide that in the event an employer violates these provisions--by
utilizing an LCA attesting that it is non-dependent when in fact it is
dependent, or by utilizing an LCA for non-exempt workers where it has
attested that it will only be used for exempt workers--the employer
will be bound by the attestation requirements for dependent employers.
5. What Changes Are Being Implemented on the Labor Condition
Application Form and the Department's Processing Procedures?
(Sec. 655.720 and Sec. 655.730)
In the NPRM, the Department provided advance public notice of an
anticipated change in the existing system for processing LCAs. Such
applications were previously required to be submitted by U.S. mail,
FAX, or private carrier, to one of 10 ETA regional offices, as
delineated in Sec. 655.720. Since March of 1999, the Department has
been operating a pilot program involving the automated processing of
LCAs. Although the Department encountered a number of technical
problems throughout the operation of the national pilot, we believe
that these problems have been resolved. Despite these temporary
setbacks, the program thus far has generally proven to be successful.
Therefore, the Department intends to fully implement the automated
processing of all LCAs submitted by employers of H-1B nonimmigrants.
The transition to the automated system will occur on February 5,
2001, the date on which the relevant sections of this Rule
(Secs. 655.720 and 655.721) become applicable as stated in the DATES
provision of this Preamble. Because the new system requires ETA to
create appropriate software, obtain necessary hardware (including
telephone lines, scanners, and other facilities), and obtain and train
new staff, as well as conduct field trials to verify the reliability of
the system once it is in place, the Department has concluded that it
will not be feasible for the system to be operable before February 5,
2001. This delay in the applicability of the new system will also
enable ETA to process all "old" LCAs which may be in queue in the
current system (including the current FAX-back system) on the effective
date of the Interim Final Rule. During the interval between the
effective date of the Interim Final Rule (January 19, 2001) and the
applicability date of the new system (February 5, 2001), LCAs will not
be accepted by FAX but must, instead, be submitted in hard copy. The
Department recognizes that this hard copy filing will be an
inconvenience to employers, but we anticipate that this short-term
inconvenience will be fully offset by the increased efficiency and
reliability of the automated system which will be available after
February 5, 2001.
On the effective date of this Interim Final Rule, January 19, 2001,
the revised version of Form ETA 9035 will become the sole form for use
by employers and their attorneys; thereafter, prior versions of the
Form ETA 9035 will not be accepted for processing. The redesigned Form
ETA 9035 is being published as an appendix to this Rule. Note that Form
ETA 9035 no longer contains the full statements of the attestations
required by the Act and the regulations. Rather, these statements,
together with the instructions for filling out the form, are contained
in the new cover pages, Form ETA 9035CP, and incorporated by reference
in Form ETA 9035. The employer, through its designated official, is
required to read the attestation statements set forth in the cover
pages and indicate on the Form ETA 9035 its concurrence with the
statements in Form ETA 9035CP.
The revised form is to be completed with a program that will be
made available for download from the Department's World Wide Web site
at https://ows.doleta.gov. For those employers who are unable to or
choose not to use the form-fill program to complete the form, a blank
hard copy of the form will also be available from any ETA regional
office. The hard-copy forms may still be typewritten or completed by
hand.
During the interim period as described above, the LCA may be
submitted in hard copy by U.S. mail or private carrier. After February
5, 2001, the LCA may be submitted in hard copy by U.S. mail to the ETA
Application Processing Center at the P.O. Box address identified in
Sec. 655.720(b) of the Interim Final Rule; delivery by private carrier
will no longer be allowed because such carriers cannot deliver
[[Page 80133]]
items to U.S. Post Office boxes such as the address of the Processing
Center. Alternatively, after the automated processing system becomes
applicable on February 5, 2001, the LCA may be submitted by FAX
transmission to a toll-free 1-800 number (1-800-397-0478), which will
route incoming FAXes to an automated servicing center.
The automated processing system will electronically scan the
incoming facsimile, extract the information contained in the
application, record the information in a database, and make the
appropriate determination to certify or to reject the application. LCAs
that are mailed to ETA will be electronically scanned and entered into
the automated processing system. As under the current manually-operated
system, the application will be certified and FAXed (or mailed) back to
the submitter if the appropriate boxes are checked, the required
information is provided on the form, and the form has been signed and
dated by the employer. If the form is incomplete or contains obvious
inaccuracies, it will be rejected and sent back to the submitter with
an addendum that identifies the deficiencies in the application.
At the present time, the ETA Web Site at https://ows.doleta.gov
lists the submission date of the LCAs that the computer is currently
processing. If the employer has submitted an LCA and has not received a
response after a reasonable period of time has elapsed (e.g., seven
working days), it is suggested that the employer check the ETA Web
Site, and if it indicates a current processing date which is later than
the date on which the employer submitted the LCA, either re-submit the
application (if using the automated system after February 5, 2001, re-
FAXing to the 1-800 number identified above) or call the information
number listed on the Web Site. The employer should not, however, submit
unnecessary duplicates of an original application (e.g., by FAXing the
application to the LCAFAX system and also mailing a hard copy of the
application, or by re-FAXing the application before seven days have
passed). The Department will provide user support in the form of a help
line for employers to call to verify that the system is up and running,
and to obtain other information such as the date of receipt of LCAs
that are currently being processed by ETA staff designated for the H-1B
program. However, given the architecture of the LCAFAX system, it will
be technologically infeasible for ETA to verify receipt of a particular
LCA.
The Department received 10 comments on the proposed form and
automated processing system. Most commenters generally favored the
Department's proposal but expressed the desire that it be thoroughly
tested before being implemented on a nationwide basis. We believe that
the system has had an extensive pilot test. In Fiscal Year 2000 alone
(October 1, 1999 through September 30, 2000), the Department processed
nearly 300,000 applications using the automated system. Since the
inception of the system in March of 1999, each of the two nodes of the
system has processed over 200,000 applications. While a number of
technical problems have been encountered, the Department is confident
that the system should be fully implemented.
Six commenters were critical of the Department for not producing a
version of the form-fill program that will run on the Apple Macintosh
operating system. The program that was utilized during the pilot test
was a Windows-based program that ran only on computers with a Windows
operating system. These commenters urged the Department to develop a
version of the program that will run on Macintosh computers or,
alternatively, to use a platform-neutral format such as Adobe Acrobat.
The Department agrees with these commenters and has developed a program
to be used to complete the form in a platform-neutral format, Adobe
Acrobat. This software will be widely distributed and, as previously
stated, will be available for download from multiple locations on the
World Wide Web.
One commenter (ACIP) expressed concern that since much of the print
on the form is in such a small font, the form may be rendered illegible
in the FAX transmission process from the attorney to the employer to
the automated processing system.
The Department is aware of this potential problem and has
identified technologies that would allow the form to be transmitted via
electronic mail which will be included as part of the program. Under
this scenario, after the employer's attorney or agent completes the
form using the program, the form could then be e-mailed to the employer
and printed out for the employer's signature and subsequent FAX
transmittal to the automated processing system. Thus, the form FAXed by
the employer to the Department would still be an original document. The
pilot test has shown that documents other than an original (e.g., a FAX
of a FAX) are often unable to be read properly by the system and their
submission usually results in either a rejection of the application or
a notification that the form was not able to be read by the automated
system.
Intel and ACIP stated that the proposed four-page form is
impractical to "post" to satisfy the employer's obligation of notice
to workers. These commenters suggested that the form be redesigned so
that all of the information that is required to be contained in the
notice (set forth at Sec. 655.734(a)(1)(ii)) appear on the same page.
The Department does not believe this to be practical, given the
amount of information that is required to be contained in the notice
and the amount of space taken up by those items on the form. However,
the Department has modified the proposed LCA form, compressing it to
three pages rather than four pages as proposed. The Department is
exploring technologies that would allow an employer, in addition to
printing the pages of the form itself, print a separate page with those
data elements from the form that are required to be contained in the
notice. The employer will have a choice of posting the three-page form
or another notice containing the required information. Should the
Department's efforts to modify the software to enable an employer to
print a one-page posting addendum with the requisite data elements from
the form prove successful, posting the addendum would also satisfy the
notice requirement. The Department notes, however, that the employer is
required by the current regulations at Sec. 655.734(a)(2) to provide
the entire certified LCA to the H-1B workers no later than when they
report to work.
One commenter (ACIP) inquired as to whether the pages of the form
may be stapled together or whether the pages must be posted side-by-
side. The Department believes that a posting consisting of the pages
stapled together would satisfy the notice requirement, provided of
course that it is done in such a fashion as to permit interested
parties to readily view each page of the form.
Another commenter expressed concern that the proposed form would
not permit an employer readily to take advantage of the new provision
which permits an employer to satisfy the notice requirement
electronically. Notwithstanding the fact that the form itself does not
need to be posted electronically--only certain data contained therein--
the Department has also identified technologies that allow an employer
to directly notify its employees by sending a copy of the application
by electronic mail to
[[Page 80134]]
similarly employed employees at the place of employment.
The Department has also made a slight modification to the proposed
form to allow employers to continue to have the option of expressing
the rate of pay as a pay range. This option was omitted from the draft
form which appeared with the proposed rule published in the Federal
Register on January 5, 1999 (64 FR 673). Since 1992, the H-1B
regulations have provided that "[w]here a range of wages is paid by
the employer * * *, a range is considered to meet the prevailing wage
requirement so long as the bottom of the wage range is at least the
prevailing wage rate." (57 FR 1316) This provision, now at
Sec. 655.731(a)(2)(vi), remains in effect. Thus, the LCA form that
appears with this Interim Final Rule has been modified accordingly.
Several commenters expressed concern that the Department would not
devote adequate resources, including personnel and infrastructure, to
support the automated processing system. The Department notes that the
new system will be supported by the monies allocated to the Department
to reduce the processing time of LCAs as part of the $1,000 fee imposed
upon employers of H-1B nonimmigrants (i.e., the $500 fee enacted by
ACWIA, increased to $1,000 by the October 2000 Amendments). The
Department believes that with the supplemental resources it receives as
part of that fee account, it will be able to operate the program in an
efficient and timely manner, once the system becomes applicable.
The regulations have been modified at Secs. 655.720 and 655.730 to
reflect the changes in the processing of the LCA, and to require that
the revised Form 9035 be either FAXed to the 1-800 number identified
above or transmitted by U.S. mail to the ETA Application Processing
Center at the address specified in the regulation and on the Form.
Revised Sec. 655.720, along with new Sec. 655.721, becomes applicable
on February 5, 2001.
The Department cautions employers that the changes being made in
the LCA form and the LCA filing and processing system do not modify the
substantive obligations of employers concerning their attestations
(e.g., wages, notices, strike/lockout) or the necessity for obtaining
ETA certification of the LCA prior to employment of the nonimmigrant.
In our view, a "new" employer which hires an H-1B nonimmigrant from
another H-1B employer, pursuant to the October 2000 Amendments'
"portability" provision, must have a certified LCA to support the
visa petition when it is filed and the nonimmigrant begins work
C. What H-1B Workers Would Be "Exempt H-1B Nonimmigrants"?
(Sec. 655.737)
The ACWIA relieves H-1B-dependent employers and willful violators
from the additional attestation elements if the LCA is used only for
"exempt" H-1B nonimmigrants. In the words of Senator Abraham, "* * *
employers required to include the new statements on their applications
are excused from doing so on applications that are filed only on behalf
of 'exempt' H-1B nonimmigrants." (144 Cong. Rec. S12751 (Oct. 21,
1998)). See also the statement by Congressman Smith, 144 Cong. Rec.
E2325 (Nov. 12, 1998).
In addition, for a limited time after the ACWIA's enactment,
neither the numerator nor the denominator of the ratio of H-1B
nonimmigrants to full-time equivalent workers, used to determine H-1B
dependency, was to include "exempt" H-1B workers. Because that time
will have expired with the promulgation of this Rule, this provision no
longer has effect and it is not incorporated in the regulations.
The ACWIA establishes two tests for whether an H-1B nonimmigrant is
"exempt." The H-1B nonimmigrant must either (1) "receive[] wages
(including cash bonuses and similar compensation) at an annual rate
equal to at least $60,000," or (2) "ha[ve] attained a master's or
higher degree (or its equivalent) in a specialty related to the
intended employment".
In introducing the topic of exempt status, the NPRM noted that the
statutory language seems clear. A dependent employer or willful
violator is required to attest and comply with the new attestation
elements unless the only H-1B nonimmigrants employed pursuant to the
LCA are exempt workers. It was the Department's reading of this ACWIA
language that if a covered employer used an LCA in support of any
nonexempt worker, that employer would be obligated to comply with the
new attestations with respect to all H-1B nonimmigrants hired pursuant
to that LCA, exempt as well as nonexempt. However, the NPRM noted that
the employer would be free to file separate LCAs for its exempt and
nonexempt workers. (Note: because this issue is closely related to
IV.C.4 ("Should the LCA be Modified to Identify Whether it Will be
Used in Support of Exempt and/or Nonexempt H-1B Nonimmigrants?"),
below, the comments and discussion on this issue will be included in
IV.C.4.)
The NPRM also specified that initial determinations of workers'
exempt status will be made by INS while adjudicating petitions filed on
their behalf by their prospective employers. The Department proposed
that copies of the approved H-1B petition, with the INS determination
as to exempt status, should appear in the employer's public access
file. The Department stated that, in the event of an investigation,
considerable weight would be given to the INS determinations of exempt
status based on educational attainment. However, if the exemption was
claimed based on earnings, the employer would be expected to document
that the exempt H-1B nonimmigrant actually received sufficient pay to
satisfy the statutory wage "floor" of $60,000.
Six commenters responded to these proposals.
The proposal that INS initially determine exempt status when it
adjudicates petitions evoked a mixed response. Senators Abraham and
Graham stated that the ACWIA does not grant either INS or DOL the
authority to prevent approval of a visa on the basis of whether or not
an individual qualifies as "exempt." Similarly, AILA questioned the
authority of DOL to delegate this review to INS and expressed concern
that INS lacks the resources to make timely assessments of this issue;
AILA stated that such review is contrary to the nature of the LCA as an
employer attestation document, and that a worker's status should be
reviewed only pursuant to a DOL investigation. AILA further suggested
that DOL should accept an employer's reasonable determination of exempt
status, or at a minimum should not assess penalties if the employer's
reasonable determination is in error.
Conversely, ACIP, ITAA and Rapidigm agreed that the INS should make
the exempt determination and suggested that its determination of
educational relevance should be dispositive; ACIP pointed out that
employers should first have an opportunity to challenge rejected
claims. BRI questioned how INS can make an "initial" determination of
the exemption status since employers must make the determination at the
time the LCA is filed.
It is the Department's understanding that INS will examine the
exempt status of any nonimmigrant whose petition is accompanied by an
LCA that indicates that it is to be used exclusively for exempt
workers. This INS review will not be pursuant to a delegation from DOL.
Rather, INS has advised that it considers this review to be an
appropriate adjunct to its role in
[[Page 80135]]
adjudicating the admissibility of the individual workers, since an LCA
for exempt workers cannot validly be used for a worker unless the
worker is in fact exempt. INS will not deny a petition on the basis
that the worker is not exempt; however, it will require that the
information on the accompanying LCA correspond with the characteristics
of the worker for whom the petition was submitted. Thus, just as INS
verifies that the worker's occupation and the LCA occupation
correspond, it will verify that the worker is exempt where the employer
has attested that the LCA will be used only to support exempt workers.
If INS initially determines that a worker is nonexempt, the employer
will be given an opportunity either to submit additional documentation
in support of the worker's exempt status or to submit an LCA with no
claim of exemption.
The Department anticipates that in most cases, INS will need to do
no more than review the stated wage level to ensure that it would equal
at least $60,000 per year. Only where the wage standard would not be
met will it be necessary for INS to review a worker's educational
qualifications. As discussed in IV.C.2 and IV.C.3, below, the
Department believes that this determination too can be easily made in
most cases, and therefore that INS review of valid exemptions should
not ordinarily delay approval of a petition.
The Department in an investigation will ensure that a worker whom
an employer attested will be paid more than $60,000 per year has in
fact received the required compensation. Only if the employer had so
attested and the earnings floor has not been satisfied will the
Department determine whether the worker is exempt based on educational
attainment (including the field of study). However, where the employer
did not attest that a worker would be paid more than $60,000 per year
but instead makes its claim of exemption based only on educational
attainment, and INS has determined that an H-1B worker is exempt based
on the evidence submitted to it of educational attainment, that INS
determination will be conclusive unless the Department finds that the
INS determination was based on false information.
The Department notes that this "up front" review by INS should
generally avoid the situation which could arise in DOL enforcement if
an employer erroneously determined a worker is exempt based on
educational attainment, but DOL later determines the worker is not in
fact exempt. In such situations, the employer would face possible
penalties for misrepresentation and failure to perform the required
attestation elements. DOL cannot agree with AILA's suggestion that the
special attestation protections for U.S. workers would not apply where
an employer has made a reasonable but erroneous determination as to
exempt status. Furthermore, the Department believes that penalties are
a particularly important remedy since, as a practical matter, it will
often be impossible to cure such violations after the fact. Nor does
the Act provide any relief from debarment for a failure to perform the
attestation elements regarding displacement of U.S. workers. Debarment
and other penalties may be imposed for recruitment violations, however,
only where such violations are "substantial." The circumstances
regarding the exemption determination, as well as the facts regarding
the recruitment performed by the employer, will be taken into
consideration in determining whether a recruitment violation is
"substantial." The circumstances will also be taken into
consideration in assessing civil money penalties and in determining
whether an employer has made a misrepresentation in its attestation
that the LCA will only be used for exempt workers.
With regard to BRI's question of how INS can make an "initial"
determination when the employer has already done so on the LCA, the
Department clarifies that the term "initial" is used to distinguish
between determinations made by the INS at adjudication and the
occasional determination which might occur during Departmental
investigation. It is of course necessary for the employer to make its
own similar assessment as to the worker's exempt status prior to
submitting the LCA and the worker's petition.
Rapidigm commented that exempt H-1B nonimmigrants should not be
included in the ratio in making the dependency determination. The
Department notes that the statute imposes a time limit upon the period
in which exempt H-1B nonimmigrants are excluded from the ratio (i.e.,
six months after ACWIA enactment or the effective date of these
regulations). Since that time limit has now expired, the determination
of H-1B-dependency now must include exempt workers.
Finally, ITAA disagreed with the proposed requirement that
employers maintain a copy of the H-1B petitions with the INS
determinations of workers' exempt status in the public access file. On
further consideration, the Department agrees that because of privacy
considerations, these documents need not be included in the public
access file. However, the Department believes that it is important for
the public to know which workers are supported by an LCA for exempt
workers, so that the public will know which workers are not covered by
the new attestation elements, and be able to challenge exemption
determinations where there is reason to believe the basis for the
exemption is invalid. Therefore, employers will be required to include
in their public access file a list of the H-1B nonimmigrants supported
by an LCA attesting that it will be used only for exempt workers, or in
the alternative, a simple statement that the employer employs only
exempt H-1B workers. Furthermore, employers will need to retain H-1B
petitions and any evidence regarding workers' exempt status (i.e., pay
records and evidence related to educational attainment) so that they
may be provided to DOL in the event of an investigation.
1. How Would the $60,000 Annual Rate be Determined? (Sec. 655.737(c))
The ACWIA provides that H-1B nonimmigrants will qualify as
"exempt" if they receive wages (including cash bonuses and similar
compensation) at an annual rate of at least $60,000. Those who receive
this level of compensation will qualify as "exempt" without
satisfying the alternative, educational standard.
In the NPRM, the Department proposed that, to ensure this standard
is met, it should be interpreted consistently with the existing DOL
regulations for determining if an employer has satisfied its other wage
obligations under the H-1B program (20 CFR 655.731(c)(3)). Future
(i.e., unpaid but to-be-paid) cash bonuses and similar compensation
would be "counted" toward the required wage if their payment is
assured, but not if they are conditional or contingent on some event
such as the employer's annual profits, unless the employer guarantees
that the nonimmigrant will receive compensation of at least $60,000 per
year in the event the bonus contingency is not met. The Department also
proposed that bonuses and compensation are to be paid "cash in hand,
free and clear, when due," meaning that they must have readily
determinable market value, be readily convertible to cash tender, and
be received by the worker when due. The bonuses and compensation for
purposes of this ACWIA requirement must be received by the worker
within the year for which the employer wants to "count" the
compensation.
In addition, the Department interpreted the statutory language
[[Page 80136]]
"receives wages (including cash bonuses and similar compensation) at
an annual rate equal to at least $60,000" to mean that the worker
actually receives at least $60,000 compensation in each year.
Therefore, the NPRM provided that an H-1B nonimmigrant who, because of
part-time employment, receives less than $60,000 in compensation in a
year would not qualify as exempt on the basis of compensation, even if
his or her hourly wage, projected to a full-time work schedule, would
exceed $60,000 in a year.
Ten commenters responded to the Department's proposals on this
issue.
The AFL-CIO stated that exempt workers must receive $60,000 in
wages annually as an entitlement. The AEA stated that exempt workers
should receive $60,000 or higher without including any benefits or
bonuses. APTA and AOTA stated that an exempt worker must receive wages
equal to at least $60,000, which must not include other employee
benefits, such as health insurance, retirement plans, and life
insurance.
Senators Abraham and Graham and ACIP contended that the statutory
language "at an annual rate equal to" requires the Department to
permit part-time workers and workers who work only part of the year to
be considered exempt if their rate of pay, extrapolated to full-year,
full-time work would meet the $60,000 threshold. Latour noted that in
the information technology industry, some of the most highly
compensated and distinguished experts work part-time for several
employers, and therefore suggested that the Department allow the
$60,000 minimum compensation to be computed on an hourly, weekly, or
other basis. The National Association of Computer Consultant Businesses
(NACCB) expressed concern about nonimmigrants who terminate during the
year, and therefore suggested the Department interpret the statutory
provision to allow a worker to receive $1,200 in wages per week.
The Department concurs in the view expressed by employee
representatives that fringe benefits in the nature of health insurance,
pension, and life insurance, are not similar to cash bonuses and are
not wages within the meaning of the definition of "exempt H-1B
nonimmigrant." Therefore benefits will not count toward the required
$60,000 level under the Interim Final Rule.
The Department does not concur, however, with the view that the
$60,000 minimum compensation requirement may be prorated for part-time
employees. Congressman Smith, in describing the legislation prior to
its enactment, stated that the additional attestation requirements will
apply to H-1B-dependent employers petitioning for H-1B nonimmigrants
without masters degrees who "plan to pay the H-1Bs less than $60,000 a
year." 144 Cong. Rec. H8584 (Sept. 24, 1998). Later statements in the
Congressional Record by both principal sponsors of the ACWIA also
describe the annual wage standard as firm. Senator Abraham stated: "An
'exempt' H-1B nonimmigrant is defined * * * as one whose wages,
including cash bonuses and other similar compensation, are equal to at
least $60,000. * * *" (144 Cong. Rec. S12751 (Oct. 21, 1998)).
Similarly, Congressman Smith stated: "An 'exempt' H-1B nonimmigrant is
defined * * * as one whose annual wages, including cash bonuses and
other similar compensation, will be equal to at least $60,000 (and will
remain at such level for the duration of his or her employment while
under an H-1B visa)." (144 Cong. Rec. E2325 (Nov. 12, 1998); see also
E2324). These statements underscore the statutory objective of ensuring
that only highly compensated H-1B workers are exempted on the basis of
their compensation. If the workers are not, in fact, highly compensated
(i.e., if they do not actually receive wages of $60,000), then this
objective is not achieved. Furthermore, allowing a pro rata of the
$60,000 compensation would necessitate that the employer be able to
demonstrate that the part-time worker received an appropriate "share"
of the annual compensation, based on the portion of a full-time year's
work that he/she performed. The Department considered allowing an
employer to claim the exemption for workers who would be employed part-
time by more than one employer and would earn combined wages of at
least $60,000 per year. However, the Department concluded that this
approach would not be feasible since an employer would not be able to
ensure effectively that workers did in fact receive the statutory wage
level of $60,000 and since such an exception could not be effectively
administered. The Department notes that part-time employees could still
qualify as exempt based on their education, notwithstanding their
relatively lower annual compensation.
However, it is the Department's view that H-1B workers who are
hired at compensation of at least $60,000 per year, but who are
employed for less than a year, will satisfy the statutory requirement
if they receive at least $5,000 for each month worked. For example, a
worker who resigned after three months would be required to have been
paid at least $15,000. Similarly, if the Administrator conducted an
investigation and found that a worker had not yet worked a year, the
Administrator would determine whether the worker had been paid $5,000
per month, including any unpaid, guaranteed bonuses or similar
compensation.
ITAA concurred with the Department's view that unconditional,
noncontingent bonuses or other payments may be counted toward the
$60,000 compensation to qualify for the exemption. AEA opposed
inclusion of bonuses at all, expressing concern that some employers
might pay a very low wage and promise a bonus at the end of the year,
but never pay the bonus unless "caught" before the end of the year.
BRI suggested that the Department should allow an annual bonus to be
paid on a specified date, contingent only upon compliance with the
contract.
Since the ACWIA expressly permits inclusion of cash bonuses, the
Department does not believe it has the discretion to exclude them from
the required minimum compensation, as suggested by AEA. With regard to
the bonus described by BRI, the Department is of the view that such a
bonus would be in compliance only where the employer ensures that a
worker who terminates employment before the end of the year in fact
receives $60,000, prorated for the amount of time worked. An employer's
remedy against the worker in such a case of early termination may be
afforded by state law relating to the recovery of liquidated damages
under the contract, as discussed in IV.J, below.
2. How Would the "Equivalent" of a Master's or Higher Degree be
Determined? (Sec. 655.737(d)(1))
Also defined as "exempt" for purposes of the additional
attestations are H-1B nonimmigrants who have "attained a master's or
higher degree (or its equivalent) in a specialty related to the
intended employment." The Department proposed to define "or its
equivalent" to mean a foreign academic degree equivalent to a master's
degree or higher degree earned in the United States, and not to allow
equivalency to be established through work experience.
The Department received ten comments on this proposal.
The AFL-CIO and AOTA agreed with the Department's interpretation
limiting this prong of the exemption to nonimmigrants with a foreign
academic degree equivalent to a U.S. master's or
[[Page 80137]]
higher degree, with no substitution of work experience. AOTA observed
that the occupational therapy profession is moving toward a master
level education requirement for entry to the profession, and believes
it is reasonable for foreign workers to meet the same education and
training as U.S. workers. Because a master's degree will be the
benchmark for the physical therapist profession after January 1, 2002,
APTA would go even further and require that a nonimmigrant have a
doctorate degree to qualify for the exemption. ACIP also agreed with
the Department's proposal that an exempt H-1B worker must hold a U.S.
master's degree or its foreign academic equivalent.
Other trade associations and employers who commented on this issue
generally disagreed with this interpretation. Six commenters (AILA,
BRI, ITAA, Rapidigm, TCS, Satyam) contended that the Department's
position is inconsistent with statutory language and current INS
regulations. AILA asserted that the ACWIA's use of the phrase
"master's degree or equivalent" rather than "master's or equivalent
foreign degree" supports the well-established INS procedure of
allowing equivalencies to be established through either degree
equivalence or work experience in its adjudication of whether an
applicant has the equivalent of a bachelor's degree for H-1B admission
and whether an applicant has the equivalent of a master's degree for
certain second preference employment admissions. Rapidigm and Satyam
stated that different "equivalency" standards for H-1B admission and
exempt status should not apply to the same pool of immigrants. TCS
expressed concern that the Department's interpretation would lead to
inquiries into the quality of education in foreign countries, rather
than the level of education as contemplated by ACWIA; TCS contended
further that since all foreign master's degrees are already
incorporated under the term master's degree, the ACWIA phrase "its
equivalent" must refer to something else.
Additionally, this Department requested the views of the U.S.
Department of Education regarding this element of the ACWIA. The
Department of Education, through its Office of Educational Research and
Development, responded to this Department's inquiry.
The Office of Education Research and Improvement (OERI) expressed
the general view that "possession of a master's degree or its
equivalent" referred to master's degrees awarded by accredited United
States institutions or degrees granted by foreign academic
institutions, which as measured by educators within the United States,
are at least equivalent to master's degrees awarded by accredited
United States institutions. With regard to nonimmigrants possessing a
United States degree, the OERI suggested a three-prong inquiry: (1) Was
the awarding institution accredited at the time of the award by an
association recognized by the Secretary of Education or is/was the
institution a bona fide member of the Council on Higher Education
Accreditation; (2) was the program of study for which the degree was
awarded either included in the Classification of Instructional Program
or incorporated by reference from an international program
classification; and (3) is/was the program of study related to an
occupation classified in the Standard Occupational Classification or an
international occupation classification.
The OERI expressed the view that basically the same inquiry should
take place where the academic credentials are granted by a foreign
educational institution. The OERI recommended that the inquiry begin by
determining whether the awarding institution is/was a recognized
institution under the laws and policies governing accreditation in the
institution's country. It suggested that the second and third prongs of
the test could be met by applying the guidelines, recommendations, and
practices of the National Council on the Evaluation of Foreign
Educational Credentials, a group managed by the American Association of
Collegiate Registrars and Admissions Officers. The OERI explained that
these standards are utilized by U.S. educators in assessing the bona
fides of a foreign degree or a program of study abroad and determining
their equivalence to U.S. degrees and standards.
The Department is of the view that Congress intended exempt status
to apply only to highly qualified employees. The Department therefore
believes that Congress did not intend to substitute work experience for
education, but rather required the attainment of an advanced academic
degree (or the alternative $60,000 wage standard) for dependent
employers and willful violators who may hire H-1B nonimmigrants without
complying with the new attestation elements. In introducing the ACWIA
on the floor, Congressman Smith explained: "[T]he compromise eases
requirements on companies when they are petitioning for workers who
have advanced degrees. * * * The point I want to make is that the term
'or its equivalent' refers only to an equivalent foreign degree. Any
amount of on-the-job experience does not qualify as the equivalent of
an advanced degree." 144 Cong. Rec. H8584 (Sept. 24, 1998).
The commenters are correct in noting that the INS regulations they
have cited, governing minimal qualifications for H-1B admission, do
recognize work experience in lieu of an academic degree. However, the
ACWIA employs the phrase "or its equivalent" in a subparagraph
distinguishing minimally qualified "nonexempt" H-1B nonimmigrants
from better qualified "exempt" workers. "A master's or higher degree
(or its equivalent)" is one of two higher thresholds provided to draw
this distinction. If the educational standard could be satisfied by
relevant work experience alone, the wage threshold would serve no
independent purpose. The added value of the $60,000 threshold is that
it exempts well-compensated workers even if they have not attained a
master's or higher degree, or have done so in a specialty not related
to their intended employment. The "work equivalency" interpretation
advocated by employers and their representatives blurs this clear
statutory distinction between exempt and nonexempt nonimmigrants.
Moreover, it is the Department's view that its interpretation is
fully consistent with the plain language of the statute, especially
when contrasted with the language in section 214(i) of the INA, 8
U.S.C. 1184(i), which explicitly authorizes work experience in lieu of
a bachelor's degree for admission as an H-1B nonimmigrant. The ACWIA
exempts all H-1B nonimmigrants who have attained a master's or higher
degree (or its equivalent) in a specialty related to their intended
employment--with no suggestion that this requirement can be satisfied
with work experience. The Department does not believe it is relevant
that the INS regulations concerning admission of immigrants under the
second preference employment category treat certain work experience as
equivalent to a master's degree. Not only are those regulations
unrelated to the H-1B nonimmigrant program, but the statutory language
in section 203(b)(2)(A) of the INA, 8 U.S.C. 1153(b)(2)(A), is clearly
distinguishable, granting preference to "qualified immigrants who are
members of the professions holding advanced degrees or their
equivalent." Unlike the specific term "master's degree" cited in the
ACWIA, the generic term "advanced degree" encompasses all post-
graduate academic credentials. Consequently, the expression "advanced
degrees or their equivalent" would seem to be without
[[Page 80138]]
meaning if not interpreted to include work experience.
The phrase "or its equivalent" in the ACWIA is not without
meaning under the Department's interpretation. In fact, it is not
uncommon for the titles of foreign degrees to differ from those used
within the U.S. educational system, or for the same title to have
different educational requirements. Differences in academic
nomenclature can create significant confusion for government programs
and universities that deal with persons educated abroad. The existence
of credential evaluation services and academic guidelines for admission
of foreign students to colleges and universities are indications that
degree equivalency is not always readily apparent.
There is, however, a readily available source of information
concerning degree equivalence. The National Council on the Evaluation
of Foreign Educational Credentials (NCEFEC) and the American
Association of Collegiate Registrars and Admissions Officers (AACRAO)
have developed specific guidance for most countries regarding which
education and training credentials are considered to be reasonably
similar to corresponding U.S. credentials. AACRAO published these
guidelines in 1994 in a publication entitled Foreign Educational
Credentials Required for Consideration of Admission to Universities and
Colleges in the United States (4th ed), which is widely used by
admissions offices and credential evaluation services. These guidelines
reflect the prevailing opinion and considered judgment of experienced
foreign student admissions officers in U.S. colleges and universities.
The Department will use this publication as a guide for determining
degree equivalence. The AACRAO publication is available for a fee of
$30 and can be obtained by contacting AACRAO Distribution Center, P.O.
Box 231, Annapolis Junction, MD 20701, or through their website,
www.aacrao.com/pubsale/grade.html.
The AACRAO guidelines explain that a Ph.D. entry level document--
i.e., the diploma or degree required for entry at the Ph.D. level
(equivalent to a U.S. master's degree)--"represents a minimum of one
full-time year of study beyond a bachelor's equivalent. The study must
also be viewed as advanced as opposed to supplemental." For example,
post-graduate training to earn a teacher's certificate is considered
supplemental rather than advanced, and would not be equivalent to a
master's degree. Where documents with the same name are awarded at more
than one level, the publication includes parenthetical guidance such as
"earned after a three-year program."
Because the AACRAO publication identifies academic prerequisites
for entry into various levels of U.S. education, it must be used
carefully. Three columns of information are provided for each country
of origin: level of entry into the U.S. educational system; foreign
certificates, diplomas or degrees required for admission at this level;
and necessary supporting documentation. The first column displays the
levels at which students are normally admitted into U.S. undergraduate
or graduate programs. Within the graduate tier, the three levels of
admission shown are Master, Ph.D., and Unclassified/Special. Persons
entering Ph.D. programs would possess degrees equivalent to a U.S.
master's, as set forth in the second column. Persons in the category
"Unclassified/Special" would ordinarily possess degrees equivalent to
a U.S. doctorate (Ph.D.), as set forth in the second column. (Persons
whose credentials correspond to the entry "Master" currently have the
equivalent of a U.S. bachelor's degree, qualifying them to begin
master's level study.)
The Department seeks comments on whether it should incorporate the
AACRAO publication in the Final Rule for use in determining whether a
degree an H-1B nonimmigrant has obtained from a foreign educational
institution is equivalent to a U.S. master's degree. In the
alternative, employers would be able to present evidence of degree
equivalence from a credential evaluation service where there is no
foreign degree listed as equivalent to a U.S. master's, or where a
worker obtained a degree in the past, and the terminology in the
foreign country has changed.
As recommended by the OERI of the Department of Education, the
Interim Final Rule requires that the institution from which the worker
obtained its degree be recognized or accredited under the law of the
country. The Interim Final Rule further provides that where an employer
claims an H-1B nonimmigrant is exempt based upon educational attainment
(rather than wages), the employer will be required to provide, upon
request of INS or DOL, evidence that the worker has received the degree
in question, as well as a transcript of the courses taken and grades
earned.
3. How Is "a Specialty Related to the Intended Employment" Defined?
(Sec. 655.737(d)(2))
The ACWIA specifies that the H-1B nonimmigrant who holds a master's
or higher degree (or an equivalent degree) qualifies as "exempt" only
if that degree is in "a specialty related to the intended
employment." The Department proposed that in order for the
nonimmigrant's degree specialty to be sufficiently "related" to the
intended employment to qualify for exempt status, that specialty must
be generally accepted in the industry or occupation as an appropriate
or necessary credential or skill for the person who undertakes the
employment in question. Furthermore, the Department stated that it
would give considerable weight to INS determinations concerning the
academic credentials of H-1B nonimmigrants who are claimed to be
"exempt" on this basis.
Six commenters responded to the Department's proposals on this
issue.
AILA asserted that there is no statutory authority for the
"appropriate or necessary" standard and that these terms are very
different in that "related" does not mean "necessary." AILA
suggested that an employer should be able to determine what specialty
degrees it considers to be "appropriate" and that it should be able
to establish the relationship by a variety of means, such as through
specific course work, or by showing that it is a standard company
requirement and that all others in the same position have the same
credentials.
ACIP acknowledged the statutory requirement that the master's
degree or equivalent be in a field relevant to the occupation and
suggested that due deference be given to an employer's determination
that a degree is relevant. ACIP observed that employers are better
placed than the government to track evolving occupations, job duties,
and degrees. Other commenters (Kirkpatrick & Lockhart, Latour, TCS)
went further and urged the Department to defer to an employer's good
faith determination of what fields of study are related to the
employment in question. One commenter noted that only one quarter of
information technology professionals possess a computer science,
computer engineering, or MIS degree.
The AFL-CIO suggested that the Department utilize the new North
American Industrial Classification System (NAICS) in making the
determination that a specialty is related to the employment; it stated
that the NAICS includes job qualifications by occupational
classification, formulated by the Bureau of Labor Statistics with the
input of labor and business.
In addition, two law firms (Kirkpatrick & Lockhart and Latour)
expressed the view that DOL should not judge the relevance of the
alien's
[[Page 80139]]
educational background to their job if that alien is receiving $60,000
or more per year.
The Department agrees that a worker may qualify as exempt by
meeting either the salary or educational standard, and is not required
to qualify under both tests. However, where the compensation level is
not met, the Department cannot simply disregard the statutory
requirement that the individual hold a master's or equivalent degree in
a specialty related to the intended employment, nor can it
automatically defer to an employer's judgment, as some commenters
seemed to suggest. The Department considers it appropriate to provide
guidance as to the meaning of the statutory requirement. As Congressman
Smith stated, "It is also important to note that the degree must be in
a specialty which has a legitimate, commonly accepted connection to the
employment for which the H-1B nonimmigrant is to be hired." (144 Cong.
Rec. E2325 (Nov. 12, 1998)). The Department believes that its proposed
standard--that the degree be generally accepted in the industry or
occupation as an appropriate or necessary skill or credential--is an
appropriate articulation of this requirement, and this standard is
adopted in the Interim Final Rule. The Department does not intend to
imply that a master's degree in a specific field must be a prerequisite
for employment in the occupation in order for a worker to meet the
"related" requirement for the exemption. On the other hand, the
employer's statement of relevance cannot be accepted without
substantiation since the employer would have little incentive to
consider the relevance of the field in which a master's degree was
earned if the occupation does not normally require a master's degree.
For example, many employers seeking a systems analyst require a
bachelor's degree in computer science, information science, computer
information systems, or data processing, but not an advanced degree. In
contrast, computer scientist jobs in research laboratories or academic
institutions generally require a Ph.D. or at least a master's degree in
computer science or engineering. U.S. Bureau of Labor Statistics, 1998-
99 Occupational Outlook Handbook. The Department does agree, however,
that a field not ordinarily considered relevant to an occupation could
be related to a specific job. For example, a master's degree in public
health could be a related field for a computer specialist in the health
industry.
The Department concurs with the AFL-CIO proposal that an objective
standard is appropriate as a guide in determining whether a field is
related to an occupation. However, it is the Department's view that the
NAICS is not appropriate since it spells out industrial rather than
occupational codes. The Department believes that there are two
occupational data systems that provide information better suited to the
related field inquiry: the U.S. Bureau of Labor Statistics Occupational
Outlook Handbook, and 0*NET 98.
The Occupational Outlook Handbook is a well-recognized source of
job and career information. Revised every two years, the Handbook
describes for about 250 of the most common occupations, what workers do
on each job, their working conditions, earnings, and other pertinent
information. For each job, the Handbook identifies the training,
education, and licensing requirement for the occupation, if any, as
well as the educational background desired by employers and the common
educational background of persons in the occupation. The Handbook can
be purchased from the Government Printing Office in paper, hard cover,
and CD-ROM format. Groups of related jobs covered in the Handbook are
available for purchase as individual reprints. The Handbook also can be
accessed free of charge on the Bureau of Labor Statistics' website, at
https://stats.bls.gov/ocohome.htm. The Handbook's easy-to-use electronic
version can be accessed by specific jobs or occupational clusters.
O*NET 98 was recently developed by the Labor Department, with the
input of both labor and business. This user-friendly electronic data
system, designed to replace and expand upon the Dictionary of
Occupational Titles (DOT), links various occupational classifications
to one another and to the Department of Education's Classification of
Instructional Programs (CIP). For each of the over 1,100 occupations in
this system, an O*NET 98 occupational profile lists the principal
fields of study appropriate to that occupation under the heading
"instructional programs." O*NET 98 can be purchased on CD-ROM or
diskette from the Government Printing Office and can also be downloaded
free of charge from the Department's website at www.doleta.gov/
programs/onet. In addition, like the Occupational Outlook Handbook,
O*NET 98 can be accessed over the Internet at any public library.
The Handbook and O*NET 98, in the Department's view, provide
useful, objective guidelines for determining whether a specific
academic discipline is related to the occupation, i.e., whether a
degree in the field is generally accepted in the industry or occupation
as an appropriate or necessary skill or credential. The Department will
therefore utilize these sources as guides. The Department also will
consider other industry studies obtained by employers or the opinions,
solicited by the employer, from a bona fide credentialing organization
attesting that a nonimmigrant's academic specialty is generally
accepted by the pertinent industry or occupation as appropriate or
necessary for the employment in question. Employers are encouraged to
rely on these sources in determining whether a master's degree (or its
equivalent) is in a field related to the job in question.
The Department also seeks comment on whether the Final Rule should
incorporate the Occupational Outlook Handbook and O*NET as the primary
sources for determining fields of study related to specified
occupations. The Department realizes, however, that there may be other
instances where a master's degree in a specialty that is not identified
in either of these sources still may be recognized by the industry or
occupation in question as related to the employment in question. The
Department proposes that if an employer chooses not to rely on O*NET or
the Occupational Outlook Handbook, or these sources fail to establish
the required relationship, an employer seeking to establish such
relationship could obtain a report by a credentialing organization that
a degree in the field is recognized by the industry or occupation as an
appropriate or necessary skill or credential. The Department seeks
comment on whether this is an appropriate task for credentialing
services, and whether there are other recognized sources of information
which can and should be utilized for this purpose--in addition to, or
in place of, the sources cited.
4. Should the LCA Be Modified to Identify Whether it Will Be Used in
Support of Exempt and/or Non-Exempt H-1B Nonimmigrants? (Sec. 655.737)
As discussed above, the ACWIA provides that "[a]n application is
not described in this clause [i.e., is not subject to the new
attestation requirements] if the only H-1B nonimmigrants sought in the
application are exempt nonimmigrants." The Department therefore
proposed that a dependent employer or willful violator would be
required to attest and comply with the new attestation elements unless
the only H-1B nonimmigrants employed pursuant to the LCA are exempt
workers. If a covered employer used an LCA in support of any nonexempt
worker, that employer would be obligated to comply
[[Page 80140]]
with the new attestations with respect to all H-1B nonimmigrants hired
pursuant to that LCA, exempt as well as nonexempt.
The NPRM stated that the Department considered proposing that
employers file separate LCAs for their exempt and nonexempt H-1B
workers. However, the Department noted that two different workers might
very well both be qualified for the same occupation, but one might be
exempt and another nonexempt. Therefore the Department preliminarily
concluded that it was not appropriate to restrict an employer's freedom
to utilize an LCA for both exempt and nonexempt workers, provided that
the employer in such circumstances complied with the additional
attestation requirements for all of the H-1B nonimmigrants under the
LCA. The Department noted in the NPRM that an H-1B-dependent employer
or willful violator would be free to file separate LCAs for its exempt
and non-exempt workers, thereby obviating the requirement of complying
with the new attestation elements for its exempt workers. Furthermore,
the NPRM provided that a dependent employer or willful violator who
planned to utilize an LCA only for exempt workers would be required to
so attest on the LCA.
Five commenters responded to this proposal.
The AFL-CIO strongly agreed that when exempt and nonexempt H-1B
workers are included on the same LCA, the new attestations should apply
to both. In its view, it would be illogical for a single document to
impose different obligations on the employer with respect to different
nonimmigrants supported by the same document. TCS, on the other hand,
stated that while it does not itself use a single LCA for multiple
workers, DOL should not take away an appropriate exemption when the LCA
of an exempt worker also includes nonexempt workers. Rapidigm
questioned why dependent employers should be required to submit two
LCAs where, under the same circumstances, other employers are permitted
to submit just one. BRI suggested that employers have one LCA and check
a box to indicate that they will comply with the attestations for
nonexempt workers only. ITAA expressed concern that DOL will not be
able to handle the increased workload from multiple LCAs.
It is the Department's view that the unambiguous language of the
statute relieves dependent employers and willful violators from the
special attestation requirements only if the LCA is used only for
exempt H-1B nonimmigrants. The Department points out that such
employers are not required to submit separate LCAs for exempt and non-
exempt workers. However, the Department notes that if an employer
attests that an LCA will only be used for exempt employees, but the LCA
in fact is used for both exempt and nonexempt workers notwithstanding
the employer's attestation, the employer is required to comply (from
the beginning of the LCA's effective period) with the special
requirements with respect to all workers on the LCA (both exempt and
nonexempt).
With regard to concern about the Department's ability to handle the
additional volume of LCAs associated with separate applications for
exempt and nonexempt workers, the Department estimates that this
requirement will affect not more than 150 to 250 employers, with a
midpoint of 250. Furthermore, the Department has instituted a new FAX-
back system for processing and certifying LCAs, which will help
streamline the process.
There were only two comments on the narrow issue of what form the
revised LCA should take. The AFL-CIO stated that employers should
indicate on the face of the LCA whether or not it will be used in
support of H-1B petitions for exempt H-1B workers. BRI suggested that a
box should be provided on the LCA which the employer could check,
agreeing to comply with the attestations for non-exempt workers only; a
separate written statement regarding the worker's exempt status would
then be filed with INS.
As noted above, the Department will permit dependent employers and
willful violators to utilize one LCA for both exempt and nonexempt
workers, but the employer taking this course will be obliged to comply
with the new attestation elements for all workers under the LCA.
Therefore the Department does not consider it necessary to require such
employers to indicate on the form that it will be used for nonexempt
workers. However, the language on the LCA form is modified to make it
clear that if an employer checks the box attesting that it will only
use the LCA for exempt workers, the employer will not be permitted to
use the LCA for nonexempt workers. This will permit the employer, the
public, and the workers, as well as DOL, to know whether the additional
attestation elements apply with respect to the workers under an LCA,
and will permit INS to know whether the worker's exempt status must be
verified. The LCA form is further modified to state that if an employer
utilizes the LCA for a nonexempt worker in violation of its
attestation, the employer will have been required to comply with the
new attestation elements with respect to all H-1B nonimmigrants
supported by the LCA.
D. What Requirements Apply Regarding No "Displacement" of U.S.
Workers Under the ACWIA? (Sec. 655.738)
Section 212(n)(1)(E) and (F) of the INA as amended by the ACWIA, 8
U.S.C. 1182(n)(1)(E) and (F), imposes requirements upon H-1B-dependent
employers and employers who have been found to have willfully violated
their H-1B obligations that are designed to protect certain U.S.
workers from being "displaced" by H-1B workers. As noted in the NPRM,
such an employer is prohibited from displacing a U.S. worker who is
"employed by the [H-1B-dependent] employer" and from displacing a
U.S. worker who is employed by some other employer at whose worksite
the H-1B dependent employer places an H-1B worker (where there are
"indicia of employment" between the H-1B worker and the other
employer). Thus, the prohibition may apply to the dependent employer's
own workforce (primary displacement) or to the workforce of another
employer with whom the dependent employer does business (secondary
displacement). With respect to the dependent employer's own workforce,
the prohibition applies during a period beginning 90 days before and
ending 90 days after the date of the filing of an H-1B petition on
behalf of the H-1B worker. With respect to a customer's workforce, the
prohibition applies during a period beginning 90 days before and ending
90 days after the placement of the H-1B worker. As discussed at IV.C,
above, the displacement prohibitions do not apply to LCAs that are used
only to support the employment of "exempt" H-1B workers. See Section
212(n)(1)(E)(ii).
In introducing the compromise ACWIA bill to the Senate, Senator
Abraham explained:
"[T]his legislation provides three types of layoff protection
for American workers.
"Let me add that throughout the process of working on this
legislation, we have been very mindful of the concerns people have
that somehow these H-1B temporary workers might end up filling a
position where an American worker could have filled the slot. Our
goal is to make sure that does not happen, and we have built
protections into this agreement which we and the administration feel
will accomplish that objective.
"First, any company with 15% or more of its workforce in the
United States on H-1B visas must attest that it will not lay off an
American employee in the same job 90 days
[[Page 80141]]
or less before or after the filing of a petition for an H-1B
professional.
"Second, an H-1B dependent company acting as a contractor must
attest that it also will not place an H-1B professional in another
company to fill the same job held by a laid off American 90 days
before or after the date of placement.
"Third, any employer, whether H-1B dependent or not, will face
severe penalties for committing a willful violation of H-1B rules,
underpaying an individual on an H-1B visa, and replacing an American
worker. That company will be debarred for 3 years from all
employment immigration programs and fined $35,000 for each
violation."
144 Cong. Rec. 10878 (Sept. 24, 1998). (Note: the third type of layoff
protection, discussed in IV.M.5, below, applies enhanced penalties for
willful violations of any of the attestation provisions, by both H-1B-
dependent and non-dependent employers, where a U.S. worker is displaced
in the course of the violations. See Section 212(n)(2)(C)(iii) of the
INA as amended by the ACWIA, 8 U.S.C. 1182(n)(2)(C)(iii).)
The Department received virtually identical requests from several
individuals that the Department provide additional information to U.S.
workers so that they could better understand their rights; these
individuals expressed their concern that H-1B workers might be used to
replace older U.S. workers. As discussed in III.B, above, the
Department plans extensive education activities in an effort to ensure
that both U.S. and H-1B workers are aware of the provisions of the H-1B
program as modified by the ACWIA. The Department acknowledges the
concern among older workers that their employment may be placed at risk
through the potential hire of younger H-1B workers, who may be willing
to perform the same work at a reduced level of pay and benefits.
Although the ACWIA may operate to reduce this possibility by requiring
that H-1B workers be employed at no less than the higher of the
prevailing wage or the actual wage paid by the employer for the work in
question, the concerns of U.S. workers in this regard are more directly
addressed by the Age Discrimination in Employment Act, 29 U.S.C. 621 et
seq., which is administered by the Equal Employment Opportunity
Commission (EEOC). The Department suggests that workers or employers
with particular concerns regarding possible instances of age
discrimination should contact their local EEOC office.
The Department also notes that section 417 of the ACWIA directs the
National Science Foundation to contract with the National Academy of
Sciences to conduct a study to assess the status of older workers in
the information technology field, including "the relationship between
rates of advancement, promotion, and compensation to experience, skill
level, education, and age." See ACWIA, Section 417(b). The National
Science Foundation also has been charged with conducting a study and
preparing a report to assess labor market needs for workers with high
technology skills during the next ten years. See ACWIA, Section 418(a)
. The ACWIA further directs the Executive Branch to bring to the
attention of Congress any reliable economic study that suggests that
the increase in the number of H-1B workers effected by the ACWIA "has
had an impact on any national economic indicator, such as the level of
inflation or unemployment, that warrants action by the Congress." See
ACWIA, Section 418(b). Both of these reports were required to be
submitted to Congress no later than October 1, 2000. NAS, through the
Computer Science and Telecommunications Board, National Research
Council, has invited submission of "white papers" and has scheduled a
series of meetings to discuss and receive input for a single study
addressing both sets of issues. Further information about this study,
and the means by which members of the public may furnish input, can be
found at https://www4.nationalacademies.org/cpsma/ITWPublic2.nsf.
1. What Constitutes "Employed by the Employer," for Purposes of
Prohibiting a Covered Employer from Displacing U.S. Workers in Its Own
Workforce? (Sec. 655.715)
The ACWIA displacement protections only apply to U.S. workers
"employed by the employer" and to U.S. workers "employed by the
other employer" where the H-1B worker is placed at another employer's
worksite and there are indicia of employment. See Section
212(n)(2)(E)(i) and (F) of the INA as amended by ACWIA, 8 U.S.C.
1182(n)(2)(E)(i) and (F). The ACWIA contains no definition of the
phrase "employed by the employer." The Department stated its view in
the NPRM that where Congress has not specified a legal standard for
identifying the existence of an employment relationship, the Supreme
Court requires the application of "common law" standards, as held in
Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992);
Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989).
Noting the Supreme Court's teaching that the common-law test contains
"no shorthand formula or magic phrase that can be applied to find the
answer, * * * [and requiring that] all of the incidents of the
relationship must be assessed and weighed with no one factor being
decisive" (NLRB v. United Ins. Co. of America, 390 U.S. 254, 258
(1968)), the Department proposed regulatory language setting out 16
factors (adapted from EEOC Policy Guidance on Contingent Workers,
Notice No. 915.002 (Dec. 3, 1997)) that would indicate the existence of
an employment relationship under the common law test. The NPRM sought
comments regarding the proposed test and alternative formulations of
the common law or other tests for determining whether an employment
relationship exists, such as the test under the FLSA and the test used
in the federal tax context.
The Department received nine comments on its proposal.
The NACCB agreed that, in light of the absence of a statutory
standard for determining the existence of an employment relationship,
the common law standard should be used. It also observed that the
common law test used under the Internal Revenue Code should be the same
as the common law test set forth in the NPRM and should provide
consistent results. The NACCB opposed application of the Fair Labor
Standards Act test. The AFL-CIO also agreed that the common law test
was appropriate and stated that this determination should be based on
objective criteria. It urged the Department to prevent employers from
hiding behind artificial titles and job descriptions; it also noted its
belief that many individuals deemed independent contractors (or
employees of a staffing firm) are actually common law employees.
Four commenters (AILA, ITAA, Latour, Chamber of Commerce) rejected
the common law test as unnecessary, failing to reflect contemporary
realities within the regulated community, or lacking predictability.
ITAA also asserted that the ACWIA did not signal a departure from the
definitions of an "employer" under the current regulations of this
Department (20 CFR 655.715) and the INS (8 CFR 214.2(h)(4), 274a.1(g)).
Three of these commenters recommended using the standards set forth by
the Internal Revenue Service, noting that these standards are already
used by the industry and would eliminate confusion and promote
predictability. BRI and Baumann recommended that the Department
eliminate "skill" as a factor because it is essentially a requirement
of the H-1B program. Senators Abraham and Graham expressed the view
that the proposed test was "unnecessarily complicated and subjective"
and
[[Page 80142]]
suggested that "[t]he Department's regulation should follow the
statute and our intent by using [as a sole factor whether] 'the worker
is considered an employee of the firm or the client for tax purposes,
i.e., the entity withholds federal, state, and Social Security
taxes."' Similarly, AILA suggested that any worker who is classified
as an independent contractor for tax and benefit purposes should not be
considered an employee. The Chamber of Commerce commented that if the
Department lists the common-law factors, it should use the list in the
Supreme Court opinions, not the somewhat longer list of factors
utilized by EEOC.
After careful consideration of the comments, the Department has
concluded that it should utilize the common law standards for
determining whether a United States worker is employed by a dependent
employer--the status that invokes the statute's protection against
displacement. As noted in the NPRM, the Department believes that it is
required by Supreme Court precedent to apply the common law test for
employment relationship in the absence of plain statutory language
directing the use of a different test. None of the comments submitted
persuade the Department that it may craft a different test under the
ACWIA.
Upon reflection, however, the Department has concluded that the
regulation should not include a detailed list of prescribed factors.
The Department believes that the factors identified in the NPRM provide
a useful framework, based on the common law, for distinguishing between
employees and independent contractors. Nevertheless, to avoid any
potential misunderstanding that the factors on the list are exclusive
or that factors not listed are less deserving of consideration, the
Department has decided that no list of factors should be included in
the Interim Final Rule. The Interim Final Rule reiterates that the
common-law test requires an assessment of all the factors bearing on
the employment relationship, with the right to control the means and
manner of work being the key determinant but with no one factor
controlling.
Some commenters expressed a concern that there is tension between
the NPRM's formulation and the IRS test. However, the Department has
not been persuaded that such a tension exists between these tests,
which are both drawn from the common law multifactor analysis. The NPRM
list of factors is quite similar to the factors identified in IRS Rev.
Rul. 87-41, 1987--Cum. Bull. 296, 298-99. As noted in the NPRM, the
proposed list of factors for determining whether an employment
relationship exists was drawn from a framework developed by the EEOC
for its policies on contingent workers. And as the EEOC recognized, its
framework was derived from non-exclusive lists of factors in Darden and
the other sources for the common law test cited by the Supreme Court in
Darden: Reid, the IRS ruling, and the Restatement (Second) of Agency
220(2) (1958).
Each of these sources for the common law test recognizes "the
right to control" as the key determinant in ascertaining the existence
of an employment relationship. As stated by the EEOC: "The worker is a
covered employee * * * if the right to control the means and manner of
her work performance rests with the firm and/or its client rather than
with the worker herself." Similarly, the IRS Revenue Ruling states:
"[G]enerally the relationship of employer and employee exists when the
person or persons for whom the services are performed have the right to
control and direct the individual who performs the services, not only
as to the result to be accomplished by the work, but also as to the
details and means by which that result is to be accomplished. * * * It
is not necessary that the employer actually direct or control the
manner in which the services are performed; it is sufficient if the
employer has the right to do so." See also the Supreme Court in the
Darden and Reid and Section 220(1) Restatement (Second) of Agency.
Thus, an employer that properly applies any formulation of the common
law test, grounded upon the cited authorities, should obtain the same
conclusion regarding an individual's employment status.
In the Department's view, the EEOC's approach (in EEOC Policy
Guidance on Contingent Workers, Notice No. 915.002, Dec. 3, 1997)
provides an especially useful model for identifying particular factors
that can be applied in the context of H-1B employment, particularly
where workers are placed at third-party employer worksites. The EEOC
established the list as guidance for ascertaining an individual's
employment status in the analogous context of staffing firm workers,
i.e., workers who are "placed in job assignments by temporary
employment agencies, contract firms, and other firms that hire workers
and place them in job assignments with the firms' clients." As such,
the list is oriented towards individuals providing services, and it
provides a focus that facilitates a differentiation among individuals
who may possess attributes of both employees and independent
contractors. This focus, the Department believes, makes the EEOC
formulation useful for resolving employee status questions in the H-1B
environment, with its mix of individuals working at a facility operated
by one employer, but who may be self-employed or employees of another
employer(s). Employers may wish to consider other sources in
determining employee status, including IRS materials. The IRS, for
instance, has identified the following factors that may be helpful in
determining employee status in the H-1B context: the firm or the client
provides training to the worker so that the worker may perform services
in a particular manner or method; the worker performs services for only
one firm at a time; and the worker has been personally selected to
perform the job by the client or firm. See IRS Rev. Rul. 87-41, 1987-
Cum. Bull. 296, 298-99.
The Department is not persuaded that Congress evinced any intention
that tax law principles should be applied by employers or this
Department in determining employee status for purposes of the H-1B
program. The statute evinces only that the common law test be applied,
not any particular formulation of the test. The Department disagrees
with the further suggestion that the IRS formulation of the common law
test should be the preferred method for making employee status
determinations. Such use could pose some problems in administering the
H-1B program. While the IRS has developed a list of factors that it
will consider in making employee independent contractor decisions,
Congress, for an extended period of time, has limited that agency's
interpretation and application of its common law-based test. Congress
has imposed significant statutory limitations upon the IRS in
collecting taxes from employers who fail to withhold taxes from
individuals whom employers claim to be independent contractors. See,
e.g., Section 530 of Pub. L. 95-600, as amended, 26 U.S.C. 3401 note,
discussed in Hospital Resource Personnel, Inc. v. United States, 68
F.3d 421 (11th Cir. 1995). Section 530(b) also prohibits the IRS from
issuing any regulations or Revenue Rulings that would further clarify
the employment status of individuals for purposes of the employment
taxes. Consequently, the Department cannot be confident that an
employer's treatment of a worker as an independent contractor or an
employee for tax purposes accords with the common law test.
Accordingly, the Department does not consider an
[[Page 80143]]
employer's designation of a worker's status for tax purposes to be
controlling on the matter of that worker's status for purposes of the
H-1B program. The fact that an employer has treated a worker as an
independent contractor for tax purposes, without protest by the IRS,
will not excuse an employer's non-compliance with its H-1B obligations
toward that worker as an employee if the common law test shows the
worker to be an employee.
The Department is not persuaded that the factor relating to a
worker's level of skill or expertise should be eliminated from the
common law test. While the Department agrees with the observation that
the occupations for which H-1B workers are sought require more advanced
skills than those required for many other jobs, it remains true that a
worker's advanced skill is one of the factors weighing against an
employment relationship and must be examined in determining whether a
worker who may have been displaced was an employee or an independent
contractor.
Finally, the Department notes that although this test is most
important in the context of displacement, the common law test applies
in any situation under the H-1B program where the question of
employment relationship may arise (see the discussion in IV.B.1, above,
regarding application of the formula for determining whether an
employer is H-1B-dependent). The Interim Final Rule states, however,
that every H-1B nonimmigrant is by definition an employee of the
petitioning employer since only employees are granted entry/status as
H-1B nonimmigrants.
2. What Constitute "Indicia of an Employment Relationship," for
Purposes of the Prohibition on Secondary Displacement of U.S. Workers
at Worksites Where the Sponsoring Employer Places H-1B Workers?
(Sec. 655.738(d)(2)(ii))
Section 212(n)(1)(F)(ii) of the INA as amended by the ACWIA, 8
U.S.C. 1182(n)(1)(F)(ii), prohibits the displacement of U.S. workers
employed by another ("secondary") employer, if an H-1B-dependent
employer or willful violator intends or seeks to place its own H-1B
workers with that other employer in a situation where, among other
things, there are "indicia of an employment relationship between the
nonimmigrant and such other employer."
In his Congressional Record statement, Senator Abraham
characterized the secondary placement provision as applying "where the
H-1B worker would essentially be functioning as an employee of the
other employer." Senator Abraham further stated that the requirement
that there be "indicia of employment" is "intended to operate
similarly to the provisions in the Internal Revenue Code in determining
whether or not an individual is an employee." 144 Cong. Rec. S12751
(Oct. 21, 1998).
In the NPRM, the Department stated its view that this protection
would be invoked where the relationship between the business receiving
the services of the H-1B individual possesses some, but not all, of the
attributes of an employment relationship. Thus, the Department proposed
as a test for this relationship a list of factors that it derived from
the common law test which the Department had proposed for "primary
displacement" (discussed above in IV.D.1). The Department identified
nine factors it believed to be most useful in determining whether the
H-1B worker and the business at which he or she has been placed by the
primary employer possess the requisite "indicia of an employment
relationship." The Department requested comments on its proposed test
and any alternative formulations for determining secondary displacement
coverage.
Several commenters responded to the proposal on this issue. Two
employee organizations (AOTA, APTA) generally endorsed the Department's
proposal, but sought assurances that the Department will hold
recruitment/staffing firms to the same standard as other employers. One
individual (Miano) urged that workers on H-1B visas should be
considered employees of a company if they work at that company's
facility and take direction from the company's management. Rapidigm
asked the Department to explain how it settled on the factors it
identified in the proposal.
Senators Abraham and Graham and three representatives of employers
(AILA, ITAA, Latour) asserted that the legislative history of the ACWIA
notes that "indicia of employment" was meant to operate in a manner
similar to IRS provisions and that the focus of the regulations should
be on that test. Senators Abraham and Graham continued: "[O]ur intent
was simple * * *. Anyone without [a contract directly with the putative
employer], whether an independent contractor, or an employee of a
third-party employer, would not be 'employed by the employer.' " The
Chamber of Commerce reiterated its opposition to application of common
law standards, but urged that if the Department does adopt these
standards, both the quantity and quality of common law factors
sufficient to establish "indicia of an employment relationship"
should be substantially the same as those necessary to establish the
"employed by the employer requirement." The Chamber of Commerce also
requested that the Department strike from the list of the "indicia"
factors that "the client can discharge the worker from providing
services to the client" because this factor, it asserts, places an
unnecessary burden on typical contracting and subcontracting business
arrangements, under which a client retains the right to insist that a
worker be removed from the client's jobsite. TCS expressed concern that
the Department's proposal may improperly lead to the result that its
consultants will be seen as meeting the "indicia" nexus. In this
regard, it stated that the Department fails to mention what TCS
believes to be the most important criterion--who pays, assigns, and
trains the individual at issue, and who possesses ultimate control over
him--and does not indicate how various factors are to be weighed. AILA
and ACIP expressed concern that a worker supplied by another company
will often be subject to the controls identified by the Department as
"indicia." ACIP contended that the Department may be misinterpreting
the common law, asserting that a client-firm's typical control of
hours, location, access, etc. should not turn an individual into the
client's employee--a relationship that should be rare, not commonplace.
Both groups also suggested that this test will operate contrary to
settled subcontracting practices.
The Department has carefully considered these comments. As
explained previously, the Department is not persuaded by the suggestion
that it could use anything other than the common law test for an
employment relationship as the starting point for interpreting the
"indicia of an employment relationship." The Department proposed a
subset of the common law factors, which, in its view, are relevant and
useful in determining the relationship between the H-1B worker and the
client business, as distinct from those factors of the test that simply
focus on whether an individual is self-employed.
The Department sees no merit to the suggestion that Congress
intended the use of the "employment relationship" test to determine
the ACWIA-specific relationship between an H-1B worker and the
secondary employer, which, in the language of the statute, possesses
"indicia of an employment relationship." If Congress had wanted to
use the same test for both purposes, it could have done so by using the
same
[[Page 80144]]
language as it did for the relationship between a U.S. worker and his
or her employer. That congress chose different language is a strong
indication that it had a different intention than suggested by the
commenters.
Furthermore, how the employee is treated for IRS purposes is simply
not pertinent, and is contrary to the clear intent of the provision.
IRS is concerned only with the entity which is paying the worker--in
this case necessarily the H-1B employer, not the secondary employer.
Thus 26 U.S.C. 3401(d) defines "employer" for purposes of payroll
deductions as "the person for whom an individual performs or performed
any service, of whatever nature," except that if that person does not
have control of payment of wages, the person having such control is the
employer. Regulations which followed the IRS approach would thus have
the result of nullifying the secondary placement protections of the
ACWIA.
Finally, reading the provision as requiring less than a full
employment relationship is congruent with the purpose of the statute to
assist U.S. workers in retaining their employment where their jobs may
be threatened by the actual or potential placement of H-1B workers.
Congressman Smith commented that the legislation is intended to address
the problems posed by "job shops." In his introduction of the
compromise ACWIA bill to the House of Representatives, he stated:
"The employers most prone to abusing the H-1B program are
called job contractors or job shops * * *. They are in business to
contract their H-1Bs out to other companies. The companies to which
the H-1Bs are contracted benefit by paying wages to the foreign
workers often well below what comparable Americans would receive.
Also, they do not have to shoulder the obligations of being the
legally recognized employers; the job shops remain the official
employers."
144 Cong. Rec. H8584 (Sept. 24, 1998). Senator Abraham also stressed
the importance of the layoff protections of the bill, "very mindful of
the concerns people have that somehow these H-1B temporary workers
might end up filling a position where an American worker could have
filled the slot. Our goal is to make sure that does not happen." 144
Cong. Rec. S10878 (Sept. 24, 1998). There is certainly no suggestion in
Senator Abraham's explanation of this provision that it should be
narrowly construed: "An H-1B dependent company acting as a contractor
must attest that it also will not place an H-1B professional in another
company to fill the same job held by a laid off American 90 days before
or after the date of placement." Ibid.
In the NPRM, the Department did not indicate the point at which the
relationship between a customer and an H-1B worker would trigger the
displacement obligation. In this regard, the Department stated that it
had considered, but rejected, an approach that would require the
presence of at least some unspecified number of factors as a litmus
test. No commenter expressed disagreement with this decision.
Upon review, the Department has decided that, as with the test of
employment relationship, the single most important consideration will
be whether the customer has the right to control when, where, and how
the worker performs the job, i.e., the manner or method by which the
particular duties of the job are to be performed. Thus, the presence of
this element alone suggests that the relationship between the customer
and the H-1B worker approaches that of employee to employer. Although a
consideration, the displacement obligation would not be triggered
simply because the H-1B worker performed duties on the customer's
premises.
The Department disagrees with the suggestion that the approach it
proposed is likely to upset usual contracting relationships. The
triggering of the secondary displacement liability of the H-1B employer
does not itself mean that there is an employment relationship between
the secondary employer and the H-1B worker. The fact that the placing
employer ordinarily will control important aspects of the relationship,
such as the pay, assignment, and training of the H-1B worker, does not
mean that the relationship between the worker and the employer's client
will not bear sufficient "indicia of employment" for the secondary
displacement provisions of the ACWIA to apply. However, these
provisions apply to the primary employer, which becomes liable under
the terms of its LCA--not to the secondary employer, which incurs no
liability under the ACWIA for the displacement.
The Department is unpersuaded that it should eliminate any of the
criteria it proposed as "indicia." Contrary to the suggestion of some
commenters, it is fully consistent with the purposes of the Act that
the proposed test may result frequently in a conclusion that the
secondary displacement prohibition is applicable.
3. What Constitutes an "Essentially Equivalent Job," for Purposes of
the Non-Displacement provisions of the ACWIA? (Sec. 655.738(b)(2))
Section 212(n)(4)(B) of the INA as amended by the ACWIA provides
that displacement occurs if the employer "lays off the [U.S.] worker
from a job that is essentially the equivalent of the job for which the
nonimmigrant or nonimmigrants is or are sought. A job shall not be
considered to be essentially equivalent of another job unless it
involves essentially the same responsibilities, was held by a United
States worker with substantially equivalent qualifications and
experience, and is located in the same area of employment as the other
job." The area of employment is defined as "the area within normal
commuting distance of the worksite or physical location where the work
of the H-1B nonimmigrant is, or will be, performed. If such worksite or
location is within a Metropolitan Statistical Area, any place within
such area is deemed to be within the area of employment."
Congressman Smith explained that Congress intended to prevent
covered employers from replacing or displacing American workers with H-
1B workers. In his words:
"Congress ma[de] clear that the prohibition is directed to
circumstances in which a covered employer hires H-1B workers with
similar qualifications to those of laid off American workers in
similar jobs.
"This language should not be interpreted as prohibiting and
preventing only a one-for-one replacement of a particular laid off
American worker; such an interpretation would be an overly rigid
reading and a mischaracterization of Congressional intent. The focus
of the provision is on the placement of H-1B workers in the kinds of
jobs previously held by American workers. If an American worker was
laid off from a job and the employer then hires an alien (on an H-1B
visa) with sufficiently similar skills and experience to perform a
sufficiently similar job, a prohibited displacement has taken place.
This is a violation of the attestation regardless of whether the
replacement was intentional or unintentional, or whether it was done
in bad faith or not."
144 Cong. Rec. E2324 (Nov. 12, 1998). He also noted that a dependent
employer or willful violator is prohibited from "concealing a lay off/
displacement by making a modest or cosmetic change in job duties and
responsibilities [or] * * * by some other subterfuge or pretense."
On the other hand, Senator Abraham remarked:
"The reason for the change from ["specific employment
opportunity"] is that it was thought desirable to include within
the scope
[[Page 80145]]
of this prohibition situations where an employer sought to evade
this prohibition by laying off a U.S. worker, making a trivial
change in the job responsibilities, and then hiring the H-1B worker
for a 'different" job' * * *. For similar reasons, especially given
the nature of the jobs in question, the geographical reach of the
prohibition was extended so as potentially to cover other worksites
within normal commuting distance of the worksite where the H-1B is
employed. This was to cover the eventuality that an employer might
try to evade this prohibition by laying off a U.S. worker, hiring an
H-1B worker to do that person's job, but assigning the H-1B worker
to a different worksite very close by in order to conceal what was
going on."
144 Cong. Rec. S12750 (Oct. 21, 1998).
Senator Abraham contrasted the provision in the ACWIA with the
original definition in the House, which did not contain the phrase
"from a job that is essentially the equivalent of the job for which
the [H-1B worker] is being sought." Senator Abraham stated that
"[t]hat phrase was added to make clear that this provision is not
intended to be a generalized prohibition on layoffs by covered
employers seeking to bring in covered H-1Bs, but rather a prohibition
on a covered employer's replacing a particular laid-off U.S. worker
with a particular covered H-1B."
In the NPRM, the Department explained that the comparison required
to determine whether an unlawful displacement has taken place involves:
a comparison first of the job held by the H-1B worker with the job held
by the U.S. worker to determine if the jobs involve essentially the
same responsibilities; a comparison of the U.S. worker with the H-1B
worker to determine if they have substantially equivalent
qualifications and experience; and a determination of the areas of
employment, which must be the same for each worker in question.
The Department proposed that when comparing the job
responsibilities component of the provision, the focus should be on the
core elements of the job, such as supervisory duties, design and
engineering functions, or budget and financial accountability, and on
whether both workers are capable of performing those duties. The
Department further proposed that peripheral, non-essential duties that
could be tailored to the particular abilities of the individual workers
would not be determinative. The Department suggested that it might be
useful to apply the standards under the Equal Pay Act ("EPA") (29
U.S.C. 206(d)(1)) for determining the essential equivalence of jobs.
See 29 CFR 1620.13 et seq. In this regard, the Department noted that
the EPA standards focus on actual job duties and responsibilities,
rather than a comparison of sometimes artificial job titles and
position descriptions. The Department noted its concern that the
protection for U.S. workers could be thwarted if essential equivalence
required a match of insubstantial aspects of jobs.
As to the qualifications and experience of the workers, the
Department proposed that the comparison be confined to matters which
are normal and customary for the job, and which are necessary for its
successful performance. In this regard, the Department proposed that
although it would be appropriate to compare the relative qualification
of the H-1B and U.S. workers by virtue of their education, skills, and
experience, it would be inappropriate to compare their relative ages or
their ethnic identities, or whether they are exactly alike in their
educational background and work experiences. As an illustration, the
Department stated its view that unlawful displacement could occur where
an H-1B worker is "overqualified" for the job under comparison.
With regard to "area of employment," the NPRM noted that the
definition is much the same as the Department's regulatory definition
at Sec. 655.715 (see IV.P.5, below).
The Department received five comments on its proposals on this
issue.
The AFL-CIO stated that the Department recognized that employers
might seek to hide behind "artificial job titles and position
descriptions," and that the comparison is between the U.S. worker's
and the H-1B worker's qualifications for the job in question. The AFL-
CIO stated that the Department must continue to rely on objective
criteria such as the North American Classifications (NAICS), "rather
than the employer's self-serving declarations . . . of 'intangible'
qualifications, such as being a 'team player,' * * *"
Senators Abraham and Graham took issue with the Department's use of
the EPA standard for a "job" which, they contended, takes the
Department beyond the one-for-one displacement definition provided by
the statute for determining whether an H-1B nonimmigrant displaced a
U.S. worker in the same job. They stated that the EPA applies a
"substantially similar"definition, which, in their opinion, is much
broader than the ACWIA's "essentially equivalent" jobs standard. ITAA
requested the Department to adopt a narrow reading of the displacement
prohibition, suggesting that the Department's proposal improperly
attempted to put in place an approach that had been rejected during the
legislative process. ACE urged the Department to reconsider its plan to
"strip away" the relevant information about job responsibilities; it
suggested that the Department, instead, should require that comparisons
take into account the context and the actual, specific requirements and
skills of a particular job.
AILA took issue with the "core elements" approach as too broad
and too difficult for an employer to apply. For example, AILA contended
that under the "core responsibilities" analysis, a software engineer
for a telecommunications project would appear to have the same core
responsibilities as a software engineer for administrative functions,
although the positions are very different and require different
expertise and knowledge. On the other hand, AILA stated that the
essential equivalence analysis of the EPA is more in keeping with
legislative intent. AILA proposed a test that would compare the
employer's existing job requirements and duties to those of the H-1B
employee.
AILA also stated its approval of the Department's proposals on
"substantially equivalent" and "area of intended employment."
The Department continues to believe the distinction between core
and peripheral elements of a job is important. The Department believes
that its reference to the "core elements" of the job may have been
misunderstood. The Department did not mean to imply, for example, that
if each job required design and engineering functions, for example,
there would be a match of core elements of the job, but rather that the
design and engineering functions of a job such as software engineer are
core rather than peripheral elements. The Department would agree with
AILA that a job as software engineer for telecommunications would not
ordinarily be similar to a job as software engineer for administrative
matters-- assuming the employer does not treat the job of "software
engineer" as fungible and move workers from one project to another
without regard to its content.
The Department finds no merit to the suggestion, in effect, that
the Department's interpretation of the phrase "essentially
equivalent" is not based on the language of the ACWIA, but on an
approach that was discarded during the legislative process. The
Department believes that its interpretation of this term is well-
grounded in the specific language of the ACWIA. The Department is not
[[Page 80146]]
persuaded that the ACWIA's displacement provisions only operate on a
"one-to-one" basis. Where the workforce in question is small, it is
quite possible that the comparison will be so focused, but in other
situations a wider inquiry will have to be undertaken. For example,
where an employer, through reorganization, eliminates an entire
department with several employees and staffs this function with one or
more H-1B workers, any U.S. worker(s) in that Department who
occupies(d) an essentially equivalent job as that filled or to be
filled by the H-1B worker(s) would be protected against displacement.
The Department will also look closely at situations where a U.S. worker
is laid off and his/her job is filled by a U.S. worker colleague whose
own job is then filled by an H-1B nonimmigrant; the Department would
seek to determine whether the first U.S. worker was, in fact, the
subject of a prohibited displacement.
The Department also continues to believe that the regulations
implementing the EPA provide a useful source of standards for assessing
the "essential equivalence" of jobs. Neither the EPA nor the ACWIA
requires that the jobs under comparison be identical as a condition for
invoking their provisions. Although the two statutes have operative
language that differ in their specifics, each requires a determination
of "equivalence" if an employee is to secure its protection. Thus,
the EPA, at 29 U.S.C. 216(d)(2), provides: "[No employee shall receive
less pay than an employee of another gender] for equal work on jobs the
performance of which requires equal skill, effort and responsibility
under similar working conditions." This compares with the ACWIA, at
Section 212(n)(4)(B), which provides: "[A U.S. worker is displaced]
from a job if the employer lays off the worker from a job that is
essentially the equivalent of the job for which the [H-1B worker or
workers] is or are sought," i.e., the job "involves essentially the
same responsibilities, was held by a United States worker with
substantially equivalent qualifications and experience, and is located
in the same area of employment as the other job." With regard to each
statute, the regulatory challenge is to determine the point at which
two arguably different jobs that share some but not all characteristics
become essentially alike for the purpose of the required statutory
comparison. See also the Department's regulations under the Family and
edical Leave Act, 29 U.S.C. 825.115(a), which use the same concept in
defining "equivalent position." On the other hand, it is not the
Department's intention to adopt wholesale the EPA regulations, but
rather to adapt those provisions which it considers relevant and
appropriate in satisfying the analogous but somewhat different
statutory test under the ACWIA. Significantly, under neither statute
did Congress require an identity of jobs as a condition to invoke the
statutory protection afforded workers.
As noted in the NPRM, it is important that the comparison of the
job filled by an H-1B worker and the job held by a U.S. worker take
into account the actual duties of the jobs. See 29 CFR 1620.13(e),
1620.14(a). U.S. workers would receive little protection if the
comparison were to be made simply by job titles or position
descriptions that easily can be tailored to disguise jobs, which in
their actual performance, are essentially alike. The same concerns
require that the comparison take into account the most significant
components (i.e., core elements) of the jobs--so that a U.S. worker
does not lose the Act's protection where the differences between the
job and the workers themselves are insubstantial, peripheral, or
reflect discrimination against U.S. workers. See 29 CFR 1620.14(a).
As under the EPA, the jobs will be viewed as different if the skill
required to perform the job the U.S. worker was holding is
substantially different than that required to perform the job of the H-
1B worker. This does not end the inquiry, however, because the ACWIA
requires in addition the comparison of the experience and
qualifications of the workers, considering the experience, training,
education, and ability of the workers as measured against the actual
performance requirements of the jobs. Thus an inquiry must first be
made into whether both workers possess the minimum qualifications for
the job. Unlike the EPA, however, the comparison includes not only the
experience and qualifications required to perform the job, but also
experience and qualifications which are directly relevant in that they
would materially affect a worker's relative ability to perform the job
better or more efficiently. Furthermore, the statutory standard
requires only that the workers' qualifications and experience be
"substantially equivalent;" certainly no two workers would have
identical experience and qualifications. For example, the Department
would consider a bachelor's degree from one accredited university to be
substantially equivalent to a bachelor's degree another accredited
university. Similarly, the Department would consider 15 years of
experience to be substantially equivalent to 10 years of experience.
Finally, a worker's qualifications or experience that are not needed or
useful in performing the specific requirements of the job are not
relevant to the comparison. For example, the Department would not
ordinarily consider experience or a degree in an unrelated field to be
relevant.
As suggested in the NPRM, the Department's Interim Final Rule
utilizes the current definition of "area of intended employment" at
Sec. 655.715 to define "same area of performance."
4. How Does the ACWIA Distinguish Between a Prohibited "Layoff" and a
Permissible Termination of an Employment Relationship?
(Sec. 655.738(b)(1))
The ACWIA's non-displacement prohibition applies only to a
"layoff" as that term is defined by the ACWIA. Section
212(n)(4)(D)(i) of the INA as amended by the ACWIA, 8 U.S.C.
1182(n)(4)(D)(i), states that a "layoff" means "to cause the
worker's loss of employment, other than through a discharge for
inadequate performance, violation of workplace rules, cause, voluntary
departure, [or] voluntary retirement." Furthermore, where loss of
employment is caused by "the expiration of a grant or contract (other
than a temporary employment contract entered into in order to evade
[the displacement provisions of the ACWIA]," it is not a layoff within
the meaning of the ACWIA.
Congressman Smith and Senator Abraham both stated that Congress
intended that the expiration of a temporary employment contract would
be treated as a layoff if an employer enters into such a contract with
the intent of evading the displacement prohibition. 144 Cong. Rec.
E2324 (Nov. 12, 1998); 144 Cong. Rec. S12750 (Oct. 21, 1998).
The Department explained in the NPRM that it would closely
scrutinize any situation where there is some question regarding the
voluntariness of the resignation or retirement of a U.S. worker. The
Department also proposed that it would look to well-established
principles concerning the "constructive discharge" of workers who are
pressured to leave employment.
In the NPRM, the Department stated its view that the statutory
exception where the U.S. worker's loss of employment is caused by the
expiration of a grant or contract was meant to address the common
situation where scientists and other academic personnel
[[Page 80147]]
are expressly hired to work under a contract or grant from another
institution. Thus, the Department proposed that where the funding is
lost, and the worker is not replaced because of this loss, no layoff
would occur within the meaning of the ACWIA. The Department similarly
proposed that where a staffing firm or other commercial firm hires an
employee expressly to work on a specific project under a contract with
another business entity, it may choose, in appropriate circumstances,
to discontinue his or her employment without violating the ACWIA.
By way of illustration, the Department described a situation where
no displacement violation occurs--the contract project ends and is not
renewed, and the employer does not have a practice of then moving its
employees to work under other contracts, or placing its employees on a
call back list or its equivalent, but instead terminates the
relationship for lack of work. The Department distinguished the
preceding situation from one where a staffing firm places employees at
other businesses, does not hire employees for a specific client or
contract, and ordinarily moves its employees to perform work under
other contracts. The Department proposed that in this latter situation,
the Department might find a displacement if the employer terminates
U.S. workers and hires H-1B workers to perform essentially the same job
under a different contract or on a different project. The NPRM also
noted the Department's intention to closely scrutinize situations where
it appears that a particular contract, including commercial contracts
and grants as well as employment contracts, has been used to evade the
dependent employer's obligation not to displace U.S. workers.
The Department received several comments on this issue.
AOTA and the AFL-CIO generally supported the Department's approach.
The AFL-CIO endorsed the Department's recognition of constructive
discharge. The Chamber of Commerce, AILA and ACIP pointed out that the
Department's proposal fails to mention that the ACWIA expressly
excludes from "layoff" any discharge for inadequate performance,
violation of workplace rules, or cause.
The Department acknowledges its oversight in failing to paraphrase
the introductory clause to the ACWIA's definition of "lays off" in
the NPRM discussion of this point. This clause lists those personnel
actions, such as a discharge for poor performance or cause, that should
not be mistakenly considered as a "layoff." The omission of this
language from the NPRM was not intended to signal that this part of the
definition was insignificant--only that this portion of the statute did
not seem to require any regulatory explication. The Interim Final Rule,
however, contains a complete statement of the statute's layoff
provision, including the statutory exceptions.
AOTA stated that the Department should scrutinize arrangements that
may appear to be limited to the duration of a contract or grant; in its
view, this would prevent staffing firms from falsely claiming that it
had hired a person specifically for the contract in question. The AFL-
CIO suggested that employers who claim that a U.S. worker was not laid
off due to expiration of contract or grant must document that they have
not engaged in a pattern or practice of denying workers assignment to
other projects. Two commenters (Kirkpatrick & Lockhart, Latour) noted
that the Department correctly recognized that the expiration of a
contract leading to the termination of employment is not a "layoff"
for ACWIA purposes.
Senators Abraham and Graham and ITAA stated that there should be no
distinction between academic and other situations involving the
expiration of a contract or grant. They expressed disagreement that it
would be a layoff where a staffing firm deviates from its practice of
continuing the employment of a worker after the expiration of a
contract and fails to continue the employment of a U.S. worker. ITAA
also objected to what it viewed to be an apparent presumption by the
Department that temporary contracts ordinarily would be used to evade
the displacement prohibition. The NACCB asserted that the distinction
between employers that usually transfer employees from contract to
contract and those that do not have that practice is impractical and
unworkable in the information-technology staffing industry. It also
provided examples of situations that it believed would be problematic
under the Department's proposal. BRI expressed concern that the
Department's approach would fail to account for situations where a
particular worker was not qualified for positions under other contracts
held by the employer.
The Department does not presume that temporary contracts ordinarily
will be used to evade the statute's displacement obligations. The
Department also does not hold the view that Congress believed that
employment contracts tied to the life of a grant or contract were
solely a creature of academia. While one of the examples discussed in
the NPRM concerned the use of such academic contracts, the NPRM also
discussed the applicability of the provision to staffing firms, whose
contracts typically are with more commercially-oriented businesses.
As the NPRM suggested, the Department recognizes that the
employment of workers on a contract or grant basis could pose some
problematic issues. The comments received confirmed the Department's
view. While the statute recognizes that a layoff typically will not
occur where "a worker's loss of employment * * * [is caused by] the
expiration of a grant or contract," it expressly distinguishes this
situation from an unlawful "temporary employment contract entered into
in order to evade a [displacement] condition." Section
212(n)(4)(D)(i)(I). The Department intends to look closely at such
contracts to ensure that employers do not attempt to evade the
statutory obligations.
Upon further review of this matter and consideration of the
comments received, the Department has decided to continue the approach
described in the NPRM. The Department, however, believes it appropriate
that the totality of the circumstances be considered to determine
whether a layoff has occurred. In many situations, the Department
expects that it will be obvious whether a layoff has occurred (e.g.,
where a worker has voluntarily retired). In other cases, it will be
unnecessary to resolve the question of whether the loss of the job was
because of the expiration of a contract or grant because the jobs are
clearly not equivalent.
In the more difficult cases, a determination of whether the
expiration of a grant or contract caused the loss of employment such
that a layoff did not occur will require an examination of the practice
of the employer (in cases of primary displacement) or the customer
(where secondary displacement is at issue) insofar as it bears on the
following questions: whether the U.S. worker's job, in fact, was tied
to the life of a particular contract or grant; whether the employer has
a practice, either as a general matter or with respect to the employee
in question, to continue the individual, without interruption in his
employment on other contracts or grants; whether the employer has a
practice, again either as a general matter or with respect to the
employee in question, that the employee will be called back when a
contract for which he or she is qualified becomes available; whether
the employer departed from its usual practice insofar as the hire or
[[Page 80148]]
placement of the H-1B worker is concerned; whether the reason for the
departure from the practice was for a reason unrelated to the
employment of the H-1B worker; whether there is any evidence to suggest
that the employer intended to evade its displacement obligations; and
the employer's previous history of compliance with its displacement and
other H-1B obligations. This analysis will be used by the Department to
determine whether it is the expiration of the contract or grant which
has caused the termination of the employee or some other consideration
such as the hiring of the H-1B worker.
The Department notes that where an employer has a practice of
continuing employees on different projects or grants where work is
available, but of laying workers off if there is no work available that
fits the worker's skills and later offering the worker work under a new
contract when one becomes available, the Department would expect the
employer to contact the U.S. worker and offer the position prior to
petitioning for an H-1B worker for the position. The Department will
closely examine such situations to determine if the U.S. worker has
been unlawfully displaced, and if not, if the employer's failure to
contact such former employees is a recruiting violation.
5. What Constitutes "a Similar Employment Opportunity" for a U.S.
Worker, Which--if Offered--Would Not Constitute a Prohibited "Layoff"
or Displacement of the Worker?
Section 212(n)(4)(D)(i)(II) of the INA as amended by the ACWIA, 8
U.S.C. 1182(n)(4)(D)(i)(II), provides that, even where an H-1B worker
is placed in a job formerly held by a U.S. worker, no "displacement"
or "layoff" is considered to have occurred if the U.S. worker was
first offered but refused "a similar employment opportunity with the
same employer."
As stated by Congressman Smith: "The intent of Congress is that
the 'similar employment opportunity with the same employer at
equivalent or higher compensation and benefits' would be a meaningful
offer." 144 Cong. Rec. E2324 (Nov. 12, 1998). Senator Abraham stated
that it "is the intent of Congress that the determination of
similarity take into account factors such as level of authority and
responsibility to the previous job, level within the overall
organization, and other similar factors, but that it not include the
location of the job opportunity." 144 Cong. Rec. S12750 (October 21,
1998).
In the NPRM, the Department described this provision as allowing a
dependent employer an affirmative defense to its displacement of a U.S.
worker if the employer can establish that it offered a bona fide
transfer opportunity to the worker. The Department proposed that the
U.S. worker would need to be offered not simply another job with a
similar title, but that the offered position also carry with it
attributes such as a similar level of authority and responsibility
within the organization, a similar opportunity for advancement within
the organization, similar tenure, and a similar work schedule.
Four commenters responded to this proposal.
The AFL-CIO asserted that by using the term "employment
opportunity" rather than "job" or "position," Congress intended
that working conditions, such as schedules, worksite location, level of
authority and discretion, and potential to advance, be factors that
determine the similarity of opportunity, and that the term does not
simply reflect a comparison of compensation and benefits. One commenter
(Latour) urged the Department to be sensitive to the geographic needs
of employers in administering this section of the ACWIA, noting that
U.S. workers often are less willing to go to some localities than H-1B
workers.
Most of the factors listed by the AFL-CIO are included in the
Interim Final Rule. The Department notes that, apart from the economic
comparison proposed by the Department, as discussed in the next
section, no commenter objected to the other illustrative factors
proposed by the Department in measuring "similar employment
opportunity." AILA stated that it agreed that the factors listed by
the Department in the NPRM are appropriate for determining the
similarity of an employment opportunity offer. The AFL-CIO identified
as an additional factor, "the level of * * * discretion" of the two
positions, which, it asserted, should be taken into account. This
factor, the Department believes, is inherent in any comparison between
two jobs, and it has specifically included this factor in the Interim
Final Rule.
The Department has not included "worksite location" as an
additional factor, as had been suggested by the AFL-CIO. The intended
meaning of this term is not clear to the Department. To the extent it
is intended to require a comparison of the relative costs of living in
the areas of the jobs--a consideration discussed in the next section of
the Preamble--the Department's proposal already accommodated the
suggestion. If the AFL-CIO is suggesting that an employer should not be
able to offer a job in a different geographic location, the Department
disagrees with this suggestion. Although the ACWIA's language does not
foreclose an interpretation that would require an offered position to
be within the same geographic area in order to satisfy the test of
"similarity," the Department believes that this would unnecessarily
limit an employer's ability to restructure its operations in order to
ensure that no U.S. workers are displaced by an H-1B worker. Although
the Department has not included worksite location as an explicit
consideration in evaluating similarity of the employment opportunity,
the Department notes that the offer of a similar employment opportunity
must be bona fide. The Department would not consider an offer to be
bona fide if all of the facts and circumstances indicate it is designed
to be rejected by the employee and therefore is a subterfuge for a
layoff.
6. What Constitutes "Equivalent or Higher Compensation and Benefits"
for a U.S. Worker, for Purposes of the Other Job Offer to That Worker
so as to Not Constitute a Prohibited "Layoff" or Displacement?
(Sec. 655.738(b)(1)(iv)(C))
Section 212(n)(4)(D)(i)(II) of the INA as amended by the ACWIA, 8
U.S.C. 1182(n)(4)(D)(i)(II), provides that no prohibited "layoff" of
a discharged U.S. worker occurs if the U.S. worker is offered another
employment opportunity with the same employer "at equivalent or higher
compensation and benefits than the position from which the employee was
discharged."
Congressman Smith stated: "It is Congress" intent that an
employer should not be able to evade attestation by making an offer of
an alternative employment opportunity without considerations such as
relocation expenses and cost of living differentials if the alternative
position was in a different geographical location." 144 Cong. Rec.
E2324 (Nov. 12, 1998). Senator Abraham stated that "the determination
of similarity * * * [does] not include the location of the job
opportunity." 144 Cong. Rec. S12750 (Oct. 21, 1998).
In the NPRM, the Department proposed that an "opportunity" could
not be considered to provide "equivalent or higher compensation and
benefits," if that "opportunity" would provide the worker a lower
disposable income, or would require the worker to incur expenses that
drive down his financial standing. The Department also noted that
Congress, by specifying "equivalent or higher" pay and benefits,
[[Page 80149]]
must have intended that the U.S. worker be offered a positive, rather
than negative, "employment opportunity."
The Department also proposed that, "[a]ssuming the regulations
provide that a 'similar employment opportunity' may include a transfer
to another commuting area," that opportunity must take into
consideration matters such as cost of living differentials and
relocation expenses (e.g., a New York City "opportunity" offered to a
worker "laid off" in Kansas City). The Department also noted that it
was considering whether it would be appropriate for this purpose to use
principles adapted from regulations defining equivalent compensation
and benefits under the Equal Pay Act and the Family and Medical Leave
Act. See 29 CFR 1620; 29 CFR 825.215(c).
The Department received five comments on this issue and its
proposals.
The AFL-CIO agreed with the Department's proposal, noting that a
position resulting in an actual loss of "real wages" for a U.S.
worker should not be considered equivalent compensation and benefits.
The AFL-CIO also observed that a change of employment that results in
higher dependent care costs for an employee has the same consequences
of decreasing real wages as cost-of-living and relocation expenses.
AILA, ITAA, the Chamber of Commerce, and Senators Abraham and
Graham, on the other hand, contended that the Department's proposal
that the cost of living and relocation costs should be considered in
determining whether the offered job offers the employee "equivalent or
higher compensation and benefits" is without support in the ACWIA, and
that "similarity" should not take into account the geographic
location of a job opportunity. The Chamber of Commerce noted that COLAs
and other expenses will not necessarily increase with an offer of
similar employment, such as where the position offered to the U.S.
worker is located in an area with lower costs than the position from
which he has been or will be laid off.
The Department believes that whether an employment opportunity
provides equivalent or higher compensation and benefits requires
consideration of the costs associated with the location of the jobs,
i.e., if the employment opportunity takes into consideration both the
cost of living and any costs expenditures necessary to relocate to
another location. The Department believes this accords with the most
natural meaning of the provision. The Department does not believe that
an employment opportunity can be bona fide if it does not take into
consideration these costs which would erode compensation under the job
offer.
The Department disagrees with the argument that Congress, by
prescribing a geographical condition in section 212(n)(4)(B) for
determining if a job offer would provide "equivalent or higher
compensation" of the job offered to a U.S. worker, but not in section
212(n)(4)(D)(i)(II), evinced an intention that the jobs' locations are
to be disregarded in making this latter comparison. The Department
notes that the two provisions measure different aspects of the
employer's displacement obligation. The first provision defines the
universe of jobs which should be compared to determine if a
displacement has taken place as those within the same geographical
area. The second provision compares the equivalency of jobs which the
U.S. worker occupies and is offered. The Department certainly does not
believe that where the statutory language in one provision explicitly
restricts the comparison to the same locality and in another provision
it is silent, it follows that the cost of relocation and the cost of
living cannot be taken into consideration in determining the
equivalency of compensation between two positions in different
localities. In fact, the Department believes that a more appropriate
inference would be that Congress intended no such limitation.
The Department, in determining whether a bona fide job offer was
made, does not intend to second-guess an employer's reasonable good-
faith efforts to achieve economic comparability. Ordinarily this could
be achieved if the job offer takes into account cost of living
adjustments between localities and relocation costs which the employer
ordinarily provides. If such cost of living adjustments are not
ordinarily provided by the employer, the Department would accept an
adjustment based on any published index of pay differentials or cost of
living, or use of the adjustments provided by the Federal Government to
its employees. In this regard, the Department agrees with the
observation by the Chamber of Commerce that if the transfer is to an
area with a less expensive cost of living, an employer may offer a
position at a reduced rate of pay, provided this accords with the
employer's normal policy.
AILA urged the Department not to adopt the EPA and the FMLA
standards for equivalency. AILA objected to the use of the FMLA
standard on the basis that it requires "virtual identity," rather
than the ACWIA's test of "substantial equivalence." With regard to
the possible use of the EPA regulations, AILA stated that its use would
be inappropriate because "substantial equivalence" would be defeated
whenever a job offered was located in another geographic area. AILA,
instead, requested that "equivalent or higher" be determined on a
case-by-case basis, in light of all circumstances of the job offer.
The Department notes that AILA has misstated the relevant ACWIA
standard, which is "equivalent or higher compensation and benefits,"
not "substantial equivalence." The Department continues to believe
that both EPA and FMLA regulations provide a proper basis for making
the comparison of compensation and benefits, although the FMLA
regulations are somewhat less useful since they provide less detailed
guidance in making an economic comparison of jobs. Accordingly, the
Interim Final Rule is based on the following principles drawn from the
EPA regulations, 29 CFR 1620.10: Wages include:
"all payments made to [or on behalf of] an employee as
remuneration for employment [e.g., ] all forms of compensation
irrespective of the time of payment, whether paid periodically or
deferred until a later date, and whether called wages, salary,
profit sharing, expense account, monthly minimum, bonus, uniform
cleaning allowance, hotel accommodations, use of company car,
gasoline allowance, or some other name. Fringe benefits are deemed
to be remuneration for employment. * * * Thus, vacation and holiday
pay, and premium payments for work on Saturdays, Sundays, holidays,
regular days of rest or other days or hours in excess or outside of
the employee's regular days or hours of work are deemed remuneration
for employment * * *."
Consistent with 29 CFR 1620.11(a), "fringe benefits" include, e.g.,
such benefits as medical, hospital, accident, life insurance and
retirement benefits; profit sharing and bonus plans; leave; and other
such benefit programs.
While the Department's interpretation allows for an inclusive
definition of compensation and benefits, the Department expects that
since the comparison will involve jobs with the same business, the
benefit components of the employee's compensation often will be the
same, leaving the cost of living differential as the sole or primary
variable in most situations. As discussed above, the regulations
specifically allow the job opportunity to be in a different locality,
provided there is an adjustment for cost of living, and relocation
costs are paid.
[[Page 80150]]
7. What Is Required of an H-1B-Dependent Employer or Willful Violator
Which Seeks to Place H-1B Workers at a Secondary Employer's Worksite?
(Sec. 655.738(d))
Section 212(n)(1)(F) of the INA as amended by the ACWIA, 8 U.S.C.
1182(n)(1)(F), requires that H-1B-dependent employers and willful
violators not place any H-1B worker at another employer's worksite
"unless the [H-1B] employer has inquired of the other employer as to
whether, and has no knowledge that * * * the other employer has
displaced or intends to displace a United States worker employed by the
other employer" within the period beginning 90 days before and
continuing until 90 days after the H-1B worker's placement at that
worksite. This requirement applies where there are "indicia of an
employment relationship" between the H-1B worker and the customer-
client of the dependent employer. section 212(n)(1)(G)(ii) further
provides: "The [LCA] application form shall include a clear statement
explaining the liability under subparagraph (F) of a placing employer
if the other employer * * * displaces a United States worker. * * *"
Additionally, section 212(n)(2)(E) provides that where an H-1B-
dependent employer places a non-exempt H-1B worker with another
employer in accordance with section 212(n)(1)(F) (i.e., after having
made the required inquiry), "such displacement shall be considered * *
* a failure, by the placing employer, to meet a condition specified [in
an LCA]. However, the employer may not be debarred unless the Secretary
finds that the placing employer "knew or had reason to know of such
displacement at the time of the placement," or the employer has been
sanctioned "based upon a previous placement of an H-1B nonimmigrant
with the same other employer."
In explaining these provisions and their interrelationships
Congressman Smith stated: "* * * [T]he legislation prohibits a
covered employer in certain circumstances from placing an H-1B
nonimmigrant with another employer where the 'other' employer has or
will displace an American worker. * * * Congress intends that the
employer make a reasonable inquiry and give due regard to available
information. Simply making a pro forma inquiry would not insulate a
covered employer from liability should the 'other' employer displace
an American worker from a job sufficiently similar to the one which
would be performed by an H-1B worker. That is one of the reasons why
subsection 412(a)(2) of the legislation requires that the employer
be notified through a clear statement on the labor condition
application (LCA) regarding the scope of a covered employer's
liability with respect to a lay off by a secondary employer. Through
the LCA form, the Department of Labor will make clear to covered
employers their obligation to exercise due diligence in ascertaining
whether the placement of H-1B nonimmigrants may correspond with the
lay off or displacement of American workers in similar jobs. Some of
the most egregious cases involving the abuse of the H-1B visa
program have involved American workers being retained only long
enough to train their H-1B replacements under contract with a
different employer. * * *"
144 Cong. Rec. E2324 (Nov. 12, 1998).
Similar statements were made by Senator Abraham:
In particular, the covered employer must promise to inquire
whether the other employer will be using the H-1B worker to displace
a U.S. worker whom the other employer had laid off or intends to lay
off within 90 days of the placement of the H-1B worker. The covered
employer must also state that it has no knowledge that the other
employer has done so or intends to do so.
144 Cong. Rec. S12751 (Oct. 21, 1998).
Congressman Smith and Senator Abraham agreed that an employer who
makes the required inquiries remains liable if the other employer
displaces U.S. workers notwithstanding the inquiry made. Thus
Congressman Smith stated:
"If the other employer has displaced an American worker (under
the definitions used in this legislation) during the 90 days before
or after the placement, the attesting employer is liable as if it
had violated the attestation.
"In all instances, the sanction may be an administrative remedy
(including civil monetary penalties and 'make-whole' remedies to the
American worker affected). The attesting employer can only receive a
debarment, however, if it is found to have known or to have had
reason to know of the secondary displacement at the time of the
placement of the H-1B worker with the other employer, or if the
attesting employer was previously sanctioned for a secondary
displacement under 212(n)(2)(E) for placing an H-1B nonimmigrant
with the same other employer. If an employer has conducted the
required inquiry prior to any placement with a "secondary"
employer, and has no information or reason to know of that
employer's past or intended displacement of U.S. workers, then the
attesting employer should ordinarily be presumed not to have
willfully violated the secondary displacement attestation. Congress
anticipates that the Department of Labor, in promulgating and
enforcing regulations, would require a reasonable level of
inquiry."
144 Cong. Rec. E2327 (Nov. 12, 1998).
Similarly, Senator Abraham stated:
"Making the required inquiries will not insulate a covered
employer from liability should the secondary employer with which the
covered employer is placing the covered H-1B worker turn out to have
displaced a U.S. worker from the job that it has contracted with the
covered employer to have the H-1B worker fill. That is why
subsection 412(a)(2) of this legislation adds a new requirement to
section 212(n)(1) that the application contain a clear statement
regarding the scope of a covered employer's liability with respect
to a layoff by a secondary employer with whom the covered employer
places a covered H-1B worker. * * * If the other employer has
displaced a U.S. worker (under the definitions used in this
legislation) during the 90 days before or after the placement, the
attesting employer is liable as if it had violated the attestation.
The sanction is a $1,000 civil penalty per violation and a possible
debarment. The attesting employer can only receive a debarment,
however, if it is found to have known or to have had reason to know
of the displacement at the time of the placement with the other
employer, or if the attesting employer was previously sanctioned
under 212(n)(2)(E) for placing an H-1B nonimmigrant with the same
employer. If an employer has conducted the inquiry that it is
required to attest that it has conducted before any such placement,
and (as that attestation requires) acquired no knowledge of
displacement of a U.S. worker in the course of that inquiry, it
should ordinarily be presumed not to have known or have reason to
know of a displacement unless there is an affirmative showing that
it did have such knowledge or reason to know."
144 Cong. Rec. S12750, S12751 (Oct. 21, 1998).
In order to achieve the purposes of this provision, the Department
proposed to develop a regulatory provision which requires that the H-1B
employer make a reasonable effort to inquire about potential secondary
displacement. The NPRM set out a non-exclusive list of methods that
could be used by an employer to demonstrate its efforts to assure
compliance with its inquiry obligation. The methods suggested included
obtaining a written assurance from the secondary employer that it does
not intend to displace a similarly-employed U.S. worker during the 90-
day period before or after the placement of the H-1B worker; a written
memorialization of such a verbal assurance; or the inclusion of a non-
displacement clause in a contract with the secondary employer. The NPRM
noted that the Department had read the language and structure of the
statutory provisions to reflect an intention that a dependent employer
must take pro-active steps to determine whether the placement of H-1B
workers would correspond with the layoff of similarly-employed U.S.
workers. The NPRM proposed that an employer, even with the receipt of a
"no displacement" assurance, should not be able to ignore other
information, coming to its attention before placement of the H-1B
worker, that calls into question the original assurance. The Department
[[Page 80151]]
proposed that in such circumstances the dependent employer would be
expected to recontact its customer and obtain credible assurances that
layoffs have not occurred or are planned during the relevant statutory
time frame.
Several commenters responded to the Department's proposals on this
issue.
One commenter (TCS) generally agreed with the Department's
approach, urging the Department to clarify that usually all that will
be required of a dependent employer is to make the layoff inquiry with
its customer and to memorialize the customer's response. ITAA stated
that it found helpful the Department's identification of a variety of
methods by which an employer may satisfy its inquiry obligation.
The AFL-CIO asserted that a refusal by a secondary employer to
respond to the staffing firm's inquiry should result in the
disqualification of that LCA. ACE and IEEE stated their belief that the
Department's proposal puts an unfair burden on the placing employer and
that, at the very least, the secondary employer should share liability
for violation of the displacement provision. The IEEE expressed
particular concerns regarding the effect of the Department's approach
on smaller businesses. Two other commenters (BRI and Cooley Godward)
asserted that the NPRM neglected to address the treatment of primary
employers who, despite reasonable efforts, receive no or an inadequate
response from the secondary employer. BRI requested that the final
regulation address a "reasonable minimal effort" threshold.
AILA, Rapidigm, and Satyam contended that getting written
assurances from secondary employers will jeopardize negotiations and
placement of H-1B workers. Rubin & Dornbaum and White Consolidated
Industries, on the other hand, stated that although only H-1B-dependent
employers and willful violators need obtain assurances, the effect of
that requirement is to impose a paperwork requirement on the secondary
employer.
AILA asserted that the proposal, in effect, required a dependent
employer to conduct an "interrogation" of its customer regarding its
layoff plans in order to satisfy its non-displacement obligation, and
stated that the proposal lacked "an articulable point at which the H-
1B employer is deemed to have made sufficient, reasonable efforts."
AILA requested that the Department allow flexibility to ascertain
whether there is a realistic possibility of displacement, such as where
the H-1B worker is only providing services for a special project or on
a short-term basis.
The Department has given careful consideration to the divergent
comments received on this proposal. The expressed concern regarding the
impact which the inquiry will have upon the dependent employer's
ability to place H-1B workers, in the Department's view, is misplaced.
The obligation has been imposed by Congress as a condition for the
employment of H-1B workers by H-1B-dependent employers and willful
violators. While a dependent employer has discretion as to how it will
meet this obligation, it must make the inquiry in every case where
there will be indicia of an employment relationship (see IV.D.2,
above).
The Department is not persuaded that its proposal imposes any undue
burden on dependent employers or their customers. The Department
believes that the statute contemplates due diligence in the inquiry,
taking into consideration the circumstances of the case, rather than
just a pro forma inquiry. Ordinarily, if the customer provides the
assurance and there is no reason to suspect to the contrary--as where
the project is only for a short-term, to satisfy a special need--an
employer would need only make the relevant inquiry of its customer and
memorialize the customer's intention not to displace any U.S. workers.
The Department does not believe that the nature of the inquiry creates
a significant burden in those instances where there is no reason to
believe that a displacement may be contemplated. On the other hand, if
the employer has any reason to believe the secondary employer may
displace its employees--as where the H-1B workers will be performing
services that the secondary employer performed with its own work force
in the past--a greater inquiry may be necessary. The Department notes
that the employer is not constrained by the Department's examples; it
can choose an alternative means to assure itself that there will not be
displacement and to minimize its potential liability, such as by an
indemnity clause, as suggested by IEEE.
Furthermore, the Department has no reason to believe that the
customer would have difficulty in answering the inquiry, especially
where no layoffs are contemplated. If a customer balks at providing the
lay-off information--an unlikely circumstance given the customer's
demonstrated operational needs--the ACWIA does not allow the dependent
employer to place an H-1B worker with that customer.
The Department disagrees with ACIP's contention that the
Department's proposal effectively dictates contract terms through
regulation and as such imposes an unauthorized and unwarranted burden.
So long as the dependent employer meets its inquiry obligation and it
does not have reason to believe there may be displacement, it is free
to structure its contractual arrangements with its customers as it
chooses.
The AFL-CIO commented that the Department had set "an incredibly
low bar" for employers to meet this obligation, urging that the
inquiry requirements should be supplemented by imputing knowledge of
public facts about the actions and intentions of secondary employers to
the H-1B-dependent employer. On the other hand, ITAA expressed concern
that an employer would be held accountable for any public information
relative to a layoff that might call into question a customer's
assurance that it had no layoff plans--even where the information is
buried in a local newspaper outside the area where the placing employer
is based.
The Department disagrees with the suggestion that it should impute
to the employer any public knowledge that layoffs by the customer had
or would occur. With regard to this matter, the statute sets up a
reasonableness standard. Although the H-1B employer is liable for civil
money penalties and other appropriate remedies in every case where a
displacement violation occurs, the ACWIA limits the imposition of the
debarment sanction to circumstances where the H-1B employer "knew or
had reason to know of such displacement at the time of placement of the
nonimmigrant with the other employer." Section 212(n)(2)(E)(i). Such a
determination obviously will depend upon the particular circumstances
presented, including the nature of the inquiry conducted by the
employer. The Department established no presumptions about the
employer's knowledge of public information, including newspaper
articles. On the other hand, the employer cannot put its head in the
sand and feign ignorance or disregard information that comes to its
attention through the press or otherwise. As the proposal stated,
"[Where a] placing H-1B employer [receives information] such as
newspaper reports of relevant layoffs by the secondary employer * * *
the [placing] employer would be expected to recontact the secondary
employer and receive credible assurances that no layoffs are planned or
have occurred in the applicable time frame."
ACIP asserted that the secondary employer might be unwilling to
assist the placing employer if the latter were
[[Page 80152]]
investigated by the Department. It suggested that the receiving
employer should be allowed to participate as an intervener in an
enforcement proceeding involving an alleged displacement violation. The
Department notes that pursuant to 20 CFR 655.815, service of the
Administrator's determination is made on known interested parties, and
that any interested party may request a hearing or participate in the
proceeding (20 CFR 655.820). The Department believes that the secondary
employer who has allegedly displaced a U.S. worker would generally
qualify as an interested party even though it is not directly liable
under the ACWIA. See also the rules of practice of the Office of
Administrative Law Judges, which provide a right to participate in a
proceeding where the ALJ determines that "the final decision could
directly and adversely affect [the applicants for participation] * * *,
and if they may contribute materially to the disposition of the
proceedings and their interest is not adequately represented by
existing parties." 29 CFR 18.10(b).
ITAA requested a "safe harbor" provision for employers who make a
demonstrated (i.e., written agreement with secondary employer) good-
faith effort to ascertain that no layoffs have occurred or will occur.
ACIP and AILA urged the Department to include regulatory language to
the effect that good faith efforts to cure violations should preclude
sanctions.
The Department's discretion in this area is limited. The ACWIA
imposes strict liability upon a dependent employer where a U.S. worker
is displaced by a secondary employer. Section 212(n)(2)(E) specifically
provides: "If an H-1B-dependent employer places a non-exempt H-1B
worker with another employer * * *, such displacement shall be
considered * * * a failure by the placing employer, to meet a condition
[of its LCA]." At the same time, the ACWIA's three-tier penalty
provisions require consideration of a violator's culpability which
should minimize the liability of a dependent employer who has acted in
good faith to comply with its displacement obligation. Additionally,
the Department notes that the regulatory provisions applicable to the
assessment of civil money penalties consider an employer's "good
faith" as a factor affecting the level of the penalty assessed. See 20
CFR 655.810(b).
8. What Documentation Will be Required of Employers About the ACWIA's
Non-Displacement Provisions? (Sec. 655.738(e))
In order to assure compliance with the ACWIA's non-displacement
provisions, the Department proposed to require that an H-1B-dependent
employer or willful violator retain certain documentation with respect
to any U.S. workers (in the same locality and same occupation as any H-
1B nonimmigrants it hired) who left its employ in the period 90 days
before or after the employer's petition for the H-1B worker(s), and for
any employees with respect to whom the employer took any action in the
180-day period to cause the employee's termination. The NPRM proposed
that for all such employees, these documents must include: The
employee's name, last-known mailing address, occupational title and job
description; any documentation concerning the employee's experience,
qualifications, and principal assignments; notification by the employer
regarding termination and the employee's response; job evaluations; and
information regarding offers of similar employment and the employee's
response. The Department noted its belief that these records are
required to be retained by EEOC regulations, 29 CFR 1602.14, therefore
their retention would not present an additional burden on employers.
The Department received four comments on this proposal.
ITAA stated that it does not object to any documentation retention
already mandated. It stressed the distinction between maintaining
records already created and creating records. Senators Abraham and
Graham asserted that the ACWIA imposes no requirement of maintaining
records of job offers made to departing employees as proposed by the
Department. Two commenters (AILA, Chamber of Commerce) stated their
belief that the proposal imposes new record creation and retention
burdens, disagreeing with the Department's assessment that the EEOC
already requires the retention of such documents. The Chamber of
Commerce stated that this burden will unduly impact upon small
businesses that normally do not maintain such records.
The Department notes that pursuant to Sec. 655.731(b), employers
are already required to maintain basic payroll information for all
employees in the specific employment at the place of employment,
including name, home address, and occupation. This information is also
required by other statutes such as the Fair Labor Standards Act and the
Equal Pay Act. See 29 CFR 516.2; 29 CFR 1620.32. The Department does
not believe that any prudent business person would fail to have such
information.
The commenters correctly recognized that the EEOC regulation cited
in the NPRM, 29 CFR 1602.14, does not establish a general requirement
that employers create the records encompassed by the Department's
displacement proposal. Section 1602.14 instead, requires the
preservation of records, for purposes of Title VII of the Civil Rights
Act of 1964 and the Americans with Disabilities Act (ADA), where the
employer chooses to make or keep personnel records, including
situations where an employee is involuntarily terminated, or a
discrimination charge is filed against the employer. As noted,
Sec. 1602.14 does not require an employer to create any records, but
rather requires an employer to preserve all personnel or employment
records which the employer "made or kept." The Department believes
that every prudent employer would "make or keep" the described
records relating to the circumstances in which employees leave their
employ. Once made or kept (i.e., where records received from others are
not immediately discarded), EEOC regulations require that these records
be preserved.
Furthermore, the EEOC does require the preservation of the same or
similar records under other statutes it administers, whether or not
they would otherwise be kept. Under the Age Discrimination in
Employment Act (ADEA), for example, there is an obligation to retain
certain records and an obligation to retain broad categories of
personnel documents which an employer "in the regular course of his
business, makes, obtains, or uses." 29 CFR 1627.3. In particular,
employers are required to retain any and all documents it makes,
obtains, or uses regarding "[p]romotion, demotion, transfer, selection
for training, layoff, recall, or discharge of any employee, * * *."
Against this regulatory backdrop, it is clear that employers
already are required by the EEOC, pursuant to Title VII and the ADEA,
to retain (i.e., preserve) the personnel documents that are encompassed
by the Department's proposal for documenting an employer's displacement
compliance. The Department repeats that it is not requiring employers
to create any documents other than basic payroll information.
The Interim Final Rule provides that, for the purposes of meeting
the
[[Page 80153]]
ACWIA's displacement requirements, a dependent employer or willful
violator is required to preserve the following documents with respect
to any U.S. worker(s) (in the same area of employment and occupation as
any H-1B nonimmigrants) who left its employ in the period 90 days
before or after the employer's petition for the H-1B nonimmigrant(s),
and for any U.S. worker(s) with respect to whom the employer took any
action during that 180-day period to cause the employee's termination
(e.g., a notice of termination): any documentation concerning the
employee's experience, qualifications, and principal assignments;
notification by the employer or the employee regarding the termination
of employment and any response thereto; and job evaluations. The
Department explains that the employer is not required to create any
such records, if they do not exist.
In addition, if the employer offers the U.S. worker another
employment opportunity, the employer shall maintain a record of the
offer, including the position offered and terms of compensation and
benefits, and the employee's response thereto. The Department believes
that most employers would make such offers in writing, but recognizes
that there may be a small burden to the employer in keeping a record if
the employee response is not in writing. The Interim Final Rule
continues the practice under the current regulations of applying a
uniform period for retaining documentation required by this part. See
Sec. 655.760(c).
The Department wishes to clarify, as it has with regard to other
documentation proposals in this part, that an employer is not required
to retain these records in any particular form so long as they are
maintained and retrievable upon this Department's request in accordance
with the requirements of 29 CFR 516.1(a) (setting forth recordkeeping
requirements under the FLSA, including the EPA). The Department also
wants to make clear that such records need not be kept in the
employer's LCA public access file.
As discussed in IV.D.7, the Interim Final Rule also requires
employers to document their inquiry to secondary employers and any
response. This inquiry may be done in any manner the employer deems
appropriate under the circumstances. However, if the inquiry and
response were not in writing, the employer will be required to keep a
written memorandum detailing the substance of the conversation, the
date of the communication, and the names of the individuals involved in
the conversation.
E. What Requirements Does the ACWIA Impose Regarding Recruitment of
U.S. Workers, and Which Employers are Subject to Those Requirements?
(Sec. 655.739)
Section 212(n)(1)(G)(i)(I) of the INA as amended by the ACWIA, 8
U.S.C. 1182(n)(G)(i)(I), requires that an H-1B-dependent employer or an
employer found by DOL to have committed willful H-1B violations take
"good faith steps to recruit, in the United States using procedures
that meet industry-wide standards and offering compensation that is at
least as great as that required to be offered to H-1B nonimmigrants * *
*, United States workers for the job for which the nonimmigrant or
nonimmigrants is or are sought." The Department is charged with
enforcing the recruitment obligation, while the Attorney General
administers a special arbitration process to address complaints
regarding an H-1B employer's companion obligation to "offer the job to
any United States worker who applies and is equally or better qualified
for the job for which the nonimmigrant or nonimmigrants is or are
sought." The ACWIA further provides that "nothing in subparagraph (G)
[the new attestation element] shall be construed to prohibit an
employer from using legitimate selection criteria relevant to the job
that are normal or customary to the type of job involved so long as
such criteria are not applied in a discriminatory manner."
The recruitment requirement does not apply where the LCA solely
involves "exempt" H-1B workers (see Section 212(n)((1)(E)(ii)). In
addition, the recruitment requirement does not apply to an application
filed on behalf of an H-1B worker described in Section
203(b)(1)(A),(B), or (C) of the INA. Section 203(b)(1) establishes the
first preference among employment-based immigrants to the United
States. This group includes aliens with extraordinary ability, aliens
who are outstanding professors and researchers, and aliens who have
been employed by multinational corporations as executives or managers
who will enter the U.S. to continue to provide executive or managerial
services to the same employer or to its subsidiary or affiliate.
The Department noted in the NPRM that the literal language of the
recruitment provision would require recruitment efforts be undertaken
before an LCA is filed ("prior to filing the application--[the
employer] has taken good faith steps to recruit"). The Department
noted that this language appears to have been based on a presumption
that employers file LCAs for individual workers at the time that need
arises (see, e.g., the statements by both Senator Abraham and
Congressman Smith that an employer must state that it has taken good
faith steps to recruit U.S. workers "for the job or which it is
seeking the H-1B worker" (144 Cong. Rec. S12751 (Oct. 21,1998); 144
Cong. Rec. E2324 (Nov. 12, 1998))--a presumption that is contrary to
the actual, longstanding practice of many employers in the H-1B
program. Under the Department's regulations, Secs. 655.730, .750, an
LCA is in effect for three years and an employer is permitted to file
an LCA for multiple positions so that it may use the LCA, during the
three-year period it is in effect, to support future H-1B petitions
when the actual need for employment arises. Many employers avail
themselves of this procedure.
In light of this common practice (which had not been at issue in
crafting the ACWIA), the Department set forth its view that it would
not be reasonable to assume that Congress intended to require a
separate LCA for each worker; nor was it reasonable to assume that
Congress intended that the employer would already have recruited in
good faith for every position it would fill over the three-year life of
the LCA, and offered a job to every equally or better qualified U.S.
worker who applied for each such position. The Department observed that
this would be virtually impossible since employers would not yet have
identified every job opportunity which would arise in the future.
Thus, the Department proposed that "the 'good faith' recruitment
attestation must be read, interpreted, and applied to mean that the
employer promises--and agrees to be held accountable--that it has, or
will recruit with respect to any job opportunity for which the
application is used, whether that recruitment occurs before or after
the application is filed (if the application is to be used in support
of multiple petitions for future workers)." The Department invited
comments on this approach and any alternative approaches to
appropriately balance employers' good faith recruitment obligations in
the context of the statutory language.
The Department received no comments on this proposal from the
employer community. The AFL-CIO, on the other hand, objected to this
proposal, stating, in effect, that Congress intended that the good
faith recruitment requirement be satisfied as a precondition to filing
an LCA, not
[[Page 80154]]
merely a promise of future compliance with this obligation. The AFL-CIO
contends that the three-year validity period of the LCA is in direct
conflict with the worker protection requirements of the ACWIA, and
suggests that the goal of protecting workers would be best served by a
six-month validity period.
The Department disagrees with this view, noting that the AFL-CIO's
interpretation would upset a long-settled practice that has promoted
the efficient processing of LCAs, a goal which the ACWIA was not
intended to impede. Furthermore, the House Report on H.R. 3736, whose
language on recruitment is very similar to that in ACWIA as enacted,
and is identical with respect to the timing of the recruitment, states
that the bill "endeavors to protect American workers by ensuring that
companies at least make an attempt to locate qualified American workers
before petitioning for foreign workers under the H-1B program." H.R.
Rep. No.105-657, 105th Cong., 2d Sess. 47 (1998) (emphasis added). In
the absence of any suggestion that Congress intended this result, the
Department is unpersuaded that Congress intended the recruitment
provision to be applied literally. Without drastically reducing the
effective period of the LCA or limiting the LCA to a single job
opportunity, the Department believes that it would be virtually
impossible for major users of the program--namely the H-1B-dependent
employers to whom the provision applies--to comply with the AFL-CIO's
construction of the Act.
The Department received one comment that addressed the "first
preference" exception to the recruitment obligation. The commenter
(Cooley Godward) expressed the concern that an employer's utilization
of this provision may prove problematic because determinations of
"first preference" status require discretionary judgments, typically
exercised by the INS, which if applied incorrectly by an employer,
could subject the employer to sanctions for violating its recruitment
obligation. Cooley Godward recommended that the Department promulgate a
regulation that would protect employers who have made a reasonable good
faith determination that an employee would qualify for first preference
immigration status.
The Department agrees that such determinations might be problematic
in some rare cases. The Department believes that it is likely that H-1B
nonimmigrants who would meet the first-preference criteria would also
be "exempt H-1B nonimmigrants" for purposes of LCA designations and
obligations. The Department will consult with the INS if the issue of
"first preference" status arises, and will take into account the
employer's good faith efforts in any assessment of appropriate
remedies.
1. How Are "Industry-wide Standards" for Recruitment To Be
Identified? (Sec. 655.739(e))
The INA, at section 212(n)(1)(G)(i)(I), requires a dependent
employer to attest that it "has taken good-faith steps to recruit in
the United States using procedures that meet industry-wide standards *
* * United States workers for the job for which the nonimmigrant or
nonimmigrants is or are sought."
In discussing the meaning of this provision, Congressman Smith
stated:
"Congress intends for an employer to at least use industry-wide
recruiting practices (unless the employer's own recruitment
practices are more successful in attracting American workers), and,
in particular, to use those recruitment strategies by which
employers in an industry have successfully recruited American
workers. The Department of Labor, in defining and determining
whether certain recruitment practices meet the statutory
requirements, should consider the views of major industry
associations, employee organizations, and other interest groups."
144 Cong. Rec. E2324 (Nov. 12, 1998). Senator Abraham stated, on the
other hand, that this provision "allows employers to use normal
recruiting practices standard to similar employers in their industry in
the United States; it is not meant to require employers to comply with
any specific recruitment regimen or practice, or to confer any
authority on DOL to establish such regimens by regulation or
guideline." 144 Cong. Rec. S12751 (Oct. 21, 1998).
Consistent with these statements, the Department stated in the NPRM
that "[t]he statute does not require employers to comply with any
specific recruitment regimen or practice, [and the Department does not]
believe it is authorized to prescribe any explicit regimen." The
Department also proposed that the benchmark "industry-wide standards"
requires the employer's recruitment efforts be "at a level and through
methods and media which are normal, common or prevailing in an industry
* * * including at least the medium most prevalently used in the
industry and shown to have been successfully used by employers in an
industry * * * to recruit U.S. workers." The Department explained that
"industry-wide standards" does not refer to the lowest common
denominator among employers in a particular industry, i.e., the minimum
or least effective recruitment methods used by companies in an industry
to recruit U.S. workers. The Department solicited the views of major
industry associations, employee organizations and other interest groups
concerning successful recruitment practices and strategies.
The NPRM identified a number of recruitment methods recognized as
appropriate for recruiting U.S. workers (e.g., advertising in
publications of general interest, advertising in trade and professional
journals, advertising on Internet sites such as the Department's own
"America's Job Bank," use of public and private employment agencies,
including "headhunters," outreach to educational and trade
institutions, job fairs, and development and selection from among the
employer's own workforce). The Department further stated its
expectation that good faith recruitment ordinarily will involve several
of these methods, "both passive (where potential applicants find their
way to an employer's job announcements, such as to advertisements in
the publications and the Internet) and active (where the employer takes
proactive steps to identify and get information about its job openings
into the hands of potential applicants, such as through job fairs,
outreach at universities, use of "headhunters," and providing
training to incumbent employees in the organization)."
The NPRM requested comment on a proposed presumption of good faith
recruitment where the employer in good faith used a mix of prescribed
recruiting methods (at least three, one or two of which are active).
This presumption would be available to employers who did not want to go
to the trouble of demonstrating that their recruitment methods meet the
standards for their industry.
Under the proposal, an employer would not have to avail itself of
the presumption, but good faith recruitment, at a minimum, would need
to involve "advertising in relevant and appropriate print media or the
Internet (where common in the industry), in publications and at
facilities commonly used by the industry * * *, as well as solicitation
of U.S. workers within an employer's organization." The Department
also expressed the view that there should be a general recognition that
good faith recruitment must "involve some active methods of
solicitation, rather than just passive methods such as posting job
announcements at the employer's worksite(s) or on its Internet web
page."
Finally, the Department proposed that employers utilize recruitment
methods
[[Page 80155]]
that are used by employers competing for the same potential workers,
e.g., a hospital, university, or software development firm would be
required to use the standards developed by the health care, academic,
or information technology industries for the occupations targeted for
recruitment. Similarly, a staffing firm seeking to place workers at
other employers' worksites would be required to utilize the standards
of the industry in which it seeks to place workers, not the standards
that exist within the staffing firm's own industry.
Thirty-two commenters, including 21 individuals, responded to the
Department's proposals relating to "industry-wide standards."
The individuals were consistent in urging the Department to
strengthen recruitment requirements. They generally urged that, at a
minimum, posting job openings in major publications, trade journals,
state employment service offices, and local colleges be a prerequisite
to the issuance of H-1B visas for particular workers. Many of these
individuals also urged a requirement that a company expend a minimum
amount, such as $1,000, on advertising a position as a precondition to
petitioning for an H-1B nonimmigrant.
APTA, AOTA and IEEE supported the Department's proposals. AOTA
stated its belief that it is especially important to require employers
to undertake several methods of active recruitment, and that those
methods comport with those undertaken by the specific industry. IEEE
agreed specifically with the requirement that employers be held
accountable for recruiting for each job they fill under an LCA and with
the Department's listed methods of recruitment and standards for good
faith steps.
The AFL-CIO opposed the idea of a presumption, noting that it is
wrong to assume that some arbitrary combination of recruitment methods
will equate with the "industry-wide standards." In this regard, the
AFL-CIO suggested that for some industries, including the information
technology industry, no form of passive recruiting should be considered
to meet the industry-wide standard.
The AFL-CIO endorsed the Department's proposal that employers must
conform their recruitment practices to those used within the industry
for which the workers are sought. It stated that staffing firms must
conform to the methods used by the industry in which they are seeking
to place workers, not the methods used by employers within the staffing
industry.
Senators Abraham and Graham, ACIP, AILA, and TCS contended that the
Department's proposed presumption represented an attempt to prescribe a
specific regimen, contrary to the statute's intent to allow employers
to use recruiting practices similar to other employers in the industry.
The common thread through employer, trade association, and attorney
comments was that there is no single template for recruitment to fit
all situations, and that recruitment procedures vary by industry, size,
geographic location, and market conditions. One commenter (Simmons)
asserted that the Department's recruitment proposal will set up an
infrastructure that some small employers and foreign-based employers
will be unable to meet.
A number of commenters responded to the Department's proposal that
an employer use a combination of approaches, some of which must be
proactive. The IEEE agreed with the Department's approach, stating that
this approach would ensure a "fair and level playing field" for all
applicants by requiring that employers utilize methods that do not skew
the process against U.S. workers or otherwise put them at a
disadvantage in competing against H-1B workers for positions covered by
an LCA. One commenter (Hammond), though expressing the view that the
statutory requirement that an employer utilize an industry-wide
standard did not need any detailed regulations, indicated its approval
of the Department's recognition that an employer cannot use the least
common denominator within its industry, but must instead use methods
that are normal, common, or prevailing in the industry. Intel (although
stating that it is not a dependent employer itself) commended the
Department for listing many of the recruitment methods used in the
information technology industry today, but suggested changing the terms
from "active" and "passive" to "on-going" recruitment and
"targeted" recruitment to better describe recruitment practices.
Similarly, ACIP commented that employers commonly undertake both "on-
going" and "targeted" recruitment.
The Department continues to be of the view that some guidance is
appropriate to assist employers in determining industry-wide standards.
The Department sees no merit in the suggestion that an employer should
be able to use any legitimate process utilized by employers in the
industry. The statute requires that an industry-wide standard be
utilized. There likely will be considerable variance among the methods
used by different employers within the same industry. An employer who
selects a method that falls short of the standard will not satisfy the
statutory requirement. Such an interpretation of the statute (allowing
use of any single practice used within its industry, even if it is the
least common denominator, to pass muster) would allow an employer's
recruiting practice to be self-validating, thereby frustrating
statutory intent as well as its plain meaning.
The Department therefore has decided to go forward with its
proposal to list the most common recruiting methods, and stating its
expectation that good faith recruitment ordinarily will involve several
of these methods, both passive and active. In this connection, the
Department finds helpful the distinction between ongoing recruitment
efforts to find candidates for "generic" positions always in short
supply as contrasted with its targeted recruitment for a particular
opening. However, the Department believes the active/passive
distinction is a different standard and is more useful in guiding an
employer's compliance with its recruitment obligations. The Department
continues to believe that "industry-wide standards" cannot reflect
the lowest common denominator. Rather, they must include methods that
are normal, common or prevailing in the industry--defined as those
employers competing for the same potential workers--including the
methods which have been most effective at recruiting U.S. workers.
In view of the comments regarding the Department's proposed
presumption, however, the Interim Final Rule does not include any
presumptive level of recruitment that constitutes good faith
recruitment. Employers will be expected to demonstrate in the event of
an investigation, that their recruitment was consistent with industry-
wide standards.
The rule requires that employers at a minimum recruit both
internally--among their own work force and workers whose employment
recently terminated because of expiration of a contract or grant--and
externally--among U.S. workers elsewhere in the economy. The Department
believes that such practices are the norm in all industries.
Furthermore, given employers' testimony at Congressional hearings
regarding widespread shortages of workers, the Department is confident
that active recruitment is also the norm, and the rule will require
some active recruitment (either internally, such as by training other
employees, or externally). Employers are cautioned that
disproportionate recruitment
[[Page 80156]]
through some sources, such as college campuses, can have the unintended
effect of discriminating against older workers. The Department also
encourages employers to recruit among underrepresented populations
(e.g., minorities, persons with disabilities) and in rural areas.
Several comments were received regarding the particular methods of
solicitation utilized by employers. Intel, among other commenters,
noted a dramatic shift away from the use of traditional methods such as
print advertisements to other methods such as electronic media and
specialized contacts. The IEEE, while agreeing with the Department's
approach, encouraged the Department to consider imposing a requirement
that employers make greater utilization of Intranet and Internet
publication of job openings. Others (AFL-CIO, Malyanker) expressed the
view that the utility of the Internet is overstated. Another commenter
(Satyam) noted that the use of the Internet for recruitment is common,
but stated that its review of the NPRM left it with the impression that
it is disfavored by DOL.
The Department did not intend to leave the impression that it does
not favor the Internet. As the NPRM recognizes, recruitment within the
industries for which H-1B workers are sought--especially the
information technology industry--often involves the use of electronic
media. The Department encourages the use of this method in industries
where it has proven effective and where it has the potential to attract
the widest relevant audience. The Department notes that this method has
shown itself to be inexpensive and expeditious (and in the case of
services such as America's Job Bank, this method is free and accessible
by any personal computer with an Internet connection). At the same
time, as some commenters have noted, the effectiveness of electronic
advertising is sometimes overrated and, in any event, it is not a
substitute for active methods of recruitment, which can be better
targeted to U.S. workers who are qualified for a particular position.
AILA and Rapidigm contend that the Department's proposal is more
stringent than the reduction-in-recruitment (RIR) guidelines
established under GAL 1-97 (Oct. 1, 1996) (recently published for
comment at 64 FR 23984 (May 4, 1999)) for the permanent program for
occupations in which there is little or no availability.
The Department notes that the ACWIA establishes a specific
recruitment requirement that employers recruit in accordance with
industry-wide standards. Furthermore, unlike the H-1B program, the
recruitment efforts and accompanying documentation of industry practice
for each RIR application under the permanent program are reviewed by
the State agency and ETA Regional Office, which base their
determinations on local labor market conditions. Because under the H-1B
program recruitment efforts by H-1B-dependent employers and willful
violators will be reviewed only in the event of an investigation, the
Department believes that an explication of the industry-wide
requirement is appropriate in these rules.
It should be noted, however, that the Department has not suggested
that an employer is required to undertake separate recruitment efforts
for every position listed on the LCA. In a particular situation, an
employer may reasonably decide to solicit for all similar positions
listed on an LCA(s) at the same time, particularly where the employer
plans to hire for the positions at or about the same time. Similarly,
as commenters pointed out, employers which regularly experience large
numbers of vacancies may undertake ongoing recruitment. The Department
will not second-guess an employer's good faith, reasonable decision in
such circumstances, provided it accords with the relevant "industry-
wide standards" applicable to the employer.
Finally, with regard to the comments by numerous individuals, the
Department believes there is no statutory support for measuring an
employer's recruitment efforts by the amount of money expended by the
employer. Accordingly, the Department is not persuaded that there is
merit to the suggestion that an employer must make a threshold showing
that it has incurred solicitation expenses at or above some prescribed
amount.
2. What Constitute "Good Faith Steps" in Recruitment?
(Sec. 655.739(h))
In the NPRM, the Department expressed the view that good faith
recruitment requires employers to "maintain a fair and level playing
field for all applicants," and to "be able to show that they have not
skewed their recruitment process against U.S. workers." The Department
stated its belief that the "good faith" recruitment obligation
encompasses the pre-selection treatment of the applicants, not merely
the steps taken by an employer to communicate job openings and solicit
applicants. The Department indicated that, where an employer's
recruitment efforts have been demonstrably unsuccessful, it would
examine closely the entire recruitment process. This examination would
include the pre-selection treatment of applicants, "to insure that
U.S. workers are given a fair chance for consideration for a job,
rather than being ignored or rejected through some tailored screening
process based on an employer's preferences or prejudices with respect
to the makeup of its workforce." The NPRM proposed that an employer
would not meet its good faith recruitment obligation if, for example,
it only interviewed H-1B applicants or used different staff to screen
or interview the H-1B applicants than the staff used for U.S. workers.
The NPRM also stated that the Department would not second-guess work-
related screening criteria or the hiring decision regarding any
particular applicant (the latter assigned by the ACWIA to the Attorney
General). The Department did not propose any specific regimen or
practice for the pre-selection treatment of applications and
applicants. However, the Department considered whether to craft a
presumption of good faith recruitment based on an employer's hiring of
a significant number of U.S. workers and, thereby, accomplishing a
significant reduction in the ratio of H-1B workers to U.S. workers in
the employer's workforce. The Department indicated that it would refer
any potential violation of U.S. employment laws to the appropriate
enforcement agency.
As stated by Representative Smith:
"Any 'good faith' recruitment effort, as required by this
legislation, must include fair, adequate and equal consideration of
all American applicants. The Act requires that the job must be
offered to any American applicant equally or better qualified than a
nonimmigrant. Congress recognizes that 'good faith' recruitment does
not end upon receipt of applications, but rather must include the
treatment of the applicants. In evaluating this treatment, the
Department should consider the process and criteria for screening
applicants, as well as the steps taken to recruit for the position
and obtain those applicants. . . . Employers who consistently fail
to find American workers to fill positions should receive the
Department's special attention in this context of 'good faith'
recruitment."
144 Cong. Rec. E2324, 2325 (Nov. 12, 1998). Regarding the interface
with the Attorney General's enforcement of the "failure to select"
requirement, Congressman Smith stated:
"[The Act] also contains a savings clause that states that the
provision should not be construed to affect the authority of the
Secretary or the Attorney General with respect to 'any other
violations.' This savings clause means that while the Secretary is
not authorized to remedy a violation of (1)(G)(i)(II) regarding an
individual American
[[Page 80157]]
worker, the Secretary retains the broad authority to investigate and
take appropriate steps regarding the employer's 'good faith'
recruitment efforts, including 'good faith' consideration of
American applicants.
144 Cong. Rec. E2325 (Nov. 12, 1998).
Senator Abraham cautioned:
"[The Act] does not contemplate, for example, recharacterizing
a 'failure to select' complaint as a 'failure to recruit in good
faith' and then using the enforcement regime for the latter category
of violations to pursue what in fact is a 'failure to select'
complaint."
144 Cong. Rec. S12754 (Oct. 21, 1998).
The Department received generally supportive comments from AOTA,
APTA, IEEE, and the AFL-CIO. The AFL-CIO stated that the proposal
represents "a very important step in protecting the rights of U.S. job
applicants by clearly stating that 'good faith steps' in recruiting
also include fair pre-selection treatment of job applicants." It also
stated that the Department's approach does not intrude upon the
Department of Justice's duty to arbitrate wrongful selection cases
because the proposal deals only with pre-selection treatment that
necessarily precedes a selection decision. IEEE stated its agreement
with the Department that employers are required to maintain a fair and
level playing field for all job applicants, and that employers must be
able to show that their recruitment and selection processes have not
been skewed so as to disadvantage U.S. workers.
Several commenters opposed parts of the proposal. AILA and ACIP
stated their view that the proposal violated the ACWIA's clear mandate
that the Department not interfere with the enforcement of the
"selection" aspects of an employer's recruitment practice. AILA
observed that the statute specifically sets up a separate remedial
mechanism for alleged violations of the "selection" portion of the
recruitment attestation, while including a savings clause that states
that this provision does not restrict either the Department's or the
Attorney General's enforcement authorities with respect to other
violations.
Several commenters opposed the proposed presumption based on an
employer's success in hiring U.S. workers. The AFL-CIO stated that
employer hiring of an arbitrary number of U.S. workers in no way
establishes that an employer did not discriminate against others.
Senators Abraham and Graham recognized that scrutiny of an employer's
recruitment process may be proper in an investigation, but opposed the
proposed presumption. Senators Abraham and Graham and AILA urged the
Department to remember that the premise of the legislation was that at
least in some cases recruitment had been demonstrably unsuccessful.
ACIP, TCS, BRI and SBSC objected to the proposal that successful
recruitment would be equated with good faith recruitment. Some
commenters noted that the positions sought by LCAs often may be filled
only from a small labor pool and that the filing of the LCA reflects
the relative scarcity of U.S. workers for the job(s) involved.
After review of the comments, the Department no longer believes
that it would be useful to create a presumption that an employer has
met its recruitment obligation by demonstrating its "success" in
recruiting U.S. workers. Apparently, there is a strong concern that a
negative presumption will arise that any dependent employer who is
unable to demonstrate success--a situation which the commenters believe
to be commonplace--will be presumed not to have acted in good faith.
This was not the Department's intention. The Department, however,
believes that this misperception may persist and could divert the focus
away from the statutory test--an employer's adherence to industry-wide
standards in meetings its recruitment obligations. For this reason, the
Department's Interim Final Rule does not establish "successful
recruitment" as a basis for a presumption of compliance. However, in
its enforcement, the Department intends to look particularly carefully
at the recruitment practices of employers who have not had success in
hiring U.S. workers.
In the Department's view, its proposal is faithful to the statute's
provision charging the Attorney General, not the Secretary, with
overseeing the mechanism designed to resolve a particular U.S. worker's
allegations that the dependent employer failed to offer him a position
for which an H-1B worker was sought. The NPRM explicitly recognizes the
concern that the Department should not supplant the specific statutory
mechanism by which a U.S. worker can adjudicate his or her complaint
that an H-1B worker was unlawfully hired for a position for which the
U.S. worker was qualified and should have been hired pursuant to
Section 212(n)(1)(G)(i)(II) of the ACWIA. However, at the same time,
the Department believes that an employer cannot engage in good faith
recruitment if it does not give good faith consideration to U.S.
applicants. The Department believes it entirely appropriate to consider
the process and methods by which an employer screens applicants for a
position in order to ensure that U.S. workers receive the protections
accorded them under the ACWIA. As noted in the NPRM, the Department has
no intention of second-guessing work-related screening criteria used by
an employer or intruding upon the role provided for the Attorney
General with respect to any hiring decision involving a particular
applicant.
Nothing in the Department's proposal suggested that the Department
was interpreting the ACWIA in a way that would require a departure from
the way in which employers customarily recruit workers for positions
with their companies. The Department recognizes, as Senator Abraham
also observed, that a multitude of legitimate factors, objective and
subjective, go into recruiting and hiring decisions. As discussed in
greater detail in the following section of the Preamble, the
Department's inquiry will be limited to ensuring that an employer's
recruitment efforts meet the statutory standard, i.e., that they are
based on "legitimate selection criteria relevant to the job that are
normal or customary to the type of job involved, so long as such
criteria are not applied in a discriminatory manner." See Section
212(n)(1)(G)(ii).
Finally, Senators Abraham and Graham and the Congressional
commenters stated that there may be legitimate business reasons for a
company to use different personnel to interview H-1B applicants than
U.S. workers, such as where the employer lacks personnel who speak the
language of an applicant, or where the company recruits specialists
from other countries who are familiar with the foreign culture.
The Department agrees that there may be circumstances in which
using different staff to interview U.S. and H-1B workers may be
appropriate. In these situations, however, it is important, in the
Department's view, that the personnel who interview the H-1B applicants
not have a more effective say in the recruitment/hiring process than
the personnel interviewing U.S. applicants. A U.S. worker's ability to
compete for the position covered by the LCA should not be adversely
affected by the status of the interviewer within the company or its
recruitment/selection process. Furthermore, it is important that U.S.
workers not be interviewed by employees or agents who have a financial
interest in hiring H-1B nonimmigrants rather than U.S. workers.
[[Page 80158]]
3 & 4. How are "Legitimate Selection Criteria Relevant to the Job that
are Normal or Customary to the Type of Job Involved" to be Identified
and Documented? What Actions Would Constitute a Prohibited
"Discriminatory Manner" of Recruitment? (Sec. 655.739(f) and (g))
Section 212(n)(1) of the INA as amended by the ACWIA provides that
"nothing in subparagraph (G) [of Section 212(n)(1), which establishes
the dependent employer's recruitment obligation] shall be construed to
prohibit an employer from using legitimate selection criteria relevant
to the job that are normal or customary to the type of job involved, so
long as such criteria are not applied in a discriminatory manner."
In explaining this provision, Senator Abraham stated:
"The purpose of this language is to make clear that an employer
may use ordinary selection criteria in evaluating the relative
qualifications of an H-1B worker and a U.S. worker. It is intended
to emphasize that the obligation to hire a U.S. worker who is
'equally or better qualified' is not intended to substitute someone
else's judgment for the employer's regarding the employer's hiring
needs. * * *. Moreover, its judgment as to what qualifications are
relevant to a particular job is entitled to very significant
deference. * * *. It is not intended to allow an employer to impose
spurious hiring criteria with the intent of discriminating against
U.S. applicants in favor of H-1Bs and thereby subvert employer
obligations to hire an equally or better qualified U.S. worker."
144 Cong. Rec. S12750 (Oct. 21, 1998).
Congressman Smith explained:
"The employer's recruitment and selection criteria therefore
must be relevant to the job (not merely preferred by the employer),
must be normal and customary (in the relevant industry) for that
type of job, and must be applied in a non-discriminatory manner.
Just because an employer in good faith believes that its selection
criteria meet such standards does not necessarily mean that they in
fact do. Any criteria that would, in itself, violate U.S. law can
clearly not be applied, including criteria based on race, sex, age,
or national origin. The employer cannot impose spurious hiring
criteria that discriminate against American applicants in favor of
H-1Bs, thereby subverting employer obligations to hire an equally or
better qualified American worker."
144 Cong. Rec. E2324 (Nov. 12, 1998).
In the NPRM, at Section E.3., the Department noted that employers
are authorized to apply criteria that are legitimate (excluding any
criterion which itself would be violative of any applicable law);
relevant to the job; and normal or customary to the type of job
involved--rather than the preferences of a particular employer.
The Department suggested the North American Industrial
Classification System as one means of showing a match between the
employer's criteria and the accepted practices for a job. In essence,
the Department stated that employers cannot impose spurious criteria
that discriminate against U.S. workers in favor of H-1B workers. The
Department also proposed that in evaluating an employer's "good
faith" in the pre-selection treatment of applicants it would limit its
scrutiny of screening criteria to these factors. The Department
proposed to issue a rule encapsulating the requirement that an employer
conduct its recruitment "on a fair and level playing field for all
applicants without skewing the recruitment process against U.S.
workers." The Department proposed that the rule would apprize
employers that hiring criteria proscribed by applicable discrimination
laws cannot be used in solicitation or screening processes, nor may
employers apply such processes in a disparate manner.
As earlier noted, the Department's overall recruitment proposals
generally received the support of the AFL-CIO, APTA, AOTA, and IEEE.
Additionally, Intel specifically endorsed this aspect of the
Department's proposal, stating: "Legitimate selection criteria should
be based on the 'core' requirements to the position [involved], which
varies by position and the specific project." Intel continued: "We
agree with [the Department] that the selection criteria be legitimate,
relevant to the job, and be normal and customary to the type of job
involved."
A general theme in many comments was that the Department should not
define legitimate hiring criteria in advance, but rather should make
determinations only in the context of individual enforcement cases.
AILA expressed the view that the statute does not intend the
"legitimate selection criteria" provision as an affirmative
requirement for employers, but rather as a savings clause where the
Department or the Attorney General, in enforcement, believes that the
employer's enforcement criteria were not "legitimate" or
"relevant," or were applied in a discriminatory manner. AILA further
stated its view that the Department's entire proposal with regard to
selection criteria is beyond its statutory authority. ACIP expressed
its concern about the Department's reference to the NAICS, which it
stated was unnecessary micromanagement and would be difficult for
employers to use since it is not yet available to employers. Latour and
Kirkpatrick & Lockhart commented that subjective factors cannot be
removed from the hiring process, including considerations such as
personality, attitude, and other intangible issues.
Miano, on the other hand, stated that it is important that H-1B
nonimmigrants meet all the qualifications posted in the recruiting
notices. In an apparent reference to employer recruitment prior to
petitioning for immigrant workers under the permanent program, Miano
observed that employers often advertise with more requirements than
anyone can meet and then lower the requirements to bring in the foreign
worker.
The Department has no intention of specifying which hiring criteria
are legitimate and which are not. The Department's Interim Final Rule,
like the proposal, simply makes plain that the statutory obligation of
dependent employers and willful violators is to base their recruitment
and selection decisions on criteria that are legitimate, relevant, and
normal to the type of job involved. Nor does the Department intend to
undertake any elaborate scrutiny of selection criteria in its
enforcement. The Department's review of the process, as the Interim
Final Rule provides, is designed to ensure that U.S. workers are not
subject to criteria that deny them a fair opportunity, as fashioned by
the ACWIA, to compete for jobs for which nonimmigrant workers are being
sought.
The Department, however, has eliminated its reference to the North
American Industrial Classification System as one means of showing a
match between the employer's criteria and the accepted practices for a
job. Upon review, the Department has determined that the online service
"O*NET," an enhanced version of the Dictionary of Occupational
Titles, and the U.S. Bureau of Labor Statistics, Occupational Outlook
Handbook, will serve better than NAICS as a means by which an employer
may choose to demonstrate the nexus between its recruitment/screening
criteria and accepted practices for the job in question. As explained
in IV.C.3 above (which addresses "exempt workers" under the ACWIA),
both O*NET and the Occupational Outlook Handbook are readily available
on the Internet. The Department wishes to stress, however, that both
O*NET and the Handbook are being suggested only as tools to employers,
and to the Department in its enforcement. Employers are not required to
use these tools. Although these sources represent a statement by the
Department of common qualifications for the occupations listed, they
are not intended to be definitive
[[<a href="65_FED_REG_80109_2.HTM">Continued on page 80159</a>]]
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