Durham: Alternatives to layoffs, terminations involving H-1B employees

The continuing fallout from the COVID-19 pandemic and the ongoing war in Ukraine has created a challenging environment for employers. Organizations are facing financial pressures and may be considering implementing operational changes and reducing financial outlays due to the economic outlook. Some employers have been forced to consolidate locations, reduce employee hours, or place employees on leave or terminate them. Organizations considering any of these actions for their H-1B foreign national employees should take into account required actions and related issues to avoid an H-1B violation, a back wage claim or a regulatory compliance charge.

The H-1B may be one of the best known and one of the most utilized employment visa classifications for U.S. employers and foreign national professionals. The H-1B visa classification is jointly administered by the U.S. Department of Labor and U.S. Citizenship and Immigration Services and provides an avenue for employers in the U.S. to fill positions in specialty occupations.

Federal regulations generally define specialty occupations as those occupations that require the theoretical and practical application of a body of highly specialized knowledge and a bachelor’s degree or higher, or its equivalent, in the specialty as a minimum for entry in the U.S. H-1B specialty occupations include fields such as accounting, engineering, science, teaching and information technology.

Of note, the H-1B visa classification requires an employer to pay the higher of the actual wage or prevailing wage for the authorized period of employment. The actual wage is the wage rate paid by the employer to all individuals with experience and qualifications similar to the H-1B employee’s experience and qualifications for the specific employment in question at the place of employment. The prevailing wage is the wage rate set for the occupational classification in the geographical area of employment by a collective bargaining agreement that contains a wage rate applicable to the occupation or, for an occupation not covered by a collective bargaining agreement, the weighted average of wages paid to similarly employed workers (i.e., workers having substantially comparable jobs in the occupational classification) in the geographic area of employment. The DOL provides wage data information to employers utilizing the H-1B visa classification.

Relocation

Organizations considering consolidating operations and relocating employees should be aware of any H-1B employees who might be affected, as those workers are authorized to work only at the location(s) listed on their visa petitions. A change in location sometimes triggers the requirement for filing a new underlying Labor Condition Application (LCA) with the DOL and possibly even a new filing with the USCIS. However, there are two exceptions if the placement to another location will be temporary: “short-term placement” and “home office within commuting distance.” Under these two exceptions, H-1B employees are sometimes permitted to work at another location without triggering the need for the employer to file a new LCA or an amended petition to reflect the new worksite.

Under the short-term placement rule, if an H-1B employee will be working remotely within the same area of employment and maintains their place of residence in the area of the regular worksite, the employee is permitted to work for up to 60 workdays within a one-year period without a new LCA posting. In more limited circumstances, the employee is limited to only 30 workdays within a one-year period of remote work if they are not working in the same area of employment or no longer maintain a residence or workstation in the area of the regular worksite.

Under the home office within commuting distance rule, employers with an approved LCA may move employees to unintended worksite locations, including to the employee’s home, without needing to file a new LCA, provided the new worksite location is within the same area of intended employment (i.e., a location within normal commuting distance) and there are no other material changes to the terms and conditions of the employment. Generally, the LCA should be posted on or before the change in worksite location.

If the employee’s new work location is outside the area of intended employment or if there are material changes to the employment scenario, a new LCA, coupled with an amended filing with the USCIS, may be required.

Pay reduction

In certain circumstances, a reduction in pay may be permissible for H-1B employees. When an organization files an H-1B petition, the entity is required to pay the higher of the prevailing wage or actual wage. As long as the employer is paying at least the required wage, a pay reduction may be permissible.

Reduction in hours

An employer may seek to reduce an H-1B employee from full-time (defined as 35 hours or more per week) to part-time. Under this scenario, an employer would be required to file an underlying LCA with the DOL and file an amended petition with the USCIS prior to placing the employee in part-time status.

Furloughs

H-1B regulations specifically prohibit furloughs, defined as nonproductive status. An H-1B employee may not be placed in nonproductive status without pay because of a decision by the employer or for the employer’s benefit. However, if the H-1B employee voluntarily requests time off, then the employer is not required to pay the employee during the leave.

Termination

Terminating an employee is always a difficult decision. In the event that your organization is forced to terminate an H-1B employee, there are strict procedures that must be followed in order to implement a bona fide termination of the employment relationship. Failure to comply may result in continuing liability for the required wage and fines. In order to effect a bona fide termination, an employer should notify the H-1B employee that the employment is terminated, offer the terminated employee the reasonable cost of return transportation home, and withdraw the H-1B petition with the USCIS and the LCA with the DOL.

Grace period

In the event that an organization terminates the employment of an H-1B employee earlier than anticipated, the employee may enjoy a grace period of up to 60 consecutive days or until the end of the validity period listed on the H-1B approval notice, whichever is shorter. If terminated with grace period availability, the employee may remain in the U.S. without working and will not be considered out of status. The H-1B employee may utilize this period to prepare to depart, find another employer that will file a petition within the grace period or seek another immigration status.

Severance package

An organization may provide H-1B employees with a severance package during layoffs. The USCIS takes the position that the receipt of pay from a severance package does not extend the legal status of an H-1B employee. Employers offering a severance package should take special consideration of the requirement to offer reasonable cost of return transportation home and the effective date of the termination when drafting the severance agreement.

Organizations with H-1B employees should take care when conducting personnel actions in order to remain in compliance with H-1B regulations. Failure to properly conduct an alternative to a layoff, such as relocation or reduction in pay or hours, or termination may result in an H-1B violation or expose the employer to a back wage obligation.•

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Michael Durham is a partner at Barnes & Thornburg LLP in South Bend. Opinions expressed are those of the author.

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