As the COVID-19 pandemic persists, U.S. employers are feeling the economic impact and the unintended consequences to their workforce. Many employers who supplement their workforce with foreign professional workers in H-1B status are attempting to navigate vague and antiquated regulations with no federal guidance from the U.S. Department of Labor or the U.S. Citizenship and Immigration Services. Absent a clear legal solution, U.S. employers of H-1B workers will need to conduct a risk analysis as they weigh difficult options including furloughs, layoffs, wage reductions, and possible office closures in order to save their businesses.
Does the law provide a path to unpaid furlough or temporary leave of H-1B workers?
No. Employers who place H-1B workers in unpaid furlough or involuntary unpaid leave status could be exposed to liability such as fines, back wages and other penalties. This is irrespective of the fact that the employer may not be paying similarly situated U.S. workers.
Under current law and in the absence of agency guidance, employers who furlough H-1B workers should continue paying at least the prevailing wage rate as set forth on the underlying H-1B documentation. Of course, your U.S. workers may file discrimination claims with the U.S. Department of Justice, Immigrant and Employee Rights Division. These claims have become more common in the last few years. Although the law may be on the side of the H-1B employer, disparate treatment of H-1B and U.S. workers can create serious morale issues in your workforce, and the complaint itself can expose your business to other legal scrutiny by the DOJ.
What is the best way to minimize risk if an H-1B employer elects the furlough option?
The only way an employer may end its obligation to pay the required wage to an H-1B worker in non-productive status is by effectuating a bona fide termination of the employment relationship. This includes a requirement to notify the USCIS and an offer to pay return transportation costs for the worker. The benefits of termination are that you eliminate the risk of future wage payment liability for the affected worker, and lessen the risk that you will get a discrimination claim from a U.S. worker.
The negative side to this approach is that when business picks up, and you would like to rehire the H-1B worker, there will be an economic cost for re-filing the petition. Moreover, depending on the timing, you may or may not be able to rehire the H-1B worker immediately. For instance, if you file a new H-1B petition to reinstate the worker within the 60-day grace period after the termination date, then the worker may begin work under the H-1B portability rules. On the other hand, if you wait more than 60 days, the H-1B petition will have to be adjudicated before you can reinstate the worker. Complicating the timing issues further is that the USCIS has suspended premium processing until further notice, so it is hard to predict how long the waiting period will be. In addition, the USCIS now applies a de novo review of new H-1B petitions (in other words, the agency reviews the new H-1B petition “from scratch,” as if an earlier petition had never been approved). This means there may be additional costs related to a Request for Evidence and the possibility that the petition is ultimately denied.
Given the unsettled state of the law, and the risks on both sides, what should an employer do?
Absent guidance from the DOL and the USCIS to address the issue of furloughs and H-1B workers, U.S. employers can only do their best with respect to substantial good faith compliance with immigrations laws versus business survival planning.
The safest approach is to either keep the H-1B employee at full pay or effect a bona fide termination of employment.
However, for employers willing to undergo some risk, the following is the closest regulatory justification to help legally manage the risk of furloughing an H-1B employee:
20 CFR 655.731(c)(7)(ii) Circumstances where wages need not be paid:
If an H-1B nonimmigrant experiences a period of nonproductive status due to conditions unrelated to employment which take the nonimmigrant away from his/her duties at his/her voluntary request and convenience (e.g., touring the U.S., caring for ill relative) or render the nonimmigrant unable to work (e.g., maternity leave, automobile accident which temporarily incapacitates the nonimmigrant), then the employer shall not be obligated to pay the required wage rate during that period . . .
(Emphasis added.) One could argue that stay-at-home orders, as well as the economic impact of the pandemic, is causing the “period of nonproductive status due to conditions unrelated to employment” rather than the employer’s decision. However, the DOL may not agree with this interpretation. If not, the agency could order back wages for all H-1B workers for the period of time during which they were furloughed. The affected H-1B workers themselves could also sue the employer to collect back wages.
The employer’s assessment should be based on all of the relevant circumstances, and a balancing of “good faith substantial compliance” against business needs. The principal goal for the DOL is to protect U.S. workers. If you roll out a plan that treats all workers equally, minimizes the impact of the furlough on the H-1B workers as much as possible, provides health and other benefits, and clearly documents the business case for company survivability, this can minimize your risk.
Another way to minimize risk is to give all affected employees (U.S. and H-1B) the option of choosing whether they prefer termination, layoff, or furlough. If you choose this approach, be sure to get the elections in writing. If an H-1B worker elects in writing to take an unpaid furlough to stay “employed,” this would appear to comply with the DOL regulations.
Can we reduce the wage rate of H-1B workers if we reduce wage rates of all employees?
If you choose to reduce pay or hours, or some combination, you will need to make sure that the wage rate for the H-1B workers does not fall below the prevailing wage rate on the Labor Condition Agreement that governs the underlying H-1B status. If the reduced wage is equal to or greater than the prevailing wage listed on the H-1B worker’s corresponding LCA (even if it is below the offered wage), you are not likely to need to file a new LCA or an amended petition, provided that no other material changes to the employment relationship have occurred.
If a reduction in pay or hours of work results in the loss of the H-1B worker's "exempt" status under the Fair Labor Standards Act, then the employer would be required to obtain a new LCA. A failure to obtain a new LCA and file an amended H-1B petition with USCIS would put the employer at risk of fines, back wages and possibly other penalties.
Are there any other general principles that H-1B employers should follow?
Whatever option you choose, you ought to consider these two basic principles of good faith compliance:
Treat all employees or classes of similarly situated employees consistently, to the extent that the DOL allows it, regardless of visa status, country of origin, or nationality.
Keep good documentation of the terms of the furlough. If the furlough is related to a government stay-at-home order, include copies of the order. Even if you do not know the duration of the furlough, your documentation should include an anticipated date on which you will re-assess the need for the furlough. Keep good records of any wages and benefits that will continue during the furlough, and any other details that may help mitigate your legal risk.
Again the safest approach is to either keep H-1B employees at full pay, or effectuate a legal termination.
For a printer-friendly copy, click here.