DOL Crackdown on H-1 Employer for Back Wages
Posted May 09, 2003

In a case decided by the U.S. Department of Labor's Office of Administrative Law Judges (OALJ) on April 30, 2003, an employer was found liable for back wages starting from the time when the employee presented herself for employment to the time when INS (now BCIS) acted on the employer's request for termination of the H1B petition. The OALJ made this finding, notwithstanding the fact that the employer, on an earlier date, had made written request to INS for revocation of the petition and that the employee had known of the termination of employment prior to INS' revocation of the H1B petition.

BACKGROUND ON THE CASE

The employee's H1B was valid from January 24, 2001 through November 2, 2002. However, due to medical problems, she did not make herself available for employment until April 4, 2001. At that time there were no assignments for her but both she and the employer attempted to place her with a client. On April 10, 2001, the employer determined that the employee should work on in-house projects to improve her skills. Thereafter, the employer claimed that they were unable to reach her via telephone. It is noteworthy that the OALJ noted that the employer previously had success in reaching the employee by eMail but did not attempt to reach her in this manner for the in-house project. In June 2001, unable to contact her via telephone, the employer stated that they decided not to continue to seek placement for the employee.

When Was the Employee Terminated?

Despite their decision to terminate in June 2001, the employer notified neither the employee nor the INS of the decision to terminate the employer / employee relationship until September 2001. On September 14, 2001, the employer mailed a letter to the employee to inform her that a letter requesting H1B revocation would be sent to the INS in the near future. Finally, on September 28, 2001, the employer sent a letter to the INS asking for the H1B revocation. The employee never received the September 14, 2001 letter, as she had moved since the employer database had last been updated. The employee periodically had updated her address on copies of her resume that had been sent to the employer's office in her attempts to obtain client project work. She was not aware of the termination until October 30, 2001, when she called the office. In reaction to the news, she filed a change of status request with the INS on November 1, 2001, requesting H-4 classification based on her husband's H1B status. The INS finally acted on the company's H1B termination request of September 14, 2001 about four months later on January 3, 2002. During the entire period from April 4, 2001 to January 3, 2002, the employer did not pay the employee any wages, stating that she never really performed any work for the company or its clients.

Findings of the Judge

Consistent with the DOL's frequent interpretations, the Judge found that the employer / employee relationship began on April 4, 2001. The controversial finding in this case is the termination date: January 3, 2002. Essentially, the Judge found that there was no bona fide or good faith termination of the employment relationship until the date that the INS acted on the termination request. The September 2001 termination notice and request to INS was considered the "Employer's unilateral effort to end the employment relationship ... [that] does not equate to a bona fide termination of the employment relationship."

Further, even once the employee discovered the termination sent by the employer to the, then, INS on October 30, 2001, the Judge found that the employee would have worked for the employer from October 30, 2001 through January 3, 2002, if given the opportunity. He, therefore, classified that time as a period of nonproductive status due to a decision by the employer and, therefore, a period for which the employer owed back wages to the employee.

OUR ANALYSIS OF THIS CASE

Incorrect Legal Standard Used

The Judge's statement that there was a unilateral termination of the employee and not a bona fide termination conflicts with the principles of employment law in most states in the U.S. These principles recognize that most professional employment relationships are "at will" relationships, terminable by either party, with or without notice, and without any future obligations. We believe that, if this case is appealed, the appeals court may reduce the sum of back wages owed. Sometimes courts will issue decisions based on the facts of the case. Here, the fraud or misrepresentation of the employer may have resulted in the Judge's ruling so strongly against the employer.

What an Employer May Do to Minimize Such Penalties

These findings are an aggressive interpretation of the back wage laws and regulations and offer warnings to the cautious employer. Clearly, the employer in this case should have paid more attention to the H1B employee and either found a project or terminated the relationship by clearly notifying the employee, preferably in writing. In this case, the employer committed certain actions that made it clear that they were not acting in good faith; the Judge's interpretation of the law was probably to punish the employer. However, this leaves case law that essentially states that an employer may owe wages to a terminated H1B employee until the BCIS acts on the employer's H1B termination request. There is no means available to the employer to expedite this request with the BCIS, and BCIS action on this type of correspondence could take several months to process. This poses a problem for most employers since it places an unreasonable burden on them. It is no longer safe to consider the BCIS termination letter sufficient to insulate the employer from back-wage claims. Therefore, a prudent employer may consider some of the following approaches.

• Pay the employee the salary and any benefits through the date of termination. One problem in this case was that the employer had never paid the employee the wages owed to her once she presented herself for employment. Under H1B laws, an employer has to pay the employee the stated wage even during nonproductive periods.

• Make every reasonable effort to notify the employee of the termination. It is preferable to notify the employee in person and have him/her sign a document stating that s/he understands the termination. If, however, the employee has not contacted the employer for some time, it is advisable to send a certified letter to any and all known addresses, to call any available telephone numbers if the letters are sent back unopened, and to contact the employee by eMail at any known electronic addresses.

• Document everything. Each time a decision is made about an employee, place a document in the individual's personnel file. If the decision is made to terminate, put all certified mail receipts, unopened letters, telephone bills showing that calls were made to that employee, and print-outs of eMail correspondence in the file. Should the DOL ask for documentation, it is far better to have too much than too little.

• Consider a severance package with appropriately-signed documents by both parties. It may be better to pay for the employee's wages for a limited severance period, in exchange for an agreement settling claims, than to risk uncertainty and back-wage orders. While the agreement may not eliminate all potential DOL enforcement action, it is helpful to understand what the employee thought s/he was owed until the termination date, even though the employer may owe much less than the employee believes.