H1B Compliance : Wage Level Issues
Posted Apr 10, 2009
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The Murthy Law Firm is committed to keeping our readers abreast of the increasing enforcement efforts by the U.S. Department of Labor (DOL). Our March 20, 2009 article, Solutions to Help Employers with H1B Compliance, described the need to revoke H1B petitions for terminated workers, and to pay or terminate workers who may be awaiting assignments, or “benched.” As explained previously, employers may be required by the DOL to pay back wages to such employees. Another aspect of back wage assessments involves the use of incorrect wage levels or categories on the labor condition application (LCA). The DOL may, in certain situations, assess back wages for underpaying workers, even if the amount set out on the LCA has been paid.
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Importance of 'Safe Harbor'
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This H1B LCA is supposed to set out the higher of the prevailing or actual wage rate for the position. Employers may request a prevailing wage determination (PWD) from the State Workforce Agency (SWA) in advance of filing the H1B case. Many employers and attorneys do not do so, however, due to the amount of time required for such requests. If a PWD has been obtained from the SWA, this creates a “safe harbor” for the employer, provided the employer properly described the job at issue. That is, the DOL indicates it will not argue with the wage determined to be appropriate by the SWA, provided that the description of the position given to the SWA was correct.
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Use of DOL Wage Surveys

In most cases, there is no PWD upon which to rely. Usually, the source of the wage selected is the Occupational Employment Statistics (OES) wage data, available on the DOL website. There are also provisions for the use of other appropriate wage surveys. Since the PWDs performed by the SWAs are based upon the DOL’s wage data, the end result should be the same either way. However, problems can arise due to the choice of wage levels, as well as job categories.
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The DOL wage surveys provide four levels of wage, essentially entry level to senior level. As would be expected, the wages increase - often substantially - as the level increases. Thus, the DOL often reviews and challenges the selected wage levels, if they believe they are too low. The DOL may question this matter more closely if all workers are categorized as entry level. Thus, employers must make properly-based, defensible selections of appropriate wage levels.
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DOL Looks Beyond the LCA
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When reviewing the issue of wage level, the DOL may look at other statements made by the employer with respect to the particular job, to see if it is consistent with the selected wage level. A typical starting point would be the advertisements used to recruit for the specific positions. If the ad says that the job requires, for example, a master's degree and certain experience, and describes complex job duties, then the DOL is unlikely to accept the assertion that this is an entry level job.
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In addition, DOL may review an employer's contracts, marketing materials and other written materials. These may include purchase order agreements or specifications for projects that specify a number of years of experience required by the complexity of duties or other factors that would lead to higher wage levels. DOL investigators may choose to interview current and former employees, inquiring as to the minimum requirements to be hired by a certain employer or how the employer presented the worker to secure projects. Some DOL investigators have compared job requirements in PERM applications to those listed for the same worker in H1B petitions, noting differences that lead to higher wage levels. While there often is room for argument in these matters, the employer must be aware that significant discrepancies between the wage level selected and other statements regarding the job create potential exposure to liability for back wages.
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Risk of Several Years' Back Wages
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If the DOL determines that the wage level was not properly assessed, it can order the payment of back wages for the discrepancy. This can represent a substantial sum, when many or even potentially all of an employer's workers have been misclassified and paid incorrect wage levels for a number of years. Beyond the increasing level of enforcement by DOL, the U.S. Citizenship and Immigration Services (USCIS) listed underpayment of wages to H1B workers as one of the most common violations found in a report issued September 2008, reported in our October 24, 2008 article, H1B Benefit Fraud & Compliance Assessment Signals Changes, available on MurthyDotCom.
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The situation is the same for wrongly categorizing the job to one that has a lower wage. However, we find that this is a less frequent problem than the wage level selection.
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Possible Solutions
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The DOL has a detailed explanation, and a worksheet (PDF 113KB) for determining wage levels. Employers should make their wage level selections consistent with this information. The selection of a wage level should be consistent with the other statements made in advertisements, marketing materials, purchase orders, contracts, and other immigration filings. The employer must be able to explain the choice, if challenged on this matter. If there is time, the SWA prevailing wage determination provides a safe harbor.
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An employer with concerns about the selected wage levels for existing H1B cases may request SWA prevailing wage determinations, even after a case is filed or approved. If this determination matches the level selected, then it may be used to support an argument that the selection was appropriate. If it appears that the wage level may have been inappropriate, the employer may need to make wage adjustments. The back wages can be assessed only for the difference between the wage paid and the proper wage. It is not uncommon to see wages paid that are between two levels. Sometimes, a slight boost is all that is needed. While this represents an expense that may be difficult for an employer, it is preferable to having to pay back wages, penalties, interest, and other required payments.
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The DOL has some discretion with respect to which penalties to pursue, and, regarding back wage issues, the length of time for which they may be assessed. An employer that reviews and makes adjustments so that all current wage levels are proper is likely to be viewed more favorably by the DOL. This may reduce the likelihood and extent of the DOL's review of past wages and assessments for prior years. Of course, any such favorable discretion also depends on the nature and extent of other violations.
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Conclusion
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As stated in previous articles on this subject, available on MurthyDotCom, employers must take H1B compliance seriously. Simply listing a DOL salary survey amount on an LCA, and paying more than that minimum, is not a protection from a DOL investigation if the job category or salary level is inappropriate. The DOL can independently assess what is considered to be the proper wage level for a company's employees, as discussed above, and make findings of back wage obligations. The best defense to such findings is to either obtain PWDs from a SWA or to assess the proper wage level carefully based on the same factors that the DOL will consider.