Absence of SSN No Excuse for H1B Wage Obligations
Posted May 22, 2009
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A recent decision by the U.S. Department of Labor (DOL), Office of Administrative Law Judges (ALJ) found the employer of an H1B worker liable for back wages for periods including time when the worker did not have a Social Security number (SSN). This matter is brought to the attention of MurthyDotCom and MurthyBulletin readers to clarify the common misunderstanding that an H1B worker cannot work and get paid while waiting for the issuance of an SSN. This case shows how this is NOT correct; and, as detailed below, provides the references from the Social Security Administration (SSA) and the Internal Revenue Service (IRS) explaining how employers are to handle such a situation.
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Employer's Obligation to Pay H1B Worker Salary per H1B Petition
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The requirements for initiating payment for H1B workers were reported to MurthyDotCom and MurthyBulletin readers in our April 17, 2009 article, When Must an Employer Start Paying an H1B Worker. The recent ALJ case, Administrator, Wage and Hour Division v. Itek Consulting, Inc., provides a detailed analysis of the requirements. The ruling was that the employee's lack of an SSN does not excuse the employer's wage obligation.
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Employers May Not "Bench" H1B Workers
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Employers are not permitted to bench H1B workers. Benching is the act of putting a worker in a nonproductive status, without pay, due to an unavailability of work. The ALJ decision explains that there are some limited circumstances that excuse the employer from the wage obligations contained in the labor condition application (LCA). However, these situations are limited and should not be abused. If the DOL does not find the failure to pay to be within a permitted exception, the result can be a DOL finding in which back wages are owed. This can include fines, penalties, and interest.
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Limited Exceptions to the H1B Employer's Wage Obligation
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The law specifies three exceptions to the wage payment duty during periods of an employee's nonproductive status. These exceptions are: (a) if the worker is nonproductive due to circumstances unrelated to work; (b) if the H1B worker is made incapable of working; and (c) if the H1B worker has been properly terminated.
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What are Circumstances Unrelated to Work?
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An example of a situation unrelated to work might be something like the individual traveling or caring for a sick family member. It would cover permitted periods of leave under the Family and Medical Leave Act. However, for an employer to qualify for this exemption, an ability to prove the facts becomes critical. It must be clear that this was a voluntary request by the H1B employee for personal reasons, rather than an attempt to cover up a lack of work. If an H1B worker is seriously injured or needs reasonable maternity leave, then this should qualify for an exception. (Employers are urged to check with employment attorneys and applicable state laws in these situations.)
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What is a Bona Fide Termination of the H1B Position?
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Another situation in which an employer is excused from the wage obligation is a bona fide termination of the position. These requirements were covered in our February 6, 2009 MurthyBulletin article, H1B Employee Termination, Employer Concerns, available on MurthyDotCom. In this case, the Administrative Law Judge found that the employer must provide notice to the employee in order for there to be a termination. Additionally, there is not a bona fide termination until the employer has notified the USCIS, offered transportation costs for the return home, and requested revocation of the H1B petition. Although this worker likely would have turned down the offer of return transportation, the ALJ in this case required satisfaction of all three prongs to establish a bona fide termination.
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Lack of SSN Meet No Exception
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The H1B worker's lack of an SSN does not meet any of the permitted exceptions to the employer's wage obligation. It does not fit within the "incapable of work" exception because the SSA and IRS provide a method to work around this situation. The ALJ decision explains that the absence of an SSN is no different from a worker requiring training or a license to perform his job, neither of which actually frees an H1B employer from the duty to pay the required wage.
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SSA and IRS Regulations on Payment of H1B Wage with No SSN
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The decision specifically referenced the SSA and IRS materials on the topic of workers who are waiting for SSNs. It may be helpful for employers to review these documents and put these practices in place, if they are not already complying with these procedures. Guidance (PDF 50.7KB) may be found on the SSA WebSite; the IRS instructions (PDF 139KB) are also publically available.
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Other Potential Problems : Employers Dependant on H1Bs
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There may be other considerations for employers that fit within the category of "H1B dependant" when assessing whether they may be excused from payment of the LCA wage. If an employer is classified as H1B dependant (or a willful violator), additional steps are typically required, including recruitment efforts, and making additional attestations on the LCA. This is not necessary if the worker will be paid at a rate of $60,000 or more. This wage obligation of paying at least $60,000 is not suspended, however, unless the worker is terminated.
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Conclusion
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As regular MurthyDotCom and MurthyBulletin readers know, the H1B wage requirements are complex, and the DOL has the authority to assess back wages and penalties in cases where there have been violations. Employers should not assume that workers cannot work or be paid while waiting for SSNs. Indeed, employers should avoid making assumptions whenever possible. It is necessary to obtain proper legal guidance and demonstrate a good-faith effort to comply with the law.