Layoffs, Furloughs and Other Reductions: Compliance issues for H-1B employers
Companies wrestling with the economic effects of COVID-19 are facing difficult choices regarding furloughs, layoffs and reductions in employee pay and hours. Employers should carefully consider all H-1B requirements to ensure they remain in compliance with regulations and to help minimize negative consequences for their H-1B employees’ immigration status.
H-1B employers are obligated to pay the “required wage” for H-1B employees for the duration of their authorized employment. The required wage means either the “prevailing wage” for the occupational classification in the area of employment or the “actual wage” the employer pays to similar employees—whichever is greater. A company that reduces an H-1B employee’s pay cannot generally reduce it below the required wage, unless the employer completes a “bona fide” termination of the H-1B employee.
Employers who terminate H-1B employees before the end of their period of authorized employment must fulfill certain legal requirements for it to be considered “bona fide.” The employer must notify both the employee and U.S. Citizenship and Immigration Services of the termination so that the H-1B petition will be withdrawn, and offer to pay the reasonable costs of the employee’s return transportation abroad. A company that does not carry out a bona fide termination may be liable for back wages and payment for the employee’s return transportation.
Companies seeking to reduce the hours of H-1B employees should be mindful of regulations that prevent employers from “benching” H-1B employees during times of slow production. Under these regulations, employers must continue to pay H-1B employees the required wage if their nonproductive status is related to a decision by the employer. This includes the lack of assigned work or waiting for a new project. There are limited circumstances where an employer need not pay the required wage because of conditions that are unrelated to employment, such as an employee’s voluntary request for leave or incapacitation.
In general, full-time H-1B employees must be paid the full-time required wage even if their number of productive hours drops below full-time; part-time workers must be paid for the number of hours stated on the H-1B petition. If the H-1B petition lists a range of hours for a part-time worker, the employer must pay the required wage for the average number of hours normally worked by the worker (but not below the minimum hours listed on the H-1B petition).
Employers may also want to consider how the timing of terminations may affect an H-1B employee’s immigration status and ability to remain in the country. H-1B employees who are terminated may have a grace period of up to 60 days for a new employer to file an H-1B petition on their behalf or to file for change of status to another nonimmigrant category, otherwise they will fall out of status. Foreign nationals who fall out of status may begin to accrue unlawful presence, which can prevent them from returning to the U.S.
Terminations may also impact a company’s recruitment, green card sponsorship and talent retention down the road. This includes the costs of losing global talent after having invested in an H-1B process that has become increasingly challenging. Employers pursuing terminations and layoffs should weigh the numerous immigration considerations and consult with counsel to make sure that they are meeting all compliance obligations and protecting their employees and the company’s long-term interests.
BAL has formed a COVID-19 task force to help clients navigate compliance and immigration strategies during this time. An overview of key issues is presented in this Executive Analysis.
Steven Plastrik is a Senior Associate in the Washington, D.C., office of Berry Appleman & Leiden LLP.