What is a Labor Condition Application in the H-1B process?
An employer must file a certified Labor Condition Application (LCA) with an H-1B petition on behalf of employees who need an H-1B visa for employment. The LCA is certified by the Department of Labor (DOL) and imposes an obligation on the employer to pay the offered wage for the duration of the H-1B petition unless the obligation is terminated earlier.
There are two reasons the obligation may be terminated early. If the employee requests non-work-related time off for personal reasons or submits a voluntary resignation, the employer is not required to pay the salary as the employee is considered unavailable for employment. Either reason should be carefully documented. The employer’s obligation for wages may also terminate if the employer decides to terminate the employment of an H-1B employee, with or without cause, prior to the end of the H-1B petition.
Terminating an H-1B employment: key requirements for employers
However, there are three requirements for an employer to effectively terminate an H-1B employee and avoid the obligation to continue paying the offered wages. A recent decision of an Administrative Law Judge (ALJ) with the DOL emphasizes that all three requirements must be met. The requirements are easily stated:
- clear communication from the employer to the employee of the termination
- payment of return transportation to the employee’s home country
- notification to the USCIS of the termination
The first requirement appears to be self-explanatory and was formulated by the DOL following several early investigations of staffing and consulting companies, where the employee alleged that they were benched (employment held in abeyance while awaiting a new assignment) and the employer defended the claim by asserting the employment had been terminated. Later published anti-benching amendments to the regulations clarified that the salary obligation did not take a break while the employer seeks the next assignment.
The final two requirements are set forth in the regulations and have also been strictly enforced. In the recent ALJ decision in Galvez v. Abundance Capital, the employer advised the employee that his employment was terminated effective Nov. 8, 2022. Two days later, he signed a Notice of Termination and Release of Claims that included a statement he would be paid his salary through the end of the month. Because the employee was unable to find another position, he departed the United States and returned to his home in Mexico on Dec. 8, 2022.
Importance of following all requirements for a complete termination
Following a complaint and investigation by a Wage and Hour Division (WHD) investigator, the investigator ordered an additional payment of wages from Dec. 1, 2022 until the employee’s departure on Dec. 8, 2022, together with a sum of money determined to be the cost of return transportation from the worksite to the employee’s home in Mexico. This payment was made on Aug. 16, 2023, and at the same time, the employer submitted notice to USCIS of the termination.[1] The WHD investigator issued its determination the following month, requiring the additional payment of wages for the 8 day period (based upon the assumption that the employee was no longer available for employment after he departed the United States) and funds for the return transportation, further noting that the payment of this amount had already been paid.
The employee appealed further. The ALJ determined that the bona fide termination was not complete until all three requirements of the termination were completed. While the notice of termination on Nov. 8, 2022 satisfied the first requirement, and return transportation was paid in May 2023 (following the WHD assessment), notice to USCIS was not provided until Aug. 16, 2023. Thus, wages were still owed for the period of Dec. 8, 2022 until Aug. 16, 2023. The ALJ credited the employee’s un-contradicted testimony that the only reason he left the U.S. was because he was told his employment terminated and he could not find another position. The ALJ therefore held that he was still available for employment and his departure did not terminate the wage obligation. The obligation to pay the wages continued until all three requirements were satisfied.
The ALJ further held that the Notice of Termination and Release of Claims did not adequately provide consideration or a settlement agreement that would be sufficient to constitute a release of all claims. The decision distinguished cases with adequate consideration and terms of a settlement agreement that would be sufficient to enforce a release of claims, but that was not the case in this instance.
Lessons for employers on wage obligations and termination
This decision is a cautionary tale providing important guidance to employers of H-1B employees and their counsel on the requirements to effectively end the obligation to pay wages when the employment terminates.
[1] Notice to USCIS of the termination is required even when it is a voluntary termination. It is not required when the term of the H-1B expires.