Immigration Impact of Furloughs, Pay Reductions, and Layoffs During COVID-19

04 / 01 / 2020

CAN WE FURLOUGH EMPLOYEES WITH NONIMMIGRANT STATUS?

H-1B, E-3, AND H-1B1 WORKERS WITH LCAS

Department of Labor (DOL) regulations require employers who sponsor H-1B, E-3, and H-1B1 workers to pay these employees the required wage that is stated in the relevant LCA for the entire duration of approved nonimmigrant status, regardless of whether or not they are subject to a furlough, reduction of hours, or other non-productive status. An unpaid furlough would be a wage violation for LCA-dependent classifications and employers could be liable for penalties including payment for back wages, fines, or debarment from the DOL’s temporary or permanent immigration programs. If the DOL orders debarment, DOL can notify USCIS to no longer approve nonimmigrant or immigrant petitions filed by the employer. In addition, impacted employees would be considered to have violated their status on the first day of their furlough, triggering a 60-day grace period that can be used only once in connection with each H-1B, E-3, or H-1B1 validity period.

In order to be fully compliant, H-1B, E-3, and H-1B1 sponsor/employers must:

Continue paying the required wage stated on the nonimmigrant petition and/or LCA, even if the employer puts the worker on non‑productive status. NOTE: if the worker voluntarily requests unpaid leave for personal reasons unrelated to employment, the employer is not required to continue paying the required wage unless a benefit plan or other law (e.g., Family and Medical Leave Act or the Americans with Disabilities Act) requires it. However, such “voluntary” requests by the worker will be closely scrutinized in the event of a government inspection or audit. The DOL will carefully investigate whether the employee’s request for leave is genuine. The leave should not be forced upon the employee as a pretext for the employer’s inability to pay the required wage due to lack of work. Such contrived leave would be viewed as a decision by the employer to place the worker in unproductive status, thus rendering the employer liable for sanctions. The employee’s request must be in writing and the purpose for the cessation of work must be solely for the benefit of the employee.

Ensure that the required wage paid to their LCA-dependent employees including H-1B, E-3, and H-1B1 status holders meets the higher of: (a) the prevailing wage where the job is located, or (b) the actual wage the employer pays workers in similar positions who have similar qualifications for the entire duration of their approved nonimmigrant status.

Offer LCA-dependent status holders benefits on the same basis as the employer offers US workers for the duration of their approved nonimmigrant visa status; and

Given these requirements, employers have the choice of (1) exempting H-1B/H-1B1/E-3 workers from an unpaid furlough (i.e. they keep working as usual and are paid); (2) continuing to pay these LCA-dependent visa holders their required wages during a furlough (when they are not working/reported to work); or (3) terminating their employment, and notifying USCIS to end their wage obligation.

H-1B, H-1B1, and E-3 employees who are subject to an unpaid furlough will be out of status and be subject to a 60-day grace period on the first day of their unpaid furlough. These employees will have a 60-day grace period to seek a new position, change status to a different visa category (if eligible), or depart the United States within 60 days of the furlough. Employers who subject H-1B status holders to an unpaid furlough must also offer to pay the employee the reasonable costs of return transportation to their country of last residence.

H-1B, H-1B1, and E-3 workers who are still within their validity periods can arguably resume employment with the same employer after the furlough ends. The worker never lost status during that 60-day grace period, and if joining the same employer, may not need to file an extension with the same employer. This is also a situation where the worker would most likely not be able to get a second 60-day grace period within the validity period of the same petition or admission.

Note, however, that if the employer furloughed the H-1B, H-1B1, or E-3 worker, and did not notify USCIS regarding the termination, the employer could still potentially be liable for back wages under its obligation to pay the required wage under the Labor Condition Application for failing to effectuate a bona fide termination. Therefore, if the employer notified the USCIS, which resulted in the withdrawal of the H-1B petition, the same employer would need to file a new H-1B, H-1B1, or E-3 petition within the 60-day grace period.

OTHER NON-IMMIGRANT VISA HOLDERS (SUCH AS E-2, L-1, O-1, P-1, TN)

Employers who sponsor and employ non-immigrant visa holders other than H-1B, H-1B1 and E-3 status holders are not subject to any wage obligations. It could be argued, however, that these employees are violating their status by not working during an unpaid furlough, unless they are taking paid leave.

The High Skilled Worker Rule that took effect on January 18, 2017 provides for a 60-day grace period to H-1B as well as nonimmigrant workers holding E-1, E-2, E-3, H-1B1, L-1 or TN status upon “cessation of employment,” or until the end of their authorized stay, whichever is shorter. During the grace period, the worker may apply to transfer their nonimmigrant status to a new employer, apply for a change of status to a different category such as B-2 visitor for pleasure or a dependent category, or depart the United States.

Nonimmigrant status holders in these categories who are placed on an unpaid furlough would trigger their 60-day grace period on the first day of the furlough. If the employer is able to rehire the worker within 60 days, then the worker will continue to maintain a lawful status. NOTE: P-1 status holders do not receive a 60-day grace period and therefore would lose status as soon as they stop work.

Employers who subject O-1 or P-1 status holders to an unpaid furlough must also offer to pay the employee the reasonable costs of return transportation to their country of last residence.

Employers are encouraged to seek the counsel of a labor and employment lawyer on the legality of forcing nonimmigrant visa holders to take accrued PTO or vacation time during a mandatory furlough to avoid immigration implications.

F-1 STUDENTS WITH OPTIONAL PRACTICAL TRAINING (OPT OR STEM OPT)

Subjecting F-1 students to a furlough where they are not working and not paid would trigger the unemployment provisions of their status. Students on OPT status are permitted a maximum of 150 days of unemployment in the aggregate – up to 90 days total during the initial 12-month OPT period and an additional 60 days for students granted a 24-month STEM OPT extension. F-1 students who exceed these periods of unemployment will be in violation of status.

CAN WE REDUCE HOURS OR PAY FOR NONIMMIGRANT WORKERS?

H-1B, E-3, AND H-1B1 WORKERS WITH LCAS

Employers who need to convert full-time H-1B, H-1B1 or E-3 workers to part-time employees, or who will impose a temporary or permanent across-the-board pay cut that is lower than the wage specified in the Form I-129 nonimmigrant petition, are advised to file new LCAs with the DOL and amended non-immigrant petitions with USCIS for those workers, as these changes would likely be considered “material.”

If an employer lowers the salary for an H-1B, H-1B1, or E-3 employee below the required wage stated on the nonimmigrant petition, according to 20 CFR 655.731(c)(2)(v), the employer can give a guaranteed bonus in the future that may be credited toward satisfaction of the required wage obligation. However, the bonus cannot be conditional or contingent on some event such as the employer’s annual profits. This approach may involve some risk, as one cannot know for sure how DOL will view this action if there is an investigation. Note that once the guaranteed bonus is paid, it must be paid as a salary and reported as earnings with appropriate taxes and FICA contributions withheld and paid.

Lowering an H-1B, H-1B1, or E-3 employee’s salary cannot be made up by offering stock options. The employer is required to guarantee the required wage, and this must be paid in the form of wages reported to the Internal Revenue Service (IRS) as the employee’s earnings, with appropriate withholding for the employee’s tax paid to the IRS and as required under the Federal Insurance Contributions Act (FICA). A stock option would not guarantee the required wage as the value of a stock option can go up or down. A stock option also does not comply with the requirement that the compensation must be paid as a wage that is reported to the IRS, with appropriate tax and FICA contributions withheld.

OTHER NON-IMMIGRANT VISA HOLDERS (SUCH AS E-2, L-1, O-1, P-1, TN)

Employers who sponsor and employ non-immigrant visa holders other than H-1B, H-1B1 and E-3 status holders are not subject to any wage obligations. Additionally, in most cases, cutting hours or pay for these workers would not result in a status violation.

F-1 STUDENTS WITH OPTIONAL PRACTICAL TRAINING (OPT OR STEM OPT)

Reductions in hours for workers with F-1 Optional Practical Training (OPT) or STEM OPT may also be limited by legal requirements. Workers with OPT or STEM OPT must work at least 20 hours per week. And while employers who sponsor and employ F-1 students on OPT are not subject to any wage obligations, F-1 students with STEM OPT must be paid wages that are “comparable” to similarly employed workers.

Additionally, employers must work with the STEM OPT visa holder to report to their university any material changes to, or material deviations from, the student’s formal training plan by filling out a new Form I-983. Material changes or deviations from the original Form I-983 include:

Any reduction in student compensation that is not tied to a reduction in hours worked.

Any significant decrease in hours per week that a student works.

WHAT IS THE IMPACT OF A REDUCTION IN FORCE OR LAYOFF ON NON-IMMIGRANT VISA STATUS HOLDERS?

H-1B, E-3, AND H-1B1 WORKERS WITH LCAS

To end compensation obligations for laid off H-1B, H-1B1, and E-3 workers under immigration law, the employer must: (a) notify the worker, (b) notify DOL and/or USCIS, and (c) pay the worker reasonable costs of return transportation to their country of last residence (for H-1B workers). The High Skilled Worker Rule that took effect on January 18, 2017 provides for a 60-day grace period to H-1B as well as nonimmigrant workers holding E-1, E-2, E-3, H-1B1, L-1 or TN status upon “cessation of employment,” or until the end of their authorized stay, whichever is shorter. During the grace period, the worker may apply to transfer their nonimmigrant status to a new employer, apply for a change of status to a different category such as B-2 visitor for pleasure or the H-4 or E-3D dependent categories, or depart the United States.

Notification to DOL and/or USCIS

Employers who lay off LCA-dependent nonimmigrant visa holders including H-1B, H-1B1, and E-3 status holders must notify DOL of the termination of employment.

Employers must also notify USCIS when it terminates the employment of any H-1B or O-1 status holders.

OTHER NON-IMMIGRANT VISA HOLDERS (SUCH AS E-2, L-1, O-1, P-1, TN)

Employers who lay off O-1 or P-1 nonimmigrant visa holders must offer to pay the reasonable cost of return transportation of the foreign national to their last place of residence abroad prior to entry into the US. It is recommended that the employer retain documentary proof of its payment to the foreign national for the return transportation costs, or of its offer to pay those costs should the foreign national choose not to depart.

WHAT ARE THE IMPLICATIONS OF REDUCTIONS IN FORCE OR LAYOFFS ON THE PERM PROCESS?

One major immigration impact of a Reduction in Force (RIF) or layoff is on the PERM Labor Certification Program. Employers who must perform any Reductions in Force or layoffs as a result of the COVID-19 pandemic will need to carefully review PERM applications that are in the preparation process against a list of its U.S. workers (i.e. U.S. citizens, lawful permanent residents, asylees/refugees, and certain other narrow categories). Employers should review whether it has laid off any U.S. workers who were employed in the same area of intended employment and same occupation or related occupation as each PERM applicant. If U.S. worker employees in the same area of intended employment and related occupation were laid off, the employer must (1) halt the PERM process and wait to file until six months after the RIF, or (2) actively notify and consider all laid off U.S. workers for the PERM position.

IS IT A PROBLEM FOR H-1B, H-1B1 OR E-3 WORKERS TO WORK FROM HOME?

Employers who have instructed their employees to work from home must ensure they still comply with Department of Labor rules about the geographic scope of positions; for example, as specified for H-1B, H-1B1, or E-3 workers under a Labor Condition Application.

If an employee works from a home which is within commuting distance of the workplace, then there is no need to file an amendment. As to whether a copy of the original LCA should be posted again in two places in the employee’s home, it does not make sense to do so since the posting cannot be seen by other employees. However, the DOL has not yet provided clarification on this point. Alternatively, the employer may provide electronic notification to affected workers in the area of intended employment.

If an employee works from a home which is NOT within commuting distance from the workplace, the employer should obtain a new LCA for that location and file an H-1B amendment. Since there is a 30 working day short term placement exception (per year), the employer can file the amendment within 30 working days of the move to a home location that is not within commuting distance.

CAN TERMINATED NONIMMIGRANT WORKERS CLAIM UNEMPLOYMENT BENEFITS?

Although one must look at state rules, generally speaking, nonimmigrant visa holders cannot claim unemployment benefits because they will not be able to work in the future due to the loss of their status as a result of the loss of the job. The legal status of nonimmigrant visa holders is based on employment, and once the worker is terminated, they are not able to work in the future due to lack of that status.

On the other hand, unemployment benefits may be available for a terminated H-4 spouse with an EAD if the H-1B spouse remains in valid status. The H-4 spouse’s ability to work in the future is linked to the H-1B status of the spouse, and if the H-4 spouse is terminated, they can work in the future with the EAD, so long as it remains valid and the H-1B spouse continues to maintain their H-1B status. Of course, one has to look at the state rules concerning unemployment insurance regarding how long one must be able to work in the future in order to be eligible to make such a claim.

If an H-4 spouse can claim unemployment benefits, they will likely not be impacted by the new public charge definition as unemployment is not a public benefit. One earns the unemployment insurance by contributing to it while employed.