Don't Forget to WARN

 

South Florida residents should be familiar with the Plantation mortgage foreclosure law firm Law Offices of David J. Stern.  Stern himself built a fortune in recent years by operating the go-to firm for banks seeking to foreclose on residential mortgages.  (Full disclosure - my wife, who is an attorney, used to work for the Stern firm, but left several years ago.)  According to a litany of recent news articles, the firm is being investigated by the state Attorney General, and has recently lost many of its clients.   The firm and its related loan-servicing business reportedly laid off some 700 employees this fall.

Now, the firm faces a class-action lawsuit brought by four ex-employees. The lawsuit, filed last week, alleges violations of the federal Worker Adjustment and Retraining Notification Act, which is more familiarly known as the WARN Act. The WARN Act applies to businesses with more than 100 employees. Among other things, WARN requires that employers provide at least 60 calendar days notice to “affected employees” before “mass layoffs” that involve at least 50 people, if those people comprise more than 1/3 of the workforce. 

The four plaintiffs here claim they were all laid off this fall. They allege that the Stern firm failed to provide any advance notice to them, and that they had “barely an opportunity to gather their personal items before security badges and telephone extensions were deactivated”. 

The penalties for a WARN violation can include up to 60 days lost wages and lost benefits to the affected employees, plus the employees’ attorneys fees. Clearly, if the Court here were to certify this as a class-action involving hundreds of ex-employees, the stakes for the Stern firm would be quite large.

There are a few limited statutory exceptions to the WARN notice requirement. The one that the Stern firm here may argue applies is the “unforeseeable business circumstances” exception. Under that exception, the employer can give fewer than 60 days notice, if the mass layoff is as a result of a “sudden, dramatic, and unexpected” business circumstance that was not reasonably foreseeable. Loss of a major client can suffice. Even under this exception, the employer must give as much notice as practicable under the circumstances. 

The lawsuit here anticipates that the Stern firm will attempt to argue that exception, and claims that the firm “had plenty of advance opportunity to provide notice”. If this case progresses, the relevant questions will be when the Stern firm became aware of the “unforeseeable business circumstances”, and whether the firm had the opportunity to provide the  60-days notice, or at least some notice. 

It is obviously much too early to determine what will happen in this case. But, in these economic times, WARN Act lawsuits have become more prevalent than before. Any sizeable employer seeking to lay off numerous employees, or to shut down operations at any of its facilities, would be wise to consult labor and employment counsel before doing so. As stated above, the penalties for violating WARN can be severe.

Reductions in Force and Employees in H-1B Status--What HR Needs to Know

By Hector A. Chichoni, Copyright Society of Human Resource Management ("SHRM"). Printed with Permission.

Due to present hard economic conditions U.S. employers are carrying out reductions in force (RIF) at a higher rate of frequency than at any other time in the last 30 years. RIFs, however, are not uncommon; they also take place during good times through mergers, company restructurings, buyouts, sellouts and more.

This article will show HR personnel what they need to know to keep their employers compliant when going through a RIF affecting foreign workers in H-1B status and to identify a few available strategies that may ameliorate their employers’ potential liability.

Reductions in Force and H-1B Status Holders

The general rule is that once the foreign national worker’s employment is terminated, so is his/her H-1B visa status. As a direct consequence of the principal visa holder’s termination, family member dependents holding derivative H-4 visas will also lose their status. Regardless of the fact that their Form I-94, Arrival/Departure Record may not yet be expired, the H-1B holder and his/her dependents will be out of status as of the last day of the principal visa holder’s employment.

Many foreign employees in H-1B status think there is a “grace period” after the expiration of their status or stay. A large number of foreign workers also believe that if they are part of a RIF, layoff, get fired for cause, terminated[1] or even resign[2] that there is a “grace period” that would allow them to find a new H-1B sponsoring employer. Contrary to their belief, there is no such thing as a grace period. Further, the U.S. Citizenship and Immigration Services (USCIS) has stated that an H-1B nonimmigrant status holder present in the U.S. even during the “severance period,” will not be considered to be maintaining status. To maintain status, the employer and the foreign national employee must maintain a “bona fide” employer-employee relationship.

As a matter of practice, however, if the period between the time in which the foreign national employee fell out of H-1B status and the time in which the new employer filed an H-1B petition is brief,[3] the USCIS may, upon its discretion, overlook the employee’s failure to maintain status and approve an H-1B extension and change of employer.

Given the serious consequences that RIFs have on H-1B nonimmigrant status holders, it is imperative that employers consider these effects prior to initiating a RIF. The employer may wish to consider providing advance notice of the termination to the employee in H-1B status to allow him/her a reasonable period of time to find another sponsor and advise him/her to seek the counsel of an experienced immigration attorney to minimize the impact of the termination.

Moreover, for purposes of termination, RIFs can be so final for H-1B status holders that, only with few rare exceptions, and even when the employer has already paid into the state unemployment system, the foreign national employee cannot file or qualify for unemployment benefits due to the lack of work authorization resulting from the termination.[4]

Once the principal H-1B visa holder is out of status, nothing can prevent the government from detaining, instituting removal proceedings, and even removing them from the United States. Therefore, terminated foreign national employees in H-1B status should seriously consider quickly finding an employer who would be willing to sponsor them for H-1B status, changing to another nonimmigrant status that will allow them to continue staying in the U.S., or leaving the country immediately.

Employers also should consider that when an H-1B holder’s employment is terminated while the company is pursuing a “green card” application before he/she is granted permanent resident status, for all practical purposes, the permanent residence case ends without the employee being able to obtain the green card. Only if the foreign national employee is at the “third stage” of his/her green card application, with an unadjudicated I-485 Adjustment of Status application pending with USCIS for 180 days or more may the employee still be able to secure a green card. The employee may be able to secure the green card by either changing jobs or employers to preserve the green card process, or continue the process with the same employer-sponsored green card case, in spite of the employment termination, if the sponsoring employer does not withdraw the unadjudicated underlying immigrant worker petition and still intends to hire the individual upon adjudication of the I-485.

U.S. employers must walk a very fine line in the context of structuring RIF because it is considered an unfair immigration-related employment practice for a person or entity to discriminate against any individual because of his/her national origin or citizenship.

RIFs also bring a significant increase not only in the number of claims against employers, but in the number of complaints filed with the U.S. Department of Labor (DOL) and the U.S. Department of Homeland Security’s Immigration and Customs Enforcement (ICE) by RIFed employees. Complaints filed against employers with DOL and ICE can trigger not only audits but also investigations which can culminate in fines and penalties, and even criminal charges for the egregious violators.

Employers, and thus HR, will typically have very little advance notice of DOL or ICE investigations and audits. Therefore, it becomes more important for employers to properly maintain and keep accurate corporate immigration records. As the saying goes, an ounce of prevention is worth a pound of cure. Nothing could be truer in the area of immigration corporate compliance. Employers should implement clear and effective immigration policies in their employer handbooks. Employers should maintain and retain all pertinent records as well as conduct periodic internal audits along with the implementation of corrective actions to ensure that they are in full compliance with all applicable immigration laws, rules and regulations, which in the end, will defend itself in the event of a government audit or investigation.

In general, ameliorating the impact of a RIF on a foreign national employee may not be mandatory for employers,[5] but it always makes sense from a business perspective to avoid potential claims against them. Claims made by H-1B nonimmigrant status holders, depending on the claim, can also be protected by “whistle-blower” and Fair Labor Standards Act laws.

Given the harsh consequences, RIFs can have a large impact not only on employees holding H-1B status, but also on employers. U.S. employers will be well served by working with HR during the planning phase of the RIF.

Immigration Obligations for Employers of Employees in H-1B Status

Employers of H-1B visa status holders must comply with certain specific obligations acquired through the filing of an H-1B visa petition with the government.[6] DOL laws, rules and regulations make clear that in order for an employer to have carried out a “bona fide” termination, and thus, disclaim potential liability, the employer must notify the USCIS of that termination, provide the foreign national employee in H-1B status with a “reasonable costs of return transportation,” and notify the H-1B status holder employee, in a clear and effective way, about his/her termination. In addition, employers must also comply with other basic obligations directly related to employing foreign workers in H-1B status.

Notify U.S. Government About H-1B Status Holder’s Termination

Under U.S. immigration law employers are required to notify the U.S. government of “any material change” to the terms and conditions of an approved H-1B petition that may affect the eligibility of the beneficiary to that visa category. Termination is considered a material change. Notifying the government is not only a requirement under the law but also a good idea. Notifying the government immediately is also effective for purposes of limiting a claim for unpaid wages for a period covering after the individual is terminated. Thus, in order to prevent or stop the back wage obligation for such H-1B workers, it is necessary to terminate the employee and send a withdrawal notification to the USCIS. The DOL considers the H-1B worker’s wages to be a responsibility of the employer until the date that the USCIS receives a written request to withdraw the relevant H-1B petition.

Similarly, employers must notify DOL about the termination (withdraw) of the Labor Condition Application (LCA) filed with the H-1B visa petition.

A typical notification sent by the employer can be a letter on company letterhead, or the attorney’s letterhead if represented by an attorney, clearly referencing the petition number, employer’s contact information, and beneficiary’s name and date of birth via U.S. certified mail. Employers can include with the letter a clear color copy of the individual’s Form I-94; Form I-797, Approval Notice; and, even when not required, a copy of the H-1B visa.

Although there is no requirement per se to inform the U.S. consulate that issued the H-1B visa about the individual’s termination, some immigration practitioners consider it a good idea to send a copy of the above packet, either via U.S. mail, or as a PDF attachment via e-mail, directed to the U.S. consulate’s nonimmigrant visa unit or the fraud prevention unit. This practice could assist employers in disclaiming any potential liability for any future wrongdoing involving the use of the visa.

Provide H-1B Status Holder Employee with Reasonable Costs of Return Transportation

Employers of H-1B status holders have an obligation under the immigration statute to provide the foreign national employee with “reasonable costs of return transportation” if the “involuntary” termination of the H-1B status holder was effective before the expiration date, as shown on Form I-94, of the period of authorized stay. This obligation falls upon the present employer of the foreign national employee or the last employer before the termination. Paying the cost of transportation neither extends to the foreign national employee’s dependents living with him/her in H-4 status, nor to paying for the transportation of his/her household belongings.

A word of caution, the employer’s mere offer to pay the foreign national employee’s “cost of transportation” may not be enough. Providing the actual airfare, one-way nonrefundable ticket to the home country or last place of residence, should meet the requirement. It is a good practice to obtain either a signed acknowledgment of receipt from the beneficiary that he/she indeed received the return cost of transportation, or that the beneficiary, upon being presented with return costs of transportation, declined the employer’s offer. The employer cannot force the individual to exit the United States and has no obligation to report the individual to ICE if the individual, of his/her own volition, decides to stay beyond the date of termination. Thus, it is imperative that the employer effectively document and create an evidentiary trail that it has complied with its obligation of paying the return costs of transportation. Again, employers should develop and implement corporate immigration policies that define their obligations. These policies should be part of their employee handbook.

Continue to Pay H-1B Status Holder Employees Required Wages Until Termination

An employer’s obligation to continue paying the required wage to the employee in H-1B status ends upon effective and clear or “bona fide” termination of the employer-employee relationship. Therefore, it follows that an employer must not only provide the H-1B status holder employee with clear and effective notice of his/her termination, but also must carefully document the termination with clear and accurate records to protect itself.

The payment of the required wage must be in accordance to what the employer promised when it filed the LCA for certification with the DOL.[7] The LCA requires by attestation that the employer will pay the H-1B workers the higher of either the prevailing or actual wage[8] during their employment.[9] The LCA also prohibits “benching”[10] the employee if the employer does not have a sufficient amount of work.

DOL has authority to enforce the H-1B wage obligations and may impose fines and penalties on employers that fail to comply with this requirement.

Employers’ Employment Verification Compliance Obligation

The employer’s termination of the employer-employee relationship through a RIF does not end its obligation to continue maintaining and retaining its Form I-9, employment eligibility verification records. The employer must retain Form I-9 for each employee for either three years from the date employment begins, or one year after the date employment is terminated, whichever is later.

Employers must consider that a RIF often breeds not only lawsuits from disgruntled former employees, which can include former foreign national employees, but also potential complaints to various governmental organizations such as DOL and ICE, which may lead to an audit or investigation of the employer’s records. It is therefore, a good practice to purge all I-9 forms that are not required to be kept under the law.

The DOL has some discretion, once it has conducted an investigation, as to the types and levels of penalties that can be assessed. There may be less harsh consequences for past violations, if there is evidence of current compliance. Employers must show good faith to avoid harsher penalties.

Employers are also responsible for, and must ensure, adequate training of human resources professionals to ensure compliance with corporate policy and immigration law. A thoughtful I-9 compliance policy and careful management of I-9 records will put employers in a better position should DOL or ICE decide to audit or investigate them.[11]

Employer’s Public Access File Compliance Obligation

Employers of H-1B employees are required by DOL regulations to make a certified (filed) LCA, along with all necessary supporting documentation, available for public examination at the employer’s principal place of business in the United States, or at the place of employment within one working day after the date in which the LCA is filed with the DOL.

Employers must retain this documentation (in tandem also known as the “Public Access File” (PAF) or “Public Inspection File” (PIF) for a period of one year beyond the last date on which any H-1B nonimmigrant is employed under the LCA or, if no H-1B nonimmigrants were employed under the LCA, one year from the date the LCA expired or was withdrawn. Ensuring proper document retention is particularly important in an economic downturn. With limited exceptions, government investigations of immigration compliance are often initiated by the DOL or by ICE as a result of a complaint made by a former employee.[12]

Compliance Issues Relating to Receipt of Stimulus Plan Funds

The law states that businesses receiving money under the stimulus package’s Troubled Assets Relief Program (TARP) will be subject to the rules that currently govern H-1B-“dependent” U.S. employers.

DOL requires that H-1B dependent U.S. employers take additional steps when hiring new H-1B foreign workers. These steps require U.S. employers to attest that, in addition to the normal attestation requirements found in the LCA, they have, among other requirements:

(1) Taken good faith steps to recruit for the position in the U.S. using industrywide standard practices.

(2) Offered, at minimum, the prevailing wage during recruitment efforts.

(3) Offered the job to any U.S. worker who applies that is equally or better qualified than the H-1B worker.

(4) Not displaced U.S. workers employed within a period beginning 90 days before and ending 90 days after the date of the filing of the H-1B petition.

Since this is a new area of compliance, it would be advisable for U.S. employers receiving TARP funds to keep constantly informed and updated.

RIFs, Government Audits and Investigations

Government agencies usually initiate audits or investigations in connection with an immigration compliance issue when there is a complaint made by a disgruntled employee or a tip. A significant number of audits and investigations are triggered by complaints made by RIFed U.S. citizens, green card holders and even nonimmigrant visa holders. Agencies can also initiate investigations on their own and with less than probable cause.

For purposes of LCA issues, the appropriate agency will be the DOL, Wage and Hour Division. As far as I-9 issues, ICE will be the agency responsible for conducting audits and investigations. Both agencies are responsible for conducting the initial review of the merits of respective complaint in order to determine if an investigation is warranted.

If the agency decides to proceed with the audit or investigation, the U.S. employer generally will be notified by letter or phone call by an investigator or officer that he/she would like to come to the employer’s offices to review the immigration-related documentation that the employer is required to maintain. Often, investigators do allow employers to send the documents the agency wishes to review to the agency’s office. In addition to reviewing the I-9 forms or the LCA PAFs, the investigator might also ask to review payroll records to ensure, among other things, an accurate account of employees, their names, Social Security numbers and that the required wage is being paid to foreign national employees. As stated, investigators usually will give employers very little time to either produce or permit inspection of the records.

A new technique ICE has been using, and will continue to use in the upcoming years, to audit and investigate U.S. employers is the so called “inspection.” Employers that have entered into Memorandums of Understanding (MOU) with a government agency to participate in some sort of electronic immigration compliance program (e.g., E-Verify) need to be aware that these MOUs grant permission for the agency to come unannounced to the premises and conduct an inspection. The work inspection is not defined, and therefore has no limit. It can include employment eligibility verification through the use of the agency’s own electronic systems and devices (without even touching the employer’s I-9s), criminal and customs searches, and much more. The inspection team can even include members of other agencies also under the U.S. Department of Homeland Security’s umbrella such as the Transportation Security Administration.

Since Sept. 11, 2001, the government has exponentially increased security measures and electronic initiatives to address national security concerns. The increase in the government’s immigration policies and electronic systems has manifested itself in a resurgence of government audits, inspections, raids and criminal investigations of U.S. employers. Government search warrants, worksite raids and audits have become standard investigative tools to assist in the enforcement of immigration laws. These systems make it easier for the government to detect not only wrongdoing, but also simple failure to comply with the law.

Under Secretary Janet Napolitano, possibly in association with other governmental agencies (e.g., the Internal Revenue Service, DOL, and the Social Security Administration), the number of government audits and inspections will continue, and probably, increase. Technology based programs such as E-Verify could become mandatory for all U.S. employers.

In conclusion, it will be important to caution that while it is often appropriate to take remedial actions such as filing H-1B petition amendments and new LCA, paying back wages, and organizing documentation, including I-9 forms to fix future problems, employers should never attempt to cover up the problems. Therefore, it will be important for employers to be in compliance at all times, especially, when going through a RIF.

Hector A. Chichoni is an attorney at Epstein Becker & Green PC in Miami. Chichoni (hchichoni@ebglaw.com) is South Region chairperson of the firm’s Immigration Law Group.

[1]The U.S. Citizenship and Immigration Services (USCIS) makes a very important distinction between layoff and termination. Layoff for USCIS is more closely related to “benching,” a period of nonproductive status for which the employer is completely responsible as opposed to a period of nonproductivity for which the H-1B beneficiary is responsible, i.e. medical leave, vacation, etc. Termination refers to a clean and effective severance of the employer-employee relationship, therefore resulting in the loss of the principal’s H-1B status. Because USCIS may consider laid-off H-1B visa holders as still maintaining status with the same employer (i.e. during the economic or work slowdown), a beneficiary may continue to reside in the U.S. and maintain lawful nonimmigrant status in spite of being laid off provided that the employer continues paying the beneficiary the required wage during such nonproductive periods. HR professionals, however, are encouraged to find sound legal advice when dealing with this complex area of the law.

[2] Under the American Competitiveness and Workforce Improvement Act of 1998, if the employee in H-1B status resigns, the U.S. employer cannot require him/her “to pay a penalty for ceasing employment with the employer prior to date agreed to by the nonimmigrant and the employer.”

[3] Some offices and officers have allowed up to 30 days between the individual’s falling out of H-1B status and the filing of the new employer’s H-1B petition; others up to 60 days and even longer periods of time. This practice has created a great deal of confusion among practitioners and HR. Further, the Jan. 21, 2009, USCIS—Vermont Service Center (VSC) liaison minutes (AILA Doc. No. 09012768), stated that “VSC discussed the impact of a revocation of an H-1B petition on H-1B portability. VSC indicated that in order to be eligible to ‘port’ to a new H-1B employer, the new petition must be filed before the old petition is revoked or withdrawn by the old employer. VSC did not state that the H-1B nonimmigrant had to be currently maintaining status with the old employer to be eligible for portability, nor did VSC indicate that it would not exercise discretion allowed under 8 C.F.R. § 214.1(c)(4) in favor of an extension of status.”

[4] The discussion of H-1B status holders qualifying for unemployment often, although not related, brings up the question from HR as to whether once a terminated H-1B status has fallen out of status, he/she is able to qualify for workers’ compensation benefits. The answer seems to be that they are. Out-of-status individuals are eligible for workers’ compensation in 30 states and probably covered in 19 other states.

[5] Under California law employers may have an obligation to ameliorate the impact of a terminated H-1B status holder where there is a reasonable alternative. Employers should consult labor and employment and immigration lawyers on this issue.

[6] Employers acquire certain specific obligations under U.S. immigration law when filing an H-1B petition on behalf of a foreign national. However, additional responsibilities may be acquired under the laws of the state in which the employer operates or where the foreign national employee works, as a flurry of states have enacted immigration laws and state courts, under certain conditions, have deemed H-1B petitions to be employment contracts.

[7] One important issue is that the employer must pay the required wage as of the first day of the beneficiary’s employment. Paying the correct required wage as stated in the LCA from the beginning of beneficiary’s employment could avoid future problems in terms of possible back wage complaints against the employer. DOL follows the 30/60-day rule. That is, the employee in H-1B status must be put on the employer’s payroll and be paid the required wage stated on the LCA by or on the 30th day from the moment the employee entered the United States. However, if the employee in H-1B status has been in the U.S. since the H-1B petition was approved, he/she must be paid the full required wage stated on the LCA by or on the 60th day after the date when the employee became eligible to work for the U.S. employer.

[8] Employers are required to pay the higher of either the actual or prevailing wage. The actual wage is the wage paid to other co-workers in similar positions. The prevailing wage is the average salary paid to workers in the area of intended employment.

[9] Any reduced salary or wage during the validity of the LCA is considered a violation of DOL regulations and can lead to an assessment of back wages and possible fines. The DOL could also seek back wages covering the period from when an H-1B worker was last paid to when USCIS receives a written withdrawal request for the H-1B petition. If the employer waits several months to send the withdrawal request, and does not have other clear proof of the termination of employment, there can be an assessment of back wages.

[10] “Benching” is the term used for “temporarily” laying off an employee or putting the employee in nonproductive status without pay or at a “reduced” pay during the period he/she is not working. The employer, however, is not required to pay if the nonproductive period is due to “conditions unrelated to employment” at the employee’s “voluntary request and convenience” (i.e. caring for a sick relative, maternity leave, etc.) which renders the H-1B status holder employee unable to work. A word of caution, employers should not try to use this provision as a disguise for benching, since it could amount to fraud or misrepresentation.

[11] Penalties for I-9 employment eligibility verification violations can range from $250 to $3,000 just for improper completion of the form. Penalties for technical and substantive, retention, and for not making timely available for inspection the I-9s can range from $100 to $1,100 for each violation. Penalties for knowingly hiring or continuing to employ unauthorized workers fines range from $250 up to $11,000 per violation. If a company shows a pattern of hiring unauthorized foreign workers, the company could also be liable for criminal charges and penalties of as much as $3,000 per worker or employee and/or six months of imprisonment. In this area of the law, ICE has considerable discretion assessing fines. When assessing fines, ICE looks at the size of the company, the seriousness of the violations, good faith efforts, and to past violations, if any.

[12] If the employer does not comply with LCA regulations, DOL will issue a finding that the employer has violated LCA requirements. Examples of such a finding can include “willful” failure to pay the required wage rate or “substantial” failure to post a notice of the LCA filing. For filing an LCA which is found to misrepresent a material fact, civil money penalties can be imposed up to US$1,000 per violation, and debarment from the H-1B program. DOL can impose additional fines up to US $35,000 and five years imprisonment for criminal violations related to LCA practices.

Today the U.S. economy employs a large number of professional foreign workers, perhaps more than at any other time in its history. Given this large number of foreign workers in the U.S., RIFs are more likely to involve the termination of workers holding H-1B nonimmigrant visa status.