January 20, 2010

Immigration obligations in times of economic downturn: Consequences of workforce changes involving foreign nationals

Kate Kalmykov

The year 2009 saw the largest bailout passed in the history of the United States, massive layoffs, drops in the stock market, a credit crisis, and unprecedented unemployment rates. As a result, in order to remain competitive, or even just to stay in business, employers are faced with difficult decisions regarding terminations, pay cuts, and hiring freezes. Managing the legal aspects of downsizing or corporate restructuring is never easy. For companies that employ foreign nationals, it is even more complicated as there are significant immigration-related consequences that must be addressed when downsizing. Termination of foreign nationals may impact an employer's obligations under the regulations of both the U.S. Citizenship and Immigration Services (USCIS) and the Department of Labor (DOL).

In situations where a foreign national is working pursuant to an employer's sponsorship, the employer has an affirmative responsibility to notify USCIS if the foreign national is terminated. Certain visas require the employer to provide the foreign national with return transportation and may subject employers to a variety of wage and benefit obligations governed by the DOL. If foreign national employees are terminated and the proper steps are not taken by the employer, the employer may be liable for back pay to the foreign national, and may be subject to steep penalties for noncompliance.

Even if companies are not terminating the foreign national, there are still significant immigration issues to address. For example, changes in the corporate structure may have implications for the validity of the foreign national's nonimmigrant status. Moreover, terminations in other sectors of the employer's workforce, or even in the industry more generally, can jeopardize an employer's ability to petition for permanent resident status on behalf of foreign nationals.

The economic downturn has brought greater government scrutiny to employment-based immigration. Employers must protect themselves and their employees from common problems associated with terminations and corporate downsizing. Employers who fail to take the proper measures may be subject to lawsuits by terminated employees or to investigations by both the USCIS and DOL. This article will discuss the legal obligations that a company must take to reduce its exposure to this liability. In these uncertain times, diligent follow-up by company human resource representatives or those in the immigration function will be essential to ensure a smooth transition.

Termination of Nonimmigrants
The new restrictions imposed on the recipients of the Troubled Asset Relief Program bailout regarding the hiring of foreign workers have placed national focus on the H-1B nonimmigrant work visa. The most common type of work visa, the H-1B, is available to employers that wish to temporarily employ foreign workers in a specialty occupation for which at least a bachelor's degree or its equivalent is required. Employers that sponsor an H-1B worker are required to make an attestation to the DOL that they will pay the worker for the duration of said status. This attestation is made in what is known as a Labor Condition Application (LCA) and requires the employer to agree to pay the H-1B employee a salary that is equal to or exceeds the prevailing wage for the listed occupation in the geographical area of intended employment.

With many employers facing hard economic times, they are often tempted to either bench employees or reduce their compensation by a certain percentage. Both of these scenarios are problematic in the immigration context. While benching may be common practice in some industries such as computer consulting, where H-1B employees are benched between assignments, it is a violation of immigration regulations. The LCA attestation requires the employer to commit to compensating the H-1B worker even if he is in nonproductive status. The employer's obligation to begin payment commences no later than 60 days after the H-1B petition for change of status is effective (if a change or extension of status was requested) or 30 days after the H-1B nonimmigrant enters the United States (if this is a new petition). Likewise, employers that are tempted to reduce salaries as a response to the economic downturn must ensure that they continue to pay their H-1B workers at least the minimum salary stated on the LCA. Employers who violate these statutory requirements are liable for back pay in addition to penalties for noncompliance.

The H-1B wage payment obligation ends only after there has been a bona fide termination of employment. Although DOL previously accepted written notice to the employee as satisfying this requirement, a recent decision by the agency's Administrative Review Board held that an employer was obligated to continue to pay the salary until the employer withdrew both the LCA with the DOL and the H-1B petition with the USCIS. Employers who do not comply with these requirements are at risk of having to pay the employee's salary through the entire validity of the H-1B status. In addition, H-1B employers are required to maintain a public access file as well as the LCA for inspection until one year beyond the end of the period of employment specified on the LCA form. Payroll records must be maintained for at least three years from the date of creation of the record. Penalties will quickly add up if DOL determines that an employer has not complied with these requirements.

Federal regulations also require an employer that terminates an H-1B worker before the end of his or her authorized stay to provide the reasonable costs of return transportation to the employee's last country of residence. This requirement does not apply to the H-1B employee's dependents nor does it apply if the employee terminates the employment relationship.

In addition to the H-1B visa, there are a number of other nonimmigrant work visas that employers may use to bring workers to the United States. These visas are attractive because, unlike the H-1B visa, there is no limit on the number of visas issued annually. Moreover, other nonimmigrant work visas do not require employers to file an LCA with the DOL, meet a prevailing wage requirement, or make attestations to the DOL regarding working conditions, wages, or employment terms.

Employers that sponsor workers using the O-1 classification for extraordinary ability aliens are required to notify the USCIS of any changes in the terms and conditions of employment. Additionally, the O-1 petitioner is jointly and severally liable for the reasonable cost of return transportation to the employee's last country of residence. There is a similar requirement for employers of P visa athletes, artists, or entertainers to provide the costs of return transportation to the employee upon termination of the employment. By contrast, employers that have sponsored employees for the L-1 intracompany transferee visa or the TN classification for Mexican or Canadian professionals under NAFTA are not required to pay the costs of the employee's return transportation or to notify USCIS of the termination of employment.

Pending Green Card Applications
Hiring personnel should be aware that there are no grace periods provided for terminated employment-based nonimmigrants to remain in the United States. Those employers that seek to hire employees who have remained in the United States after the termination of their employment should work with immigration counsel to ensure that they properly file applications on their employees' behalf.

Additionally, where an employing organization changes its structure as a result of a merger, acquisition, or corporate restructuring, new petitions may need to be filed on behalf of the organization's workforce. This requirement will hinge on whether the terms and conditions of employment under the new corporate structure differ from the original position for which the nonimmigrant was hired and whether the organization has succeeded to all of the interests and obligations of the original employer.

Termination of employment can have serious repercussions on an employee's ability to obtain permanent residency if the terminating employer was the sponsor for such benefit. An essential point in this context must be clarified: employer-sponsored applications for permanent residency are for offers of prospective employment. Therefore, the employee must intend to work with the employer upon the approval of the final step of the permanent residency application.

Most companies seeking to obtain permanent residence for their foreign national employees must obtain a labor certification known as PERM from the DOL as a first step in the residency process. As a result of PERM's rigid requirements, even those employers that do not terminate workers may find that they have to address USCIS and DOL concerns. This is because sponsoring PERM labor certifications requires employers to establish that they have adequately tested the labor market and have not identified a U.S. worker qualified for the position. Employers also must indicate whether, in the last six months, they have had layoffs at any worksite, and in a same or similar occupation. If so, the employer must indicate whether they have notified laid-off workers of this job opportunity. The employer's obligations become more convoluted in cases of businesses that have had stealth layoffs or reorganized. Interestingly, there is no clear guidance on how an employer should notify former employees of the position, and it remains to be seen how stringent the DOL will be in regulating this requirement.

Employers that file PERM applications where layoffs have occurred within the area of intended employment also can expect greater scrutiny of their recruitment efforts by the DOL. For example, at a June 2009 meeting of the American Immigration Lawyers Association, representatives from the DOL noted that an application for a financial analyst position in New York City would be heavily scrutinized as an example of a particular occupation and location where there might be qualified U.S. workers available due to recent financial industry layoffs. Note that this is irrespective of whether or not the employer has had layoffs at its organization. If the DOL believes that the employer's recruitment efforts were insufficient, they may audit the employer in order to perform an extensive review of the recruitment. If they deem the efforts insufficient and not taken in good faith, they can impose supervised recruitment for all future PERM filings. Supervised recruitment requires the employer to receive advance approval from the DOL for all recruitment efforts to ensure that U.S. workers are fully considered for available positions.

Since PERM applications are specific both to the employer and to the position for which they are sought, they cannot be transferred to another employer or even to another position with the same employer. They are invalid, with several caveats. If the employer intends to rehire the worker once its business rebounds from the economic downturn, it may be possible to salvage the application, depending on how far along in the process it has proceeded.

If the employee has received PERM certification, the outcome of the employee's ability to obtain a green card hinges on when the termination of employment occurs. Generally, after a PERM is certified, an employer files an I-140, Immigrant Petition for Alien Worker, on behalf of the employee. The immigrant petition establishes that the employer can in fact pay the employee the proferred wage and that the employee has the qualifications listed in the PERM application. The third step of the process is the actual permanent residency application, known as the I-485, Application for Adjustment of Status. Assuming that a worker only has an approved I-140 immigrant petition and no pending I-485 permanent residency application, the I-140 would become null and void after a layoff. However, if the sponsoring employer has the intention of rehiring the worker after the approval of the I-485 permanent residency application, the I-140 immigrant petition remains valid because green-card sponsorship is for prospective employment.

However, there is some good news for the worker if the employer has no intention to rehire him or her after the approval of the PERM application. If the worker has to restart the permanent residency process with a new employer, the worker can retain the original priority date from the original PERM case or I-140 filing for the new permanent residency application. This scenario is covered by the American Competitiveness and Workforce Act, which permits an employee to "port" to another employer. Portability allows employees with pending permanent residency applications to switch employers without having to refile the petition from the beginning, if they can demonstrate that the new position is the same or similar to the original position. In addition, the I-140 Immigrant Petition filed by the original employer with the USCIS must have been approved and the employee's I-485 permanent residency application must have been pending for more than 180 days. During a recession, finding work in one's occupation may be especially difficult. However, if an employee accepts employment in a field not closely related to the field that served as the basis for the permanent residency application, portability may not be available.

In cases of corporate reorganization, companies that are deemed to be successors in interest to the original PERM application do not need to file a new application on behalf of the employee. Rather, they may file an immigrant petition with the USCIS showing that they have assumed the rights, duties, and obligations of the original employer and that they will continue to operate the same type of business and offer the employee the same position. I-140 immigrant petitions filed on behalf of multinational managers or executives in particular will need to be reviewed on a case-by-case basis, as changes in the corporate relationship can impact the applicant's ability to obtain his or her green card.

As mentioned above, certain individuals are not subject to PERM. In fact, certain aliens can sponsor themselves for residency in the extraordinary ability or national interest waiver categories. Although these aliens will not have their permanent residency applications impacted by the loss of a specific job, they will still need to demonstrate their intent and likelihood of continuing to work in their field of expertise upon approval of the permanent residency application.

Employer Compliance Considerations
Companies reducing their workforce also should note that federal regulations relating to the I-9, Employment Eligibility Verification Form, require employers to retain I-9s for inactive employees for three years from the date of hire or one year from the date of termination, whichever is later. I-9 forms that no longer need to be retained should be discarded to minimize liability. Employers that rehire former employees within three years must reverify their work eligibility if the employee is no longer authorized to work on the same basis as indicated on the original I-9 form.

In the context of a merger or acquisition, the company should carefully review the I-9 documentation of the acquired foreign nationals to ensure that they are in valid status and authorized to work. Failure to comply with I-9 requirements may result in penalties. It is advisable prior to beginning a corporate restructuring to have counsel examine the I-9 compliance of the entity by conducting an internal audit. In these instances, it is prudent to have I-9 representations and warranties required at the closing.

As many companies try to rebound from this economic crisis, they must make difficult business decisions on a daily basis. Layoffs, terminations, and corporate restructuring can result in a variety of thorny issues. As every situation is unique, companies should work with competent immigration counsel to ensure that they are in compliance with immigration regulations governing changes in the employment relationship.

Kate Kalmykov

Associate, Klasko, Rulon, Stock & Seltzer, LLP

Kalmykov is an associate in the New York City office of Klasko, Rulon, Stock & Seltzer, LLP, where she focuses her practice on business immigration and compliance. Her e-mail is kkalmykov@klaskolaw.com.