Exercise Care When Terminating Employee Who Holds H-1B Status
If an employer doesn’t follow certain requirements when it terminates an employee holding an H-1B visa, then the employer could be surprised to learn that employee wasn’t properly terminated, and the obligation to pay that employee wages and benefits continues despite the attempted termination. As background, Department of Labor (DOL) regulations at 20 CFR §655.731 provide guidance regarding wage obligations relating to H-1B ("specialty occupation") employees. Employers are required to pay to H-1B visa holders the higher of the prevailing wage for the occupation, or the actual wage for the position, as confirmed in the Labor Condition Application (LCA) that the employer must file during the H-1B petition process.
This wage obligation even applies to H-1B nonimmigrants who have been "benched" or are no longer actively working for the employer. When an employer terminates an H-1B employee prior to the expiration date of the employee's H-1B status, DOL considers this action to be a form of benching the employee UNLESS/UNTIL the employer has taken the following steps to effectuate a "bona fide" termination:
STEP 1 - The employer must notify the USCIS that the relationship has been terminated (USCIS will then cancel the petition); and
STEP 2 - The employer must provide the employee with offer of payment for return transportation abroad [for these purposes, the term "abroad" is defined in 8 CFR 214.2(h)(4)(iii)(E) as the foreign national's last place of foreign residence].
Although not required by regulation, it is also advisable for the employer to withdraw the underlying Labor Condition Application (LCA), as long as the terminated employee is the only employee who has been covered by that particular LCA.
Failure to take Steps 1 and 2 above may result in DOL's requiring the employer to pay back wages commencing on the date of attempted dismissal and continuing until the date upon which DOL determines that the termination has been perfected.
Note that these regulations do not apply to an H-1B employee who has voluntarily terminated his/her employment prior to the H-1B expiration date. Termination by the employer launches these stringent requirements. In reality, many terminated H-1B employees are able fairly quickly to secure new employment and to transfer their H-1B sponsorship to the new employer; however, these two simple steps should shield the original H-1B sponsor from potential back-pay obligations.