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FEATURE ARTICLE Are you Benching Employees in this Tough Economy? Violating your LCA Could Cost Much More than a Return Ticket Home! by Katie Orton-Jacob Over the recent weeks, our office has received countless phone calls from employers wanting advice on how to handle employees that cannot be placed on client sites due to the struggling economy. Similarly, we receive regular calls from frustrated employees that have been placed on “unpaid leaves of absence” because their employer cannot find work for them. Not uncommon in a down economy, many employers mistakenly believe that placing an employee on an unpaid leave is not “benching” and will relieve them of their duty to pay full salary thereby allowing the company to save money. The issue of benching and LCA violations recently caught attention in the Bureau of Labor Certification Appeals (“BALCA”) case of Huang v. Ultimo Software Solutions, Inc. See Case No. 2008-LCA-00011 (published Dec. 17, 2008) available at www.oalj.dol.gov/Decisions. In this case, Mr. Huang a relatively new employee of the company, was told that his resume would be marketed to clients for placement on IT project work and that he would receive a salary of $60,000 per year plus benefits. Mr. Huang interviewed with clients and competed for contracts but he was never hired. The company suggested that Mr. Huang should return to China for a period of six (6) months and they would bring him back when market conditions changed and try again. Mr. Huang did not want to return to China and instead moved to Houston to look for work. Despite the move, Mr. Huang was still “benched” and never placed on a contract. He was also never paid, despite the fact that he had been an employee of the company for over three (3) months. Mr. Huang complained to the Department of Labor and an investigation of the company began. The company subsequently fired Mr. Huang.
In addition to addressing possible claims of retaliatory firing, the Department of Labor looked into the company’s payroll records to determine whether the company committed any LCA violations. The employer’s LCA submitted with Mr. Huang’s H-1B Petition stated that he would be paid a salary of $60,000. In actual fact, Mr. Huang received a salary of zero dollars. When questioned, the company provided a copy of their employment contract which included an impermissible benching clause:
“We will pay you at the start $60k per annum subject to being on a project … If you are on the bench between projects, we will maintain your pay at the regular rate for two weeks and at half pay for another two weeks. This should encourage you to try to do your best to be on a project.”
The Department of Labor ultimately determined that the employer had committed multiple LCA violation including failure to pay the stated salary, impermissible benching, failure to maintain LCA records upon moving employee outside of a commutable distance, failure to pay benefits similar to US workers, and falsifying documents. For the LCA and “whistleblower” violations, BALCA ordered the employer to pay “unpaid salary for the full term of the H-1B visa … at the rate specified on Mr. Huang’s LCA [$60,000] … plus compound interest.” The penalty came to $150,000 plus Mr. Huang received payments and interest for health insurance benefits owed to him and litigation costs.
As contract work becomes harder and harder to find during these tough times, employers must protect themselves, even if it means letting go of a valuable employee. Pursuant to the H-1B regulations, employers are required to pay the H-1B worker’s full salary throughout the duration of employment, including non-productive time. The only way to ensure that you will not be subject to fines and penalties like in the Huang case is to terminate the employment and notify USCIS. Upon termination of the employee, the employer is liable for the reasonable costs of return transportation to the alien’s home country unless refused by the alien.
Employers must begin paying employee’s salary as stated on the LCA and H-1B Petition as soon as the employee presents himself/herself for employment. Or, if the employee has not yet presented for employment, the employer must being paying within 30 days of the employee’s entry to the United States or within 60 days of filing the H-1B petition, in the case where an employee is seeking a change of visa status to work for your company. If the employer is unable to employ the H-1B worker at full salary (once the payment period has begun) penalties and back wages could be assessed by the DOL. DOL will calculate the amount of back wages due by taking the salary specified on the LCA and H-1B, dividing in into monthly salary payments, and then multiplying the monthly figure by the number of months that the employee should have been paid (from start of payment obligation to termination or date of the DOL audit, if still listed as an active employee). On top of that amount, employers can be liable for interest, unpaid benefits, unpaid retirement contributions, unpaid reimbursable expenses, and punitive damages for “pain and suffering” in order to make the alien whole.
Why expose your company’s assets to a heavy-handed judgment in the hopes that a contract will come along? In light of Ultimo Software, it is easy to see that a plane ticket home is much cheaper than the alternative… Or, if you are unwilling to part with a valuable employee, please contact our office to learn about a number of strategies that can be used to reduce your payroll liability under the LCA and H-1B regulations.
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