Layoff or Termination of H-1B Employees

This update explores the central issues involved in the termination of H-1B employees, including an H-1B layoff. Terminations, whether for performance or for lack of work, present special challenges to H-1B employers and to the terminated H-1B worker. These challenges, including employer obligations to terminated or laid off H-1B employees, are discussed below.

This update explores the central issues involved in the termination of H-1B employees, including an H-1B layoff. Terminations, whether for performance or for lack of work, present special challenges to H-1B employers and to the terminated H-1B worker. These challenges, including employer obligations to terminated or laid-off H-1B employees, are discussed below.

H-1B Employer Obligations

The three main components of a “bona fide” termination of H-1B employees under the rules governing H-1B employment include 1) notice to the H-1B employee, 2) notice to United States Citizenship and Immigration Services (“USCIS”) that the H-1B employment has been terminated, and 3) the employer’s payment to the H-1B employee of reasonable costs of return transportation abroad. Employers should maintain a clear record of each element met.

As you will see from the discussion below, USCIS does not have an enforcement mechanism for the requirements, but the Department of Labor (DOL) has imposed financial obligations for back wages and return transportation in certain cases brought before it regarding whether the elements of a bona fide termination have been met. Interestingly, a recent case demonstrates that employers may be able to avoid liability up front by crafting an appropriate release agreement, though this is a very new area and raises some risks for an employer.

Notice of Termination to the H-1B Employee

• Notice to the H-1B employee should be clear, as some employees have argued they thought they were put on temporary leave. Of course, as discussed below, the regulations do not allow H-1B employers to “bench” their H-1B employees, but this has not prevented this misunderstanding from arising during litigation before the DOL.
• Employers should consider informing terminated employees of the employer’s obligation to notify USCIS of the termination and of the eventual revocation of the employee’s H-1B petition that will result.
• The eventual revocation of the H-1B petition may cause a dilemma for an H-1B employee, who may have remained in the United States to seek other employment. The regulations provide for a grace period of up to 60 days for certain H-1B workers who are terminated, so long as they have more than 60 days remaining on their I-94/H-1B approval period, and other requirements are met.
• Employees should be aware that USCIS and/or the Department of Homeland Security (DHS) of which it is a part may shorten the grace period at its discretion.

Notice of Termination of H-1B to USCIS

• Regulations require an H-1B employer to notify USCIS “immediately” of “any material changes in the terms and conditions of employment” affecting an H-1B employee. USCIS policy is that a termination is such a “material change.” Employers may satisfy this notification obligation by sending a letter explaining the termination to the USCIS office that approved the petition.
• After receipt of a letter from an H-1B employer indicating that the H-1B employee is no longer employed, USCIS is supposed to respond with a notice revoking that employee’s H-1B petition and confirming receipt of the request. In some cases, USCIS has taken a year to respond to a withdrawal request, thus employers and employees may not know when USCIS has finalized withdrawal of an H-1B.

Liability for Reasonable Costs of Return Transportation

• If an employer lays off or otherwise terminates an H-1B employee before the end of that employee’s period of authorized stay, the H-1B employer needs to provide reasonable costs of transportation back to the H-1B employee’s last place of foreign residence, although this element is subject to some interpretation, as discussed below.
• In general, H-1B employers are advised to offer the cost of return transportation to terminated H-1B employees given that not doing so can open an employer to litigation before the Department of Labor (DOL). The employer bears the burden of demonstrating whether an exception to the requirement of paying return costs applies.
• Immigration statutes and regulations suggest that the employer’s liability is limited to the reasonable costs of physically returning the H-1B employee abroad and does not extend to the cost of relocating family members or property.
• The statute does not impose an obligation to provide the payment of return transportation costs to an employee who elects not to depart the United States, and the DOL has found that the intent of the employee to remain in the United States can result the release of an employer from liability for transportation costs. However, this determination is usually made in the course of what can be expensive litigation and failure to satisfy this obligation could result in the employer’s continued obligation to pay H-1B wages.
• DOL case law indicates that if the employer does not provide reasonable costs of return transportation, a bona fide termination may still occur once a second employer’s H-1B petition on behalf of a terminated H-1B employee has been approved. These cases hold that the approval of the second employer’s petition relieves the first employer of liability for wages and the requirement to pay for transportation home. Employers should note, however, that DOL may hold them liable for the employee’s wages during the period (sometimes several months) that the second employer’s H-1B petition was pending.
• To avoid continuing wage liability, employers are advised to provide terminated H-1B employees with a sum approximating the employee’s reasonable return costs and obtain a written release from the employee. Alternatively, the employer may be able to satisfy the return transportation requirement by offering to provide a ticket for the employee within a reasonable period after the date of termination through the employer’s travel agent. This approach would provide evidence that the employer made a good-faith effort to satisfy its obligation, while avoiding a windfall to an employee who elects to remain in the United States. At a minimum, employers should make a written offer to pay a terminated employee’s reasonable return costs and should provide the employee with a reasonable deadline to accept (e.g., within 60 days of the effective date of termination). Finally, as discussed further below, the employer may be able to contract for release from the requirement under certain circumstances.

Department of Labor Implications

• Employers should be aware that DOL regulations prohibit the “benching” of H-1B workers—that is, underpaying or not paying an employee who is not engaged on a matter that will produce revenue for the employer. These regulations impose a requirement that employees in nonproductive status or otherwise temporarily laid off “due to the decision of the employer” continue to receive their normal wages. This requirement ceases once there is a “bona fide termination” of employment. Because of this requirement, employers should never suspend an H-1B employee without pay, even if their progressive discipline system provides for such a sanction.
• If an employer fails to fulfill the requirements of a bona fide termination of H-1B employees, the employer may be found liable by the DOL for back wages through the date on which the employer’s H-1B approval expires.
• The DOL’s Administrative Review Board (ARB) has ruled that a bona fide termination of H-1B employment can occur and end back wage liability for an employer that proves it (1) expressly notified an H-1B employee that it terminated the H-1B employment, and (2) the H-1B employee subsequently secures USCIS’s approval for a “change of employer” or “new employer” H-1B petition. Notwithstanding this ruling, H-1B employers should continue to abide by USCIS notification requirements and offer return transportation expenses. Even if an employer is certain that this rule applies, notice to USCIS is recommended to document the employer’s bona fide termination.
• While USCIS’s position is that an H-1B petition is valid until revoked so that a terminated H-1B employee whose petition has not been revoked could later return to work for the same employer without the filing of a new H-1B petition, the DOL takes the position that failing to file a new petition means that no “bona fide termination” occurred, such that the employer may still be obligated to pay the required wage for the entire period between the date of purported “termination” and the date of “re-hire.”
• A summer 2022 decision from the ARB determined that employer liability related to H-1B employment may be limited by a valid release agreement. Thus, one element for employers and employees to consider in enter an H-1B employment arrangement is what type of claims each party may be willing to waive up front. Note however that this is a new area in the field and careful analysis of a potential release agreement as compared to statutory and regulatory requirements at the time of potential execution of the agreement is essential.

Consequences for the H-1B Employee

Grace Period for H-1B Workers Following Layoff or Other Termination

• H-1B workers have a potential grace period of up to 60 consecutive days – or until the expiration date of their current I-94, whichever period is shorter – following the loss of employment, during which they can remain lawfully in the United States and seek sponsorship by a new employer.
• Under the plain language of the rule, H-1B workers who voluntarily leave their H-1B employer may also take advantage of the 60-day grace period provisions.
• A worker may use the grace period only once for each validity period. For instance, if an H-1B worker loses their job and then uses the grace period to transfer to another H-1B employer, they may still be eligible for another 60-day grace period should they lose that job. Unused days in the first grace period cannot be carried over into a subsequent grace period.
• Terminated H-1B workers should be aware that employment is not permitted during the grace period. An H-1B worker may, however, work for a new employer as soon as a petition has been filed under the portability provisions, as discussed below.
• H-1B workers should also be aware that DHS/USCIS has the discretion to deny or shorten a grace period if there are violations of status such as unauthorized employment, fraud, or criminal convictions.
• Generally, USCIS policy continues to be that periods during which an H-1B employee receives severance payments or remains on the employer’s payroll after termination without reporting for work are not periods of valid status for an H-1B nonimmigrant. However, some pre-termination “garden leave”/noncompete periods may be permissible.

Potential Actions in Case of Employer Noncompliance

• If a terminated H-1B employee believes that an employer is not complying with the obligation to provide return transportation costs, he or she may file a complaint with USCIS. USCIS policy regarding enforcement of this obligation, however, is unclear, and USCIS lacks statutory authority and a regulatory mechanism to enforce this obligation.
• A terminated employee may also seek to enforce the employer’s obligation in state court; however, it is unclear whether such a suit could succeed.
• A terminated H-1B employee who believes his or her employer did not properly comply with the wage payment obligation until bona fide termination may file a complaint with the Department of Labor’s Wage and Hour Division.

Taking Advantage of the H-1B Portability Rules

• The H-1B portability rules allow H-1B workers to begin work for a new H-1B employer as soon as the new employer files with USCIS a non-frivolous petition to employ the worker in H-1B status, provided that certain conditions are met. One condition is that the beneficiary of the petition hold valid status at the time of filing.
• The 60-day grace period provides H-1B workers with a window of opportunity to take advantage of the portability rules, as USCIS considers terminated employees to be maintaining status during the 60-day period for the purposes of filing for a change or extension of status.

Conclusion

There are many issues to consider regarding the termination of H-1B employees, including an H-1B layoff. This update is a general treatment of these issues and challenges. Each individual termination will present unique circumstances that may require more detailed analysis. As individual terminations are carried out, both employers and employees should keep these general issues and challenges in mind and should consult with experienced immigration counsel for an individual determination of their options.

The material contained in this article does not constitute direct legal advice and is for informational purposes only.  An attorney-client relationship is not presumed or intended by receipt or review of this presentation.  The information provided should never replace informed counsel when specific immigration-related guidance is needed.

© 2022 Klasko Immigration Law Partners, LLP.  All rights reserved. Information may not be reproduced, displayed, modified, or distributed without the express prior written permission of Klasko Immigration Law Partners, LLP.  For permission, contact info@klaskolaw.com.

This article originally appeared on www.klaskolaw.com on July 8, 2008. It has been updated to reflect current immigration policy by Myriam Jaidi.