H-1B Compliance Obligations of the Primary and Secondary Employers under the Common-law definition of Employment Relationship
DHS has sent final rule for publication titled Strengthening the H-1B Nonimmigrant Visa Classification Program.
It is a limited version of the IFR dealing only with the employer employee relationship.
· The DHS is “changing the definition of the employer-employee relationship.
· Replacing it with common- law definition of employer-employee relationship.
· Under third-party placements, the third-party entity will also be considered employer (secondary employer).
· Hence, the third-party entity will also be required to file the petitions with USCIS.
· Rule will go into effect 180 days after its publication.
· Effort to restore the 2010 11 factor employer employee relationship test which has recently been rescinded.
· In conjunction with the DHS’s final rule, DOL has also issued clarification that LCA from the third-party entities will be required where H-1b worker will be placed at the third-party client site. DOL is also interpreting its regulations to require third party entitles to file LCA as USCIS will require the common-law “secondary employers” to file petitions as well. As petitions cannot be filed without LCA, DOL will require that in case of third-party placements, third party entity shall file an LCA as well.
When a staffing or outsourcing company (primary employer) places an H-1B worker with another common-law employer (secondary employer), the INA and its regulations require both the primary employer and the secondary employer to file an LCA with OFLC as well as file a petition with USCIS. The employers (primary and secondary) might have distinct compliance obligations depending on the details of the LCAs filed and the wages and working conditions that each employer offers its similarly employed non-H-1B workers, this guidance explains how the compliance principles will apply in practice.
Responsibility for compliance with the H-1B provisions lies with the employer. DHS under its final rule- Strengthening the H-1B Nonimmigrant Visa Classification Program has changed the definition of “employer-employee relationship". Hence, the term “employer” in this context will refer to an employer that has a common-law employment relationship with the H-1B worker.
Hence, the Primary Employer on whose payroll the H-1b worker is and the End Client – Secondary Employer, where the H-1b worker is placed both will be required to file separate petitions and LCA’s. In essence, at any given point, one beneficiary will be employed under multiple H-1b petitions and each primary and secondary employer will be responsible for compliance with their own LCAs and the related H-1B program requirements.
Below is the summary of Compliance responsibilities of Common Law Employers:
a) Actual wage obligations for a primary and secondary employer may be different. The actual wage is the wage rate paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question. If the primary employer’s actual wage for the position is $70,000 and the Secondary employer’s actual wage for the same position is $74,000 then as long as the H-1b worker receives at least $74,000 in wages, both the employers will be in compliance. If the H-1b worker only receives $70,000 then the secondary employer will be in violation of obligations to pay the actual wage. That the H-1B worker appears on the primary employer’s payroll is irrelevant to the secondary employer’s actual wage obligation since, as discussed above, the secondary employer is also considered an “employer” under the H-1B statute and regulations.
b) Prevailing Wages: Primary and Secondary employers employing one H-1B worker may file separate LCAs using different prevailing wage sources and may have different prevailing wage obligations relating to the same H-1B worker. If both employers accurately identify the occupational classification and area of intended employment on the LCA and petition but provide different legitimate prevailing wage sources, each employer will be responsible for complying with the prevailing wage obligation pursuant to its own LCA.
c) Benefits and eligibility: The primary and secondary employer must offer the benefits H-1B workers on the same basis, and in accordance with the same criteria, as the employer offers to its U.S. workers. When two employers employ an H-1B worker, their benefit obligations will differ depending on the benefits that each employer offers its respective similarly employed employees.
For example- A primary and secondary employer employs an H-1B worker. The secondary employer offers two weeks of paid vacation to its U.S. workers, while the primary employer does not offer any paid vacation to its workers. The secondary employer must offer the H-1B worker two weeks of paid vacation, regardless of whether the H-1B worker is usually on the payroll of the primary employer.
d) Recordkeeping Obligations and Public Access File: Both – Primary and Secondary employers must maintain all required records and maintain a Public Access File for public examination as required by 20 C.F.R. § 655.760. An employer is also responsible for obtaining and maintaining records required by the H-1B program even if it did not create the records.
e) Bona Fide Termination: Primary and Secondary employers will have their separate and individual obligations to effectuate a bona fide termination with respect to the H-1B worker. Termination of employment by one employer (primary or secondary) will have no effect on the status of the petition or employment relationship with the other employer. However, outbound transportation has to be paid only once. Hence, if one employer pays for it after termination, then both employers can take credit for it. If the H-1b worker continues to be employed by the primary employer after termination from the secondary employer, the secondary employer need not pay for transportation costs. If both employers terminate the employee at the same time, both employers may send one joint notification to DHS terminating both petitions.
f) Notification Requirements: Notice of posting will have to posted by both the primary and secondary employer. The notification can be made jointly or separately (either hard copy or electronic). Regardless of whether posting is made jointly or individually, both employers must maintain a record of the notification in the public access file as required by 20 C.F.R. §§ 655.734(c) and 655.760(c).
