In this month’s blog, we will address an employer’s legal obligations when terminating the employment of a Foreign National (FN) employee who holds H-1B status by exploring frequently asked questions and providing insight into the steps employers must take to ensure their businesses are in compliance with H-1B requirements when handling sensitive termination scenarios.
I will be terminating the employment of an employee holding H-1B status. Do I need to give the employee advanced notice or a severance period so that he or she can find other employment?
There is no legal requirement to provide the employee with an advanced warning regarding their termination or provide a severance period. However, an employer must notify the H-1B employee that they have been terminated. This termination should be in writing and records pertaining to the written termination should be retained. All wages and other benefits payable under the underlying Labor Condition Application (LCA) must be fully paid through the end of the H-1B employee’s last date of employment. FNs holding H-1B status are allowed a grace period of up to 60 days after termination to remain in the United States under 8 CFR 214.1(l)(2), and this should provide an opportunity to find a new employer.
Are there any specific actions I need to take when terminating the H-1B employee?
Yes. First, the employer should expressly notify the H-1B employee that his or her employment is being terminated; there should be a written communication between the employer and the employee that states unequivocally that the employment relationship between the two is being terminated. This may seem obvious, but, as described more fully below, documented notice by the employer to an H-1B employee of his or her termination is an important factor in avoiding legal liability.
Second, the United States Citizenship and Immigration Services (USCIS) regulations at 8 CFR 214.2(h)(11)(i)(A) require that employers “immediately” notify the USCIS of any changes in the terms and conditions of employment of an H-1B beneficiary which may affect H-1B eligibility and specifically state that employers shall send a “letter” of explanation to the USCIS when they no longer employ the FN. Employers who are terminating the employment should therefore make sure that the appropriate letter is sent to the USCIS as soon as the FN ceases to be an employee.
Last, USCIS regulations at 8 CFR 214.2(h)(4)(iii)(E) make employers of FNs in H-1B status liable for the “reasonable costs of return transportation” of the FN to his or her last place of foreign residence if the FN’s employment is terminated before the end of his or her H-1B period of stay. This means that employers of FNs in H-1B status whose employment is terminated must offer to pay for the FN’s return abroad upon termination. This offer should be provided in writing so that the employer may maintain a record of this compliance step.
It is critical that an employer completes all three of the steps outlined above. Completing step one, but failing to follow the second and third steps, for example, may result in liabilities to an employer as discussed in more detail below.
What should the letter to USCIS say, and to whom should it be specifically addressed? Is there a fee?
The letter should be addressed to the Director of the USCIS Service Center that approved the H-1B petition for the FN. It should identify the Form I-797 Notice of Action receipt number of the petition (a ten-digit number preceded by NSC, TSC, VSC, or WAC), the name of the FN employee, and the name of the employer. It is not necessary that the letter request the withdrawal of the H-1B petition. There is no fee for submitting such a letter to the USCIS.
The letter to the USCIS to notify the agency that the employer no longer employs the FN employee should be sent by a mail service (such as U.S. Certified Mail, FedEx, or UPS) that provides proof of delivery. A copy of the letter as well as the proof of delivery should be kept in the FN employee’s personnel file.
Will the USCIS acknowledge or issue a receipt for the letter?
No. Since no fee is paid, the USCIS will not acknowledge or issue a receipt for the letter. The agency should issue a formal revocation of the petition some months later, however.
How should I make the offer of return transportation overseas? Do I need to provide proof of this offer to the USCIS?
It is advisable that the offer of return transportation be made in writing and the FN should confirm receipt of the offer by signing an acknowledgement. The offer should also allow the FN to indicate whether the offer is accepted or declined. Copies of the written offer and the signed acknowledgement should be kept in the employee’s personnel file but need not be sent to the USCIS. If the employer purchases a transportation ticket for the FN, copies of the ticket, itinerary, and proof of payment should also be retained in the employee’s personnel file.
Can you provide more clarity on what the offer of return transportation should consist of?
Yes. Please note the following: (1) The employer need only offer to pay for the cost of the FN employee’s transportation. There is no obligation for an employer to pay for the cost of the transportation of the employee’s spouse and children or of his or her personal effects. (2) The “reasonable” cost of such transportation is generally accepted to be the cost of a one-way coach class air ticket, although this has not been specifically endorsed by the USCIS. (3) The transportation should be to the FN’s last residence overseas and not his or her country of citizenship. Thus, if a Pakistani national employee was living in Canada before entering the United States, only the cost of transportation to Canada, and not Pakistan, need be offered.
The USCIS has indicated that it views the fulfillment of the cost of return transportation requirement as a matter of private contract between the employer and the terminated FN employee, and that it will not police the terms of arrangements entered into by the two parties. Employers should therefore allow themselves latitude to impose terms such as placing a time limit on the acceptance of the offer by the FN and on his or her travel, requiring that travel arrangements be made through a particular agency or travel department, or requiring the FN to provide proof of all costs incurred if he or she made the relevant travel arrangements. Employers should be mindful, however, that the USCIS’ regulations expressly invite terminated H-1B FNs to file a complaint if they believe that the return transportation requirement has not been complied with.
It is important to note that this obligation is not triggered when an H-1B employee voluntarily resigns before the end of their H-1B period of stay or when the employment ends because the worker’s period of authorized stay in H-1B status expires.
Are there any consequences for the employer if these steps are not followed?
Yes. If an employer does not complete all the actions described above, it is possible that the Department of Labor (DOL), which also has jurisdiction over the employment of FNs in H-1B status, may determine that a “bona fide termination” of the employment relationship between the employer and H-1B employee has not occurred. Such a bona fide termination is necessary to relieve an employer from having to pay the H-1B FN the wage indicated in the underlying LCA. If a bona fide termination has not occurred, the employer will continue to be liable for the payment of this wage, even if the employee has left and is no longer providing services. The authority for this is 20 CFR 655.731(c)(7), which specifies that an H-1B employee’s wages must be paid even if he or she is in “nonproductive” status. The DOL has on a number of occasions assessed back wage and other penalties on employers that did not effect the requisite bona fide termination. In the leading case on this issue, Amtel Group of Fla., Inc. v. Yongmahapakorn, ARB No. 04-087, ALJ No. 2004-LCA-0006 (ARB Sept. 29, 2006), which involved a complaint filed against an employer by a terminated H-1B employee, the Administrative Review Board (ARB) of the DOL held that an employer must fulfill three obligations to accomplish a bona fide termination of the employment relationship under 20 CFR 655.731(c)(7)(ii). First, the employer must explicitly terminate the employment relationship with the H-1B worker. Second, the employer must notify USCIS of the termination. Third, the employer must offer the H-1B FN the reasonable cost of return transportation overseas. The ARB in Amtel held that an employer can be obligated to pay an H-1B worker back wages if it explicitly terminated his or her employment but failed to notify USCIS of the termination and/or offer to pay for the employee’s cost of return transportation.
It is therefore crucial for an employer who terminates the employment of an H-1B employee to complete the three steps above, including, most importantly, the notification to the USCIS of the employee’s termination, and maintain documentary evidence of the completion of these steps. Not doing so will expose the employer to liability for a back wage assessment, plus interest, for a period during which the employee was no longer providing services and was considered to be terminated by the employer.
In addition to a back wage assessment, the DOL may also impose civil monetary penalties on the employer up to $1,000 per violation and up to $5,000 per violation if the DOL finds a “willful” failure by the employer to comply with the H-1B regulations, a “willful” misrepresentation of a material fact on the LCA, or discrimination against an employee.
In addition to notifying the USCIS of the H-1B employee’s termination, should I also withdraw the Labor Condition Application (LCA) associated with the approved H-1B petition for the worker with the DOL?
This is not a strict legal requirement to complete a bona fide termination and none of the ARB cases discussing bona fide terminations in the H-1B context mention the withdrawal of the LCA as a necessary element in demonstrating a bona fide termination.
However, it is still considered a best practice and prudent for employers to withdraw an LCA to make the documentation of a termination that much more clear and cut off any potential back pay liability.
Do the bona fide termination requirements apply to any other nonimmigrant status other than H-1B?
The employment of Australian nationals in Specialty Occupation E-3 status is also subject to the bona fide termination requirement; employers should therefore take the steps described above when terminating an E-3 worker. Please note, however, that the requirement of the offer of reasonable return transportation does not apply to an E-3 employee, per guidance recently issued by the USCIS.
When terminating a Chilean or Singaporean national who holds H-1B1 status, an employer should make sure that all three steps in the bona fide termination process are followed.