Downsizing and Foreign Nationals, Quirky Question # 76

Quirky Question # 76:

I read with interest your analysis of alternatives to layoffs [Quirky Question # 71].  We have a slightly different issue.  Like many companies, we are facing the difficult prospect of downsizing staff.  We are a small technology company with operations in the US and an office abroad.  Among our professional staff are a number of foreign nationals with a veritable alphabet soup of immigration statuses.  We have a permanent resident, a couple of H-1B’s, and L-1A, an L-1B, a TN and an F-1 foreign student thrown in for good measure  If we lay off or reduce the hours or salaries of these individuals are there any special considerations we need to think about from an immigration perspective?

Dorsey’s Analysis:

Changes in employment, such as layoffs, changes in duties or salaries can expose employer and employee alike to variety of risks, or no risk at all, depending on the type of immigration legal status involved. The question posed listed a variety of immigration variants.  Let’s look at each status in turn.

Lawful Permanent Residents.

Also known as “green card” holders, these individuals are able to live and work indefinitely in the United States.  Generally, employers may treat US permanent residents as they would a US citizen worker.  A layoff, reduction in salary or hours, re-assignment or other change in employment does not typically affect a permanent resident differently than it would a US citizen, or raise any special considerations for the employer.  This is true even if the foreign national has acquired permanent residence based upon an offer of permanent employment, and it is the sponsoring employer which is later terminating employment.  In employment-based permanent residence processes, both employer and employee must intend permanent employment when the application is filed, and when approved.  Subsequent events, such as downsizing by the employer or discovery of a more attractive job offer by the employee can result in termination of employment without risk to the employer or to the employee’s immigration status.

H-1B’s.

The H-1B is a temporary immigration status for “specialty occupations” which commonly means employment for which a Bachelor’s degree or equivalent is a minimum requirement for entry into the occupation.  There are employer and employee risks which arise with significant changes in H-1B employment.  Every H-1B petition rests in part on a Labor Condition Application (LCA), a US Department of Labor tool intended to protect wages and working conditions for US workers competing with foreign nationals for positions suitable for H-1B classification.  The LCA is a collection of attestations, or promises, made by the employer regarding the employment circumstances.  The Department of Labor has enforcement authority to ensure compliance with employer attestations made on the LCA.  Chief among the attestations is the employer’s promise to pay the prevailing wage for the occupation or the employer’s own wage, whichever is higher.  This obligation continues throughout the time period for which the LCA was certified and the related H-1B was granted.  An employer may not simply reduce the earnings of an H-1B employee without risking sanction by Department of Labor, typically in the forms of fines and back pay.  It is possible to change the level of employment from full time to part time, by filing of an amended H-1B petition with the US Citizenship & Immigration Services (US CIS) accompanied by a new LCA reflecting part-time employment.  In fact, this is the best approach to making a key H-1B employee less expensive to retain, despite the transactional costs incurred in filing an amended H-1B.

What about termination?  H-1B regulations do not prohibit terminations, but termination prior to the end date of the approved H-1B petition raises two employer obligations. The first is notice to US CIS that the employment has terminated.  While US CIS regulations do not provide for a penalty for failure to notify the agency of a termination, the Department of Labor has hinted it would take the extraordinary position that the employer’s obligation under the LCA  to pay the H-1B wage continues even after termination, unless the employer makes the notification to US CIS. The second employer obligation is to pay the cost of returning the H-1B employee to his or her home country. If the employee goes home as the result of termination, the employer has the obligation of paying the travel expense.  The obligation does not extend to transportation of household goods or dependent travel however. Also, the obligation does not arise if the employee does not go home, but instead chooses to look for another H-1B employer in the United States, or chooses to apply for a different type of visa, or chooses to remain in the US without legal status.

An H-1B employee who is terminated loses his/her immigration legal status immediately upon termination, and consequently loses the right to remain in the US.  From the employee’s perspective, it is helpful if an employer provides as much notice as possible, allowing the employee to search for another H-1B sponsoring employer, or to change to a different immigration legal status.

L-1A and L-1B.

These are intra-company transferees, for companies which have parent, subsidiary, branch or other affiliated offices outside the United States.  The L-1A is for executives and managers, while the L-1B is for workers who have specialized knowledge of the company’s products or processes.  Unlike the H-1B, there is no Labor Condition Application for L-1’s, hence no wage or working condition attestations enforced by the Department of Labor. The hours or earnings of an L-1 employee may be reduced without violating immigration laws or regulations applicable to the L-1 category.  A termination of employment would result in the loss of immigration status for the employee, but the L-1 regulations impose no specific requirement on the employer’s part to notify US CIS of the termination or to pay the cost of returning the employee home, as is the case with H-1B’s.  Other changes, such as changes in employment duties or relationships between the US and foreign affiliated entity may require an amended petition, however.

TN.

This is a temporary employment visa available to Canadian and Mexican citizens as part of the North American Free Trade Agreement (NAFTA.)  The treaty contains a list of approved occupations for which TN classification may be granted.  The regulations governing TN classification do not require any notice to US immigration agencies of termination or reduction in pay, nor do the regulations impose any requirement upon employers to pay the cost of returning the terminated employee home.  Termination of employment results in the employee’s loss of immigration status however.

F-1.

This is the most common type of foreign student visa. There are several types of work authorization available to students with F-1 visas, and recent graduates typically are authorized to engage in post-completion “optional practical training” (OPT) with off-campus employers. The usual duration of post-completion OPT is 12 months.  There are no employer wage or other attestations associated with F-1 work authorizations, nor is there a general requirement to report terminations or other changes in employment in most cases.  A new variant of OPT, for graduates in science, technology, engineering or mathematics programs (so-called STEM graduates) permits these graduates to apply for an extension of 17 months of post-completion OPT, for a total of 29 months.  In order to qualify for the additional 17-month extension however, the employee must show his/her employer is enrolled in the Department of Homeland Security’s E-Verify system. If an employer is enrolled in E-Verify, and employs a STEM graduate on OPT during this 17-month period, the employer is obligated to report termination of the student’s employment to the school’s designated school officer.  The reporting and E-Verify requirements are conditions of the additional 17-month extension available to STEM graduates, and do not apply to the initial 12-month grant of OPT.  Termination of OPT employment does not trigger any requirement for the employer to notify US CIS or to pay the cost of returning the student home.

An F-1 student whose employment is terminated or whose compensation is reduced does not necessarily lose his/her immigration status. The regulations governing OPT permit up to 90 days of unemployment during the initial 12-month grant of OPT, and a total of 120 days’ unemployment during the 29-month period available to a STEM graduate.

Dorsey & Whitney

Dorsey & Whitney

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