No Coronavirus-Related Furloughs of H-1B Employees

Many employers financially strained by the coronavirus outbreak are considering employee furloughs rather than outright layoffs, especially given the hopefully short duration of the crisis.  This is generally impossible in the case of H-1B employees, however, due to the Department of Labor’s “no-benching” rule.  The rule is so called because it was enacted primarily to prevent the practice of not paying H-1B employees who work for consulting firms while the employees are “on the bench” between client projects.  It is not limited to consulting arrangements, however, and essentially, it requires that an H-1B employee be paid the wage specified in the visa petition continuously through the date of final termination of her employment with the employer sponsor, even when she has no duties.  Similarly, if the visa was issued for a full-time position, the rule effectively bars the employer from reducing the employee to part-time work and cutting her pay accordingly (without filing an amended visa petition).

This requirement arises from 20 CFR § 655.731(c)(7), as well as from the “labor condition application” filed by the employer with the U.S. Department of Labor as the first step in the visa process, in which the employer attests that it will comply with this and other wage-related rules of the H-1B program.  The requirement applies regardless of any state law that otherwise would not prohibit a furlough.

As a consequence, an employer who purportedly furloughs an H-1B employee can be subject to an administrative complaint to the DOL for failure to pay the specified wage during that period, or to an enforcement proceeding initiated by the department itself in the absence of a complaint, such as during a random audit.  The department has the power to order back wages and interest, as well as to impose fines on the employer.  In other words, no cost-savings are ultimately available to the employer even though the employee is in fact temporarily relieved of duty.

Furthermore, any ambiguity in whether an employer has finally and fully terminated an employee, as opposed to “benching” him, will be resolved in favor of the employee.  As a result, the best practice for an employer in normal economic times (with exceptions beyond the scope of this article) is to send a written notification to the Department of Labor each time that an H-1B employee is discharged, specifying the precise last day of work. The same will generally be prudent in a coronavirus-related layoff

While this obviously means that an employer needing to make workforce reductions including H-1B visa holders will have to consider terminating the H-1B employees’ employment altogether where it might otherwise have only furloughed them, employers should bear in mind that the consequences of doing so are especially harsh for a visa holder.  Not only will she lose her income, but ending the employment on which the visa is premised will also end her valid stay in the United States, and the stays of any spouse and dependents whose visas are derived from hers.  Although the employee will generally have a 60-day “grace period” within which to remain in the U.S. and look for other work, change to a different visa status if eligible, etc.,  she will not be able to take another H-1B job, even during the grace period, without the employer filing a new visa petition for her. Crucially for purposes of a contemplated furlough, this includes resuming employment with the same employer.

Astute readers will notice that the disparate treatment that this rule incents, as between foreign-national H-1B visa holders and U.S. persons, creates a potential risk of discrimination claims.  As a general matter, an employer is not required either to sponsor for a visa a foreign-national candidate whom it would otherwise be willing to hire, nor to continue the employment of a visa holder just because it previously undertook to sponsor him.  But employment discrimination rules still apply.  That is, neither decision can be motivated by the employee’s membership in a protected class.  The law in this area, particularly as applied to layoffs, is not heavily developed, and employers for whom it presents a potential risk should take particular care to obtain detailed advice of counsel on planned reductions in force.

To date, we are not aware of any emergency guidance or policy from the Department of Labor that would relax the no-benching rule to permit furloughs, rather than layoffs, of H-1B employees by employers that are in distress due to the outbreak.

Posted in COVID-19

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