Immigration Enforcement through Employer Sanctions

(written on 3/21/2009)
In September of 2008, a computer consulting firm in Iselin, NJ, was fined more than $80,000 for alleged violations H-1B regulations under the federal immigration law. The U.S. Department of Labor ordered the company to pay back wages to 11 foreign-born workers after an investigation revealed that the company had failed to pay these H-1B workers the required wages for about a year. GlobalCynex, another IT company in Virgina, agreed to more than $1.6 million to 43 non-immigrant workers after the Wage and Hour Division of the Labor Department concluded that the company had failed to pay the required wages to its H-1B workers. The WHD also found that the training fees this company charged the new employees were illegal.

These are just two examples of how the government has stepped up efforts in enforcing immigration and labor laws through employer investigations and sanctions. For the past few years, the Bush administration focused on raiding the job sites and residences to round up the undocumented workers. These raids by the Immigration and Customs Enforcement (ICE), a branch of the Department of Homeland Security, focused on the apprehension and removal of undocumented workers in the U.S., and have been the subject of much controversy. The Obama administration has taken a slightly different approach. The new administration expressed that it will focus on punishing the employers who exploit immigrants and foreign workers. Consequently, the attention of law enforcement agencies will be shifted more towards employers.

Just last month, eleven employees of a NJ-based IT consulting firm was arrested and indicted for conspiracy, mail fraud, and wired fraud charges. Vision Systems Group Inc. was allegedly operating a scheme to hire foreign workers to come to the U.S. by fraudulent documents and operating a ghost office in another state. In addition to forfeiture of $7.4 million of assets that the government is seeking, the company and the indicted employees are also subject to hundreds of thousands of fines and many years of jail time.

A Historical Perspective

The idea of punishing employers as a means of immigration law enforcement is not a new concept. The Immigration Reform and Control Act of 1986 (IRCA) already imposed severe sanctions against employers who failed to maintain the proper documentation for employees or failing to comply with certain documentation requirements and/or knowingly hired unauthorized workers. Although these sanctions have not been used heavily in recent years, they are still very much in effect. While the IRCA focused on document compliance (I-9 Form), the current focus of investigations is much broader and includes also various visa programs such as the H-1B professional visa program, the L-1 multinational manager visa, the H-2B temporary worker program, the R religious workers, etc. The scale of these investigations is much wider and the players involved are also different. The IRCA was largely enforced by the former Immigration and Naturalization Services. Nowadays, these employer investigations usually involve multiple law enforcement agencies under various departments including the US Citizenship and Immigration Services Fraud Detection and National Security Division (FDNS, Immigration and Customs Enforcement (ICE), Customs and Border Patrol (CBP), and Labor Department’s Wages and Hours Division (WHD). More complex cases, such as the Vision Systems Group one, would involve even more agencies such as the U.S. Postal Inspection Service, the U.S. Department of State, the Social Security Administration Office, the U.S. Attorney's Office, etc.

Importance of Legal Compliance

In light of this change in enforcement policies, employers, whether or not they hire foreign workers, must be extremely careful in order to avoid any civil and criminal liabilities. It should be emphasized that these enforcement efforts do not only target fraudulent applications, but also compliance of the laws and regulations. Therefore, employers must make sure that every document that they file with the government is truthful and accurate. They must also confer with their attorneys to make sure that they keep proper documentations and follow other regulatory requirements. We will identify some common violations of employers who hire foreign workers.

Many employers hire foreign workers under a nonimmigrant visa category such as the H, L, or O. It should be understood that these visa categories are only for temporary employment purposes in the U.S. Each of these categories has their own set of requirements. We will focus our discussions on the H-1B program since it is the most common visa category for professionals.

The Labor Condition Application

Take H-1B as an example - an employer must file a document called “Labor Condition Application” (LCA) with the Labor Department before filing the H-1B petition with USCIS. By signing this document, the employer agrees to pay the foreign worker the market wages, disclose the specific geographic areas of employment, maintain the working conditions for the U.S. workers, notice has been provided to workers in the named occupation, and give a copy of the LCA to the employee.

These LCA obligations take effect once the H1B employee “enters into employment,” or when the individual first makes him or herself available. The regulation indicates that “even if the nonimmigrant has not yet ‘entered into employment’,” once the petition is approved, the required wage must start to be paid 30 days after the nonimmigrant is first admitted to the U.S., or if he or she is already here, 60 days after the nonimmigrant first becomes eligible to work for the employer. Payment obligation terminates only if there has been a “bona fide” termination of the employment relationship. Some employers, trying to cut corners, pay the foreign worker less than the market level wages or otherwise reduce their salaries through other means such as training fees other deductions of pay. Some employers bench their H-1B workers by not paying them when there is no consulting work available. All these practices are illegal and the employers who practiced them can be sued for the back wages by their employees and labor department. The correct way to handle an economic downturn or lack of consulting work is to terminate the LCA and H-1B status of the employee. Upon termination, employers should revoke the H-1B petition and withdraw the LCA from the Labor Department. Employers may also pay for the H-1B worker’s return travel expenses in certain situations.

Technical Violations

Even conscientious employers commit technical violations. For instance, an employer must put up a notice of filing for ten business days before filing the LCA, and maintain a public file about the case after the LCA was filed. The notice of filing must also be posted at third party worksites when applicable. This public file must be accessible by the public and government agencies upon request or during an audit. Many employers did not know or simply neglected to keep the public file, believing that such audits were rare. Unfortunately, government audits are happening now and many employers are fined heavily because of their failure to maintain this file. Additionally, there are also some record-keeping requirements for H1B employees. The public access file mentioned above must be kept for at least one year for public examination and all the employee’s record must be kept for three years from the day of its creation.

Another common violation occurs when an H-1B employee changes job site or experiences other material changes in employment. The law requires the employer to file an amendment of either the H-1B petition and/or LCA when there have been material changes in the H-1B employer. If an employee was hired to work in New Jersey initially but then was transferred to a client in Ohio, the employer must file a new LCA and amend the H-1B petition or risk getting fined or other penalties.

Form I-9 – Eligibility of Employment

For all employers of U.S. or foreign workers, they must properly prepare and execute a Form I-9 for each new employee within three days of hire. The I-9 form determines the eligibility of the employee to work legally in the U.S. The employer must complete the form properly, after examining the employee’s documents to ascertain his or her identify and employment eligibility. The form must also be properly signed. If it is determined that the employee is not eligible to work legally in the U.S., the employer must terminate employment. Failure to comply with these requirements will result in very severe fines. Paperwork violations will be fined from $100 to $1000 for each employee while knowing hiring of unauthorized workers will be fined up to $10,000 per violation for the repeat offenders. There are also severe criminal liabilities for employers who smuggle illegal workers into the U.S. or harbor them illegally. During my tenure with the former INS, I was involved in the prosecution of employer sanction cases and witnessed the closing of some companies as a result of these violations.

Getting Ready for an Audit

To prepare properly for a government audit, in addition to keeping the immigration documents, employers should also maintain their corporate documents and tax and payroll documents. It is very common for government officials to request for the certificate of incorporation, stock certificates, or other company documents for review. These documents are matched with the information provided in a labor certification application or other application. Similarly, Federal income tax returns are also used to match with the financial information provided by the employer. If an employer claims to have made a certain amount of profit, it better be able to substantiate it in the tax return. Payroll records are also commonly used to establish that the foreign workers are paid according to the immigration petition and LCA during the period of employment. Government agencies also use payroll records to gather such information as the number of employees and financial status of the employer.

Smart employers should always be ready for an audit. There are just too much documents to maintain and too many issues to tackle, and it would be almost impossible to get everything together on short notice. There are many violations which cannot be cured on short notice without committing fraud or misrepresentation. It is therefore a good idea to have a qualified attorney review and audit all documents regularly to ensure proper compliance.