Labor & Employment Law Daily Private equity group must pay back wages for H-1B workers’ irregular monthly payments
Thursday, September 24, 2020

Private equity group must pay back wages for H-1B workers’ irregular monthly payments

By Wayne D. Garris Jr., J.D.

The employee received a greater annual salary than required, but his monthly pay fluctuated—sometimes below the required amount.

Affirming a district court’s grant of summary judgment for the Department of Labor, the Second Circuit held that a private equity group must pay back wages to its two H-1B program workers. Although the employer paid one of the employees a larger annual salary than he was entitled to, his monthly pay fluctuated, resulting in underpayments for 10 of the 17 months under investigation. The court held that the DOL regulations governing payment to H-1B workers required the employer to pay no less than one-twelfth of the employee’s annual salary on a monthly basis, and each monthly underpayment violated the Immigration and Nationality Act, despite his total annual salary exceeding his required pay (Aleutian Capital Partners, LLC v. Scalia, September 22, 2020, Carney, S.).

H1-B worker pay requirements. An employer that wishes to hire an H-1B worker must file a Labor Condition Application (LCA) with the DOL in which the employer agrees to pay the prospective employee the required wage rate. The amount of the required wage rate is set by the INA and the DOL’s regulations require employers to pay the employee “cash in hand, free and clear, when due” in “prorated installments paid no less than monthly.

The employer, a private equity investment group, hired two H-1B program employees from 2010 to 2013: a market research analyst and a financial analyst. In the LCA for the financial analyst, the employer committed to paying him $65,000 per year. However, once the employee started working for the employer, he was paid $3,000 per month as a base salary plus a bonus of three percent of the employer’s gross revenues for the month. Thus, his monthly pay fluctuated depending on the employer’s monthly revenues—sometimes he was paid more than his pro rata share of $65,000, sometimes less. For the year 2012, the financial analyst’s total compensation was $57,509.

Complaint. In January 2013, the financial analyst filed a complaint with the DOL alleging that from August 6, 2011 to December 31, 2012, the employer failed to pay him wages as required by the LCA. At the end of its investigation, the DOL concluded that the employer had paid the employee more money in 2012 than to which he was entitled; however, the employer underpaid the employee for four months in 2011 and six months in 2012. The agency concluded that the employer owed the financial analyst $22,713 for the 10 monthly underpayments, giving it no credit for the overpayments. The DOL also found that the market research analyst had been underpaid during several months and ordered that the employer pay her back wages.

Appeal. The employer appealed the decision to an ALJ, arguing that the “required wage obligation” should be calculated on an annual, rather than monthly, basis and that the DOL lacked jurisdiction to order payment of back wages to the employee for 2011 or to the market research analyst. The ALJ concluded that the employer was required to pay the employees at least one-twelfth of their annual certified salaries every month and that the failure to do so in a given month could not be excused by paying bonuses in other months. An administrative review board affirmed the ALJ’s decision.

District court proceedings. The employer sued the DOL in federal court. Granting summary judgment to the DOL and affirming the ARB ruling, the district court held that in order to satisfy the required wage obligation, the employer had to pay its H-1B employees monthly prorated installments of a calculated minimum amount. Second, it ruled that the DOL could award remedies for violations that occurred earlier than the start of the INA’s one-year limitations period, and thus could award the employee back wages from 2011. Lastly, the court ruled that the DOL could award back pay to the market research analyst even though she did not file a complaint.

Required wage obligation. The employer argued that the INA only allows a backpay remedy after the agency determines that an employer has not paid wages at the wage level specified by the LCA. In its LCA for the financial analyst, the employer listed his annual salary, not monthly. Since the employer paid a higher annual salary than it indicated on the LCA, it contended that it should not have to pay back wages.

The court noted that the INA is silent as to when the amount to be paid during each pay period must be calculated. However, the DOL’s regulations state that wages must be paid “when due” and that they are due in prorated installments, “paid no less than monthly.

This reading of the regulation, the employer argued, would result in unsound policy because employers would not be able to self-remedy pay deficiencies. This was exactly the point, the court responded. The purpose of the regulation was to ensure that H1-B employees receive consistent, monthly payments and not one annual payment. This interpretation of the regulation also protects domestic workers because it prevents employers from replacing domestic workers with H-1B workers who “lacking the same labor protections, are vulnerable to being paid according to the vagaries of the employer’s balance sheet rather than in a standard manner comparable to a domestic worker.”

Credits. The employer next argued it should be allowed to credit an overpayment made earlier in the year against an underpayment later in the year. Again, the court rejected this argument, pointing to the DOL’s intent to provide consistent, predictable payments to H-1B workers. Further, the DOL’s regulations allow for irregular payments only if an employer has met strict requirements, indicating that the regulations favor consistency. Thus, summary judgment was affirmed.

Statute of Limitations. The employer next argued that DOL acted outside its statutory authority when it investigated and ordered payments for underpayments in 2011. The employer pointed to the one-year statute of limitations for an aggrieved party to make a complaint set forth in INA. Here, the employee filed his complaint on January 14, 2013, so DOL could only investigate and authorize back wages no earlier than January 14, 2012.

The court rejected this argument. The INA states that “[n]o investigation or hearing shall be conducted on a complaint concerning” an employer’s failure to meet an obligation under the LCA “unless the complaint was filed not later than 12 months after the date of the failure.” The statute does not place a temporal limit on the DOL’s remedies assessment. In fact, the DOL’s regulations provide that when a complaint is timely filed, back wages may be “assessed for a period prior to one year before the filing of a complaint.”

The market research analyst. Lastly, the employer argued that the DOL exceeded its authority when it awarded back pay to the market research analyst since she did not file a complaint against the employer. The employer relied on an Eighth Circuit decision, Greater Missouri Medical Pro-Care Providers, Inc. v. Perez, in which that court held that the DOL exceeded its jurisdiction when it conducted an investigation of an employer’s entire H-1B program after an investigator found reasonable cause to investigate one possible violation.

But the facts here were distinguishable from Greater Missouri. In Greater Missouri, the employer was accused of a single violation and the DOL opened its investigation to find any violations of the INA. Here, the DOL opened its investigation to the other H-1B employee, but its investigation was limited to the same issue—the underpayment of monthly wages. The regulations give the agency “broad discretion” to determine whether the employer is complying with requirements that are the subject of the investigation. Even in Greater Missouri, the Eighth Circuit stated that DOL can investigate “specific misconduct as alleged in the complaint.”

The court concluded that where the specific misconduct alleged is that the employer is using an impermissible payment practice, then an investigation into the specific misconduct would reasonably include payroll information about the other H-1B employee.

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