With the increasing reliance of U.S. employers on high-skilled foreign workers, particularly those on H-1B visas, it is important that employers remain aware of the makeup of their workforce and the additional obligations they could trigger should they become “H-1B dependent.” This post will explore the different agency standards for H-1B dependency and the consequences of becoming an H-1B-dependent employer.

The U.S. Department of Labor (DOL) and U.S. Citizenship & Immigration Services (USCIS) each has its own test/standards for determining whether and when an employer is an “H-1B dependent” employer. Pursuant to the American Competitiveness and Workforce Improvement Act (ACWIA), an employer classified as “H-1B dependent” under the DOL’s rule is required to include additional attestations in the Labor Condition Application used for the petition of any H-1B beneficiary who will be compensated in an amount less than $60,000 and/or who does not possess a master’s degree or higher. Employers who are “H-1B dependent” under USCIS’s more stringent standard may be required to pay substantial additional filing fees for their H-1B petitions.

Department of Labor Standards: Calculating H-1B dependency

Under the DOL’s framework, an employer is considered H-1B-dependent if it has:

• 25 or fewer full-time equivalent employees and at least eight H-1B nonimmigrant workers; or

• 26 – 50 full-time equivalent employees and at least 13 H-1B nonimmigrant workers; or

• 51 or more full-time equivalent employees of whom 15% or more are H-1B nonimmigrant workers.

H-1B dependency must be determined when filing either an LCA, an initial H-1B petition for an employee based on an LCA, or a request for an extension of an employee’s H-1B status based on an LCA.

An employer whose dependency is not readily apparent or is borderline may use the “snap-shot” test. The snap-shot test requires a comparison of the total number of all H-1B workers to the number of the total workforce (including H-1B workers). If a small employer’s snap-shot calculation shows that the employer is dependent, the employer must then fully calculate its dependency status. If a large employer’s calculation exceeds 15% of its workforce, that employer must fully calculate its dependency status.

A full calculation of H-1B dependency must take into consideration the total number of H-1B workers (a “head count” of both full-time and part-time workers) and the employer’s total work force in the United States (including both U.S. workers and H-1B workers) and must be measured according to full-time equivalent employees.

Of particular note is the abrupt shift in calculating H-1B dependency once an employer reaches 51 U.S. employees. As an example, an employer with 50 U.S. employees would be permitted to have up to 12 employees in H-1B status (24 percent of its workforce) without triggering the H-1B dependency obligations. However, if that same employer, with 50 total employees, 12 of whom are in H-1B status, adds another U.S. employee and reaches a total workforce of 51, it would become H-1B dependent without adding another H-1B worker, as its H-1B workforce would then exceed 15 percent of its total workforce.

Who counts as a United States employee?

To count as a United States employee, the person must be employed in the United States. United States employees include United States citizens and lawful permanent residents, as well as H-1B employees in the United States. Employees in other countries cannot be counted. Independent contractors and consultants are not counted as employees.

Any employee who works 40 or more hours a week is considered one full-time equivalent employee. Employees who work between 35 and 40 hours may be treated as full-time equivalent if this is accepted in the employer’s regular course of business. An employee who works less than 35 hours a week is not alone treated as a full-time equivalent. For employees who are less than full-time, the employer can choose one of two methods:

• Count each such employee as 1/2 of a full-time equivalent; or

• Total the hours worked by each employee and divide by the employer’s standard hours of full-time employment (which must be at least 35 hours).

Requirements of H-1B-Dependent Employers

If an employer is determined to be H-1B dependent under the DOL’s framework, the employer must agree to additional attestations on the LCA submitted with any subsequent H-1B petitions for as long as the employer remains “H-1B-dependent” (unless the employee for whom the petition is being filed is an exempt H-1B nonimmigrant – see below). These attestations include:

• The employer promises not to displace any similarly employed US worker within the period beginning 90 days before and ending 90 days after the date of filing the H-1B nonimmigrant petition; this is not the date of the LCA filing.

• The employer promises not to place the employee at another employer’s worksite unless the employer has made a bona fide inquiry as to whether the other employer has displaced or intends to displace a US worker any time between 90 days before and 90 days after the placement, and has no knowledge to the contrary. If the other employer makes such a displacement, the employer applicant may be subject to civil money penalties and disbarment from the H-1B program.

• Prior to filing any petition for a H-1B nonimmigrant pursuant to the application, the employer took or will take good faith steps to meet industry-wide standards to recruit U.S. workers for the job for which the nonimmigrant is sought, offering compensation at least as great as that required to be offered to the non-immigrant.

• The employer has first offered, or will first offer, the job to any US worker who is equally or more qualified than the intended H-1B beneficiary.

Prior to filing an LCA or H-1B petition while in “H-1B-dependent” status, an employer is required to take good faith steps to recruit U. S. workers in the United States for the job(s) in the United States for which the H-1B nonimmigrant(s) is sought. The recruitment shall use procedures that meet industry-wide standards and offer compensation that is at least as great as the required wage to be paid to H-1B nonimmigrants pursuant to § 655.731(a) (i.e., the higher of the local prevailing wage or the employer’s actual wage). The employer may use legitimate selection criteria relevant to the job that are normal or customary to the type of job involved, so long as such criteria are not applied in a discriminatory manner.

An employer is not required to utilize any particular number or type of recruitment methods, and may make a determination of the standards for the industry through methods such as trade organization surveys, studies by consultative groups, or reports/statements from trade organizations. An employer’s recruitment is expected to be at a level and through methods and media, which are normal, common or prevailing in the industry, including those strategies that have been shown to be successfully used by employers in the industry to recruit U.S. workers. An employer may not utilize only the lowest common denominator of recruitment methods used in the industry, or only methods that could reasonably be expected to be likely to yield few or no U.S. worker applicants, even if such unsuccessful recruitment methods are commonly used by employers in the industry. An employer’s recruitment methods are required to include, at a minimum, the following:

1) Both internal and external recruitment (i.e., both within the employer’s workforce (former as well as current workers) and among U.S. workers elsewhere in the economy); and

2) At least some active recruitment, whether internal (e.g., training the employer’s U.S. worker(s) for the position(s)) or external (e.g., use of recruitment agencies or college placement services).

Similar to the PERM labor certification process in the “green card” context, employers should maintain documentation of all recruiting methods used (including the places and dates of the advertisements and postings or other recruitment methods used, the content of the advertisements and postings, and the compensation terms), all screening questions or evaluation materials utilized, and all applications received, along with the employer’s evaluation of any applicants for the relevant position, in order to be able to demonstrate that no U.S. worker who applied was “equally or better qualified for the job than the H-1B nonimmigrant.”

Exempt H-1B employees

H-1B nonimmigrants are considered “exempt” from the additional H-1B/LCA attestations above if either:

1) The worker will be paid at least $60,000 in annual compensation; or

2) The worker holds a master’s degree or higher, or a foreign equivalent, in a field related to the offered position If an H-1B beneficiary/employee falls into at least one of the criteria above, he or she is exempt from the additional H-1B attestations on the LCA submitted as part of his or her H-1B petition.

Note, however, that the employee is still counted in the calculation of whether the employer is H-1B-dependent.

U.S. Citizenship & Immigration Services Standards

Under USCIS’s heightened standards, an employer is considered “H-1B-dependent” only if the H-1B petitioner has 50 or more employees in the United States, and more than 50 percent of these employees are in H-1B, L-1A, or L-1B nonimmigrant status. If so, the employer is required to submit an additional government filing fee of $4,000 for its first H-1B petition on behalf of each subsequent employee as long as the petitioner remains H-1B-dependent. Like the Fraud Prevention and Detection Fee, the additional H-1B dependency fee is not required for an employer’s second or subsequent H-1B petition on behalf of any particular employee; it is only required once per H-1B beneficiary.