Employers must determine if they are an H-1B dependent employer in any of the following situations:
- Submitting a Labor Condition Application (LCA) to the Department of Labor (DOL).
- Filing an H-1B Petition (Form I-129) for a nonimmigrant worker, using the LCA.
- Requesting an Extension for an existing H-1B employee.
In some cases, employers might need to re-evaluate their status. For example, if a company restructures after determining its status for an LCA, it will need to reassess its dependency status for any new LCAs it submits.
What Does It Mean to Be an H-1B Dependent Employer?
An H-1B dependent employer has a certain ratio of H-1B workers (nonimmigrants) to full-time equivalent (FTE) employees. This determination is based on U.S. regulations. Depending on the number of employees a company has, there are specific thresholds that define whether the company is H-1B dependent. Here’s a breakdown of the categories:
- 25 or fewer employees: The company is considered dependent if 7 or more are H-1B workers.
- 26 to 50 employees: The company is considered dependent if 12 or more are H-1B workers.
- 51 or more employees: The company is considered dependent if at least 15% of the total employees are H-1B workers.
Employers who don’t meet any of these conditions are classified as non-dependent.
What is a Full-Time Equivalent (FTE) Employee?
In U.S. regulations, an FTE is an employee who works at least 40 hours per week. Consultants and contractors are not counted as FTEs. If employees work less than 40 hours, they may still be considered FTEs under certain conditions, but they must work no less than 35 hours per week to qualify.
Can Part-Time Employees Be Counted as FTEs?
Yes, part-time employees can be counted as FTEs, but they are calculated differently:
Hourly Method:
Employers can add up the total hours worked by part-time employees during a pay period, divide that number by 40, and round it to the nearest whole number. For example, if 4 part-time employees worked a total of 83 hours, the employer would count them as 2 FTEs (83 ÷ 40 = 2.075, rounded down to 2).
Half FTE Method:
Part-time employees working less than 35 hours can be counted as half an FTE. In this case, the employer would round up to the nearest whole number. For example, if an employer has 5 part-time workers, they would count as 3 FTEs (2.5 rounded up).
How is an Employer Defined for H-1B Purposes?
For determining H-1B dependency, the Department of Labor (DOL) and U.S. Citizenship and Immigration Services (USCIS) refer to the Internal Revenue Code (IRC). The IRC defines a “single employer” as any related group of companies with shared ownership or control. Three types of controlled groups may be considered a single employer for H-1B purposes:
- Brother-Sister-Controlled Groups: A group of corporations owned by up to 5 people who own at least 80% of each company.
- Parent-Subsidiary-Controlled Groups: A company that owns at least 80% of a subsidiary, and the subsidiary may also own 80% of other subsidiaries or the parent company.
- Combined Groups: A group of three or more companies that are linked through either brother-sister or parent-subsidiary relationships.
If a company is part of one of these groups, it will be considered a single employer for H-1B purposes. Similarly, if a business is a sole proprietorship, partnership, corporation, or trust, it will also be considered a single employer.
How Do Employers Determine Their H-1B Dependency Status?
Employers can use the ratios provided in the earlier section to determine their H-1B dependency status. For example, if a company has 400 FTEs, including H-1B workers, and 61 of those employees are H-1B workers, then they are considered H-1B dependent because they fall into the third category, where 15% of their total FTEs are H-1B workers.
What Records Should an H-1B Employer Keep?
H-1B employers must maintain various records related to their H-1B workers. These include:
- Copies of petitions and LCAs.
- Payroll records.
- Employee identity documents.
- Wage determination and methods used to calculate wages.
- Notice of postings at the worksite.
- Any extension requests.
If the company is sold or acquired, the employer must also keep the following:
- A statement from the acquiring company.
- A list of affected H-1B employees.
- A breakdown of any new wage systems.
- Updated dates or metrics on the previously filed LCA.
- The Employer Identification Number (EIN) of the acquiring company.
Additionally, if the company’s status changes—such as moving from H-1B dependent to non-dependent status due to workforce changes—the employer must recalculate and keep records of the new status.
What is an Exempt H-1B Employee?
An exempt H-1B employee is someone who meets one of these criteria:
- They earn a minimum salary of $60,000 per year.
- They hold a Master’s degree (or its equivalent) in a related field.
Employers who only hire exempt H-1B employees must provide a statement confirming this and include a list of all H-1B workers associated with the LCA. They also need to keep records of petitions and payments made to those employees.
What Attestations Must Employers Make for Non-Exempt Employees?
When submitting an LCA for a non-exempt H-1B employee, H-1B dependent employers must attest to the following:
- The new H-1B employee will not displace any similarly qualified U.S. workers. This includes a 90-day period before and after the H-1B petition is filed. If a worker is transferred to another employer’s site, this attestation applies as well.
- Records are being kept regarding U.S. workers who left the company and any related job offers.
- The employer has made a good-faith effort to recruit U.S. workers for the position. The employer should maintain records related to the recruitment process.
The Role of H-1B Dependency in Immigration Compliance
Understanding H-1B Dependency
H-1B dependency refers to the status of an employer who relies significantly on H-1B visa holders for their workforce. According to the Department of Labor (DOL), an employer is considered H-1B dependent if they have a specific ratio of H-1B employees to total employees. For example, an employer with 25 or fewer employees must have at least eight H-1B workers to be classified as dependent. This classification triggers additional compliance obligations, including specific attestations in their Labor Condition Application (LCA) and heightened scrutiny during audits.
Avoiding Non-Compliance Risks
To mitigate non-compliance risks, employers should adopt best practices that include:
- Regularly Updating Dependency Status: Employers must reassess their H-1B dependency status whenever filing an LCA or petition. This is crucial during corporate restructuring or significant workforce changes.
- Maintaining Accurate Documentation: Keeping thorough records of recruitment efforts and employment decisions helps demonstrate compliance with DOL requirements and can protect against potential audits.
- Training HR Personnel: Ensuring that human resources staff are well-informed about H-1B regulations and compliance requirements can prevent unintentional violations.
Best Practices for Employers
Employers should implement the following strategies to ensure correct dependency classification:
- Conduct Regular Audits: Internal audits of H-1B employment practices can identify areas of risk before external audits occur. This includes reviewing LCA filings and ensuring that all required attestations are made.
- Engage Legal Counsel: Consulting with immigration attorneys can help navigate complex regulations and ensure compliance with both DOL and USCIS requirements.
- Implement Recruitment Strategies: Employers should actively recruit U.S. workers for positions filled by H-1B visa holders, documenting these efforts to demonstrate compliance with the non-displacement requirement.
Audit Requirements and Risk Mitigation Strategies
The DOL has increased scrutiny over H-1B employers, leading to more frequent audits. Employers must be prepared by:
- Understanding Audit Triggers: Familiarizing themselves with common triggers for audits, such as high ratios of H-1B employees or complaints from U.S. workers, can help employers proactively address potential issues.
- Establishing Compliance Programs: Developing comprehensive compliance programs that include regular training sessions, policy updates, and monitoring systems can significantly reduce the risk of violations.
H-1B Dependency and Labor Market Protections
Relationship with Labor Market Protections
H-1B dependency is closely tied to labor market protections aimed at safeguarding U.S. workers. Dependent employers are required to attest that they will not displace U.S. workers when hiring H-1B employees. This includes a 90-day pre-filing and post-filing period during which employers cannot lay off U.S. workers in equivalent positions. The intent is to ensure that U.S. labor is prioritized before resorting to foreign labor.
Impact on U.S. Worker Recruitment
H-1B dependency affects how employers recruit U.S. workers. Dependent employers must demonstrate good faith efforts to recruit American candidates before hiring foreign workers. This includes advertising positions widely and considering all qualified applicants before making hiring decisions. Failure to adequately recruit U.S. workers can lead to penalties, including fines and restrictions on future visa applications.
Determining H-1B Dependency for Large Employers
Special Considerations for Large Corporations
Large corporations face unique challenges in determining their H-1B dependency status due to their size and the complexity of their workforce structure. The DOL’s criteria stipulate that if an employer has 50 or more employees, they become dependent if more than 50% of these employees are in nonimmigrant status (H-1B, L-1A, or L-1B). This necessitates careful tracking of employee classifications across all branches.
Procedures for Multinational Corporations
Multinational corporations must consider their global workforce when assessing H-1B dependency. They should:
- Aggregate Employee Counts: When determining dependency status, multinational companies must combine employee counts across all subsidiaries as defined under the Internal Revenue Code, ensuring accurate reporting on LCAs.
- Monitor Changes in Workforce Composition: Continuous monitoring of workforce changes is essential to maintain compliance with dependency classifications and avoid unexpected penalties.
By maintaining these records and following the proper procedures, H-1 B-dependent employers can stay compliant with labor regulations and ensure their workforce remains in line with U.S. immigration requirements.
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